Société Générale announced on Monday that it will pay $1.3bn to US authorities and enter a Deferred Prosecution Agreement (DPA) with the Southern District of New York and the New York County District Attorney to settle claims that it violated US sanctions on Cuba, Iran and Sudan. The bank will also have to pay an additional $95m to settle with the New York Department of Financial Services who found discrepancies in the anti-money laundering program at the bank’s New York branch. To top it all off, the bank will also have to make enhancements to the ways in which it prevents and detects potential violations of US sanctions.
This is not the first time that SocGen has found itself in this position. Earlier this year, the bank was fined $585m to settle accusations, also by US authorities, that it breached sanctions on Libya . As with the first fine, the bank has assured its shareholders that the actions against it will not have an impact on its financial results for 2018. The bank has a significant pot set aside to pay for its disputes, buffering it from the true weight of the US authorities.
As reported last week, a number of countries in the EU are awaiting fines for failing to implement the Fourth Anti-Money Laundering Directive (4AMLD). Their hearts must have sunk a little then, when last week the Sixth Anti-Money Laundering Directive (6AMLD) was published in the EU’s official journal. 6AMLD aims to harmonize money laundering laws at a national level and enable swifter and more efficient cross-border information sharing between competent authorities. The new directive must be transposed by early December 2020, 11 months after the implementation date of the Fifth Anti-Money Laundering Directive (5AMLD).
Member states, especially those still struggling with 4AMLD, will have their work cut out getting their laws in order. 6AMLD requires states to make changes to the definition of money laundering which will impact law enforcement and judiciaries. There are also a few quirks in the directive which could have far-reaching implications. Recital 17 for example, on jurisdictions and the use of Information Communications Technology (ICT) to commit a crime, is worth highlighting. For companies, 6AMLD will be less of a concern as it doesn’t bring in any new practical compliance obligations. For compliance professionals however, the new directive will make future money laundering indiscretions punishable by a minimum four-year jail sentence combined with the possibility of fines and a bar to practice.
In 2016 the UK’s Financial Conduct Authority (FCA) sent a survey to 2,000 financial institutions. The aim of the survey was to find out more about the financial crime threats and trends they experience. The results are finally in. From an anti-money laundering perspective, there are a couple of insights that compliance professionals may find interesting. Firstly, the survey tells us how many “high-risk entities” firms believe existed in the UK in 2017. The answer is 3,625,267, 120,000 of which were Politically Exposed Persons (PEPs).
The second insight of note is the list of ‘perceived country risk’. Iran unsurprisingly topped the list in 2017. In second place, however, is Panama which doesn’t feature on the FATF gray list, appears only in the middle of the Transparency International Corruption Perception Index and has no UN or OFAC sanctions against it. What this shows perhaps is the impact that the Panama Papers have had on the country’s reputation. The conclusions of this report are quite generalized but they do provide a useful measure for companies to evaluate their perceptions of where financial crime risk lies.
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