Reactions is a new column from Report seeking faculty reactions to news and issues.
The French banking giant BNP Paribas recently pleaded guilty to violating U.S. sanctions on transactions with U.S. dollars in the countries of Iran, Sudan and Cuba. Gary Koppenhaver, chair of the Department of Finance, Insurance and Law at Illinois State’s College of Business takes on the topic of breaking sanctions.
Gary Koppenhaver
Essentially, it was a money-laundering operation. Banks that make transactions converting U.S. dollars into some other type of currency are supposed to identify who is getting the money. And the U.S. has banned any dollar transactions for parties in Cuba, Iran or Sudan – a recent addition after Darfur.
BNP not only did not report the transactions, they ran the transactions through their satellite banks. It worked a lot like a central bank, helping businesses and individuals evade the sanctions. Actions like this can make economic sanctions less onerous.
At almost $9 billion, this is the largest single penalty imposed on a banking organization in terms of dollar amount, but it is still small based on the number of transactions that went on over the years in violation of the sanctions. Even though the punishment BNP is facing climbs into the billions, the corporation earned more than that over the years breaking the sanctions.
This is the second international case to come to light recently of large corporations helping to avoid U.S. law. Recently, Credit Suisse pleaded guilty to charges that they helped U.S. citizens evade taxes.
It does say something that these corporations are pleading guilty instead of the usual plea of no contest. It may seem like a minor point, but companies are seeing their stock prices decline when news gets out about breaking U.S. law. Stock prices can rebound after resolution of the uncertainty surrounding the violation of law, even if it involves a guilty plea. A guilty plea also signals the strength of the bank regulators’ case against BNP Paribas.
Prior to his work in higher education, Koppenhaver was employed by the Federal Reserve Bank of Chicago as a senior economist. He has been an economic consultant to the Federal Reserve of Bank of Dallas.
