BNP Paribas handled more than US$586 million of transactions with a Dubai-based corporation controlled by Iran, according to US court filings.
The disclosure came as the bank agreed to pay a record $8.97 billion in fines after pleading guilty to a series of sanctions violations involving entities in Sudan, Iran and Cuba over an eight-year period,
The French bank, the fourth largest in the world, pleaded guilty to processing more than $8.8bn through the US financial system on behalf of Sudanese, Iranian and Cuban entities subject to US sanctions from 2004-12, and to falsifying business records.
As part of the settlement agreement, the bank will be barred from US dollar-clearing operations for one year for its oil and gas commodity finance business, starting from next January. In addition, 13 executives including its group chief operating officer, will be required to leave the bank.
“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive US authorities,” said the US attorney general Eric Holder in a statement issued late on Monday.
“These actions represent a serious breach of US law,” he added. “Sanctions are a key tool in protecting US national security interests, but they only work if they are strictly enforced. If sanctions are to have teeth, violations must be punished.”
Jean-Laurent Bonnafe, the BNP Paribas chief executive, issued a repentant response. “We deeply regret the past misconduct that led to this settlement,” he said. “We have announced today a comprehensive plan to strengthen our internal controls and processes, in ongoing close coordination with the US authorities and our home regulator to ensure that we do not fall below the high standards of responsible conduct we expect from everyone associated with BNP Paribas.”
The bulk of the bank’s transactions with Iranian entities were processed via an unidentified Dubai-based corporation that was under Iranian control, according to court documents.
“[BNP Paribas] processed payments on behalf of a client registered as a corporation in Dubai … but controlled by an energy group in Iran, in connection with three letters of credit that facilitated the provision of liquefied petroleum gas to an entity in Iraq,” the filings read.
“[The bank’s] ‘know your customer’ documentation on the Iranian Controlled Company showed that it was owned by the Iranian energy group, which was in turn owned by an Iranian citizen.”
The transactions began at a time when certain US dollar transactions were permitted by the US under the so-called U-turn exemption, which was eventually revoked in 2008. BNPP continued transacting with the entity until 2012, despite agreeing to commence an internal investigation into its compliance with US sanctions and cooperate fully with New York state and US authorities in 2010.
BNP also processed about $100.5 million in US dollar payments involving an Iranian oil company following the revocation of the U-turn exemption. The payments were in connection with six letters of credit issued by BNPP that financed Iranian petroleum and oil exports.
The majority of BNP’s illegal transactions were made on behalf of sanctioned entities in Sudan, according to court filings.
The bank processed about $6.4bn through the US on behalf of Sudanese-sanctioned entities from July 2006 through June 2007, including approximately $4bn on behalf of a financial institution owned by the government of Sudan.
jeverington@thenational.ae
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Killing of Qassem Suleimani
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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