Opinion

Ben Walsh

from Counterparties:

Sanctions mean business

Ben Walsh
Jun 4, 2014 21:26 UTC

BNP Paribas may soon find out the cost of allegedly violating US sanctions: about $10 billion. The US Justice Department is reportedly close to levying the biggest fine ever paid by a single bank against the French financial institution for doing business with countries like Sudan and Iran. The size of the punishment would far outstrip Credit Suisse’s $2.5 billion fine for helping Americans evade taxes. Like Credit Suisse, BNP is expected to plead guilty to criminal charges.

DealBook’s Jessica Silver Greenberg and Ben Protess report that several months ago BNP “thought it had a secret weapon to avoid that fate altogether”: a memo drafted in 2004 by outside counsel. Based on the memo, BNP executed transactions for Sudan, but attempted to exclude any US-based employees from the work. After reviewing the memo, however, US prosecutors determined that it did not cover the charges the bank faced: that it has processed transactions on behalf of Iran and Sudan through its US operations.

The French government’s reaction to the negotiations between BNP and US law enforcement has been rather fluid. Just two days ago, French officials were wary of politicizing the fine, at least publicly. Privately, however, the bank had been enlisting the support of French government officials for some time. Yesterday, that tactic seemed to shift into the media, with French foreign minister calling the potential fine “unfair and unilateral”. And today, the French finance minister called the penalty “inequitable”. French president Francois Hollande now plans to talk to President Obama about the “disproportionate” nature of the fine directly at a dinner commemorating D-Day on Friday. That’s not exactly, Bess Levin notes, a low-key way of raising the issue.

The French government’s response is not just awkward because BNP is France’s largest bank by market cap. Dealbreaker’s Jon Shazar writes that “France has spent most the post-crisis period pushing to hold banks accountable. But the Americans holding a French bank accountable? That’s where they draw the line”.

Beyond a multi-billion dollar fine, US prosecutors appear to be after another form of punishment. They want to strip BNP of its authorization to transfer dollars in and out of the US, which is called “dollar clearing” and is an essential service for any global bank.Matt Levine thinks US prosecutors’ focus on dollar clearing is a way of ratcheting up the penalties of criminal charges against financial institutions. “After BNP Paribas, no one will really want to be the third big bank to plead guilty to crimes”. That may or may not be the outcome the Justice Department is looking for. — Ben Walsh

from Counterparties:

FIFA’s fouls

Ben Walsh
Jun 2, 2014 21:59 UTC

Soccer’s international governing body had a really bad weekend. Twelve days before FIFA kicks off the world’s largest sporting event in Brazil, the New York Timespublished details of alleged match fixing in the run up to the last World Cup in South Africa. Then the Sunday Times (paywall: see the Guardian) released the latest and most damningly detailed report of corruption in Qatar’s successful bid to host the 2022 World Cup.

The match-fixing report mixes seemingly amatuer criminal techniques with sophistication and global reach emanating from a Singaporean front company. FIFA’s report investigated a total of 15 games, and the report is remarkably blunt in its conclusion: “Were the listed matches fixed? On the balance of probabilities, yes!” For example, the day of a match between South Africa and Guatemala ahead of the 2010 World Cup, a referee for the game deposited $100,000 in $100 bills in a bank in South Africa. According to the NYT’s Declan Hill and Jere Longman, the referee put in a questionable performance: “Even to the casual fan, his calls were suspicious — he called two penalties for hand balls even though the ball went nowhere near the players’ hands”.

The NYT’s report comes on the back of several high-profile reports of match fixing.Earlier this year, a match fixer claimed his financial backing enabled Nigeria and Honduras to qualify for the last World Cup. In 2013, Europol detailed its suspicions regarding more than 380 club matches. Among those were games in the Champions League, the highest level of European club competition.

  •