May 31 (Bloomberg) -- From an unassuming seven-story building overlooking Lake Geneva, hundreds of BNP Paribas SA bankers structured deals that made it possible for companies to move oil and other commodities around the world.
Transactions involving this office between 2002 and 2009 are now the focus of BNP Paribas’s efforts to clean up its operations amid a U.S. investigation of allegations that France’s largest bank violated sanctions against Sudan and Iran, according to four people with knowledge of the matter. Prosecutors are seeking a guilty plea, fines of more than $10 billion and a temporary ban on transferring dollars into and out of the U.S., people familiar with the probe have said.
BNP Paribas has said it’s cooperating with investigations and taking steps to change its practices. About 30 executives who worked at the energy and commodities finance unit in Geneva and Paris, where the bank is based, have resigned, gone on leave, been fired or relocated since 2012, three people with knowledge of the staffing said. Dominique Remy, who ran the business at the time, left in recent weeks, two said. The extent of remediation and cooperation could affect the outcome.
“The amount of leniency a company can get by cooperating with authorities depends on what is revealed in the process,” said Michael Perlis, a partner at Locke Lord LLP in Los Angeles and a former assistant director at the Securities and Exchange Commission. “If it reveals an institutional violation of the law, the company may save some legal fees, but they will get hit nearly as hard as if they didn’t cooperate.”
Authorities in the U.S. first heard about possible wrongdoing around 2007, when an informant contacted the Manhattan District Attorney’s office, according to two people with knowledge of the probe who asked not to be identified because the matter is private. About a year later the bank came forward with its own findings and views itself as having self- reported, two other people said.
BNP Paribas was less forthcoming than other banks investigated for sanctions violations, even as it said it was cooperating, one person familiar with the investigation said.
A large number of the transactions under investigation passed through BNP Paribas’s Geneva office and about 30 employees there have been penalized, Swiss newspaper Le Temps said yesterday, without stating how it learned the information.
Pascal Henisse, a spokesman for the bank in Paris declined to comment, as did the U.S. Justice Department and the Manhattan District Attorney’s office.
Remy, 60, didn’t respond to phone messages left at his home in Brussels, where he had been in charge of European corporate banking since 2012. He joined the bank in 1979. The two people with knowledge of his status said they didn’t know the reason for his departure.
BNP Paribas is a leader in commodity-trade finance in Europe. Its office in Geneva has played a key role, as companies in the region handle about one-third of global oil sales, according to the Geneva Trading & Shipping Association. Revenue at the bank’s Energy, Commodities, Export & Project Finance unit ballooned under Remy, exceeding 1.2 billion euros ($1.6 billion) in 2006. That represented 16 percent of corporate and investment-banking sales that year, according to a 2007 investor presentation by Remy.
The commodities-finance unit had “unparalleled know-how” to manage risks with know-your-customer procedures “strictly applied,” regular staff training and “hands-on” management of sensitive assets, according to the presentation. The business had hubs in Paris, New York, Geneva and Singapore, and while 17 percent of revenue came from the Middle East and Africa, just 17 people were based there, one slide showed.
Even so, some unauthorized dollar payments were made on behalf of oil companies to Sudanese or Iranian entities, one former employee said. Metals and agriculture commodity deals, as well as non-commodity transactions, also are being reviewed, according to two people.
The U.S. imposed sanctions against Iran in 1979 and Sudan in 1997. As members of the United Nations, France and Switzerland follow sanctions imposed by that body, and often those by the European Union, though Switzerland isn’t part of the EU. Both adopted some controls on dealings with Sudan in 2004 and with Iran in 2007 and expanded them in later years.
Bank of France Governor Christian Noyer said this month that all of BNP Paribas’s transactions “conformed with European and French laws and rules.”
The bank may have breached U.S. sanctions because the transactions were cleared in dollars from accounts in the U.S., two people with knowledge of the investigation said.
BNP Chief Executive Officer Jean-Laurent Bonnafe told shareholders at the company’s annual general meeting in Paris this month that its own investigation focused on transactions “that took place between 2002 and 2009.” The review was known internally as Mars, according to three former employees.
While most of the transactions ended in 2008, some continued until 2011, two former employees said. Some bankers believed the deals were allowed because they weren’t given guidance or rules from compliance and legal departments against doing them, they said. Management didn’t order such transactions to stop until 2011, one said.
The alleged violations aren’t restricted to BNP Paribas’s Swiss unit, according to three people. Bankers weren’t aware the transactions exposed them to breaching sanctions rules set by the U.S. Treasury Department’s Office of Foreign Assets Control, another person said. When payments were reported, documentation was often vague, with Sudan in some cases referred to as SU, according to that person.
Manhattan District Attorney Cyrus Vance, Manhattan U.S. Attorney Preet Bharara and the Justice Department’s criminal division in Washington, are working together on the BNP investigation. Benjamin Lawsky, superintendent of New York’s Department of Financial Services, and the Federal Bureau of Investigation also are involved in the probe, which could result in the biggest sanctions-violations settlement ever.
Spokesmen for Lawsky, Bharara and the FBI declined to comment about the matter.
Among executives who left BNP Paribas’s Geneva office is Jacques-Olivier Thomann, former head of structured finance there. He stepped down from his position in 2012, becoming an external adviser to the bank. Thomann, who served as president of the Geneva trade association from its 2006 founding until last year, said his departure from BNP Paribas’s Swiss unit was amicable and wouldn’t comment further when reached by telephone. He said he’s no longer with the bank.
Thomann was replaced by Philippe de Gentile, who also led energy and commodity finance. De Gentile left his post at the end of last year and declined to comment on his current role with the bank when contacted by telephone.
Departures from the commodities and structured-finance groups began as BNP Paribas was still reducing corporate and investment-banking staff and trimming assets in response to the region’s sovereign-debt crisis. Almost 130 jobs were eliminated at BNP Paribas (Suisse) SA in 2012, reducing staff by 7 percent to about 1,700 people, data on the company’s website show. Assets at the Geneva-based unit, which also includes private banking, fell almost 11 percent that year. Its 2013 annual report isn’t out yet.
--With assistance from Suzi Ring in London, Tom Schoenberg in Washington, Keri Geiger and Greg Farrell in New York and Giles Broom in Geneva.