One of France's largest banks warned Wednesday that the cost of penalties over its handling of transactions for countries sanctioned by the United States could soar beyond $1.1 billion.
The BNP Paribas announcement came amid several media reports that the Paris-based bank may face criminal charges and heavy fines from U.S. authorities and regulators for doing business with Iran, Sudan, Cuba and other nations hit with financial sanctions.
In its first-quarter financial results, the bank said "a high degree of uncertainty exists as to the nature and amount of penalties that the U.S. authorities could impose." But the bank cautioned the total "could be far in excess" of the $1.1 billion reserve it previously disclosed in February.
A Department of the Treasury division called the Office of Foreign Assets Control enforces economic and trade sanctions against foreign countries, regimes and individuals formally declared to be a threat to U.S.security. BNP Paribas and other international financial institutions are required to abide by the sanctions or face penalties that could affect their lucrative U.S. banking operations.
A BNP Paribas internal review "identified a significant volume of transactions" that "could be considered impermissible under U.S. laws and regulations, including, in particular, those of the Office of Foreign Assets Control," the bank said in its year-end consolidated financial statements.
The statement said the bank had "commenced subsequent discussions" with the Department of Justice, the Manhattan District Attorney's office in New York City and other U.S. regulators, law enforcement agencies and governmental authorities. BNP Paribas' U.S. operations include a large investment bank office in Manhattan.
The bank and U.S. authorities on Wednesday declined to discuss specifics of the talks.
However, The New York Times reported that federal prosecutors may soon press criminal charges against BNP Paribas and other banks. The prosecutors are coordinating with the New York Federal Reserve Bank and the New York Department of Financial Services in an effort to avoid putting the banks out of business and causing severe economic harm, the report said.
Separately, The Wall Street Journal reported that BNP Paribas faces roughly $2 billion in fines plus criminal charges for violating U.S. sanctions.
U.S. authorities have also been discussing possible charges and penalties against approximately a dozen Swiss banks, including Credit Suisse, over evidence they helped wealthy Americans evade taxes on assets and income hidden in off-shore accounts.
Credit Suisse executives acknowledged the alleged scheme and voiced regret during a February hearing by the Senate Permanent Subcommittee on Investigations. A report by the panel showed that Credit Suisse bankers from 2001 to 2008 helped as many as 22,000 Americans who collectively controlled an estimated $12 billion in assets duck paying the IRS.
The Department of Justice announced that Josef Dörig, 72, the owner of a Swiss trust firm, pleaded guilty to federal conspiracy charges on Wednesday. A Virginia federal court filing listed Credit Suisse as Dörig's present or former employer. A statement of facts filed in the case said he conspired to help clients evade U.S. taxes from 1996 to July 2011.
Deputy Attorney General James Cole said the plea "further pulls back the curtain on efforts by Swiss banks to help U.S. taxpayers evade taxes through the use of sham trusts and foundations."