French bank BNP Paribas (BNP) recently announced it has set aside $1.1 billion to cover the anticipated cost of violations of US economic sanctions and anti-money laundering rules. The bank's own internal investigation revealed a large number of payments involving sanctioned countries. In addition, US investigators — including the Justice Department and the Treasury Department's Office of Foreign Assets Control (OFAC) — are focusing on whether BNP violated US laws by disguising transactions with Iran, Sudan and Cuba.
BNP is only the latest in a string of foreign banks that have agreed to pay billions in fines when faced with increasingly aggressive US regulators seeking to punish Iran for its nuclear program. BNP’s budget of $1 billion for potential penalties is indicative of the US enforcement environment, as sanctions violators have faced stiffer penalties in recent years. In January 2009, the UK’s Lloyds TSB Bank Plc was the first to pay a substantial $350 million fine for masking the origin of payments in an effort to evade US sanctions. In 2012, three banks paid a combined total of $3.2 billion in fines to settle US allegations of money laundering and improper transactions with countries like Iran, Cuba, Libya, Myanmar and Sudan.
BNP's statement comes at a time of increased US scrutiny of foreign banks that engage in deceptive activities while processing payments connected to countries subject to US economic sanctions. Tighter US sanctions and political tensions — in addition to the very real threat of criminal prosecution for bank executives — have made foreign banks more willing to cooperate with US investigators and disclose transactional information, share account data and monitor payments.
Businesses can avoid significant penalties by recognizing the inherent risk in disguising information related to a sanctioned country, entity or person when a transaction involves even a minimal nexus to the US.