In 2014, the United States’ regulatory hammer came down on BNP Paribas SA, sending a shock to compliance systems across the globe. Pleading guilty to violating the International Emergency Economic Powers Act and the Trading with the Enemy Act, the French bank would rack up a $9 billion price tag.[1] The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) would go on to make an example of those who violate sanction laws and risk national security interests, reaching the largest sanctions-related settlement of $963 million.[2]
As the Russian invasion of Ukraine continues to develop, international headlines have captured its global effects, including major disruptions to the United States’ financial markets concerning economic sanctions. U.S. Fund managers, with an estimated $70 billion held in Russian equities and bonds before the war, have found themselves scrambling to keep up with updated compliance and sanction regulations to avoid ending up like BNP Paribas SA in 2014. Time is of the essence to evaluate sanctions risk and take action.
As a result of the 2014 record-breaking settlement with the U.S. federal and state authorities, BNP Paribas has undergone major changes within its compliance division.[3] Without an efficient compliance system in place, firms run the risk of paying the ultimate price. It is crucial that firms ensure compliance with sanction laws and regulations concerning investments in Russia as to not unintentionally facilitate any activities prohibited by sanction regimes.
In times like these, organization is key. Managing regulatory rules, mandates, and internal guidelines can be challenging and time-consuming, especially when not all compliance requirements are properly documented, managed, or monitored. IMP’s CLEAR Compliance™ Solution uses AI, machine learning, and our internal expertise in regulatory technology and financial technology to help investment managers organize, track, manage, and accelerate their investment oversight processes.
Economic sanctions are likely to continue as the Russia-Ukraine war escalates, further justifying the need for compliance systems that work as intended. Investors across the globe have received harsh lessons on the principles of investing in the past few years, with a pandemic and an impending war. Though these situations could not have been easily predicted, IMP can help navigate through the uncertainty by helping investment managers keep tabs on their OMS activities by organizing requirement centric programs and reacting swiftly and effectively to trade flow interruptions.
[1]BNP Paribas Agrees to Plead Guilty and to Pay $8.9 Billion for Illegally Processing Financial Transactions for Countries Subject to U.S. Economic Sanctions. 29 Aug. 2014, https://www.justice.gov/opa/pr/bnp-paribas-agrees-plead-guilty-and-pay-89-billion-illegally-processing-financial.
[2]“Treasury Reaches Largest Ever Sanctions-Related Settlement with BNP Paribas SA for $963 Million.” U.S. Department of the Treasury, https://home.treasury.gov/news/press-releases/jl2447. Accessed 30 Mar. 2022.
[3]Sun, Mengqi. “BNP Paribas Revamps Compliance After Sanctions Violations Settlement.” Wall Street Journal, 19 Nov. 2019. www.wsj.com, https://www.wsj.com/articles/bnp-paribas-revamps-compliance-after-sanctions-violations-settlement-11574204524.
