BNP Paribas closes Cayman branch

(CNS Business): French bank BNP Paribas is closing one of its two remaining branches in the Cayman Islands, as it continues to scale back its international offshore operations, having closed two Cayman subsidiaries in 2015. However, it will retain a banking presence in Cayman, which it does not classify as a “fiscal paradise”.

A New York-based spokesperson for BNP Paribas told CNS Business that its Bank of the West branch in the Cayman Islands would close, which is a development confirmed yesterday by BNP Paribas Deputy Chief Operating Officer Jacques d’Estais in a hearing before the Finance Commission of the French Senate. Senior officials from major French banks like BNP Paribas and Societe Generale have been summoned to appear before the Senate to explain their role in the infamous Panama Papers leak, which shone new light on how tax havens were being used by the world’s wealthy, prompting a fresh round of outrage from governments over the perceived loss of tax revenue.

Bank of the West along with First Hawaiian Bank makes up BNP Paribas’ wholly owned subsidiary BancWest, which has over 700 branches in the midwest and west of the US, with assets of $76 billion. The BNP Paribas spokesperson told CNS Business that the branch closure in the Cayman Islands was completely unrelated to the Panama Papers leak.

“The Cayman Islands are not a fiscal paradise as all fiscal related items must be declared to the US authorities,” he noted.

French banks have come under great pressure in their home market to demonstrate to regulators and legislators that they are making every effort to ensure clients do not utilise offshore accounts for illicit purposes.

The Wall Street Journal recently cited a Le Monde report which stated that BNP Paribas worked with Mossack Fonseca & Co to set up 468 firms for clients since the 1980s. While only six of these accounts are still active, it was suggested that many more hold offshore accounts as BNP Paribas had worked with other Panamanian law firms.

Crédit Agricole was also highlighted in the report as a major facilitator for clients putting money in offshore shell companies set up by Mossack Fonseca & Co.

BNP Paribas has been in the firing line before with regard to offshore tax evasion. Its Swiss subsidiary BNP Paribas (Suisse) paid a fine of almost $60 million last year as one of three Swiss banks implicated by the US Department of Justice for assisting clients to evade US tax through secret Swiss accounts. The DoJ said that since 1 August 2008, BNP Paribas (Suisse) held and managed some 760 US-related accounts with a peak value of approximately $1.2 billion in assets under management.

BNP Paribas said yesterday that since 2009 its group had initiated a rigorous programme to strengthen its “commercialisation and control methods” for its international private banking business, with various measures taken to change its international private bank practices.

The bank said this involved continuous reinforcement of compliance and ‘know your customer’ procedures and the suspension of all activities linked to the administration of offshore companies for clients.

Fiscal compliance declarations have been required since 2013 for all clients who are French, EU or OECD fiscal residents and accounts will no longer be opened on behalf of offshore legal structures for French fiscal residents, BNP Paribas said.

“As far as we are concerned, we consider that there is today in France and within the European Union sufficient tools to ensure the management, structuring, and transmission of our clients’ assets, without having to resort to offshore legal structures,” the BNP Paribas spokesperson said.

BNP Paribas and its offshore activities have been the subject of intense media speculation, after international news reports this week stated that it was on the verge of closing all its remaining operations in the Cayman Islands. Reuters reported these claims from Paris-based social campaign group Attac (the Association for the Taxation of financial Transactions and Aid to Citizens), which placed this information on its website, citing the minutes of a BNP Paribas Finance Committee meeting from its central works council of 3 May.

In addition to its banking activities, BNP Paribas also operates a fund administration business in Cayman, which itself was beset by rumours of closure and accusations, strongly denied by management, that it had already starting laying people off as part of a wind down of its Cayman office. Several Caymanians were understood to have been let go, prompting the attention of the Department of Labour.

Bennard Ebanks, Director of the Department of Labour and Pensions, confirmed that a small team of DLP officers attended the offices of BNP Paribas Bank in February 2016 as part of ongoing discussions with BNP management in relation to some redundancies that had taken place. Ebanks said the site visit was to verify that the observance of our Labour and Pensions Laws had taken place relative to the affected employees and said that the benefits provided met the requirements of the Labour Law.

At Q1 2016 there were 179 total banking licenses in effect in Cayman, down dramatically from the heyday at start of the 2000s when there were well over 400 banks registered, with industry consolidation the main reason for the fall. More recently, de-risking and concerns regarding association with tax havens have proven a major threat to the resumption of growth of the banking sector in Cayman.

Tags: BNP Paribas, Department of Labour and Pensions, Featured, Panama Papers

Category: Banking, Finance, Financial Services