French bank BNP Paribas was warned in 2006 by a high-ranking U.S. Treasury official and in three reports by legal experts that it risked being penalized for breaking U.S. sanctions, according to Le Monde newspaper.
Since France's biggest bank flagged the risk of a big fine in February this year, sources close to the affair have said it ignored early warnings of the risks it faced. They pointed out that the alleged offending transactions being investigated by U.S. authorities continued until 2009.
The French newspaper's report, written as talks accelerate towards a possible $10 billion fine and other penalties, said Stuart Levey, then the U.S. Treasury Under Secretary for Terrorism and Financial Intelligence, made a visit to Paris in September 2006.
The paper, drawing on the findings of its own investigation, said Levey met the bank's top officials, including Baudoin Prot, who has since become chairman, in its boardroom.
Levey was there not to talk about the legal risks, but to warn the bank to be vigilant, citing the names of a number of blacklisted Iranian banks, the Le Monde report said.
U.S. President George Bush had called Iran part of an “Axis of Evil” and wanted European banks to stop working there. Levey took the same “clear” message to other European banks, Le Monde reported.
A second set of warnings also came in 2006, the report said, this time from legal experts, after ABN Amro was fined $40 million for breaking sanctions against Iran and Libya in January of that year.
Until that point, lawyers Cleary Gottlieb had assured BNP Paribas it was not at risk as long as it operated outside U.S. territory, Le Monde said. However the ABN Amro fine was a first - covering transactions done outside the United States. After it, Cleary Gottlieb changed its advice to say there was a risk in certain cases. Two other expert reports commissioned by the bank came to a similar conclusion.
BNP Paribas was not immediately available to comment on the Le Monde report.
The bank has said publicly only that it is in discussions with U.S. authorities about “certain U.S. dollar payments involving countries, persons and entities that could have been subject to economic sanctions”.
It has set aside $1.1 billion for the fine but told shareholders it could be far higher than that. Last month it also said it had improved control processes to ensure such mistakes did not occur again.
The suggestion that Prot had a personal warning from the U.S. Treasury puts a new focus of attention on him after the bank announced the departure of chief operating officer Georges Chodron de Courcel on Thursday.
U.S. authorities - five of them in all including the New York financial regulator - are investigating whether BNP evaded U.S. sanctions between 2002 and 2009. Sources familiar with the matter say they are trying to establish whether the bank stripped out identifying information from wire transfers so they could pass through the U.S. financial system without raising red flags.