HSBC Private Bank (Suisse) S.A. (HSBC), a private bank of the HSBC group, settled with the French national financial prosecutor (NFP) on 14 November 2017 for EUR 300 million for allegations of aggravated money-laundering of tax evasion proceeds and unlawful financial and banking solicitation of French prospects or prospects residing in French territory by unauthorised persons. This was the first time that a settlement agreement which is similar to a deferred prosecution agreement (DPA) – in France, called a Convention Judiciaire d’Intérêt Public – has been concluded in France.
The settlement is the result of the new anti-corruption law, Sapin II, which entered into force on 9 December 2016 and created a French equivalent of a DPA. Under this law, the settlement may contain a public interest fine, calculated in proportion to the benefits obtained from the offences. The amount of the fine can reach up to 30% of the company’s average annual turnover, calculated on the basis of turnover during the last three years, as available at the time the offences were first discovered. The fine is divided into disgorgement of profits and a penalty.
According to the agreement, HSBC allegedly provided its French customers with services to conceal their assets while in possession of information enabling it to know or suspect that French clients were using these services to avoid French tax obligations. In addition, HSBC allegedly advised French clients to transfer money to bank accounts in offshore entities. The alleged misconduct took place over several years, including in 2006 and 2007. Over 8,900 HSBC bank accounts belonging to French tax payers were identified, with assets totalling at least EUR 1.64 billion.
Due to the severity of the facts and the continuing nature of the offence, HSBC was given a maximum fine of 30% of turnover: almost EUR 158 million. According to the NFP, HSBC only offered minimal cooperation and did not acknowledge its criminal liability or voluntarily disclose the facts. An additional amount of over EUR 142 million had to be paid to compensate for damage suffered by the French state, bringing the total amount of fines to EUR 300 million.
HSBC group has acknowledged past control failures of its Swiss subsidiaries and indicated that, since 2011, it ”has initiated a complete overhaul of its structure, controls and procedures aimed at adapting its risk profile”. Its control over the activities of operational subsidiaries has increased, and strict compliance standards have been put in place. The proceedings against HSBC group have been terminated, but two former directors of HSBC remain subject to possible legal action.
The new anti-corruption law
In addition to the introduction of a settlement agreement, Sapin II also addresses anti-corruption. The jurisdictional scope for public sector bribery offences now extends to foreign conduct by persons “habitually residing in France” or “having all or part of their economic activity in France”.
The new law also introduced mandatory anti-corruption compliance measures. Companies or groups with over 500 employees and an annual revenue exceeding EUR 100 million must now include certain measures and procedures in their compliance programmes, including a code of conduct, an internal reporting mechanism, and accounting controls. The new anti-corruption agency Agence Française Anticorruption (AFA), also established by Sapin II, monitors the compliance programmes, supervises their implementation, performs audits of companies subject to the requirements, and has the power to impose sanctions if a company fails to implement a compliance programme.
SBM Offshore reaches FCPA resolution with U.S. Department of Justice
The U.S. Department of Justice (DOJ) announced its decision to resolve criminal charges against SBM Offshore N.V. (SBM) on 29 November 2017. The resolution relates to a conspiracy to violate the FCPA and entails a deferred prosecution agreement for the holding company, a guilty plea for SBM’s US subsidiary, and a monetary penalty of USD 238 million. No independent compliance monitor was imposed.
According to the DOJ, SBM violated the FCPA by paying over USD 180 million in commissions to intermediaries while aware that a portion of those commissions would be paid to foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq during the period from 1996 until 2012.
SBM received a 25% discount on the total fine range because the company cooperated with the DOJ’s investigation, undertook remedial measures, terminated longstanding agency agreements, and implemented an enhanced compliance system to address and mitigate corruption and compliance risks. In setting the amount of the penalty, the DOJ also took into account SBM’s resolution with the Dutch authorities in 2014 and the amounts provisioned by SBM for resolution of its legacy issues in Brazil.
In the UK, the Serious Fraud Office charged two individuals on 16 November 2017 and two individuals on 30 November 2017 with conspiracy to make corrupt payments for SBM, a client of Unaoil. The first two individuals are former Unaoil employees, while the second two individuals are former SBM employees, one of whom also worked for Unaoil.
The impact of current developments
The HSBC settlement indicates that French anti-corruption law is no longer limited only to French nationals or French residents, but encompasses anyone exercising part or all of his or her economic activity on French territory. The broader jurisdiction resembles other anti-corruption laws like the UK Bribery Act and the FCPA, the latter of which the SBM settlement was based on. Companies need to ensure that their current anti-bribery and compliance policies comply with all laws in all countries they are operating in to prevent violations which could result in high penalties and prosecution. The wide range of these anti-bribery and corruption laws can also result in severe reputational damage to companies, further emphasising the need for vigilance in this area.