French National Bank Pays Huge Fine
By: Pamela Coyle Brecht
On November 19, 2018, Société Générale, multinational investment bank and financial services company located in Paris, entered into a Deferred Prosecution Agreement (DPA) with the United States Attorney’s Office for the Southern District of New York (SDNY) and the Manhattan District Attorney’s Office (DA) and agreed to pay $1.34 billion for illegally sending payments through the United States financial system in violation of U.S. federal laws and New York state laws, making this the second largest fine to ever be imposed on a financial institution for economic sanctions violations.
Federal law prohibits U.S. financial institutions from performing transactions for certain persons, entities, and countries that are specified by the government in order to prevent terrorists, money launderers, and other criminals from gaining access to the U.S. banking system. Similarly, New York contains an additional state law that makes it unlawful to make or cause to make a false entry in business records when made with the intent to defraud. Under the same state law it is also illegal to prevent the making or cause the omission of a true entry in business records when made with the intent to defraud.
From 2004 to 2010, Société Générale engaged in more than 9,000 transactions valued at $13 billion that violated laws regarding illegal and non-transparent transactions involving parties in countries subject to embargos or sanctions including Cuba, Iran, Libya, and Sudan. Société Générale wrote inaccurate interbank messages that accompanied each transaction in order to conceal its true illicit purpose and deceive the receiving bank into completing the transaction. These fabricated interbank messages caused the illegal transactions to be processed when they should have been rejected, blocked, or stopped for investigation. Some of these transactions stemmed from Société Générale’s 21 U.S. dollar credit facilities.
Under the DPA, Société Générale agreed to pay $717.2 million to the SDNY, $162.8 million to the DA, $325 million to the New York State Department of Financial Services, $81.3 million to the Board of Governors of the Federal Reserve System, and $53.9 million to U.S. Department of Treasury’s Office of Foreign Assets Control.
For the Record
“Other banks should take heed: Enforcement of U.S. sanctions laws is, and will continue to be, a top priority of this office and our partner agencies,” Manhattan U.S. Attorney Geoffrey S. Berman remarked in a statement on Monday.
The Take Away
While $1.34 billion is the second largest fine on a financial institution for economic sanctions violations to date, there were a significant number of mitigating factors the SDNY and DA considered when determining this amount. First, Société Générale ceased its illicit behavior before the SDNY’s and DA’s investigation commenced. Société Générale also substantially cooperated and contributed to the investigation, and accepted responsibility for its illegal conduct. Further, Société Générale voluntarily improved its sanctions compliance program. It increased the amount of employees working on sanctions compliance, boosted its compliance technology, tripled its compliance budget, reorganized its sanctions policies, and instituted biannual trainings for sanctions compliance.