It may come as a surprise to many investors that the largest settlement a bank pays to the U.S. government might not come from an American bank.

So far we've seen such enormous settlements like $13 billion from JPMorgan Chase (NYSE:JPM), and it looks like there's a chance Bank of America (NYSE:BAC) might top that amount when it finally settled with the Justice Department in the near future. However, BNP Paribas (OTC:BNPQY), France's biggest bank could be on the hook for even more than those two.

The latest reports say the U.S. is seeking a record $16 billion fine from BNP, so what did they do wrong and what will it mean to investors and the economy?

What did they do wrong?
BNP is facing fines and other actions for violations to U.S. sanctions relating to Sudan between 2002 and 2009. Specifically, the bank is being accused of stripping out identifying information from wire transfers so they wouldn't raise any red flags in the U.S. financial system.

First, the volume of BNP's questionable transactions is allegedly about 10 times larger than any other bank which has faced similar charges. Furthermore, the charges indicate that senior management had extensive knowledge of the wrongdoing, which is generally grounds for stiffer penalties than say, if lower-level employees acted without the knowledge of management.

Also, the bank has been largely uncooperative with the government's investigation, and this played a role in a similar fine imposed on Credit Suisse.

For all of this, sources close to the negotiations say there is more than ample justification for an 11-figure fine, and for other penalties. One potential outcome that could really hurt the bank would be a suspension of the bank's ability to clear U.S. dollar transactions, as BNP usually clears hundreds of billions of dollars through New York on a daily basis.

Why could the settlement be so large?
One reason the numbers being thrown around have gotten so high is that at five different offices are charging BNP with wrongdoing.

The company has been negotiating with the U.S. Justice Department, U.S. Attorney's Office in the Southern District of New York, the Treasury, the Manhattan District Attorney's office and the New York Department of Financial Services.

What's the significance of it?
The fines imposed on banks have skyrocketed over the past several years, and it looks like the Justice Department is trying to send a clear message that abusive banking practices will simply not be tolerated, whether they have to do with mortgage lending, money laundering, sanctions violations, or any other illegal or unethical activities.

This has significance for both U.S.-France relations as well as investors in BNP.

The potential fine is so steep that political leaders have gotten involved. French President Francois Hollande has complained about the potential of a $10 billion fine to President Obama, and was met with a rather dismissive attitude. Basically, Obama said he will not meddle in the prosecution and that he wants to play no role in the process.

Then, France declared that if the fine is anywhere near as severe as it's speculated to be, it could threaten a planned transatlantic trade partnership between the U.S. and France. Not only does France feel such a stiff penalty would severely hurt its largest bank, but that it would open up other international banks to colossal penalties and hurt the overall Eurozone economy.

Investors should be concerned
For investors; there may be good cause for concern.

Unlike virtually all of the banks which faced large mortgage-related settlements, BNP was certainly not anticipating the possibility of a fine of this magnitude.

In fact, BNP only set aside $1.1 billion in reserves to cover legal expenses related to the American investigation, less than one-tenth of the potential cost. Even a fine of $10 billion would be more than the bank profited during 2013.

As a result of the larger settlement estimate, shares of BNP are down by about 15% since February. However, the impact could be much more severe if the bank were to be suspended from U.S. transactions.

What will the real number be?
When discussing legal settlements like this, bear in mind that the entire process is a negotiation. The $16 billion figure is likely an inflated number, just like BNP's settlement offer of $1 billion is ridiculously low.

The consensus seems to be a figure in the $10 billion neighborhood, but the actual cost could prove to be much more than that. The U.S. is out to make an example of banks that violate our laws, and is out to show the world international banks get no special treatment.

As this saga unfolds, the impact on the Eurozone economy, France-U.S. relations, and BNP itself will be interesting to see, but one thing is for sure.

I would be a little nervous if I was a BNP shareholder right now.