French bank handled $1.7 billion in illegal business with Cuba

Posted on Wednesday, 07.02.14

French bank handled $1.7 billion in illegal business with Cuba
BY JUAN O. TAMAYO
JTAMAYO@ELNUEVOHERALD.COM

The largest bank in France, BNP Paribas, disguised $1.75 billion in
illegal transactions with Cuban entities as part of a long string of
violations of U.S. sanctions that brought it a record $8.9 billion in
forfeitures and fines, according to U.S. prosecutors.

A prosecution document on the case said BNP already has corrected its
ways, "including terminating all business and prohibiting new business
in any currency with sanctioned entities" in Cuba, Iran and Sudan.

It was not clear how the case would impact Cuba, already restricted by
the U.S. embargo and U.S. laws and regulations on money laundering and
terrorism financing. BNP shuttered its Havana office last year, after it
came under U.S. investigation.

"This is a very important bank, but it doesn't mean other banks won't be
able to do transactions," said Luis F. Luis, a former chief economist at
the Organization of American States who follows Cuban banking.

The U.S. Justice Department on Monday announced an agreement with BNP,
under negotiation for several months, for the bank to forfeit $8.83
billion and pay a $140 million fine for violating U.S. sanctions on the
three countries from 2000 to 2010.

The bank pleaded guilty to criminal charges in New York State and is
expected to plead guilty to federal charges within a few weeks.

BNP officials knew and approved of repeated violations by leaving out
the names of the sanctioned countries from transactions sent to the
bank's New York office, according to the 36-page "Statement of Fact"
filed by U.S. prosecutors in New York.

"During the course of its illicit conduct, BNP processed thousands of
U.S. dollar-denominated financial transactions with Sanctioned Entities
located in Cuba, with a total value in excess of $1.747 billion," the
document said. The use of U.S. dollars anywhere is subject to U.S. laws
and regulations.

That amount included more than $300 million in transactions with an
enterprise identified only as "one of Cuba's largest state-owned
commercial companies" and one that is on the U.S. watch list of
"Specially Designated Nationals," the document added.

Bank employees "directed that transactions involving Cuba omit
references to Cuba in payment messages" to hide them from U.S.
watchdogs, it said. And after three transfers in 2006 were blocked
because they mentioned Cuba, BNP resubmitted them without mention of
Cuba and through different U.S banks.

"From at least 2000 up through and including 2010, BNP, through its
Paris headquarters, conspired with numerous Cuban banks and entities as
well as financial institutions outside of Cuba to provide U.S. dollar
financing to Cuban entities in violation of the U.S. embargo," the
document added.

The use of such large quantities of U.S. dollars in the BNP deals is
surprising because Cuban banks generally use euros to avoid U.S. blocks,
said a former Havana banker who defected in 2005 and asked to remain
anonymous because he still has family in Cuba.

Although the Statement of Fact did not identify the enterprises involved
in the violations, it included several examples of illegal "Cuban Credit
Facilities" that showed they covered a broad range of Cuban government
financial and commercial activities.

One of the facilities involved U.S. dollar loans to a company in
Netherlands to finance the company's purchase of crude oil products that
were to be refined in and sold to Cuba, according to the document.

Another facility involved U.S. dollar loans for "one of Cuba's largest
state-owned commercial companies" identified in the document only as
Cuban Corporation 1.

The facilities "were structured in highly complicated ways," it added.
And BNP employees confirmed to U.S. investigators that the complexities
"had no business purpose other than to conceal the connection to Cuba."

The $8.9 billion in forfeitures and fines amounts to the largest
sanctions violations case ever brought by the Justice Department, and
was reported to be the largest in any criminal case against a U.S. bank.

Several European and other banks have paid stiff fines in recent years
for violating U.S. regulations on business with Cuba, Iran, Sudan, Syria
and other countries sanctioned for weapons development, human rights
abuses and other issues.

In 2011, ING bank in the Netherlands agreed to pay $619 million to
settle allegations of illegal dealings with sanctioned countries. Two
years earlier, Credit Suisse Bank had paid $536 million and in 2004 the
Swiss UBS bank had paid $100 million for similar cases.

But BNP's violations were portrayed as more brazen and broader in the
Statement of Fact, agreed to by both U.S. prosecutors and bank officials.

Shortly after one Cuba-related transfer was blocked in 2006, a senior
bank attorney in Paris consulted with a U.S. law firm on whether the
block "could … trigger a retroactive investigation" by U.S. authorities,
the document said.

The U.S. law firm replied in a memorandum that "the risk of serious
regulatory sanction … is such that BNP Paribas should consider
discontinuing participation in any such U.S. dollar facility," according
to document said.

But after a junior BNP attorney forwarded the memorandum to a bank
officer in charge of complying with laws and regulations, he was
reprimanded by the senior attorney "who insisted that 'it was a draft
memo and should not have been distributed to just anyone.'"

"We now no longer have control over its status. Do not do anything more
on this file without talking to me about it," the senior lawyer told the
junior, according to the document.

The junior attorney, it added, responded that the compliance officer
would "delete the e-mail."

Source: French bank handled $1.7 billion in illegal business with Cuba -
Cuba - MiamiHerald.com -
http://www.miamiherald.com/2014/07/02/4215549/french-bank-handled-17-billion.html