In September 2018, ING Bank N.V. entered into a EUR 775 million settlement with the Dutch Public Prosecutor (OM) in connection with violations of the Dutch Act on the Prevention of Money Laundering and Financing of Terrorism (Wwft) and money laundering. Under the terms of the agreement, ING Bank has agreed to pay a fine of EUR 675 million and EUR 100 million for disgorgement.
According to the OM, its investigation established serious and structural shortcomings at ING Bank in the prevention of financial economic crimes, including missing or incomplete customer due diligence files, failure to exit business relationships in a timely manner, and insufficient availability of qualitative and quantitative human resources. These shortcomings resulted in clients being able to use their bank accounts for, among other things, money laundering practices. According to the OM, the identified shortcomings are not attributable to certain individuals, but rather represent collective shortcomings at all responsible levels within the ING organisation.
In formulating the terms of the settlement, the OM recognised ING Bank’s cooperation with the investigation, the enhancement of its compliance programme in coordination with the Dutch Central Bank (DNB) and its acknowledgement of the facts as laid down in the statement of facts published by the OM.
In connection with the investigation by the OM, ING Bank also received information requests from the SEC. ING Bank has been cooperating with these requests. Following the announcement of the settlement with the OM, ING Bank received a formal notification from the SEC stating that the SEC has concluded its investigation and, based on current information, does not intend to recommend an SEC enforcement action against ING Bank.
Never before has such a high settlement amount been offered by the OM. Notably, according to the OM, the disgorgement amount of EUR 100 million represents the underspend by ING Bank on staffing for implementation and execution of financial economic crime and customer due diligence policies and procedures over the relevant period. The level of transparency displayed by the OM in the form of the publication of the transaction agreement and the comprehensive statement of facts is likely to herald a new era in which the settlements by the OM are moving further towards US-style settlements, addressing also the public call for more transparency in relation to larger settlements in the Netherlands.
Credit Suisse Group AG and its Hong Kong subsidiary entered into a USD 76.7 million settlement with the DOJ and SEC in connection with a hiring scheme Credit Suisse Hong Kong had in place between 2007 and 2013. As part of the settlement, Credit Suisse Hong Kong admitted that during this period it offered employment opportunities to friends and family of Chinese officials in exchange for business. The NPA between Credit Suisse Hong Kong and the DOJ is conditional on the company’s continued cooperation with the U.S. authorities in related ongoing investigations and prosecutions, as well as the enhancement of the company’s compliance programmes.
Credit Suisse Hong Kong allegedly hired more than 100 employees at the request of Chinese officials over a seven-year period. According to the SEC, “the practice of hiring client referrals bypassed the firm’s normal hiring process” and was known to, and approved by, Credit Suisse employees. The bank was found to have violated anti-bribery and internal accounting controls provisions.
Under the terms of the settlement, Credit Suisse Hong Kong will pay a USD 47 million criminal penalty to the DOJ, while its parent, Credit Suisse Group AG, will pay USD 24.9 million in disgorgement and USD 4.8 million in pre-judgment interest. In line with the recently introduced DOJ anti-piling policy, the SEC did not impose a civil penalty, taking into consideration the criminal penalty imposed by the DOJ.
Based on its cooperation with the criminal investigation, Credit Suisse Hong Kong received a partial credit of 15% under US Sentencing Guidelines. The cooperation included making foreign-based employees available for interviews and handing over documentation from other jurisdictions “in a way that did not implicate foreign data privacy laws.” According to the DOJ, the company could have received further credit had it cooperated proactively and sufficiently disciplined the employees at fault.
Credit Suisse is not the first international bank facing US enforcement agencies for hiring friends and family of public officials in an attempt to win lucrative business. The Credit Suisse matter bears resemblance to the 2016 JPMorgan Chase settlement of USD 264 million in relation to its “sons and daughters” hiring scheme. In 2015, BNY Mellon paid a fine of USD 14.8 million to the SEC for corruption offences resulting from granting internships to relatives of Middle Eastern officials linked to a sovereign wealth fund. With the Credit Suisse settlement, the DOJ is sending the global market a clear message that it remains committed to investigating and prosecuting corruption in all its forms, including corrupt hiring practices.
Legg Mason Inc.
In June 2018, Legg Mason, a US investment management firm, concluded an NPA with the DOJ as a result of which the company will pay USD 64.2 million (a USD 32.625 million criminal penalty and a USD 31.617 million disgorgement). In addition, the SEC issued an order for violation of internal accounting controls provisions. Under the SEC order, the company agreed to pay a USD 34 million civil penalty, USD 27.6 million in disgorgement and USD 6.9 million in pre-judgment interest. The disgorgement amount payable to the DOJ will be credited as a result of the disgorgement amount payable to the SEC.
The investigations by US authorities are related to violations of the Foreign Corrupt Practices Act (FCPA) in Libya. Under the NPA, Legg Mason admitted that its subsidiary, Permal Group, together with Société Générale, engaged in a bribery scheme intended to secure business from Libyan state-owned financial institutions. According to the DOJ, a broker engaged by Société Générale was paid a total of USD 90 million in the form of commission payments, part of which was then passed on by the broker as a corrupt payment. In seven of these transactions, the commissions paid to the broker benefited Legg Mason through its subsidiary. As a result, Société Générale secured 13 investments and a restructuring with a combined estimated value of USD 3.66 billion, earning USD 523 million in profits. Legg Mason allegedly obtained USD 31.6 million in profits as a result of the scheme. In June 2018, Société Générale entered into a settlement resulting in a total penalty of USD 585 million, to be shared between the DOJ and the French authorities.
This settlement highlights, among other things, the importance of third party due diligence and ongoing monitoring of (long-term) business partners. In connection with this settlement, US enforcement authorities also took into consideration the DOJ’s recent anti-piling policy, which aims to prevent duplicative penalties.
SBM Offshore N.V. and SBM Holding Inc. S.A. (SBM Offshore) signed a leniency agreement with the Brazilian Federal Prosecutor’s Office (Ministério Público Federal – MPF) on 31 August 2018. In addition to the settlement reached with Brazilian authorities CGU (Ministério da Transparência e Controladoria-Geral da União) and AGU (Advocacia Geral da União) and state-controlled oil company Petrobras last July, SBM Offshore has now also reached a final settlement with the MPF over alleged improper sales practices before 2012.
Under the leniency agreement, SBM Offshore will pay an additional amount of BRL 200 million (approximately USD 48 million) in fines to Petrobras. This brings the total amount to be paid to Petrobras under the two settlements to USD 347 million. The MPF in return commits to refrain from initiating new legal proceedings against SBM Offshore in relation to the legacy issues in Brazil. As with all such agreements signed by the MPF, the agreement is subject to prior approval by the Fifth Chamber of the MPF. Furthermore, the MPF and SBM Offshore will jointly request the Federal Court of Rio de Janeiro to formally close the improbity lawsuit that was filed by the MPF in 2017. Once approved, the leniency agreement will become fully effective and mark the end of SBM’s legacy issue in Brazil.
De Brauw acts as legal counsel to SBM Offshore in this matter.