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Au Revoir Dollar

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The newspapers this week are full of stories of the impending settlement between French bank, BNP Paribas, and US authorities for BNP's alleged violations of US sanctions. The latest speculation on the settlement number is $10 billion. That hefty financial contribution to American coffers is just part of the anticipated settlement. According to the Wall Street Journal, the New York Department of Financial Services is also insisting that executives lose their jobs and the bank temporarily lose its dollar-clearing privileges. The transactions, at issue apparently fall under US law because they were denominated in dollars. As reported by France's Le Figaro, Bank of France governor Christian Noyer noted that the transactions at issue did not run afoul of French or European Union laws and regulations or United Nations rules. He also cautioned other banks in light of "evolving American jurisprudence".

Absent more details about the conduct at issue, it is difficult to assess the degree of wrongdoing and the proportionality of the contemplated settlement. If these were dollar-denominated transactions conducted by bank employees outside of the US in compliance with applicable foreign laws, should US regulators be pursuing this case at all? By using dollar denomination as a jurisdictional hook are financial regulators hastening the transition away from the dollar's reserve currency status, a trend that many believe is already underway? Rather than using the dollar and opening themselves up to unpredictable punishment at the hands of countless federal and state regulators, companies might choose to conduct their business in other currencies. American regulators and prosecutors should not hesitate to pursue illegal conduct, but focusing their attention on cases not reasonably within their regulatory jurisdiction could have the undesirable consequence of making the dollar a currency to be avoided.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

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The Manhattan Insitute's Center for Legal Policy.