BNP Paribas criticised over Africa client controls

Wed Apr 17, 2013 11:50am EDT

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By Lionel Laurent

PARIS, April 17 (Reuters) - French bank BNP Paribas exercised poor controls over "high-risk" African clients and potentially illicit activity at its private bank in Monaco, according to an internal report seen by Reuters.

News of the confidential report, handed to top managers in October, 201l, comes as regulators across the world crack down on money laundering and tax evasion.

BNP, France's biggest bank by market value, has since closed the "few dozen" accounts involved and toughened risk controls to avoid "irregularities" in the future, a spokeswoman said.

Paris-based advocacy group Sherpa, which separately obtained the report, called on prosecutors to open an inquiry into its findings. BNP's spokeswoman declined to comment further.

The report alleges that "many" Madagascar residents seek to escape foreign-exchange regulations by accepting or exchanging euro-denominated cheques in lieu of local currency, building up an illicit money chain of cheques that passes back through Europe.

The inquiry analysed the activity of dozens of Madagascar accounts at BNP's private bank in Monaco between January 2008 and July 2011 and found high cheque volumes.

One account, belonging to a freelance salesman for the bank, received approximately 10 million euros ($13.1 million) via hundreds of cheques and passed the money to other accounts at BNP or to other banks in countries such as Switzerland, Belgium and China.

"It appears that the bank is not entirely in control of the back-end of financial transactions that may be in breach of regulations in the clients' country of residence," according to the report, which was passed to managers including Deputy Chief Operating Officer Jacques d'Estais.

"The way these accounts are used does not correspond to the activity of a private bank and generates high risks for the bank because of the weakness of the compliance framework that governs their oversight."

The account was frozen in June 2011 and BNP instructed the salesman that it would no longer accept any cheques, the report said.

Money laundering and tax evasion have shot to the top of the political agenda as countries search for ways to tackle public deficits in the wake of the financial crisis.

The crackdown on tax havens took a dramatic turn in France when Budget Minister Jerome Cahuzac quit the government and admitted he had held an undeclared Swiss bank account.

French banks have so far avoided being tainted by the Cahuzac scandal but BNP and Credit Agricole were put in the spotlight after reams of documents on offshore investments were made public earlier this month.

Both banks said they were committed to quitting all non-cooperative tax havens.

BNP, like its arch-rival Societe Generale, has also said it is reviewing some transactions as part of talks with U.S. authorities on activity in countries that are subject to sanctions. ($1 = 0.7616 euros) (Editing by David Cowell)

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