Guilty: BNP Paribas admitted laundering $9 billion in New York-based wire transfers for countries under U.S. economic sanctions. More than half of the acknowledged illicit transactions at the bank were done on behalf of criminal enterprises in Sudan, including customers believed to be involved in narcotics and arms smuggling and the slave trade. The actual amount of money laundering at the bank’s New York offices between 2004 and 2012 was a much larger sum, surely over $20 billion per year, much of it involving government-owned enterprises in Iran, but the bank negotiated a plea agreement in which it admitted only a tiny fraction of the alleged infractions and agreed to pay just $9 billion in penalties. The government of France, where BNP Paribas is based and is the largest bank in the country, had interceded in the case a month ago, complaining that the proposed penalties were too large. But the objections became much softer after officials in France had looked at the files. The bank had kept systematically false records and had worked through a bewildering array of front organizations to disguise the transactions in a scheme worthy of Enron.
The investigation went on for at least three years, mainly because the bank steadfastly refused to cooperate with officials. The bank continued its money laundering activities even after it was notified that it was the target of a criminal investigation. This lack of cooperation is part of the explanation for the size of the $9 billion penalty. The scale of the conduct at issue appears to be a larger factor, though. It is the largest single monetary penalty ever anywhere, as far as I can recall, but it does not look so large when you compare it to the sums of money involved, not to mention the actual lives affected. In addition to the monetary penalty, the bank has agreed not to conduct any wire transfers this year between the United States and any other country, and 30 employees are barred from working for the bank, including several who have left already. For their part, regulators have agreed not to revoke the bank’s licenses to conduct banking and securities trading in the United States, a result that would surely have come about had any of the cases resulted in a conviction at trial. The bank had already put in place, earlier this year, internal controls intended to catch its bankers when they conduct transfers for prohibited organizations.
It is a measure of the continued esteem of the banking sector that the severe penalties available under the law were never considered. A lesser-known non-bank enterprise facing similar charges would most likely face criminal forfeiture of the entire enterprise, with executives drawing multi-year jail sentences.
Astute readers will notice that while disguising the transactions of criminal enterprises is a crime in every country, and this particular case involved conduct in several countries, only one investigation was undertaken, it was strictly limited to sanctioned countries, and it happened only after a long delay. Banking regulators are mostly not inquiring too closely about banks’ black-market ties because they are afraid of what they will find.
Anonymous Internet messages and text messages led to a run on First Investment Bank (Fibank), Bulgaria’s third largest bank, last Friday. Depositors withdrew 5 percent of deposits from the bank in less than three hours, prompting the bank to close early for the day and authorities to step in. Several arrests were made over the weekend. Not much is known about the plot to discredit the bank, but traders in stock futures, currency, and swaps would stand to make millions of dollars in less than an hour with advance knowledge of this kind of campaign. Political insiders too might try to sway voters by concocting a crisis. Things seem to have returned relatively to normal this week for Bulgaria’s banks. The European Commission approved a $2 billion line of credit as a precaution.
Raising capital: Deutsche Bank is seeking a buyer for two North American cargo terminals. The two terminals are located in British Columbia and New Jersey. The bank spent $2.3 billion to buy the cargo terminals in 2007, borrowing half that amount. In seven years the cargo operation has recorded losses around $1.7 billion, much of that going to debt service. Now industry analysts think the two terminals may fetch around $1 billion. Separately, Deutsche Bank has sold its U.S. energy portfolio to Citibank.
Leak: Goldman Sachs showed how easy it is to leak customer data when a worker inadvertently directed an email message to a gmail.com address instead of the intended internal gs.com address. The message contained “massive” amounts of identifiable customer data. Ever since, Goldman Sachs lawyers have been seeking a court order authorizing Google to delete the errant message. Pending that order, Google has sequestered the message in question so that the account holder will not see it.
Ailing: Jamie Dimon, CEO of JPMorgan Chase, has cancer. His condition is thought to be fully curable, but the illness is surely a sufficient excuse to get out of his job, if Dimon were looking for an exit strategy.
Holding the bag: Bank of New York Mellon is stuck with $500 million in money Argentina had intended for bondholders. The bank cannot forward the money to the intended recipients because a federal court has ordered Argentina to stop making payments on its international debts. The court is expected to direct the bank to return the funds to Argentina. U.S. courts have jurisdiction because the bonds were originally issued in the United States.