JP Morgan Reportedly Gave Unwitting Help To BNP Paribas's Sanctions Breaches

Tom Burroughes

4 July 2014

In a twist to the Franco-US wrangle over the $8.97 billion fine slapped this week on unwittingly helped the French firm violate those sanctions.

BNP Paribas, which has also been suspended from making dollar-denominated transactions for a temporary period after pleading guilty to the offences, turned to JP Morgan on the basis of legal advice from Cleary Gottlieb Steen & Hamilton LLP, Bloomberg said, quoting two unnamed sources.

The Paris-based bank relied on a legal memo that suggested using a US bank might protect it from sanctions penalties, according to the statement of facts filed by prosecutors in New York, the report said. JP Morgan is referred to as “US Bank 1” while Cleary Gottlieb is identified as “US Law Firm 1” in the court filings, the sources said. Cleary Gottlieb later said such transactions may be illegal.

Neither JP Morgan nor Cleary Gottlieb are accused of wrongdoing, the report said.

The heavy fine imposed by US authorities - a record - has created tensions between the US and France, raising the issue of whether countries that say they wish to stamp out financial wrongdoing are on the same page in terms of setting the appropriate punishment. The size of the fine is greater than BNP's annual profit for 2013.

In 2011, JP Morgan paid $88.3 million to settle an unrelated civil probe into transactions involving Cuba, Iran and Sudan. Investigators at the Treasury Department cited incidents in which JP Morgan managers and supervisors "recklessly failed to exercise a minimal degree of caution or care" in their sanctions obligations. The bank said at the time that none of the alleged violations were intentional, according to the report.

BNP Paribas’s offences concern sanctions against Iran, Cuba and Sudan.

BNP Paribas used a network of non-US banks, including at least nine Arab banks, to disguise US dollar transactions, according to court papers, the report said.