KYC/CDD Issue: Projected BNP fine riles some French


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The political and economic push-pull of AML/CTF due diligence and KYC/CDD is evident yet again, this time in France’s reaction to the BNP Paribas troubles.

News of the BNP Paribas fine potentially reaching $10 billion dollars is making headlines in the U.S. and Europe, and criminal charges likely will accompany the fines. According to numerous sources, BNP from 2002 to 2009 ignored some KYC/CDD practices and conducted large amounts of business with sanctioned nations including Iran, Cuba, and Sudan, and BNP is alleged to have “stripped” coding in the transactions in order to mask their origin in order to move them through the U.S. clearing systems in violation of OFAC sanctions.

BNP’s internal investigations have acknowledged as much, according to the Wall Street Journal, and the massive bank had set aside over a $1 billion in order to cover what it predicted would be the fine. However, the figure is now expected to be 10 times that amount, and now some French authorities are arguing that the U.S. government has overreached in its unilateral imposition of sanctions and its imposition of U.S. regulations on French business and banking interests.

The Journal quoted French legislator Jacques Myard as describing the predicted $10 billion fine as yet another “trademark of Washington’s judicial and trading hegemony.” Other French leaders have joined the chorus of opposition to the fine, and President Francois Hollande is expected to raise the issue with U.S. President Barack Obama when they meet next week.

The French outcry is similar in some ways to the European pushback against U.S.-driven sanctions of Russia for its territorial aggressions against Ukraine. European business interests, particularly in Germany and England, have lobbied their governments to minimize or reject sanctions because of the high volume of trade they conduct with Russia.  Given the billions of dollars of profit at stake due to sanctions, the old-style geopolitical responses to military or terrorist aggressions have less weight, as evidenced both by France’s reaction to BNP’s covert servicing of sanctioned customers and the debates on whether and how to impose sanctions against Russia.

For those in the financial-services sector, it’s certainly an interesting question about whose regulations and whose interests should prevail. And it’s a question that appears to be gaining in complexity as business relationships and trading alliances transcend the borders and blocs so well established in the 20th century. That said, the KYC/CDD and transaction-monitoring requirements in place to achieve AML/CTF compliance are well known, as is the OFAC list, and after-the-fact complaints likely will fall on deaf ears, at least in the U.S.