BNP faces US$10b sanctions settlement, source says

PUBLISHED : Saturday, 31 May, 2014, 12:59am
UPDATED : Saturday, 31 May, 2014, 4:29am

United States authorities are seeking more than US$10 billion from BNP Paribas to settle federal and state investigations into the lender's dealings with sanctioned countries including Sudan and Iran, a source said.

A final deal was probably weeks away, the source said. The amount to settle has escalated: the bank said in April that it might need to pay far more than the US$1.1 billion it had already set aside for the case.

Prosecutors are also pressuring BNP to plead guilty to moving funds for clients in violation of sanctions against Sudan, Iran and Cuba, sources said. The settlement could be the largest criminal penalty in the US, eclipsing BP's US$4 billion deal with the government last year.

Jean Pierre Lambert, an analyst at Keefe, Bruyette & Woods, said in a report he expected BNP to pay a fine of about US$7 billion to avoid being excluded from the US dollar payment system.

Negotiations are being handled by Leslie Caldwell, head of the Department of Justice criminal division, Manhattan US Attorney Preet Bharara and Manhattan District Attorney Cyrus Vance Jnr. Benjamin Lawsky, superintendent of New York's Department of Financial Services, is also involved in the discussions, along with the Federal Reserve and the Department of the Treasury's Office of Foreign Assets Control.

Spokesmen for BNP, the justice department, the Fed, the treasury, Lawsky, and Vance declined to comment.

US authorities are seeking a record fine against BNP that would make it the first French bank since President Barack Obama took office to be penalised for doing business with sanctioned countries.

The French government has not been involved in the US discussions over Paris-based BNP and views the case as a legal matter that must follow its own course, three sources have said.

BNP said in 2011 that it was reviewing operations to see how they complied with the Office of Foreign Assets Control's rules after talks with the US authorities. The office administers and enforces economic and trade sanctions based on US foreign policy and national security goals.

The French bank's review focused on transactions made between 2002 and 2009, BNP said this month.

Prosecutors argue that a more severe penalty against BNP is justified because the misconduct was more egregious and the bank did not fully co-operate with the investigation, a source said.

Most of the BNP trades under investigation would not have broken French or European law, a source said.

Prosecutors met BNP officials this month and were still discussing settlement terms, a source said.