By Karen Freifeld, Aruna Viswanatha and Steve Slater
NEW YORK/WASHINGTON (Reuters) - BNP Paribas SA is relocating its U.S. sanctions compliance operations to New York from Paris, ahead of a nearly $9 billion settlement it is expected to reach with U.S. authorities over violations of sanctions on Sudan and other countries, according to people familiar with the matter.
The move is not specifically part of the settlement agreement being hammered out. But France's largest bank decided to transfer the operations as part of its efforts to improve compliance and proactively appease U.S. regulators, according to one of four sources interviewed by Reuters.
Sanctions compliance involves screening and analyzing transactions to make sure they don't run afoul of U.S. laws that bar moving money on behalf of certain designated parties, including those in Iran and Sudan.
Some people familiar with the move described it as unique, though it is unclear how much further BNP is going than other foreign banks, some of whom have their global sanctions compliance heads in New York.
BNP's action is part of a trend by banks to bolster their compliance operations in the United States, amid a series of increasingly harsh U.S. enforcement actions against banks that have for years not closely policed illicit money flows.
BNP is also expected to transfer some related efforts that supervise dollar-clearing operations to New York, one source said.
A BNP spokeswoman declined to comment. The bank's chief executive, Jean-Laurent Bonnafe, told shareholders in May that the bank had improved its control operations to avoid sanctions-related failures in the future, without providing specifics.
U.S. authorities are investigating whether the lender evaded U.S. sanctions relating primarily to Sudan, Iran and Syria between 2002 and 2009.
The bank's overall compliance team employed more than 1,500 staff in 40 countries at the end of 2013, mostly within Europe, the United States and Asia, according to the bank's 2013 annual financial report. It did not say how many staff were dedicated to its U.S. sanctions compliance operations.
BNP is now trying to fill more than 200 jobs in the United States that have compliance responsibilities, a search of its website shows, including many for its California-based Bank of the West unit. One of the jobs includes a vice president position in New York for BNP Paribas to investigate accounts for anti-money laundering and other risks.
Banks have been beefing up their compliance operations in response to the U.S. crackdown on violations. JPMorgan said in its annual shareholder letter in April that 8,000 of its employees will be dedicated to its anti-money-laundering operations.
U.S. authorities have pursued top foreign banks over sanctions violations and have obtained hundreds of millions of dollars in settlements from Credit Suisse, Standard Chartered, and Barclays, among others.
One source said BNP's New York sanctions compliance unit would have powers over every branch and subsidiary of the bank worldwide. Another source said locating the operation in New York was significant because it would offer more transparency to U.S. regulators.
A years-long U.S. government investigation has turned up some $100 billion in transactions processed by BNP that may have had some information removed or otherwise disguised in order to evade filters on certain transactions with Sudan and elsewhere, Reuters reported earlier. Around $30 billion of the transfers specifically violated U.S. sanctions, one of the sources said.
Part of the problem lay in the New York clearing operation relying on questionable information being provided by employees in Paris about the nature of the transactions, another source said.
Representatives of the U.S. Federal Reserve and the New York state bank regulator, the Department of Financial Services, the U.S. Justice Department, the U.S. Treasury Department and the Manhattan District Attorney's office, which are involved in the investigation, declined comment.
'AHEAD OF THE THUNDERBOLT'
The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctions drug traffickers, terrorists, Iranian banks and others under more than 30 different programs, freezing their assets and prohibiting U.S. firms from doing business with them. It relies on the private sector to ensure the sanctions work in practice.
The work is often painstakingly detailed, because there are often multiple variations of each name, with sometimes little other identifying information than a name and a country of residence.
Large banks spend millions of dollars and hundreds of hours a year devising complex automated systems to scan the list and avoid false positives.
BNP told U.S. regulators privately it would make the move weeks ago, a source said. "It was an effort to appease regulators. I think what they were trying to do was get ahead of the thunderbolt," another source said.
The overall settlement between BNP and U.S. authorities, which is also expected to include BNP pleading guilty to a federal criminal charge, is still taking shape.
Negotiators are working out details of a "statement of facts" and how long the bank will be suspended from clearing clients' dollar transactions. At least a dozen individuals also are expected to leave the bank as part of the deal, some of whom have already departed.
(Additional reporting by Maya Mikolaeva in Paris and Anna Yukhananov in Washington)