Swiss Banking Regulators Take Tough Stance on Sanctions Violations

Saturday, July 5, 2014
From the Swiss Financial Market Supervisory Authority (FINMA):

Inadequate risk management of US sanctions: FINMA closes proceedings against BNP Paribas (Suisse)

The Swiss Financial Market Supervisory Authority FINMA conducted enforcement proceedings against BNP Paribas (Suisse) SA. The proceedings focused on the bank's compliance with US sanctions, especially those issued against Sudan. FINMA has concluded that in particular between 2002 and 2007 the bank persistently and seriously violated its duty to identify, limit and monitor the inherent risks, subsequently breaching supervisory provisions. FINMA has ordered additional capital requirements for operational risks and banned the bank from conducting business with companies and persons subject to EU and US sanctions.

The US authorities conducted an investigation against the BNP Paribas (Group) regarding the violation of US sanctions against Cuba, Iran and Sudan. FINMA also examined whether the Swiss company, the BNP Paribas (Suisse) SA (= BNP Suisse), had breached Swiss supervisory law in this regard. During the probe, FINMA examined how BNP Suisse identified, limited and monitored the risks emanating from its cross-border trading business from 2002 to 2011. Business developments with business partners in countries sanctioned by the US, the bank's business and monitoring policy since 2002 and compliance with internal rules and regulations were also examined.

FINMA has issued a decree and has thus concluded its enforcement proceedings against BNP Paribas (Suisse) SA. It has established that the bank seriously violated its duty to identify, limit and monitor the risks involved in making transactions with business partners in countries subject to US sanctions. The bank exposed itself to unduly high legal and reputational risks and violated requirements for adequate organisation under Swiss supervisory law. On the other hand, FINMA found no indications of Swiss sanctions having been breached.

The proceedings also found that BNP Suisse had in the meantime adapted its procedures for making transactions with business partners in countries subject to sanctions in order to avoid any further breaches in compliance. FINMA will engage an independent third party to review the consistent implementation of those measures.

The supervisory authority will also order additional capital adequacy requirements for operational risks and impose a two-year ban on conducting business with companies and persons subject to EU and/or US sanctions.

It will also continue its probe into determining the extent to which the board of directors, management and other BNP Suisse employees were involved in the misconduct.