As the US President Barack Obama heads to France, a confrontation over US fines against BNP Paribas SA (ADR) (OTCMKTS:BNPQY) (EPA:BNP) looms.
As reported in ValueWalk, BNP Paribas SA (ADR) (OTCMKTS:BNPQY) (EPA:BNP) is accused of transferring money to outlaw nations such as Sudan, an issue that might land smaller US banks in jail.
Concern massive fine might wipe out key financial institutions in France
At issue is the severity of the fine — $10 billion, a dramatic sum considering that for laundering money of drug cartels and terrorist nations, HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) received only a $1.9 billion fine. The fine for large bank’s documented criminal behavior is moving higher and higher, sparking a discussion headlined in today’s Wall Street Journal that perhaps the bank fines might get so large they threaten the entire financial system by wiping out the bank.
Chicago Tribune endorses individual bank employee prosecutions
With the stakes so high – and an international incident at stake – the real question is why aren’t individual prosecutions being considered for big bank criminal acts? A Chicago Tribune editorial endorsed individual prosecutions this past May 27.
Individual prosecutions for big bank crimes don’t threaten the entire organization or economy with disaster and they do a better job of providing deterrence. If you’re a big bank criminal and your punishment is going to be individual jail as opposed to a fine for the entire company, which would you choose? When asked why the DoJ doesn’t engage in individual prosecutions as opposed to company fines, after a conversation the Washington DC Public Affairs office did not respond before press time.
BNP received legal advice in 2004 to handle transactions outside US jurisdiction
BNP Paribas SA (ADR) (OTCMKTS:BNPQY) (EPA:BNP) had pinned their legal justification from a 2004 memo from an outside law firm that absolved the bank of responsibility if they handled the transactions entirely outside US legal jurisdiction, as originally reported in the New York Times by DealBook’s Jessica Silver-Greenbook and Ben Protess. This path to escape prosecution failed, and now the battle is being taken on a diplomatic front.
On one hand is France, concerned about the US taking down one of its pillars of economic stability. On the other hand is the US Department of Justice, apparently motivated by forces behind the scenes, is avoiding individual prosecutions like the plague. As instructions were said to have been handed down to straighten out the “lawlessness” on Wall Street, for some reason the DoJ continues to avoid the one approach that provides the most deterrence and the lowest amount of collateral damage.