The record breaking financial penalties -- approximately $9 billion -- assessed in connection with this summer’s agreement by BNP Paribas, S.A., a French bank, to plead guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act (TWEA) serve as a wake-up call to both U.S. and foreign financial institutions and their customers regarding the importance of compliance with U.S. economic sanctions and related export controls.
According to a Justice Department press release, the agreement by BNP Paribas was the first time a global bank has agreed to plead guilty to large-scale, systemic violations of U.S. economic sanctions. Although the BNP Paribas case represents a high water mark, it is only one of a string of recent enforcement actions focused on the financial sector that have involved close cooperation among the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of Justice, and U.S. banking regulators. All indicators point to continuation of this trend.
Given the size of the settlement and the number of other banking institutions that may have played a role in the investigated BNP Paribas transactions, it seems likely that this guilty plea will not be the last. This investigation is almost certain to spur related inquiries involving global financial institutions. Furthermore, the escalating enforcement scrutiny comes at a time when sanctions targeted at the financial sector are becoming more and more complex, both in the U.S. and internationally -- the Ukraine-related sanctions being a case in point.
Miller & Chevalier's leading export and sanctions lawyers explored some of the specific lessons that can be learned from the BNP Paribas investigation as well as other recent enforcement actions against financial institutions -- lessons involving how to deal with both federal and state investigators, the care that must be taken by companies and their financial institutions when initiating and handling currency transactions especially in U.S. dollars, the role of outside counsel in dealing with potential sanctions violations, and the dangers of a weak and/or inadequate compliance unit. The discussion focused on precisely what went wrong, and how financial institutions and their customers can anticipate and prevent similar problems going forward while at the same time interpreting and reacting to multiple new regulatory requirements.