Foreign Policy Blogs

Finance and BNP: How Do They Fit Our Geopolitics?

Siège BNP Paribas, Genève

Photo Credit: jyhem via Flickr

French bank BNP Paribas will likely pay up to $10 billion in penalties in a settlement with U.S. prosecutors for alleged transactions, dating back to 2002, with Iran and Sudan, countries sanctioned as terrorism sponsors.  Also, prosecutors want BNP to plead guilty to criminal charges.

U.S. sanctions on terrorists and their enablers are appropriate, as is the use of America’s financial power to isolate such countries.  But questions arise from the manner in which we apply sanctions and penalties.

By one account, the U.S. prosecutor’s actions against BNP seem at least partially caused in order to forestall the New York State banking regulator.  The New York office had stolen a march on the U.S. prosecutor in citing Standard Chartered Bank earlier, embarrassing the federal office.  You may recall that Eliot Spitzer made his public name as New York’s attorney general, prosecuting financial firms independently of federal regulators.  Whether this history played any role in the actual handling of BNP is a matter of conjecture, but it does raise the possibility.  The interplay of other cases in front of the prosecutor may influence his handling of BNP as well.

President Obama indicated that he would not interfere in the Justice Department’s prosecutions. This was the same response he had to U.S. indictments of Chinese army officers, charged with hacking for commercial theft, not national security purposes.  In both cases, we treat the issue as divorced from matters of foreign policy.

But there are foreign policy effects.  In the case of BNP, certainly there is a question of America’s determination to maintain its sanctions against odious regimes.  But Americans “trumping” others’ domestic laws with our own will trigger resentments, and, perhaps, consequences.  In the BNP case, it invites European complaints of “extraterritorial power mongering.”  The fact that BNP is French raises the additional question of the U.S. stance toward a NATO ally and fellow democracy.  Antagonizing France, even in the course of a private sector prosecution for violations of anti-terrorism measures, would seem to contradict other foreign policy priorities.  Confronting France while appeasing Russia, as we did until the Ukraine crisis, seems contradictory to our values.

Many Americans might say, fairly, that the French need to get over themselves, stop coddling their corporate champions, play clean, and accept the consequences of dealing with bad actors like Sudan and Iran. But was something approaching a diplomatic clash necessary? Did we inform the French government of the prosecutors’ plans? Was there any degree of prior consultation between the governments?

On another front, on what basis do we want U.S. foreign policy to be carried out? Does the Department of State have any role, consultative or otherwise, in setting the pace and tone of the prosecution? Should they have a role in the announcement, if not the substantive handling, of such matters?  Should they manage the message of American intent in prosecuting foreign firms and persons in matters that touch on foreign policy matters?

U.S. government agencies outside of the formal foreign policy sectors have become more and more involved in actions that affect foreign policy.  Some, such as Treasury, explicitly see a role for their offices in foreign policy.  While the management of executive branch turf issues is not per se a foreign policy issue, the tone of U.S. government activities can affect our diplomacy.

In particular, most foreign policy acts of otherwise “non foreign policy” agencies enforce economic, trade-related, or financial rules against foreign actors.   They tend to impute unfriendly motives to the U.S. government.  On the one hand, our diplomacy should control the tone of our relations with others.  On the other hand, commerce, finance, and trade are tools for peoples to develop.  Development raises the chances for them to grow in, or into, freedom.  This kind of development and progress is in America’s deepest interests.

BNP most likely broke laws, and deliberately evaded the U.S. prosecutor’s investigations.  They likely undermined U.S. sanctions on Iran and Sudan.  But U.S. application of its own laws and wants in the international arena should not fuel suspicions of our motives.  If we will apply our laws in diplomatically-laden situations, we need to manage the execution of our actions.  We cannot allow domestically driven actions to paint us as extraterritorial power mongers.  We can and should manage ourselves to show how we run a nation of laws, established clearly for the sake of human freedom, at home and abroad.




George Paik

George F. Paik is a former political affairs officer in the U.S. Foreign Service, as well as a twenty year veteran of U.S. capital markets. He is a current board member and former chair of the World Affairs Forum (a sister to FPA in the World Affairs Councils of America network) in Stamford, CT. His work as a diplomat straddled the fall of the USSR, and included political analysis, human rights, trade affairs, and environmental policy, in postings were in Brazil and Trinidad, and in the Department of State. Financial experience includes stints with Mellon Bank, Manufacturers Hanover Trust Co. and People’s United Bank. He currently holds the position of Managing Director at Lord Capital, LLC, a firm focused on international trade finance.

Paik graduated from Harvard University with a BA in Social Studies; he also holds an MBA in Finance from the Wharton School of the University of Pennsylvania. He counts ten years playing Rugby, with club mates from countries around the globe, as part of his international experience.