New York and Paris - BNP Paribas is likely to be suspended from converting foreign currencies to dollars on behalf of clients in some businesses for as long as a year, according to sources close to the matter, an untested and severe penalty for the French bank accused of persistently violating US sanctions laws.
The department of financial services in New York state, headed by Benjamin Lawsky, is near a deal with BNP Paribas on the ban on unit conversions, known as dollar clearing. The bar would be the first of its kind for a global bank.
The temporary ban was expected to be limited to business lines related to the underlying transactions in question, and it would span various regions, a source said on Wednesday. Business lines under scrutiny include oil trade financing.
“It won’t be a death mallet, but it’s a serious hit,” the source said.
BNP Paribas clears hundreds of billions of dollars through New York every day, serving customers in trade finance, commodities, custodian accounts and foreign exchange.
Much global business is done in dollars, and dollar clearing is a key banking activity. It was unclear when the ban would take effect. It might be phased in.
It is also unclear if BNP Paribas has a workaround to soften the blow, such as identifying another bank to temporarily meet clients’ needs.
Lawsky’s office proposed the ban as one condition for not revoking BNP Paribas’s licence to operate in New York in light of the lengthy alleged violations, Reuters reported last month.
The bank was also expected to plead guilty to a federal criminal charge and pay $9 billion (R95bn) as part of a larger settlement with multiple authorities that could be announced next week, sources said.
Spokespeople for the bank, prosecutors and the banking regulator declined comment. Chief executive Jean-Laurent Bonnafé told shareholders last month that the bank had improved its control operations to avoid sanctions-related failures in the future, without providing specifics.
Authorities are probing whether BNP Paribas evaded US sanctions relating to Sudan, Iran and Cuba from 2002 to 2009.
The inquiry has turned up $100bn in deals processed by BNP Paribas that disguised identifying information to pass through the US financial system without raising red flags, Reuters has reported. About $30bn of the transfers specifically violated US sanctions.
Banking experts note that it could be hard for BNP Paribas to win customers back after other banks have met their dollar-clearing needs. – Reuters