Basically, the US government's approach is "If you want to clear US dollars, you must conform to our laws." The following explanation will simplify things some

Basically, the US government's approach is "If you want to clear US dollars, you must conform to our laws." The following explanation will simplify things somewhat in the interest of brevity. Basically, all dollars (the ones that aren't physical cash, anyway) are ultimately held in accounts at one of the Federal Reserve banks. Banks like Citi, Wells Fargo, JP Morgan and Bank of America have accounts at the Federal Reserve. When clients of those banks transfer US dollars to someone who's a client of another bank, the real transfer of dollars takes place between the banks' accounts at the Federal Reserve. If your bank doesn't have an account at the Federal Reserve, then it needs to have an account with a bank that has an account at the Federal Reserve. (Or with a bank that has an account with a bank that has an account at the Federal Reserve, etc.) To be a member of the Federal Reserve, you need to hold a banking license in the US, which means that you are subject to US laws (because, if you ignore them, the US authorities will take your banking license away). You'll also have an office there (probably in New York) but that's kind of incidental. So, if you're a bank with a US banking license, and one of your clients annoys the US authorities, they can basically say "Stop doing business with that client." (or, in other words, impose sanctions). If you refuse to comply, they can take your licence away. That's effectively what happened with BNP Paribas - they were clearing US dollar transactions for clients that were subject to US sanctions. So, BNP has been effectively grounded for a year. Instead of going direct to the Federal Reserve to transfer US dollars to other banks, it will need to become a client of another bank that's a member of the Fed. It's embarassing, it'll cost them money (they'll have to pay the other bank) and they may well lose some business (from clients who want to deal with a top-tier US dollar clearing bank). In theory, they could have just turned around and said "Screw you, we're not paying any fine!", in which case the US authorities would have withdrawn their US banking license, seized any assets they could get their hands on (e.g. the dollars they have in their account at the Federal Reserve) and blacklisted the company, so no other US bank would do business with them. That would effectively have prevented them from doing any business in US dollars. To be a proper, credible international bank like BNP, you need to be able to handle US dollars. Hence, BNP is prepared to pay the fine. The alternative would be to effectively downsize massively.