Societe Generale SA settled its longstanding sanctions violations case with U.S. authorities, entering a deferred prosecution agreement with federal prosecutors and paying $1.34 billion to regulators in New York and Washington.
As part of the settlement announced on Monday, France's third-largest bank acknowledged violations of U.S. sanctions laws against Cuba, Iran and Sudan starting as far back as 2003 and extending to 2013.
The bank agreed to pay $1.34 billion in all to settle the matter, the U.S. Federal Reserve said in a statement. For the sanctions violations, it will pay $717 million to the U.S. Justice Department, $325 million to New York's Department of Financial Services, $163 million to the Manhattan District Attorney's office, $81 million to the U.S. Federal Reserve and $54 million to the U.S. Treasury. It will pay an additional $95 million to the New York department for weak anti-money-laundering controls.
The settlement "will remove the bulk of the bank's legal risks in the U.S.," according to a report by Bloomberg Intelligence.
"Societe Generale has admitted its willful violations of U.S. sanctions laws -- and longtime concealment of those violations -- which resulted in billions of dollars of illicit funds flowing through the U.S. financial system," said U.S. Attorney Geoffrey S. Berman in Manhattan. "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."
Maria Vullo, who leads the Department of Financial Services, said: "The absence of an effective, global sanctions-compliance infrastructure and lack of management oversight allowed Societe Generale employees to ignore the scope and applicability of laws governing economic sanctions."
The cost of the penalties is covered entirely by legal provisions already booked in SocGen's accounts, the bank said in a written statement on Monday. The French company sees no additional impact to its 2018 results from these agreements.
"We acknowledge and regret the shortcomings that were identified," Chief Executive Officer Frederic Oudea said. SocGen "has already taken a number of significant steps in recent years and dedicated substantial resources" to improve its compliance programs for stamping out sanctions evasion and money laundering.
SocGen resolved two other U.S. investigations -- relating to bribery in Libya and the manipulation of interest rates -- for a total of $1.3 billion in June. Monday's settlement is the first major sanctions settlement involving a global bank during the Trump administration. In 2015, Credit Agricole SA settled a sanctions matter with U.S. authorities for $787 million.
Starting around 2002, SocGen concealed many of its illegal transactions by sending cover payments with wire transfers from U.S. banks to foreign lenders that omitted the name of the beneficiary, according to the statement of facts filed in federal court.
After sending the blind instructions to the U.S. bank, SocGen would notify the foreign lender that the incoming dollar transfer should be credited to the sanctioned party. In this way, SocGen was able to hide from U.S. authorities its ongoing business on behalf of entities in Cuba.
The French bank also extended lines of credit to various Cuban entities. Between 2003 and 2010, SocGen processed more than $15 billion worth of transactions for Cuban clients, including a sanctioned Cuban bank, the filings said.
In 2004, after noting aggressive enforcement actions by the U.S. against other European banks that violated sanctions, SocGen management decided to eliminate the Cuban business. Despite that edict, according to the filings, SocGen continued to operate its Cuban lines of credit until 2010.
New York's DFS focused on SocGen's conduct with Iranian entities. In a consent order, the regulator noted a 2002 email from a SocGen employee in Paris to an Iranian bank that said: "Due to SG's very high consideration for your country and to the commercial efforts made during the last two years...we are pleased to tell you that it has been decided that the usual SG risk-management specific procedures for sensitive situations, such as with countries under USA embargo, will not apply" to the Iranian bank customer.
According to a consent order filed by New York's Department of Financial Services, the bank executed more than 2,600 outbound payments for about a decade ending in 2013, valued at about $8.3 billion, in violation of U.S. sanctions laws.
Business on 11/20/2018