French Bank BNP Paribas pleaded guilty in a trial with the U.S. authorities. The bank will pay $8.7 billion fine for breaching the interdiction regarding financial transactions with Sudan, Iran and Cuba. It is another victory for the Department of Justice. Just about a month ago, Creddit Suisse pleaded guilty and it received a $2.6 billion fine for supporting customers dodge taxes. Both sums add up to a total amount of more than $100 billion penalties accorded to various financial institutions in the last couple of years.
The case U.S. authorities versus French Bank BNP Paribas
BNP Paribas ran concealed economic transactions between 2002 and 2012 in the name of Iran, Cuba and Sudan in oil business to avoid the ban imposed by the U.S. The banks operations ran in the context of being under investigation by the U.S. authorities. Besides the $8.7 billion penalty, the bank will not have the right to transfer dollars, a punishment known as ‘dollar clearing’. The effect of the measure will only cover the U.S. transactions. The bank will be able to carry its transactions in dollars through its European branches. Now BNP Paribas, which reported earnings in the last year, has to find administrative technical ways of offering services to its clients in the U.S. They will use third-party banking services and ensure that the clients will not even notice the change, as the bank will cover all the expenses. Lars Machenil, French Bank BNP Paribas chief financial officer, stated that the oil and gas departments do not account for more than one percent of the total revenues.
The ban will last one year, starting with January 1, 2015. Clients who wish to move their operations somewhere else will have almost a half a year to do so.
The French Government was worried that a very harsh penalty will have repercussions on the French economy. The French Finance Minister suggested that the penalties should be oriented towards past actions, instead of future economic relations. The problem is that white collar crime has not been extremely punitive so far. Thus, the question is what type of measures the authorities should take in these cases to ensure a drastic diminishment of corporate crime level.