BNP Paribas SA (EPA:BNP) violates sanctions and ordered to pay $9 billion judgment

BNP Paribas SA (EPA:BNP) is guilty of helping Middle Eastern and coastal clients in Cuba, Sudan, and Iran from 2002 to 2009 to help launder billions of dollars of funds by manipulating wire information to conceal the source of these transactions. They provided the Sudan government with resources to evade US sanctions and help them sell their oil for US dollars. US Authorities have ordered the French bank to pay a penalty of $9 billion for violations. In addition, US Authorities will be banning the bank from engaging in forex trading with US dollars, barring the bank from trading in oil and energy activities in Singapore, Switzerland, and France.

BNP Paribas’s financial strength can take the financial penalty since they have a lot of capital. But this financial penalty along with trade suspension could impose an earnings hit in their quarterly statements. BNP has set aside $1.1 billion for this trading fine and will set regulations to make sure these mistakes don’t happen again.

Although a settlement was reached with the US authorities, the staff has already been warned of the penalties looming. Bonnafe has warned that the bank will be facing stiff penalties but these penalties should not stop the bank from continuing.

Over 12 people will be asked to leave the company. BNP will be selling euro bonds and slash dividends to zero in order to raise funds to continue operations. US Authorities are debating whether to press charges against employees and this matter will be handled after the fines are levied.

This fine will out-shadow the $1.9 billion fine paid by HSBC in 2012 for handling funds of Mexican drug cartels. Despites this setback, BNP is confident that a double digit net earnings per share in the coming three years and that they will re-raise dividends back to 45 percent of earnings in 2016.