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Regulators slap bank with big fine

By David McMillin · Bankrate.com
Thursday, July 3, 2014
Posted: 10 am ET

© Gil C/Shutterstock.com

The largest banking institution in France is feeling the wrath of U.S. regulators as it is slapped with an almost $9 billion fine.

Paris-based BNP Paribas has pleaded guilty to violating the International Emergency Economic Powers Act and the Trading with the Enemy Act. Between 2004 and 2012, the financial giant routed billions of dollars worth of transactions through the U.S. financial system on behalf of Sudanese, Iranian and Cuban entities.

The U.S. prohibits banks from dealing with these countries. The BNP Paribas guilty plea and accompanying settlement proves just how serious the Justice Department is about the law.

"BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law," Attorney General Eric Holder said in a statement.

"Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced," Attorney General Holder said. "If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”

The Department of Justice released supporting documents that highlight the sophisticated level of the bank's scheme to attempt to fool U.S. regulators. Using a system of satellite banks, BNP Paribas worked to disguise the real names of institutions in Sudan, Cuba and Iran. It's clear that top leaders at the bank were well aware of the wrongdoing, too.

A 2007 memo from an executive warned, "In a context where the international community puts pressure to bring an end to the dramatic situation in Darfur, no one would understand why BNP Paribas persists (in Sudan) which could be interpreted as supporting the leaders in place."

While the BNP Paribas case is significant because of the massive fine, this is certainly not the first instance of banks attempting to work around U.S. economic sanctions. In 2012, HSBC and Standard Chartered Bank paid fines for involvement in money laundering schemes with clients based in countries with ties to terrorist organizations and human rights violations.

Despite settlements and fines, there are some concerns that regulators are not doing enough to pursue criminal cases against banks. Do you agree? Check out "Bank regulators under fire in DC."

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