Société Générale (“SocGen”) entered into two deferred prosecution agreements (“DPA”) (here) and agreed to pay $1.34 billion in penalties (here): $717 million to the Justice Department; $325 million to New York’s Department of Financial Services “DFS”); $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’s Office of Foreign Assets Control (“OFAC”).  The bank paid $95 million to the DFS for anti-money laundering violations.  SocGen entered into a DPA with the US Attorney’s Office for the Southern District; and a second DPA with the Manhattan District Attorney’s Office.

SocGen is another in the long line of international banks to settle trade sanctions violations by paying large fines and agreeing to a DPA.  See e.g. BNP Paribas (here), Commerzbank (here).  SocGen admitted it violated sanctions on Cuba, Iran and Sudan, over a ten-year period from 2003 to 2013.

SocGen voluntarily disclosed the violations that it discovered during the course of internal reviews initiated after other global banks announced settlements for OFAC and sanctions violations.  In particular, SocGen learned that several transactions involving Sudanese financial institutions had been blocked by other U.S. financial institutions.  SocGen eventually voluntarily disclosed the Sudan violations to OFAC but did not disclose other violations involving Cuba at the same time.

To remediate the problems with its sanctions compliance program, SocGen enhanced its global compliance program.  In addition, SocGen agreed to avoid re-employing any of the individuals involved in the past actions or retaining them as consultants or contractors.

SocGen’s violations occurred primarily in relation to U.S. Dollar Credit Facilities to finance Cuban business.  In particular, SocGen operated 21 credit facilities to provide significant money flow to Cuban banks, entities controlled by Cuba and foreign corporation for business conducted in Cuba.  The Cuban Credit Facilities involved a substantial amount of U.S. cleared payments through U.S. financial institutions.  In total, during this time period, SocGen engaged in more than 2,500 sanctions violating transactions, causing those U.S. financial institutions to process close to $13 billion in transactions that otherwise should have been blocked.

SocGen disguised the transactions by making incomplete or inaccurate notations on SWIFT payment messages.  To avoid detection, SocGen engaged in a two-step process by routing payments through a Spanish bank and employees were instructed to omit any reference to Cuba or Cuban entities.

SocGen’s compliance department and leaders were aware of its bank’s conduct and expressed concerns to a top executive and the risk that discovery of the breaches would result in the “most stringent punishment.”  The same senior leader alerted several members of SocGen’s senior management of the ongoing violations.  Eventually, SocGen’s top management eliminated the Cuban Credit Facilities.

Despite this decision, SocGen continued to engage in Cuban transactions for another six years until October 2010.  The conduct continued despite the fact that SocGen’s compliance department knew about the ongoing violations.  From 2005 to 2010, SocGen conducted 1,921 U.S. dollar transactions involving a total of $10.3 billion.

SocGen engaged in significant remediation to its compliance program.  In 2009, it established a Group Sanctions Compliance function, which increased from a single employee to 31 employees by 2017.  SocGen’s Group Compliance personnel increased from 169 to 785 employees, and its financial crime section from 16 to 106 employees.  SocGen’s compliance budget increased from 53 million euros to 186 million euros in 2016.  SocGen established a biannual compliance training program for sanctions laws and regulations.