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June 30, 2014 6:45 pm
The French bank’s punishment for conducting business with countries subject to sanctions, which will include a guilty plea and a one-year suspension from clearing certain dollar transactions, is expected to be announced on Monday in New York after US equity markets close.
BNP’s settlement is a setback for the bank that largely weathered the US and European financial crises. It comes after failed attempts by French politicians to avert a guilty plea, which they feared would have ripple effects through the country’s economy.
The settlement sets a record for a US sanctions case and marks the first time a bank has pleaded guilty to violating laws governing economic sanctions. The fine – for transmitting $30bn in transactions for Sudan, Iran and other countries – is more than four times the $1.9bn paid in 2012 by HSBC for violating sanctions and transmitting money belonging to drug cartels.
The fine will be split evenly between federal agencies, including the Department of Justice and Office of Foreign Assets Control in the Treasury Department, and state authorities, with at least $2bn going to New York’s Department of Financial Services and the rest to the Manhattan district attorney’s office.
About a dozen BNP employees will lose their jobs, including several who have already left the bank, these people say. The most senior executive caught in the case is Georges Chodron de Courcel, chief operating officer, people familiar with the matter have said. The 64-year-old has announced plans to retire.
DFS had also sought the removal of Vivien Levy-Garboua, a one-time head of compliance for BNP in the US, this person said. Neither executive has been accused of wrongdoing. Both were unavailable for comment.
BNP adopted a clawback regime in 2009, which applied to its 2010 pay rounds. While the bank told employees to stop dealing with Sudan, Iran and Cuba in 2007, it later found evidence that some transactions in breach of US sanctions had continued until 2011.
BNP planned to hold a conference call for analysts on Tuesday to discuss the impact of the settlement. The French bank is expected to say that it will finance the $8.9bn fine from retained profits, without needing to cut its dividend or issue bonds, according to a person close to the bank.
The French bank made €4.8bn of net profit last year, which analysts expected to rise to about €5.6bn this year. However, the bank is likely to say that it is reviewing a plan to increase its dividend payout ratio to 45 per cent by 2016, reflecting its need to restrain dividends to retain more profits.
Last year it paid a €1.50 dividend, equivalent to a 40 per cent payout ratio. Derivative contracts show the markets pricing in a dividend of €0.35 per share, down from expectations of €2 per share in late April, according to Bloomberg data.
The biggest hit to BNP’s business will be the suspension of dollar clearing for clients of its oil and gas unit where US authorities believe the bulk of the illegal transactions with Sudan occurred. Bank officials feared far worse – that the suspension would apply across the board to all of its businesses, in effect shutting it out of global dollar-based transactions.
The bank will also not be allowed to clear transactions for other banks. The suspension is expected to go into effect in January, allowing the bank’s clients time to move their accounts, people familiar with the matter say.
US authorities sought tougher penalties because of the scale of the sanctions-busting activity – $30bn in transactions between 2002 and 2009 – and their findings that some of this activity had continued even after BNP was told to stop and investigations had started, these people say.
DFS alleges that more than $100bn in illegal transactions are at issue in the case, which includes instances of bank employees seeking to to evade detection in New York by stripping information identifying Sudanese or Iranian entities that were subject to sanction.
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