The New York Department of Financial Services has released the greatest hits of French bank BNP Paribas’ efforts to circumvent U.S. sanctions to conduct business on behalf of Iran, Sudan, and Cuba.
The bank was just fined a record $ 8.9 billion, and about a dozen employees will be dismissed.
In the NYDFS complaint, we first learn that BNP Paribas was well aware that it would have to commit fraud to get around the U.S. restrictions, but deemed the risk worth it, because other firms were also doing it.
Even the highest levels of the compliance division for the New York Branch recognized and accepted that amending, omitting and stripping was widespread among foreign banks transmitting funds through the U.S. When a settlement with U.S regulators and Dutch bank ABN AMRO was announced for violations of U.S. sanctions law, the Head of Ethics and Compliance North America wrote in an email to another employee, “the dirty little secret isn’t so secret anymore, oui?”
AMRO settled for $ 500 million in 2010.
BNP employees also seem to have been fond of deploying exclamation marks to let colleagues know when the fix was in:
one payment message for a Sudanese party was stamped “URGENT,” “ATTENTION EMBARGO” and cautioned,“! Transfer in$ without mentioning [Sudanese Bank] to the USA!!!”
BNP Paribas used policy directives, such as those contained in the February 2007 Operating Application for Filtering of Transactions under the Group Policy on Iran, to ensure that SWIFT MT 202 cover payment messages meant to be processed through New York from BNPP reflected only the identity of the “receiving institution (and not the [ultimate] Iranian beneficiary institution!)” (emphasis in the original).
All this made things quite awkward for the firm’s compliance officers. Here’s what it looked like on Cuban transactions…
BNPP was fully aware of the legal risks. In a January 2006 internal email, one employee at BNPP Paris asked a BNP Paribas compliance officer, “when we lend money to the Cubans, the loans are generally made out in [ d]ollars … [ c ]ould we be reprimanded, and if so, based on what?” The compliance officer responded to that employee and others, including a senior manager at BNPP Paris: “These processing transactions obliges us to obscure information regarding the USD (BNPP NY) Clearer, and it is a position which BNPP is not comfortable with, and which, of course, offers a risk to its image and, potentially, a risk for reprisals from US authorities if this behavior was discovered …”
And Sudanese ones.
…BNPP’s senior compliance personnel agreed to continue the Sudanese business and rationalized the decision by stating that “the relationship with this body of counterparties is a historical one and the commercial stakes are significant. For these reasons, Compliance does not want to stand in the way of maintaining this activity for ECEP…”
You may recall that the Sudanese government was butchering its own people in Darfur during this period. Here is what BNP had to say about that:
Internal Bank memoranda regarding BNPP’s Sudanese business that discussed the political environment and the “crisis in Darfur” also discussed the economic environment and the Sudanese oil industry’s “financial dynamism.”
The whole complaint is worth reading — it’s not very long, and the fraud is pretty unsophisticated.