Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

More info on the negotiating positions in the settlement talks for BNP Paribas evading trade prohibitions and pushback from France

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A few more details on settlement talks mentioned earlier.

The N.Y state Department of Financial Services wants to see a dozen or more staff fired, including an unspecified number of executives.

The government position is fine of $10B or more.

So here’s the combined government position:

  • Fine of $10B or more
  • One guilty plea (hint in one article is it might be a subsidiary – if that’s the case I predict it will be a sub that doesn’t have any contact with transactions in the U.S. so the guilty plea will be meaningless)
  • Fire a dozen or more staff, including some execs
  • Temporary ban on dollar settlements in U.S.

I’ve not seen any indication of the number or dollars involved in what BNP itself has self-identified as

  • …“a significant volume of transactions” from 2002 to 2009…

As a wild guess, my prediction is the transaction count will be a multiple of 25,000 and the dollar amount will be in measured in large fractions of a trillion.

New articles:

  • 5/30 – Wall Street Journal – U.S. Wants Firings at France’s BNPI think individual accountability would be a wonderful thing as I’ve mentioned before. It would focus everyone’s mind if we could make a transition from “eh – if we get caught the bank will miss quarterly earnings forecast by  a couple of cents” to “forget about it –  I could go to jail.”
  • 5/30 – WSJ – In U.S., BNP Must Pay to Play – Author suggests a $10B fine might be worthwhile to keep access to U.S. settlements. Article also points out that Bank of the West is a unit of BNP. Full disclosure: Bank of the West is a big lender in the market niche served by my CPA firm.
  • 5/30 – WSJ – French Politicians Rally Around BNP Parabis – As expected the French banking and regulatory officials are suggesting the U.S. is pushing around the banks with extraterritorial claims. French regulator says the disputed transactions are perfectly legal under French and EU law. I am absolutely confident that is a completely true statement.

Specific technique in use is called ‘stripping’. That involves intentionally removing identifying information that would show the transaction is going into or out of a banned country or on behalf of a banned person, business, or country. Stripping is an intentional act, by the way. Doesn’t happen by accident or oversight. I hope they didn’t set up a specialized department to do the stripping, but that is what I expect to see

Several newspapers and politicians are upset with possibility of fine against BNP Paribas. This news from Financial Times, French outcry over threat to BNP Paribas of $10bn US fine.

There are calls for the French government to protect the bank. BNP is the largest bank in France based on market capitalization. A US$10B fine would reportedly leave the bank with a primary capital ratio around 10%, slightly above the required 9% ratio.

The Financial Times articles suggests the stripped wires were for money sent to Iran, Sudan, and Cuba. If I recall correctly, comments in previous articles I’ve read only mentioned Sudan.

The French government is getting actively involved.

  • 6/3 – Wall Street Journal – France Pushes Back Against Possible U.S. $10 Billion Fine on BNP Paribas – The French government is fighting hard to minimize any penalties. President Hollande will raise the issue with President Obama during dinner at the G7 meeting. The $10B would not be reasonable and would actually amputate the bank’s capital. Of most concern is the possible suspension of settling dollar trades through the U.S. banking system. French authorities have also met in the States with U.S. regulatory authorities.
  • 6/4 – WSJ – Hollande Backs BNP Paribas in Letter to Obama – President Hollande sent President Obama an official letter expressing concerns. The Finance Minister says France will protect its interests if the bank isn’t treated fairly.

Written by Jim Ulvog

June 4, 2014, 7:11 am at 7:11 am

Posted in Other stuff

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