NEW YORK/WASHINGTON/PARIS - French bank BNP Paribas has pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve accusations that it had violated U.S. sanctions against Sudan, Cuba and Iran, in a severe punishment aimed at sending a clear message to other financial institutions around the world.
The BNP Paribas guilty plea is the direct consequence of a broader U.S. Justice Department shift in strategy that is expected to try to snare more major banks for possible money laundering or sanctions violations.
In an unprecedented move, regulators banned BNP for a year from conducting certain U.S. dollar transactions, a critical part of the bank's global business, in addition to the fine which was a record for violating American sanctions.
U.S. authorities said the severe penalties reflected BNP's violations going back to at least 2004 and through to 2012 and its drive to put profits first, even after U.S. officials warned the bank of its obligation to crack down on illegal activity. Shares in BNP rose 4.1 percent by 0945 GMT, making it the strongest performer in the European bank index because of relief the bank had finally settled the case.
The bank essentially functioned as the "central bank for the government of Sudan," concealed its tracks and failed to cooperate when first contacted by law enforcement, U.S. authorities said. They also found BNP Paribas had evaded sanctions against entities in Iran and Cuba, in part by stripping information from wire transfers so they could pass through the U.S. system without raising red flags.
With its Sudanese clients, the bank admitted it set up elaborate payment structures that routed transactions through satellite banks to disguise their origin.
"BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities, but that is exactly what we did today," said Manhattan U.S. Attorney Preet Bharara, whose office helped to prosecute the case.
"We deeply regret the past misconduct that led to this settlement," BNP's Chief Executive Officer Jean-Laurent Bonnafe told analysts and investors on a conference call on Tuesday.
He said the bank would implement a significant strengthening of its internal controls and processes. Credit Agricole and SocGen have disclosed that they are reviewing whether they violated U.S. sanctions. SocGen said in its latest annual report that it is engaged in discussions with the Treasury Department's Office of Foreign Assets Control over potential sanctions violations.
The two banks could not be immediately reached for comment.
The settlement marks a stinging rebuke for BNP, the granddame of French banking and one of the world's five biggest banks by assets.
Until now BNP Paribas had managed to avoid the sort of scandals that damaged most of its rivals, including interestrate manipulation and the mis-sale of U.S. sub-prime mortgages.
From BNP Paribas' historic Parisian headquarters, where Napoleon married Josephine in 1796, BNP Paribas management has always prided itself on its tight risk controls which helped it successfully navigate the financial and euro zone debt crises.
The Swiss financial regulator said it was investigating staff at BNP Paribas' Swiss arm after the bank's general counsel appeared in a New York court to plead guilty to one count of falsifying business records and one count of conspiracy.
France's bank supervisor said that BNP Paribas could cope with the sanctions without risking its financial health, and Finance Minister Michel Sapin said the bank "will still be able to finance economic activity" in France. But the stock is still down around 16 percent since mid-February because of the affair.
Concern about the future of France's biggest listed bank and the knock-on effect on the fragile French economy prompted President Francois Hollande to express concern to Barack Obama and a French threat to derail U.S.-EU trade talks.
A pipeline of cases has built up as U.S. prosecutors have pivoted from focusing on specific criminals to also vigorously pursuing financial institutions that move money for them, which some had in the past considered "too big to jail."
Leslie Caldwell, who leads the criminal division at Justice Department, said in an interview that a unit within the Justice Department has its sights set on a range of firms potentially involved in illicit money flows.