Exclusive: BNP may face one-year ban on processing some dollar payments - sources

Wed Jun 25, 2014 8:12pm EDT
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By Karen Freifeld and Matthias Blamont

NEW YORK/PARIS (Reuters) - BNP Paribas (BNPP.PA: Quote) is likely to be suspended from converting foreign currencies to dollars on behalf of clients in some businesses for as long as a year, according to sources familiar with the matter, an untested and severe penalty for the French bank accused of persistently violating U.S. sanctions laws.

The New York State Department of Financial Services, headed by Benjamin Lawsky, is near a deal with Paribas on the ban on currency conversions, known as dollar clearing, people said. The bar would be the first of its kind for a global bank.

The temporary ban is expected to be limited to certain business lines related to the underlying transactions in question, and it would span various geographic regions, one of the sources said on Wednesday. Business lines that have come under scrutiny include oil trade financing.

"It won't be a death mallet, but it's a serious hit," the source said.

BNP clears hundreds of billions of dollars through New York every day, according to sources, serving customers in trade finance and commodities businesses, custodian accounts and foreign exchange.

Much business worldwide is done in dollars, and dollar clearing is a key banking activity.

It is unclear when the ban would take effect. It may be phased in, another source said on Wednesday.  

It's also not clear if Paribas has found a workaround to soften the blow, such as identifying another bank to temporarily meet clients' needs.   Continued...