French bank BNP Paribas is expected to pay a record $9 billion fine and admit its guilt for years of dealing with US-blacklisted Sudan and Iran, in a case that has strained ties between Paris and Washington.
US justice authorities could announce the hefty penalty as early as Monday, capping months of haggling which saw French President Francois Hollande pressing US counterpart Barack Obama to step in and lighten the punishment.
The record US fine of a foreign bank will also come with a guilty plea from BNP, according to a person close to the situation. France's largest bank is accused of breaching US sanctions against Iran, Sudan and Cuba between 2002 and 2009 by handling $30 billion worth of transactions with them.
BNP has a strong enough capital base to handle the penalty, but the size of the fine and the temporary suspension of parts of its dollar-handling business in the United States -- key to any major bank's US operations -- will mean a significant hit on its earnings.
BNP chief executive Jean-Laurent Bonnafe reportedly wrote to employees on Friday conceding the bank will be "punished severely," but stressing: "But this difficulty we are facing will not impact our roadmap."
US authorities have already forced BNP to dismiss three senior officials allegedly linked to the sanctions violations, including its chief operating officer.
Many more lower bank officials could also be kicked out as part of the settlement with the US Department of Justice.
- Relatively paltry -
Sources say the settlement could also include a year-long suspension of the bank's dollar clearing for oil and gas trading activities in Switzerland, Singapore and France, and suspension of dollar clearing on behalf of other banks and some clients.
That would likely add significantly to the costs of the settlement, hitting the bank's bottom line. In 2013 BNP reported total profits of 4.83 billion euros ($6.59 billion) on revenues of 38.8 billion euros. It has already set aside $1.1 billion to cover losses from the case.
The bank has been largely quiet about the allegations and potential penalties during months of negotiations during which Washington has been accused of taking an extremely heavy hand against foreign banks, and BNP especially, while treating the transgressions of US banks much more lightly.
In punishing US banks for violations related to the financial crisis, negotiated fines have run into the billions of dollars, but none has had to plead guilty, an act which potentially could lead to the loss of a banking license.
Moreover, for similar sanctions-busting, in 2012 Dutch bank ING paid a relatively paltry $619 million and Britain's Standard Chartered $670 million. HSBC, which was also accused of complicity in money laundering, paid $1.9 billion.
None of them was forced to plead guilty or give up certain banking operations.
- 'Negative consequences' -
But US authorities have become much tougher with banks that are allegedly less cooperative in investigations.
In May, Credit Suisse pleaded guilty to helping Americans evade taxes and was fined $2.6 billion, over three times the $780 million fine the US imposed on fellow Swiss bank UBS for the same charges in 2009.
Analysts say the size of the fine expected for BNP relates to the size of the business it did with Sudan and Iran, several times larger than that handled by ING and Standard Chartered.
But the hefty punishment threatened for BNP has become a thorn in US-France relations. French officials warned in early June that it could cause problems for the huge transatlantic trade treaty under negotiation between the European Union and the United States.
"Evidently... this risks having negative consequences," Foreign Minister Laurent Fabius warned.
Hollande raised the issue with Obama during a dinner in Paris as well.
Fabius said that Hollande had told Obama the case is "very important for Europe and for France," saying if BNP is weakened it would "create a very negative interference in Europe and its economy."
But even before the dinner, Obama had signaled he would stay out of a legal issue.
"The rule of law is not determined by political expediency," he said.