BELEAGUERED FRENCH BANKING GIANT SOCGEN EXPECTS TO PAY NEARLY $1.3 BILLION TO SETTLE SANCTIONS CASE

A French banking behemoth stated Tuesday it is expecting to pay a 1.1-billion-euro penalty, or $1.27 billion, to a host of U.S. federal and state investigative and regulatory authorities for breaching U.S. sanctions rules – the second time in recent months the bank has negotiated a high-profile settlement for financial crime compliance failures.

Société Générale stated it has “entered into a phase of more active discussions” with U.S. officials and stated that a finalized settlement is likely “within the coming weeks,” according to a company announcement, adding that the mammoth penalty would be mostly covered by previously set-aside provisions for legal expenses.

The bank’s overall set asides for legal expenses are currently pegged at 1.43 billion euros, according to the update.  The more than 150-year-old bank has assets of nearly 1.3 trillion euros, or $1.5 trillion and annual revenues of just under 24 billion euros, or just less than $28 billion.

The figure is reportedly the first time the bank has put a number on the looming U.S. sanctions fines, though it has been in recent years raising its full set aside figures for penalties and settlements.

The bank is yet again doing battle with a familiar retinue of U.S. agencies: The U.S. Treasury’s Office of Foreign Assets Control, the U.S. Attorney’s Office of the Southern District of New York, the New York County District Attorney’s Office, the Federal Reserve and the New York State Department of Financial Services, the country’s most aggressive state regulator for foreign bank systemic and longstanding sanctions and anti-money laundering (AML) failures.

The incoming penalty is yet another black mark on the bank’s financial crime compliance programs.

Earlier this year SocGen was part of a historic multi-jurisdictional graft and rate-rigging deal.

In June, the bank stated it would pay $1.3 billion in a global settlement related to corruption and currency manipulation charges in the United States and France, according to authorities.

The allegations related to bribing Gaddafi-era Libyan officials and illicitly influencing the Libor interest rate benchmark, a further showing that global regulators are more aggressively teaming up to tackle major corruption investigations to better see all the pieces of the puzzle.

Both countries at the time called the settlement the first ever such resolution coordinated and negotiated by both countries simultaneously. To read the prior SocGen action, click here.

Collectively, stripping cases eclipse $12 billion

The incoming fine against SocGen is just the latest sanctions penalty and likely hefty remediation in a series of major sanctions violation actions against large foreign banks dating back nearly a decade, typically referred to as “stripping cases,” as institutions in many cases institutionalized sanctions evasion tactics such as stripping out wire details tied to regimes on U.S. blacklists.

The current reigning U.S. champ occurred in June 2014, when BNP Paribas Bank (BNPP) pleaded guilty in New York County to falsifying business records and conspiring to evade U.S. sanctions, paying a record $8.83 billion in criminal forfeiture and penalties.

Since 2009, a plethora of banks have forfeited more than $12 billion for their illegal conduct, with an estimated half of the funds being paid to the City and State of New York.

U.S. authorities have previously entered into Deferred Prosecution Agreements and related settlements with some of the largest foreign banking groups in the world for sanctions violations, including:

·         Credit Agricole for $787 million in 2015

·         Commerzbank AG for $342 million in 2015

·         BNP Paribas for $9 billion in 2014

·         HSBC Bank for $375 million in 2012

·         Standard Chartered Bank for $327 million in 2012

·         ING Bank for $619 million in 2012

·         Barclays Bank for $298 million in 2010

·         Credit Suisse AG for $536 million in 2009

·         Lloyds TSB Bank for $350 million in 2009

Bank working to improve fincrime compliance

While the bank has not detailed the AML and sanctions remediation steps it has taken to address the concerns of U.S. investigators and regulators, it has detailed steps it has taken this year to bolster these areas.

On its site, SocGen stated that the Compliance Division (CPLE) was reorganized on in January of this year and directly reports to the “Group’s General Management, thus becoming an independent division in its own right headed by Edouard-Malo Henry, member of the Group’s Management Committee.”

The bank states that, currently, under the new structure, a “number of committees are in place in the presence of General Management and the Inspection to define the Group’s main orientations and principles in terms of compliance,” with certain teams devoted to each business line and further, “central teams devoted to supervising the various risks and controls, as well as key cross-business functions such as the digital transformation and training.”

“To meet the growing challenges in this area, over the last 3 years Societe Generale has doubled the workforce devoted to this activity and significantly increased the training budgets,” according to the bank.

“Compliance with sanctions is an ongoing issue which is increasing in importance and complexity, thus generating significant operational risks and requiring an international approach,” the bank stated on its site. Trade embargoes and “economic sanctions are strictly complied with throughout the Societe Generale group.”