NEW YORK/WASHINGTON (REUTERS) - French bank BNP Paribas on Monday pleaded guilty to two criminal charges and agreed to pay almost US$9 billion (S$11.2 billion) to resolve allegations that it violated US sanctions laws and enabled the activities of terrorists and humans rights abusers in Sudan and elsewhere.
In an unprecedented move, regulators also banned BNP for a year from conducting certain US dollar transactions, a critical part of the bank's international business.
The authorities said the severe penalties were warranted because of BNP's persistent and deliberate violations and desire to put profits first, even after US officials warned the bank of its obligation to police for illicit money flows.
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, Deputy Attorney General James Cole said in announcing the settlement.
The bank's general counsel, Georges Dirani, briefly appeared in New York state court to plead guilty to one count of falsifying business records and one count of conspiracy.
US authorities also found that 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 US 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 US Attorney Preet Bharara, whose office helped prosecute the case.
The penalties against France's largest bank are far bigger than those against Credit Suisse in May, which became the largest bank in decades to plead guilty to a US criminal charge, for helping Americans evade taxes. No individuals were charged on Monday, but US authorities said they have not wrapped up their probes.
"The case which BNP is pleading to now is against the corporation alone, but our investigation into potential individual culpability is continuing," Manhattan District Attorney Cyrus Vance said in an interview.
BNP said it would take an exceptional charge of 5.8 billion euros (S$9.9 billion) in the second quarter of this year, and that it would hold a conference call for investors on Tuesday. "We deeply regret the past misconduct that led to this settlement," BNP Chief Executive Officer Jean-Laurent Bonnafe said in a statement. "We have announced today a comprehensive plan to strengthen our internal controls and processes."
The bank would need to suspend its so-called dollar-clearing operations through its New York branch and other US affiliates during all of 2015 at the business lines where the misconduct took place, the authorities said. The temporary ban could trigger a client exodus, and it is not clear how BNP may blunt its impact.
Some of the business lines affected were dollar clearing on behalf of the oil and gas finance business from Geneva, Paris and Singapore, the trade finance business from Milan, and for oil and gas-related clients from Rome. During the negotiations, Benjamin Lawsky, the head of the New York state bank regulator, had proposed the ban as one condition for not revoking BNP's licence to operate in New York, sources had previously told Reuters.
In addition, the bank will need to prohibit all US dollar clearing as a correspondent bank for unaffiliated third-party banks in New York and London for two years. Of the total payment, US$2.24 billion would go to Lawsky's Department of Financial Services as a civil penalty, and 13 individuals - including Group Chief Operating Officer Georges Chodron de Courcel - would leave the bank.
"This conduct, this conspiracy was known and condoned at the highest levels of BNP," Assistant District Attorney Ted Starishevsky said.
In total, the bank disciplined 45 employees in connection with the investigation.
BNP's Dirani told the judge that BNP took steps to evade US sanctions on Sudan, Cuba and Iran between 2004 and 2012. The Department of Justice said BNP's illicit Iranian transactions were done on behalf of its clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company. Manhattan's Vance said prosecutors had insisted on a guilty plea because of how long the conduct went on, even well after the probe began, the volume of the transactions, and the nature of the conduct itself.
Mr Richard Weber, chief of the Internal Revenue Service Criminal Investigation, said
BNP committed "literally thousands of flagrant violations." Internal bank memos showed that BNP officials, while aware of the humanitarian crisis in Sudan and the ties of the government with Al-Qaeda founder Osama bin Laden, chose to continue to do business with Sudan because it was commercially attractive.
France's bank supervisor ACPR said that the bank could cope with the sanctions without risking its financial health, and the country's Finance Minister Michel Sapin said the bank "will still be able to finance economic activity" in France.