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Monday
Feb172014

BNP Paribas faces penalties for potential U.S. sanctions violations

BNP Paribas has set aside $1.1 billion for a potential settlement with federal and state government agencies that are investigating possible U.S. sanctions violations.

The French bank made the disclosure while announcing its annual earnings results in a press release on Thursday.

The U.S. Justice Department, Federal Reserve, Treasury's Office of Foreign Assets Control and U.S. Attorney's Office in Manhattan, along with Manhattan's district attorney and New York's financial regulator, Benjamin M. Lawsky, are investigating the bank, the New York Times' Dealbook said on Friday.

The investigation is centered on whether BNP Paribas processed transactions for companies and countries that the U.S. government has sanctioned. The transactions may have been routed through the U.S. financial system from 2002 to 2009. 

The bank said in its press release that its review had "identified a significant volume of transactions that could be considered impermissible under U.S. laws and regulations including, in particular, those of the Office of Foreign Assets Control (OFAC)."

It said it had "presented the findings of this review to the U.S. authorities and commenced subsequent discussions with them."

Dealbook said that a person briefed on the matter identified the countries as Sudan, Iran and Cuba, but the company did not name them in its press release.

The bank said that the size of actual penalties in this matter could be "very different" than the $1.1 billion estimate. Final penalties would be linked to the number of impermissible money transfers, as the bank acknowledged in its press statement.

The $1.1 billion projection impacted the bank's fourth-quarter profit as net income fell 76 percent to $73 million.

The United States has brought a number of sanctions-related charges against banks in recent years. The Royal Bank of Scotland Group PLC paid $33 million to settle an OFAC investigation in December.

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Julie DiMauro is the executive editor of FCPA Blog and can be reached here.