DA’s Office and Federal Partners Have Secured Approximately $12 Billion in Settlements From 7 Banks Since 2009
Manhattan District Attorney Cyrus R. Vance, Jr., together with U.S. Attorney General Eric H. Holder, Jr., and U.S. Attorney for the Southern District of New York Preet Bharara, today announced the resolution of a joint investigation into the criminal conduct of BNP Paribas S.A. (BNPP), the largest bank in France, through a guilty plea to charges of Falsifying Business Records in the First Degree, a class E felony, and Conspiracy in the Fifth Degree, a class A misdemeanor, as well as the payment of a record total of $8,833,600,000 in criminal forfeiture and penalties. In the Superior Court Information, allocution, and corresponding Factual Statement filed in New York State Supreme Court by Manhattan state prosecutors, BNPP admitted that it violated New York State law by conspiring to and falsifying the records of New York financial institutions.
The nearly $8.9 billion settlement includes parallel resolutions of regulatory inquiries, in which the Board of Governors of the Federal Reserve System (Federal Reserve) and the New York State Department of Financial Services (DFS) imposed civil monetary penalties in the amount of $508,000,000 and $2,243,400,000, respectively, with these amounts being credited against the total forfeiture amount. The total amount also includes a settlement of $963,619,900, reached with the Office of Foreign Assets Control of the United States Department of the Treasury (OFAC) arising out of the same pattern of conduct.
“The most important values in the international community – respect for human rights, peaceful coexistence, and a world free of terror – significantly depend upon the effectiveness of international sanctions,” said District Attorney Vance. “Today’s guilty plea marks the seventh major case involving sanctions violations by a large international bank that my Office has pursued and resolved since 2009. These cases are critically important for international public safety and the security of our banking system, which is put at risk when it is used to further criminal activity. The seven investigations have revealed a series of widespread schemes to falsify the business records of financial institutions in Manhattan and have resulted in the forfeiture of approximately $12 billion in total. But, more importantly, they have resulted in a fundamental change in the way all banks conduct their business, have heightened vigilance worldwide with respect to dealing with sanctioned entities, and have increased the integrity of our Manhattan-based financial institutions.”
U.S. Attorney General Holder said: “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. Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced. 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.”
U.S. Attorney for the Southern District of New York Bharara said: “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 do today. BNPP, the world’s fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan."
About the Bank
BNPP is the largest bank in France and, in terms of total assets, one of the five largest banks in the world. It has approximately 190,000 employees and more than 34 million customers around the world. Its headquarters are located in Paris (BNPP Paris), and BNPP has a subsidiary based in Geneva, Switzerland, incorporated as BNPP Paribas (Suisse) S.A. (BNPP Geneva), as well as a branch office in the United States headquartered in New York (BNPP New York).
One of BNPP’s core businesses is its Corporate Investment Bank which, among other activities, provides clients with financing in the form of letters of credit and syndicated loans. A significant part of this financing occurs within a business line formerly called Energy Commodities Export Project, which focused on providing financing related to oil and other commodities.
As admitted in its guilty plea, from at least 2004 through 2012, BNPP moved nearly $8.9 billion through the financial institutions in Manhattan primarily on behalf of Sudanese, Iranian, and Cuban clients in violation of U.S. sanctions. BNPP used a variety of different methods to conceal the involvement of sanctioned entities in dollar transactions processed through BNPP New York and other financial institutions in the U.S. These methods included the use of cover payments – a non-transparent method of payment messages – with co-conspirator financial institutions located in non-sanctioned countries; structured payments in highly complicated ways, with no legitimate business purpose; the instruction to co-conspirators not to mention the names of sanctioned entities; the adherence to instructions from sanctioned entities not to mention their names in dollar-payment messages; and the removal of information that would have revealed the involvement of a sanctioned country or entity in the payments.
As a result of BNPP’s illegal conduct, Manhattan financial institutions unknowingly processed transactions that otherwise should have and would have been rejected, blocked, or stopped for investigation by sophisticated computer programs known as “OFAC filters.” OFAC is charged with administering economic sanctions against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. Sanctioned financial institutions, countries, and individuals generally are prohibited from accessing the U.S. financial system. Financial institutions rely on accurate and complete payment messages in order to determine whether their institutions are being used to further criminal activity. BNPP purposefully transmitted false and incomplete payment messages through Manhattan institutions, including its own affiliate in New York. This was done despite BNPP New York repeatedly making clear that the practice of concealing these transactions violated U.S. sanctions laws, as well as its internal policy.
These prohibited, dollar-denominated transactions violated New York laws by causing false payment messages to be filed with entities located in Manhattan, thereby concealing the illegal nature of these transactions and deceiving U.S. banks into processing the illegal payments. This conduct occurred within BNPP locations around the world, with the knowledge of senior corporate managers and legal and compliance departments.
Explanation of Sanction Violations in Specific Countries
The Sudanese government is globally recognized as committing major human rights violations and other atrocities among its civilian population since at least 1997, when President Clinton declared the situation in Sudan a national emergency and signed an executive order that imposed trade sanctions with Sudan. Those sanctions were strengthened in 2006 and the United Nations Security Council passed a resolution in 2005 recognizing the failure of the Sudanese government to disarm, apprehend, and bring to justice members of the Janjaweed militia “who have carried out human rights and international humanitarian law violations and other atrocities.”
BNPP undermined these efforts primarily through its subsidiary in Geneva, by conspiring with numerous Sudanese banks and entities, as well as financial institutions outside of Sudan, to violate the U.S. embargo by providing them with access to the U.S. financial system between 2002 and 2007. Shortly after the imposition of U.S. sanctions against Sudan, BNPP Geneva secretly agreed to become the sole correspondent bank in Europe for the Sudanese government. Consequently, all or nearly all major Sudanese banks had U.S. dollar accounts with BNPP Geneva. BNPP Geneva also provided letters of credit for the Sudanese banks.
BNPP aided the primary financial institutions serving the Sudanese government and processed thousands of transactions worth billions of dollars on behalf of numerous individuals and companies specifically banned by OFAC from accessing the U.S. financial system.
The investigation revealed that this illegal activity was egregious, prolonged, and well-known by bank employees. As detailed in the Factual Statement, an email in 2004 from a BNPP manager in Geneva described the political environment in Sudan as “dominated by the Darfur crisis” and called it a “humanitarian catastrophe.” In April 2006, a senior BNPP compliance officer in Paris stated in a memorandum that: “The growth of revenue from oil is unlikely to help end the conflict [in Darfur], and it is probable that Sudan will remain torn up by insurrections and resulting repressive measures for a long time.” In 2007, another senior BNPP compliance officer in Paris reminded other high-level compliance and legal employees that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which … has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.” A few months later, a BNPP executive in Paris with responsibilities for compliance across all BNPP branches warned in a memorandum that: “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.”
BNPP also followed instructions from sanctioned entities to not mention their names in wire transfer messages: “due to US embargo on Sudan, please [debit our U.S. dollar account] without mentioning our name in your payment order.” Payment message instructions frequently bore stamps from BNPP employees stating “ATTENTION: US EMBARGO.” A 2005 report by BNPP compliance personnel explicitly stated: “The main activity of certain BNPP customers is to domicile cash flows in USD on our books on behalf of Sudanese banks. These arrangements were put in place in the context of the U.S. embargo against Sudan.”
Other than the letters of credit transactions, most of the illegal Sudanese transactions were made through unaffiliated “satellite banks” in a way that enabled it to disguise the involvement of sanctioned entities in U.S. dollar transactions. As a result of this conduct, the Sudanese government and numerous banks connected to the government were able to access the U.S. financial system and engage in billions of dollars’ worth of U.S. dollar-based financial transactions, significantly undermining the U.S. embargo.
U.S. economic sanctions against Iran have been in place since 1995, and have been repeatedly strengthened in the ensuing years. In late 2009, the Manhattan District Attorney’s Office approached BNPP to inform it of concerns regarding BNPP’s business with sanctioned entities. In early 2010 the Manhattan District Attorney’s Office and DOJ jointly met with BNPP regarding its involvement in such transactions. Despite agreeing to commence an internal investigation into its compliance with U.S. sanctions and cooperate fully with U.S. and New York authorities, between December 2011 and November 2012, BNPP knowingly, willfully, and intentionally processed a total of approximately $586.1 million in transactions on behalf of an Iranian-controlled company in violation of U.S. sanctions. Additionally, BNPP processed approximately $100.5 million in U.S. dollar payments involving an Iranian oil company.
The U.S. has maintained an economic embargo against Cuba since 1960. From at least 2000 up through and including 2010, BNPP, through its Paris headquarters, conspired with numerous Cuban banks and entities, as well as financial institutions outside of Cuba, to provide U.S. dollar financing to Cuban entities in violation of this embargo. BNPP processed thousands of U.S. dollar denominated financial transactions with sanctioned entities located in Cuba, with a total value in excess of $1.747 billion.
BNPP carried out transactions with Cuban sanctioned entities and evaded the U.S. embargo principally through its participation in several U.S. dollar-denominated credit facilities designed to provide financing to various Cuban entities. Similar to BNPP’s means of circumventing the U.S. embargo against Sudan, BNPP employees directed that transactions involving Cuba omit references to Cuba in payment messages to prevent the transactions from being blocked when they entered the United States. On the occasions when payments were identified and blocked when they entered the United States, BNPP at times stripped them of any mention of Cuba and then resubmitted the payments through an unaffiliated U.S. bank without that bank’s knowledge of the resubmittal. BNPP also employed a complicated “fronting” structure to disguise from U.S. banks the true nature of the transactions with Cuban parties, similar in some respects to BNPP’s use of satellite banks to disguise the true nature of transactions with BNPP Geneva’s Sudanese clients.
BNPP’s efforts to evade the U.S. embargo against Cuba continued long after the illicit nature of the transactions was made clear to numerous compliance, legal and business personnel at BNPP Paris. Indeed, high-level business managers at BNPP Paris overruled explicit concerns from compliance personnel in order to allow the Cuban business to continue, valuing the bank’s profits and business relationships over adherence to U.S. law.
Pursuant to the plea agreement, BNPP has agreed to adhere to best practices for international banking transparency, implement procedures and training designed to ensure U.S. sanctions compliance, and pay nearly $8.9 billion in criminal penalties and forfeiture.
Prior Sanctions Cases
Within the past five years, seven banks, including BNPP, have forfeited approximately $12 billion for their illegal conduct, with half of the funds being paid to the City and State of New York. The Manhattan District Attorney’s Office has previously reached Deferred Prosecution Agreements with the following financial institutions:
The four-year investigation was conducted jointly with DOJ’s Asset Forfeiture and Money Laundering Section, the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the United States Internal Revenue Service Criminal Investigation. District Attorney Vance recognized the substantial contributions of the Federal Reserve, OFAC, and DFS, which conducted their own investigations.
The BNPP case was prosecuted by Assistant District Attorneys Edward Starishevsky, Senior Counsel for International Financial Investigations, and Kim Han, Deputy Chief of the Tax Crimes Unit, under the supervision of Polly Greenberg, Chief of the Major Economic Crimes Bureau, Christopher Conroy, Principal Deputy Chief of the Major Economic Crimes Bureau, and Executive Assistant District Attorney David Szuchman, Chief of the Investigation Division. Investigative Analysts Bonnie Robinson, Trevor Chenoweth, and Lisa Daniels assisted in the investigation.
District Attorney Vance also thanked the following individuals for their assistance in the investigation: Trial Attorneys Craig Timm and Jennifer Ambuehl of the DOJ Asset Forfeiture Money Laundering Section; Assistant United States Attorneys Andrew Goldstein, Martin Bell, Micah Smith, and Christine Magdo of the United States Attorney’s Office for the Southern District of New York; Special Agent Matthew Komar of the Federal Bureau of Investigation; and Special Agent Nicholas Finocchio of the Internal Revenue Service Criminal Investigation.