BNP’s ‘huge’ role in undermining U.S. Sudan sanctions behind looming tough penalty, sources say

June 19, 2014

By Brett Wolf, Compliance Complete

ST. LOUIS, June 18 – The pivotal role BNP Paribas played in helping Sudan sell oil in violation of U.S. sanctions is the major reason U.S. authorities are pushing for harsh penalties against the French banking giant, two sources with firsthand knowledge of the matter said.”BNP basically was the Sudanese economy. They were just huge in helping the government of Sudan evade U.S. sanctions,” one of the sources said.BNP’s role involved removing references to Sudanese parties from wire-transfer messages, so U.S. dollar oil payments could clear through New York and move into accounts controlled by Khartoum, the sources said. The sources declined to name the buyers of the Sudanese oil or to say what Khartoum did with the revenue.

The dollar is the primary currency for the global oil trade.

The prohibited transactions ran into the “many billions of dollars,” and their “sheer volume” weakened the U.S. sanctions from 2002 and “well beyond 2009,” the other source said. He added that the sums involved and the damage to sanctions “factored into the mix” as authorities calculated the approximate size of the penalty that would be demanded from the bank.

When asked whether U.S. authorities plan to pursue criminal charges against any current or former BNP executives, one of the sources said such decisions will not be made until after the case against the bank has been resolved. “That’s something that is being looked at closely,” the source said.

Both sources spoke on condition of anonymity because they were not authorized to discuss the matter.

U.S. prosecutors have been pushing the bank to plead guilty to unspecified criminal charges as part of a resolution that is expected to include a multi-billion dollar penalty, sources have said. Neither source cited above was willing to say precisely how much U.S. authorities have sought during the continuing negotiations. Reuters has reported a figure of $10 billion.

Washington imposed sanctions against the government in Khartoum in October 1997 over its purported links to groups regarded as international terrorist organizations. The United States imposed new sanctions against the Khartoum in May 2007 over its suspected complicity in violence against the people of Darfur.

BNP’s main office in Paris forwarded a request for comment to New York-based spokeswoman Cesaltine Gregorio, who declined comment.

A spokesman for the New York Department of Financial Services declined comment, as did a spokesman for the Justice Department. A U.S. Treasury Department spokeswoman also declined to speak about the matter, citing a policy of not commenting on “possible or pending investigations.”

A London-based spokesman for the Sudanese government did not respond to a request for comment.

The prohibited transactions continued for roughly five years after European bank ABN AMRO in December 2005 became the first to be penalized for stripping information about sanctioned parties from wire transfer messages to clear U.S. dollar transactions through New York, one of the sources said. This was evidence BNP Paribas’ actions were willful, because the bank engaged in similar behavior despite “being aware of the enforcement landscape.”

BNP provided more oil-related banking services to Sudan than any other bank and “made a determination” that it wanted to bank the U.S.-sanctioned country, one source said. He was unable to say precisely what percentage of Sudan’s banking BNP handled, but said it was the “dominant player.” The source added that the bank also violated U.S. sanctions by doing business with Iran and Cuba.

The dollar value of prohibited transactions processed by BNP was much larger than those of several other European banks that have been penalized by the United States for stripping wire transfer messages to clear transactions through New York.

But unlike the other banks, the lion’s share of BNP’s prohibited transactions involved Sudan, not Iran. Until 2008, U.S. Iran sanctions had a financial loophole known as the “u-turn” that allowed Iran-linked oil transactions to be cleared through New York as long as certain criteria were met.

This loophole sought to protect the U.S. dollar as a primary currency for trading oil by letting U.S. trade partners keep buying Iranian crude in dollars. No such loophole ever existed for transactions involving Sudanese oil, however.

“When dealing with Sudan they had no u-turn-eligible transactions, so all of them counted (against BNP). That’s a huge difference,” one of the sources said.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Accelus compliance news on Twitter: @GRC_Accelus)

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