Bill Black on Real News: BNP Paribas Fine Shows Financial Crime Still Pays

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This Real News Network interview with Bill Black provides a good high-level overview of what is right and (mainly) wrong with the $8.9 billion settlement with BNP Paribas over money-laundering charges. Black stresses that financial crime remains a very attractive activity for both the enterprise and its employees. As usual, no executives were charged or even fined, although thanks to the intervention of New York financial services superintendent Benjamin Lawsky, eleven employees of the French bank lost their jobs.

Black also points out that even though the level of the fine sounds impressive, by definition, it could never be large enough to threaten the health of a too-big-to-fail bank. Even though it does represent a step in the right direction, it is still insufficient in magnitude. Black also points out how inconsistent the fines have been.

Black did omit a couple of points that we regard as important. First, the US has decided to impose a big fine with respect to money-laundering that defied US sanctions. In other words, this action was intended to send a signal about the ability and willingness of the US to inflict pain upon organizations that defied US military/security priorities. Second, the target was a foreign bank. And finally, these crowd-pleasing fines are being imposed in the runup to Congressional midterms when the Democrats are in trouble. So expect the tough-looking posture towards financial crime to be a thing of the past come mid November.

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  1. Expat

    It’s frankly appalling. The dividend goes from €2.00 to €1.50. Nothing else changes.
    It’s all a crock of shit. If the US system were not so fundamentally corrupt, we would have built about ten new prisons just to hold all the convicted bankers from secretaries to CEO’s. JP Morgan, Goldman, Citi, etc. should not longer exist.

    But hey! Money talks and poor people can either work at McDonald’s or join the army and get blow to pieces in one of our numerous invasions of the 3rd World.

  2. fosforos

    Perhaps the most outrageous aspect of Hollande’s capitulation to Obama’s unilateral and extraterritorial imposition of US imperial sanctions on a French bank is the forced firing of eleven PNB employees who had done absolutely nothing violative of French law or of company policy. They have rights under law, and may very well exercise them in French courts. In any event, expect Mme. Le Pen to have some choice words about the craven behavior of Hollande & co., and to reap a new electoral windfall for her FN party.

    1. Jim Haygood

      Bank of France governor Christian Noyer was quoted by Bloomberg saying that the BNP case will encourage diversification from the dollar.

      This is as it should be. Using the reserve currency as a nationalistic weapon to shake down a French bank which violated no French law is noxious, as is Fatca which reflects a similar mentality.

      Increasingly the U.S. resembles the Soviet Union in its latter days, issuing presumptuous diktats to its occupied satellites. Extortion isn’t a sustainable economic policy.

    2. Yves Smith Post author

      This was not Obama. This was Benjamin Lawsky. Obama would never get tough with bank employees.

      As for your indignation, BNP Paribas, by having a branch in New York, which is what put it under Lawksy’s jurisdiction, is subject to US regulations as well. And how many of the employees in that were forced out are in the US and thus NOT subject to the protection of French employment laws?

      Get a grip. If you operate in a foreign country, you should expect to play by their rules. The violation of anti-money laundering rules by Standard Chartered and BNP Paribas were egregious. Now you can say the US can been capricious in enforcement. But the idea that the US should not enforce clearly stated, long standing rules is a non-starter, PARTICULARLY since the US stands ready to bail out Eurobanks by having put in place unlimited currency swap lines to the ECB.

      1. Fiver

        ” If you operate in a foreign country, you should expect to play by their rules.”

        But does anyone imagine the US would comply with the order of a French regulator regarding French sanctions on a country big US banks wanted to do business with? Might the legality of the sanctions themselves not be called into question, given they are baseless?

        Legality aside, the political damage here is not trivial. This is a huge French institution that might just as well be the French State so far as both elite leadership opinion and very likely a good many of the French people themselves are concerned. Globalization is already on a collision course with itself as the lines of power and authority and legitimacy have been stretched to the limit between the national and international elites. Another crack joins the growing lattice of tensions in an increasingly brittle Euroscape, with national elites coming under ever more severe internal pressures as the political and economic illegitimacy of corporate globalization finally fails national societies into some form of revolt.

        Big things have many beginnings.

      2. James Skinner

        The USA is claiming jurisdiction here because the transactions were in US Dollars, not because BNP Paribas had a branch in the US. Quite a stretch IMHO.

        1. Yves Smith Post author

          I suggest you learn how to read a complaint. The US would not have jurisdiction over BNP Paribas unless it has operations in the US. And BNP Paribas broke specific US laws. This is from the DoJ’s summary of the court filings (emphasis mine):

          According to court documents submitted today, BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, agreed to enter a guilty plea to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions. The agreement by the French bank to plead guilty is the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions…

          According to documents released publicly today, over the course of eight years, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system. BNPP engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions. BNPP routed illegal payments through third party financial institutions to conceal not only the involvement of the sanctioned entities but also BNPP’s role in facilitating the transactions. BNPP instructed other financial institutions not to mention the names of sanctioned entities in payments sent through the United States and removed references to sanctioned entities from payment messages to enable the funds to pass through the U.S. financial system undetected.

          In order to clear large dollar transactions, you need to have access to Fedwire. For a foreign institution to have access, you need to have an account with a Reserve Bank. That means having a branch or an agency in the US.

  3. Pelham

    Is there any way to assess whether this fine is on anything like the scale of business and profits that Paribas achieved by violating the U.S. sanctions? In other words, it may be that the bank made substantially more in profits than the $9 billion fine, which means that trampling the law underfoot is still good business.

    1. Christopher D. Rogers


      A few figures are being tossed around, the FBI in its press release on the case says that from 2004-2012 BNP Paribas enabled transactions in US dollars worth some US$8.8 billion, I think the WSJ or NYT came up with a different figure and Nils Pratley over at the Guardian came out with a figure of US$30 billion – Yves actually supplied a link to this or a post within the past two weeks, but if the FBI is to be believed, effectively for every US$ transaction enabled by BNP it received a US dollar penalty.

      Further, in May Credit Suisse was the first bank in a decade to not only receive criminal charges, but actually plead guilty to these criminal charges, which were tax related, it total, US authorities in two months have fined two European SIFI’s nearly US$12 billion, nearly US$9 billion imposed on BNP and US$2.5 billion imposed on Credit Suisse, this figure being larger than all fines to date paid by JP Morgan Chase for its criminality.

      I’ll mention one word, WACHOVIA, and another, HYPOCRISY – from my vantage point, and having undertaken a fair bit of research over these issues over the past three weeks, its seems a case of one rule for the Europeans, and another rule for Wall Street banks – as with the Alcoa FCPA case in January, it seems US prosecutors are also keen on keeping the goal posts moving around.

      For what its worth, I see no issue about sanctions busting against Cuba or Iran, Sudan though is another case, and US authorities spoke up the Sudan handle – Rowan Boswell-Davies has a decent post up on this and a big report has been issued on it from Thomson Reuters, which I’ve yet to read.

      If the charges were that great and severe though, you’d not be seeing plea bargaining, which is an insult to justice – you’d have seen a jury trial and jail time if the USA was actually ever to move away from the infamous late 90’s “Holder Memo”.

        1. monday1929

          Yves, we all know where you stand on these matters, and you have acknowledged we are dealing with “two bad guys”. I think your readers have trouble understanding why you seem to think U.S. “Laws” have any legitimacy, or any role in this case. The motivations are, as always, laced with evil intent, and you, in this instance, seem to see this as a simple legal issue.

  4. Guglielmo Tell

    “Money-laundering”?! Shame on You for publishing this kind of lies!! BNP was fined for carrying out business with Cuba, Iran and Sudan – countries that American oligarchs and political mafias want to starve to death! We’re talking absolutely legitimate business, such as tourism in the case of Cuba. So, the biggest money-launderers in the world accuse BNP and these countries of something that sounds like “drug dealing” when it’s just attracting tourists so to bring money to feed country’s own population! How dare You?! Shame! Shame! SHAME!!!!

    1. Yves Smith Post author

      You’ve just revealed you have no idea what you are talking about. From the Washington Post, and you can find broadly the same story in any financial source:

      France’s BNP Paribas pleaded guilty Monday to concealing billions of dollars in transactions for clients in Sudan, Iran and Cuba in violation of U.S. sanctions and agreed to pay $8.9 billion in fines, according to the Justice Department…

      Prosecutors say BNP, France’s largest bank, went to elaborate lengths to disguise illicit trans­actions with sanctioned countries.

      BNP used a network of banks in the Middle East, Europe and Africa with their own clearing codes to mask dollar-based transfers connected to Sudanese companies. Employees also removed information from wire transfers that could have revealed the identity of the countries blacklisted by the United States….

      The disguising of information about customers to hide their identity IS money laundering. It’s a clear violation of the Treasury and New York state AML laws. And did you miss that BNP Paribas pled guilty and agreed to have access to dollar clearing suspended for a full year, which is a huge penalty in and of itself?

      BNP Paribas and every major Eurobank would be dead if the US hadn’t offered currency swap lines to the ECB. Getting access to the largesse of the Fed in bad times and doing business in dollars generally means you have to play by the rules, like them or not. And as a foreigner, one might anticipate that you’d lack the clout to get less harsh treatment the way powerful domestic players can. This was stupid and arrogant and the French got caught.

      1. christine

        And this is why fewer and fewer countries want to play with the US… Sore loser with systematic double standards. Funny that De Margerie, Total CEO, just declared that “there really is no reason oil should be paid in petrodollar if transacted outside of the US.”

        1. Yves Smith Post author

          The pricing of oil in dollars is not meaningful. The issue is that the dollar is the reserve currency and there is no replacement remotely in sight.

          As for the anti-money-laundering violations, the reason that the US didn’t go after Wachovia was that the tidal wave of drug money that washed in during the crisis was one of the few things helping prop up US banks. The authorities did NOT want to go down that rabbit hole, which is what going hard after Wachovia would have exposed.

          By contrast, your humble blogger, who does not have great contacts, nevertheless knew in 2007 that “terrorist financing” and anti money laundering were top priorities not just for the US but for the ECB too. I knew a guy who was consulting to the Treasury on terrorist finance and he could get Trichet (head of the ECB) on the phone. The fact that a mid level guy could do that said what importance this effort had. If I knew this, BNP Paribas knew it in spades. They were fully cognizant of the risks they were taking.

          Do you regularly sympathize with stupid criminals? Just because the US has lousy foreign policies does not make BNP a good guy. There happen to be two bad guys in this story.

          1. christine

            True, there are bad guys pretty much everywhere. Corruption is endemic worldwide. The enormous difference is that only the US roam the earth is search of wars to wager to “boost” its economy… instead of cleaning house here, at home! And painting a rosy picture of the US economy “improving” when everyone with half a brain knows it ain’t so. Hegemony is cyclical. Time to fess up to the fact that this country is done as the lighthouse of the world.

          2. Bob G

            That the timing and target of the fines is so convenient has raised questions of a darker ulterior motive.
            From Paul Craig Roberts:
            “Putin’s bet is that European business interests will prevail over Washington’s European lap dogs. This is a hopeful and optimistic bet, but Washington is already at work to threaten and to undermine the resistance of European business interests. Using concocted charges, Washington has stolen $9 billion from France’s largest bank for doing business with countries disapproved by Washington. This was Washington’s warning to European business to comply with Washington’s sanctions. Washington even told France that the fine would be rescinded or reduced if France broke its contract with Russia to supply two helicopter carriers. Other such moves against European businesses are in the works. The purpose is to intimidate European businesses from opposing sanctions against Russia.

            Washington’s arrogance that Washington can decide with whom a French bank can do business is astonishing. It is even more astonishing that France and the bank would accept such arrogance and infringement of France’s sovereignty. France’s acceptance of Washington’s hegemony shows that one risk in Putin’s bet is that the bet assumes European business interests can prevail over Washington’s strategic interest.”

            1. christine

              Very interesting interview of Jim Willie by John B. Wells. Having followed Russia and China for quite some time, including the creation of BRICS, the trumped up charges against Dominique Strauss Kahn who had the nerve to want to audit the US gold and was a tad too cozy with Putin for Washington’s taste, the purchase of JPMorgan’s tower and vault by China, the delivery of tungsten bullions by the US to China, the refusal by the US to give back to Germany its gold, etc., etc., it is obvious to me (and to many others, worldwide) that Washington/WS have run out of steam, out of friends and out of options to help this country pay its debts, short of wars no one else wants. Hence the theft of so much land from the American people: amazing how much of this country HK, Singapore, Chinese and Russian Corps have purchased in the past decade. When people realize what was done right under their nose, heads will start rolling.

              PCR appears to doubt France’s ability to decide for itself. Here’s the kicker, though: France doesn’t deal very well with treason. Ask Chirac and Sarkozy…

      2. Guglielmo Tell

        You’ve just revealed You’re totally brainwashed with banksters’ technocratic ideology. Cuba pointed out many times that economic blockade qualifies for genocide in international law and is calculating the losses which get amounted over the decades. There is human damage, and in the international law it prevails over corporate technical definitions – as it’s written, not in practice. In practice, it’s the other way around. The tide is turning against the U.S. dollar, but didn’t turn it down yet. We’re talking mafia way of doing business – blackmail and extorsion – disguised with technicalities. The dollar is backed by the Pentagon – the largest recipient of American “welfare” – which also backs the Wall Street. BNP-Paribas obviously decided that expanding the business all over the world was a safer bet than investing into decrepit American economy, so it must be conducting plenty of business also with countries under lighter U.S. sanctions, but which American investors would rather stay away anyway (unless it’s Monsanto killing peasants somewhere and grabbing their land and alike). BNP may need dollars still, but is thinking ahead in time even purely in terms of business. They may have foreseen they might get caught. Being more aware of what the Pentagon, the IMF and the Wall Street busters are ACTUALLY doing all over the world, they know that from the point of view of the law, the righteousness is on the side of the victims, and if (or when) the hour to apply it for real comes, the law defining technicalities will be worth as much as the junk of the former billions in stock holdings. The background issue is banksters’ pretension to de-politize finance and present it all as a matter of nothing but technicalities thus thinking of themselves as eternal. But this just another ideology – politically perennial as all of them. Legally, a Nation under attack can rely upon “the state of necessity” – to do something not so legal for a greater good, such as national survival – and if BNP plunged itself into this with several nations, is not because of being “stupid” nor “arrogant”, but because of knowing that historically and legally American corporate arrogance is doomed.

  5. christine

    And one more development in “What’s good for the goose is good for the gander”… Too bad old-fashioned common sense is so profoundly escaping this country’s bought and paid for leaders… Let’s see what happens when American banks get the same treatment worldwide they keep trying to inflict on every other country. That ought to be good! Maybe justice will come from abroad…? Without bloodshed…

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