10 ms·

A Grieving Father Pulls a Thread That Unravels BNP’s Illegal Deals

90 points by r0h1n 12y ago

protonfish 12y ago
Were any people actually convicted and punished with prison time, or was the resolution for a bank to have to give up some money?
- snarfy 12y ago
  They mentioned criminal penalties, but no mention of jail times. Tens of billions in transactions, 8.9 billion in fines. It was probably worth it even after getting caught.
  - scotch_drinker 12y ago
    They are likely to also be forbidden from dollar clearing for a time, possibly up to a year. This is an unheard of penalty and is actually very punitive. It's a new strategy by the US prosecutors and there was a good Planet Money podcast recently on what it means. Essentially, because we control the reserve currency of the world, we control the ability to transfer foreign currencies into dollars. This is a very powerful thing to control and being restricted from dollar clearing will likely be pretty painful.
    - joosters 12y ago
      Yes, they are banned from some dollar-based transactions for a year, from the start of 2015 http://www.bbc.co.uk/news/business-28099694 http://www.bbc.co.uk/news/business-28099694
      - joezydeco 12y ago
        Here's the link to that Planet Money podcast. It's a very well-done story, but frustrating that in the end nobody is going to jail. http://www.npr.org/blogs/money/2014/06/18/323045793/episode-547-how-to-punish-a-bank http://www.npr.org/blogs/money/2014/06/18/323045793/episode-...
    - Scoundreller 12y ago
      Why not just fine them more? This embargo just forces groups to come up with creative solutions around dollar clearing that could harm the dollar's status as a reserve currency.
  - joosters 12y ago
    With the size of the fine, there is no chance that it was worth it (to the bank). This fine is over four times bigger than the previous record fine ($1.9 billion, HSBC, also for sanctions violations) However, it could have been worth it to the individuals who arranged the transactions and (presumably) got large bonuses as a result.
    - dragonwriter 12y ago
      > With the size of the fine, there is no chance that it was worth it (to the bank). This fine is over four times bigger than the previous record fine ($1.9 billion, HSBC, also for sanctions violations) The previous record fine of a European bank by the US wasn't HSBC's $1.9 billion for sanctions violations, it was Credit Suisse's $2.6 billion for tax evasion. http://money.cnn.com/2014/06/30/investing/bnp-paribas-sanctions-fine/ http://money.cnn.com/2014/06/30/investing/bnp-paribas-sancti...
  - dragonwriter 12y ago
    > Tens of billions in transactions, 8.9 billion in fines. It was probably worth it even after getting caught. For the bank? It would have to be retaining a ludicrously high share of the value of each transaction for that to be true -- the transactions were $30 billion, so BNP Paribas would have to have retained nearly a third of the values of the transactions it concealed to break even with a $9 billion fine.
    - protonfish 12y ago
      Banks are not people. Was it worth it to the individuals who perpetrated the crime?
      - rtpg 12y ago
        Well 13 of them just lost their (well-paying) jobs so maybe not
        pessimizer 12y ago
        Would they have kept those jobs (and would those jobs have been as well-paying) if they hadn't been doing those deals? Having to stop mugging people isn't usually considered part of the punishment for a mugger.
        protonfish 12y ago
        I have lost my job for not being enough of a "team player." Banksters lose their jobs if they violate international law to fund terrorist murder. I hope the stinging from their slap on the wrists isn't too painful. You see, wealthy bank employees have much more sensitive skin than us average folk.
joosters 12y ago
A conspiracy theorist might note that all the recent huge banking fines have been against non-US banks. Could it be that US prosecutors are much keener to investigate foreign banks and do not look as closely at banks back home? Or are the US banks miraculously less corrupt?
- bernardom 12y ago
  From TFA: "It is a cautionary tale of how European banks, spotting a lucrative business opportunity that American rivals shunned, opened their doors to countries under sanctions and ultimately exposed their reputations to the stain of criminal cases."
  - joosters 12y ago
    How do we know that American banks shunned it? They too could have been disguising transactions and hiding illegality. It's not like US banks are known for avoiding 'lucrative business opportunities' that aren't entirely legal. Perhaps the whistleblowers required haven't come forward, or perhaps the investigators just haven't looked too hard...
    - nickff 12y ago
      >"How do we know that American banks shunned it?" We can never prove this, as an absence of evidence is not evidence of absence.
- the_ancient 12y ago
  US Banks are defacto part of the Federal Reserve which a quasi dept of the government. So any "investigation" into a US bank is like an Internal Investigation, and we all know how those work... can you say coverup?
- bhouston 12y ago
  I noticed that clear trend as well. Just off the top of my head... I think that foreign banks do not have local political weight to throw around because they do not give many political donations and are not part of the revolving door of political appointments from the banking industry to the various regulatory agencies.
mnw21cam 12y ago
Could someone explain to me (as a non-American non-financial type) the basis of US jurisdiction over banks not based in the US? Is it because they have a presence in the US, or some other reason?
- privong 12y ago
  > Is it because they have a presence in the US That is essentially it.
- awjr 12y ago
  I believe it has to do with the way US dollars are traded on the world market. In effect any bank holding US dollars has to hold them on US soil which, by default, brings US dollar transactions under US jurisdiction.
  - viggity 12y ago
    Do you have a source on that, doesn't pass the sniff test for me. I thought it was because they have a presence in the US.
    - awjr 12y ago
      I did some more research. I think because BNP had offices in NY they came under US jurisdiction. I don't think I'm correct in saying that a bank that trades in US dollars comes under US jurisdiction. However if you do decide to set up offices in the US, expect your world banking practices to come under US scrutiny.
      - pcrh 12y ago
        At the end of each period, for example a day, banks calculate how much money was paid from accounts at bank A to those at bank B, from bank C to bank A, etc This results in a net credit or debt between the banks. Rather than send all the transactions back and forth, banks will "clear" this net amount between themselves. The "clearing house", which in the US is often either CHIPS [1] or Fedwire [2], handles this process, which handle most large interbank US dollar transactions globally. (Clearing also seems to mean currency exchange in the US, according to WSJ). BNP used this service in the US, so it fell under US law. [1] http://en.wikipedia.org/wiki/Clearing_House_Interbank_Payments_System http://en.wikipedia.org/wiki/Clearing_House_Interbank_Paymen... [2] http://en.wikipedia.org/wiki/Fedwire http://en.wikipedia.org/wiki/Fedwire
ivanca 12y ago
What I take from this is that you pretty much can get away with anything (including terrorism) as long as you do it from within a corporation and have enough money to pay the USA government any fine it imposes.
- joosters 12y ago
  $9 billion is hardly 'getting away with anything'...
  - Drakim 12y ago
    It depends, if the thing you were doing net you profits above $9 billion then it's not so painful.
  - Zikes 12y ago
    The corporation is responsible for that fine, not the individuals responsible for running the corporation. If you were a skilled member of the finance industry, do you think you'd have any trouble at all finding a job elsewhere if your current company suddenly fell on hard times? Would it even be necessary, given the type of "severance package" likely to be awarded?
    - dragonwriter 12y ago
      > If you were a skilled member of the finance industry, do you think you'd have any trouble at all finding a job elsewhere if your current company suddenly fell on hard times? Would it even be necessary, given the type of "severance package" likely to be awarded? Do you think the people dismissed at the direction of the criminal prosecutors as part of a prosecution that also caused their employer to receive a fine nearly equal to its annual pre-tax income got generous severance packages? And, beyond that, do you think that, that the reason they left their last job -- including the condition imposed on BNP Paribas not to rehire them again even indirectly -- has no impact on the employability elsewhere in the industry?
- radmuzom 12y ago
  True. And I also think we are going to see many more like these unless humans, rather than corporations, are prosecuted for these kind of incidents.
bhouston 12y ago
Why is there so much more motivation on the part of authorities to go after this type of crime rather than those that caused the financial collapse of 2008/2009? The financial collapse affected a lot more people here in North America, but I guess the issue is that it was local banks, not foreign ones. It does seem like authorities like to go after foreign banks for large fines rather than local ones.
- confluence 12y ago
  It's much easier to prosecute money laundering than it is to prosecute stupidity. Some people did illegal stuff way back then and got totally destroyed (see what we did to the mortgage brokers). That didn't extend to the vast majority of people though because they were just stupid, not criminal.
  - LanceH 12y ago
    Additionally, the government itself was a large player in pushing the mortgage crisis. From keeping interest rates low, to encouraging lenders to get loans for those who couldn't afford them, to the implied bailouts (which turned out to be true) that only encouraged reckless behavior. If they look too hard they'll have to look in the mirror and that will never happen.
    - res0nat0r 12y ago
      Unfortunately much of the things which were happening leading up to 2008 were not illegal, which is why there haven't been many prosecutions. Doing shady things and passing the buck, moving risk to other parties? Yes, but unfortunately not against the law.
      - confluence 12y ago
        Indeed. If we criminalized being shady most business owners in the continental US would be behind bars. Selling overpriced phones? Apple. Selling overpriced junk food? McDonalds. Selling overpriced headphones? Beats. Selling overpriced housing loans? Banks. Selling overpriced jeans? Levis. Selling overpriced smelly water? Perfume companies. Selling overpriced hydrocarbons? Deodorant companies. Overpriced sugar water? Coca cola. The list goes on and on and on. The system we live in is designed around rewarding people who can extract capital from others. That means everyone's fucking over everyone and only the most clearly fraudulent transactions are regulated away to minimize externalities. Is it optimal? No. But that's the reality of the system we live in.
phantork 12y ago
Won't watch French Open tennis anymore. I hope the players will boycott as well, as long as BNP is sponsoring that event.
- chriscool 12y ago
  While at it, HSBC is sponsoring Wimbledon: http://www.wimbledon.com/en_GB/suppliers/ http://www.wimbledon.com/en_GB/suppliers/ And JP Morgan, Chase and American Express are sponsoring the US Open: http://www.usopen.org/sponsorship/ http://www.usopen.org/sponsorship/ ...
  - phantork 12y ago
    Stopped watching those as well! Sigh
cdibona 12y ago
It's interesting to juxtapose all the bitcoin articles with this kind of story..
- x1798DE 12y ago
  Frankly, I'd be happy if bitcoin facilitated these "criminal" transactions to a much greater degree. I'm absolutely no fan of Iran or Cuba or any of the other sanctioned countries, but I think the idea that economic sanctions do more harm than good. If BTC (or some analogous currency) does become a standard value store on the international market, I'll be interested to see if governments continue pursuing the impossible goal of imposing economic sanctions like this or if they change tactics. My guess is they'll continue pursuing the impossible goal.
  - FedRegister 12y ago
    Are you saying that sovereign nations don't have the right to decide who they're willing to trade with? Because that's in essence what you're saying when you say economic sanctions should end.
    - x1798DE 12y ago
      I'm saying I would prefer it if their governments didn't have the ability to limit who their citizens can trade with, yes.
      - eropple 12y ago
        They have that ability through the power vested in them by the citizens, to effectively project the force that the citizenry, as a whole, desires to project. If the citizenry cared, they can do something about that. (They don't, for a lot of reasons. And they're wrong, but they don't.)
        icebraining 12y ago
        But if the citizenry, like you said, doesn't care, how can it be a force that the citizenry desires to project?

90 points by r0h1n 12y ago

Were any people actually convicted and punished with prison time, or was the resolution for a bank to have to give up some money?

snarfy 12y ago
They mentioned criminal penalties, but no mention of jail times. Tens of billions in transactions, 8.9 billion in fines. It was probably worth it even after getting caught.
- scotch_drinker 12y ago
  They are likely to also be forbidden from dollar clearing for a time, possibly up to a year. This is an unheard of penalty and is actually very punitive. It's a new strategy by the US prosecutors and there was a good Planet Money podcast recently on what it means. Essentially, because we control the reserve currency of the world, we control the ability to transfer foreign currencies into dollars. This is a very powerful thing to control and being restricted from dollar clearing will likely be pretty painful.
  - joosters 12y ago
    Yes, they are banned from some dollar-based transactions for a year, from the start of 2015 http://www.bbc.co.uk/news/business-28099694 http://www.bbc.co.uk/news/business-28099694
    - joezydeco 12y ago
      Here's the link to that Planet Money podcast. It's a very well-done story, but frustrating that in the end nobody is going to jail. http://www.npr.org/blogs/money/2014/06/18/323045793/episode-547-how-to-punish-a-bank http://www.npr.org/blogs/money/2014/06/18/323045793/episode-...
  - Scoundreller 12y ago
    Why not just fine them more? This embargo just forces groups to come up with creative solutions around dollar clearing that could harm the dollar's status as a reserve currency.
- joosters 12y ago
  With the size of the fine, there is no chance that it was worth it (to the bank). This fine is over four times bigger than the previous record fine ($1.9 billion, HSBC, also for sanctions violations) However, it could have been worth it to the individuals who arranged the transactions and (presumably) got large bonuses as a result.
  - dragonwriter 12y ago
    > With the size of the fine, there is no chance that it was worth it (to the bank). This fine is over four times bigger than the previous record fine ($1.9 billion, HSBC, also for sanctions violations) The previous record fine of a European bank by the US wasn't HSBC's $1.9 billion for sanctions violations, it was Credit Suisse's $2.6 billion for tax evasion. http://money.cnn.com/2014/06/30/investing/bnp-paribas-sanctions-fine/ http://money.cnn.com/2014/06/30/investing/bnp-paribas-sancti...
- dragonwriter 12y ago
  > Tens of billions in transactions, 8.9 billion in fines. It was probably worth it even after getting caught. For the bank? It would have to be retaining a ludicrously high share of the value of each transaction for that to be true -- the transactions were $30 billion, so BNP Paribas would have to have retained nearly a third of the values of the transactions it concealed to break even with a $9 billion fine.
  - protonfish 12y ago
    Banks are not people. Was it worth it to the individuals who perpetrated the crime?
    - rtpg 12y ago
      Well 13 of them just lost their (well-paying) jobs so maybe not
      - pessimizer 12y ago
        Would they have kept those jobs (and would those jobs have been as well-paying) if they hadn't been doing those deals? Having to stop mugging people isn't usually considered part of the punishment for a mugger.
      - protonfish 12y ago
        I have lost my job for not being enough of a "team player." Banksters lose their jobs if they violate international law to fund terrorist murder. I hope the stinging from their slap on the wrists isn't too painful. You see, wealthy bank employees have much more sensitive skin than us average folk.

joosters 12y ago

A conspiracy theorist might note that all the recent huge banking fines have been against non-US banks. Could it be that US prosecutors are much keener to investigate foreign banks and do not look as closely at banks back home? Or are the US banks miraculously less corrupt?

bernardom 12y ago
From TFA: "It is a cautionary tale of how European banks, spotting a lucrative business opportunity that American rivals shunned, opened their doors to countries under sanctions and ultimately exposed their reputations to the stain of criminal cases."
- joosters 12y ago
  How do we know that American banks shunned it? They too could have been disguising transactions and hiding illegality. It's not like US banks are known for avoiding 'lucrative business opportunities' that aren't entirely legal. Perhaps the whistleblowers required haven't come forward, or perhaps the investigators just haven't looked too hard...
  - nickff 12y ago
    >"How do we know that American banks shunned it?" We can never prove this, as an absence of evidence is not evidence of absence.
the_ancient 12y ago
US Banks are defacto part of the Federal Reserve which a quasi dept of the government. So any "investigation" into a US bank is like an Internal Investigation, and we all know how those work... can you say coverup?
bhouston 12y ago
I noticed that clear trend as well. Just off the top of my head... I think that foreign banks do not have local political weight to throw around because they do not give many political donations and are not part of the revolving door of political appointments from the banking industry to the various regulatory agencies.

mnw21cam 12y ago

Could someone explain to me (as a non-American non-financial type) the basis of US jurisdiction over banks not based in the US? Is it because they have a presence in the US, or some other reason?

privong 12y ago
> Is it because they have a presence in the US That is essentially it.
awjr 12y ago
I believe it has to do with the way US dollars are traded on the world market. In effect any bank holding US dollars has to hold them on US soil which, by default, brings US dollar transactions under US jurisdiction.
- viggity 12y ago
  Do you have a source on that, doesn't pass the sniff test for me. I thought it was because they have a presence in the US.
  - awjr 12y ago
    I did some more research. I think because BNP had offices in NY they came under US jurisdiction. I don't think I'm correct in saying that a bank that trades in US dollars comes under US jurisdiction. However if you do decide to set up offices in the US, expect your world banking practices to come under US scrutiny.
    - pcrh 12y ago
      At the end of each period, for example a day, banks calculate how much money was paid from accounts at bank A to those at bank B, from bank C to bank A, etc This results in a net credit or debt between the banks. Rather than send all the transactions back and forth, banks will "clear" this net amount between themselves. The "clearing house", which in the US is often either CHIPS [1] or Fedwire [2], handles this process, which handle most large interbank US dollar transactions globally. (Clearing also seems to mean currency exchange in the US, according to WSJ). BNP used this service in the US, so it fell under US law. [1] http://en.wikipedia.org/wiki/Clearing_House_Interbank_Payments_System http://en.wikipedia.org/wiki/Clearing_House_Interbank_Paymen... [2] http://en.wikipedia.org/wiki/Fedwire http://en.wikipedia.org/wiki/Fedwire

ivanca 12y ago

What I take from this is that you pretty much can get away with anything (including terrorism) as long as you do it from within a corporation and have enough money to pay the USA government any fine it imposes.

joosters 12y ago
$9 billion is hardly 'getting away with anything'...
- Drakim 12y ago
  It depends, if the thing you were doing net you profits above $9 billion then it's not so painful.
- Zikes 12y ago
  The corporation is responsible for that fine, not the individuals responsible for running the corporation. If you were a skilled member of the finance industry, do you think you'd have any trouble at all finding a job elsewhere if your current company suddenly fell on hard times? Would it even be necessary, given the type of "severance package" likely to be awarded?
  - dragonwriter 12y ago
    > If you were a skilled member of the finance industry, do you think you'd have any trouble at all finding a job elsewhere if your current company suddenly fell on hard times? Would it even be necessary, given the type of "severance package" likely to be awarded? Do you think the people dismissed at the direction of the criminal prosecutors as part of a prosecution that also caused their employer to receive a fine nearly equal to its annual pre-tax income got generous severance packages? And, beyond that, do you think that, that the reason they left their last job -- including the condition imposed on BNP Paribas not to rehire them again even indirectly -- has no impact on the employability elsewhere in the industry?
radmuzom 12y ago
True. And I also think we are going to see many more like these unless humans, rather than corporations, are prosecuted for these kind of incidents.

bhouston 12y ago

Why is there so much more motivation on the part of authorities to go after this type of crime rather than those that caused the financial collapse of 2008/2009? The financial collapse affected a lot more people here in North America, but I guess the issue is that it was local banks, not foreign ones. It does seem like authorities like to go after foreign banks for large fines rather than local ones.

confluence 12y ago
It's much easier to prosecute money laundering than it is to prosecute stupidity. Some people did illegal stuff way back then and got totally destroyed (see what we did to the mortgage brokers). That didn't extend to the vast majority of people though because they were just stupid, not criminal.
- LanceH 12y ago
  Additionally, the government itself was a large player in pushing the mortgage crisis. From keeping interest rates low, to encouraging lenders to get loans for those who couldn't afford them, to the implied bailouts (which turned out to be true) that only encouraged reckless behavior. If they look too hard they'll have to look in the mirror and that will never happen.
  - res0nat0r 12y ago
    Unfortunately much of the things which were happening leading up to 2008 were not illegal, which is why there haven't been many prosecutions. Doing shady things and passing the buck, moving risk to other parties? Yes, but unfortunately not against the law.
    - confluence 12y ago
      Indeed. If we criminalized being shady most business owners in the continental US would be behind bars. Selling overpriced phones? Apple. Selling overpriced junk food? McDonalds. Selling overpriced headphones? Beats. Selling overpriced housing loans? Banks. Selling overpriced jeans? Levis. Selling overpriced smelly water? Perfume companies. Selling overpriced hydrocarbons? Deodorant companies. Overpriced sugar water? Coca cola. The list goes on and on and on. The system we live in is designed around rewarding people who can extract capital from others. That means everyone's fucking over everyone and only the most clearly fraudulent transactions are regulated away to minimize externalities. Is it optimal? No. But that's the reality of the system we live in.

phantork 12y ago

Won't watch French Open tennis anymore. I hope the players will boycott as well, as long as BNP is sponsoring that event.

chriscool 12y ago
While at it, HSBC is sponsoring Wimbledon: http://www.wimbledon.com/en_GB/suppliers/ http://www.wimbledon.com/en_GB/suppliers/ And JP Morgan, Chase and American Express are sponsoring the US Open: http://www.usopen.org/sponsorship/ http://www.usopen.org/sponsorship/ ...
- phantork 12y ago
  Stopped watching those as well! Sigh

cdibona 12y ago

It's interesting to juxtapose all the bitcoin articles with this kind of story..

x1798DE 12y ago
Frankly, I'd be happy if bitcoin facilitated these "criminal" transactions to a much greater degree. I'm absolutely no fan of Iran or Cuba or any of the other sanctioned countries, but I think the idea that economic sanctions do more harm than good. If BTC (or some analogous currency) does become a standard value store on the international market, I'll be interested to see if governments continue pursuing the impossible goal of imposing economic sanctions like this or if they change tactics. My guess is they'll continue pursuing the impossible goal.
- FedRegister 12y ago
  Are you saying that sovereign nations don't have the right to decide who they're willing to trade with? Because that's in essence what you're saying when you say economic sanctions should end.
  - x1798DE 12y ago
    I'm saying I would prefer it if their governments didn't have the ability to limit who their citizens can trade with, yes.
    - eropple 12y ago
      They have that ability through the power vested in them by the citizens, to effectively project the force that the citizenry, as a whole, desires to project. If the citizenry cared, they can do something about that. (They don't, for a lot of reasons. And they're wrong, but they don't.)
      - icebraining 12y ago
        But if the citizenry, like you said, doesn't care, how can it be a force that the citizenry desires to project?