BNP Paribas, Trading With the Enemy

Jail Time Seems Warranted for American Citizens Who May Have Participated in this Scheme

My random thoughts on the recent BNP Paribas matter:

  • French government officials are upset with the United States. What’s new, right? This time they’re cringing over a somewhat hefty fine imposed by the United States on BNP Paribas (BNPP), one of the largest financial institutions in the world that happens to be headquartered in Paris. In essence, it is a French bank with deep French roots. So it’s a matter of national pride.
  • BNPP officials created an elaborate scheme to evade U.S. economic sanctions. These sanctions are designed to combat, among other things, the global war against radical Islamic terror. BNPP was caught helping facilitate financial transitions to terrorist states such as Iran, as well as a rogue regime just 90 miles from U.S. shores, Cuba. As detailed by DOJ officials last week, it was a conspiracy to willfully and knowingly violate executive orders that prohibited the exportation, directly and indirectly, of services from the U.S. to Cuba, Sudan and Iran.
Raul Castro
Raul Castro and other beneficiaries of the foiled BNP Paribas scheme are upset: “Once again, the United States government is ignoring the sweeping international rejection of this criminal and failed policy against our nation,” Cuba’s Foreign Ministry said in a statement published in official media on Thursday. “Moreover, with these actions it is ignoring the growing calls from several sectors in U.S. society in favor of a fundamental change in policy toward Cuba,” the statement said (Available from Reuters). P.S., to critics of U.S-Cuba policy who claim that U.S. sanctions do not work, closely review this case. You’ll understand why you’re, maybe, half right.
  • BNPP made it easier for bad actors, including terrorists, human rights abusers, and other criminals, to plot against and undermine United States interests. Criminals need money. Without money, it becomes just about impossible to plot and scheme. The close to $9,000,000,000 fine was small, at least when compared to the totality of what BNPP officials did over a span of more than a decade. It also appears that BNPP was not the only bank up to no good as there seem to be several unnamed parties that should also be brought to justice.
  • Legal heuristics should be left to the classroom, not the boardroom. If you’re going to engage in dollar transactions, there is just about no way to do so without running afoul of U.S. sanctions on places such as Iran, Sudan, and Cuba. BNPP officials appear to have been playing legal tricks and were gaming the U.S. enforcement system. They thought they’d never get caught.
  • The moment BNPP devised and set up the scheme to “avoid” U.S. sanctions, it is like that old exclusionary evidence rule we learn in law school, everything that came afterwards was fruit from the poisonous [transaction] tree. It was illegal. Period. End of the story. This is especially true in the case of Cuba sanctions because, unlike Iran and Sudan, the Cuba sanctions are anchored in an older set of laws, the Trading with the Enemy Act (TWEA) that makes it just about impossible to do anything without U.S. government authorization.
  • U.S. taxpayers have invested a great deal of money, and national treasure, to combatting the global war against radical Islam. It may not be important to certain people in Europe but, then again, they were not attacked on 09.11.01. You’d think a country ravaged by Adolf Hitler’s war machine, would know better than to collude with terror states and other global bad actors. Then again, this is the same bank that recently used Adolf Hitler images in a training video. Some folks over there just don’t seem to care.
  • You can get access to the U.S. Government documents about this case here. Based on the materials released by the Justice Department, BNPP is real lucky. What they were doing merits criminal prosecution. If there were any U.S. citizens involved in the legal chicanery, they should face prison time for what they did and failed to do. Prior DC Dispatches posts are available here and here.
  • Finally, the U.S. Congress should initiate oversight investigations. This is not the first time BNPP has run afoul of economic sanctions and this will not be the last time a major international business interest does it. In this particular case, it appears that the BNPP compliance team, as well as some its lawyers, tried repeatedly to warn the company that something was amiss. Senior officials opted to ignore them. Based on my cursory reading of the DOJ materials, there area a few sanctions loopholes that Congress should revisit revisited and, if warranted, closed shut so that folks will think twice before trying to copy this somewhat not to original sanctions evasion scheme.
  • If you’d like a private consolation on this issue, or on related compliance with U.S. economic sanctions and export controls laws, as well as how this all translates politically in this town, give me a call.
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