In this report, we assess the strategic implications of the action Monday evening against BNP Paribas focusing on financial-market ramifications, not specific criminal sanctions for the institution and some individuals.  We draw client attention in particular to the resilience with which BNP has withstood the record-breaking fine and the market’s positive response to it.  Targeted financial institutions have little choice but to defend their market position in the wake of these actions, but success here poses risk to subsequent targets, as the higher fines consistently ramping up as each case is settled make all too clear.  We here also analyze the strategic impact of the less-noticed, but still unprecedented, Federal Reserve action against BNP.  Done in conjunction with the bank’s French supervisor, it nonetheless signals a still stronger U.S. hand dictating compliance protocols for banks doing business in the U.S. This will exacerbate trans-Atlantic tension, leading to retaliatory actions in the EU and rapid enforcement cases in the U.S. against large U.S. banks in defense.  Given the challenges posed by new FBO risk-management requirements (see forthcoming FedFin report), we view the FRB action as putting FBOs on notice that even those not now subject to possible enforcement actions will need to centralize worldwide AML and sanctions compliance in the U.S. 

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