French banker BNP Paribas is likely to be banned from processing US dollar payments through New York relating to clients in some businesses for at least a year, as part of its settlement for violating US sanctions.
Reuters citing sources familiar with the matter reported that the "untested and severe penalty," which is the first of its kind for a global bank is part of BNP's settlement with the US authorities, and compliments a whopping $9bn (£5.3bn, €6.6bn) payment to placate US authorities.
The New York State Department of Financial Services, headed by Benjamin Lawsky, is close to reaching a deal with the bank on the ban on currency conversions, known as dollar clearing, the sources told the news agency. Lawsky's office had earlier proposed the suspension as one condition for not revoking Paribas's license to operate in the state.
The temporary ban is expected to be limited to certain business lines such as oil trade financing, but would span various geographic regions. BNP, like any large or bulge bracket banks, clears hundreds of billions of dollars through New York every day.
The ban may be phased in, according to one source quoted by Reuters.
US regulators are expected to announce a $9bn settlement with BNP over violation of sanctions next week, according to media reports. The bank is expected to plead guilty to a federal criminal charge as part of the settlement.
The bank is reported to have finally reached an agreement with the US Department of Justice and New York state banking regulator Lawsky.
The settlement is related to accusations that BNP breached US sanctions against Iran, Sudan and Cuba between 2002 and 2009 by handling $30bn worth of transactions with them.
Reuters earlier reported that BNP Paribas is shifting its US sanctions compliance operations from Paris to New York, ahead of the settlement to appease US regulators.