SocGen to pay $1.3bn in US sanctions case settlement

Bloomberg

Societe Generale SA settled its longstanding sanctions violations case with US 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, France’s third-largest bank acknowledged violations of US 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 US Federal Reserve said in a statement. For the sanctions violations, it will pay $717 million to the US 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 US Federal Reserve and $54 million to the US Treasury. It will pay an additional $95 million to the DFS for weak anti-money-laundering controls.
The settlement “will remove the bulk of the bank’s legal risks in the US,” according to a report by Bloomberg Intelligence.
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 US sanctions laws.
“Societe Generale has admitted its willful violations of US sanctions laws — and longtime concealment of those violations — which resulted in billions of dollars of illicit funds flowing through the US financial system,” said US Attorney Geoffrey S. Berman in Manhattan, which announced the settlement. “Other banks should take heed: Enforcement of US 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. The French company sees no additional impact to its 2018 results from these agreements. SocGen were down 2.3 percent at 9:52 a.m. in Paris, in line with the STOXX 600 Banks Index. The shares have fallen by a quarter this year.
The settlement is a key step for Chief Executive Officer Frederic Oudea, 55, in his effort to improve profitability and deliver dividend growth through 2020. Oudea, who shook up senior management this year, is also selling some businesses and expanding in Germany with the purchase of Commerzbank AG’s exchange-traded products and market-making operations.“We acknowledge and regret the shortcomings that were identified,” 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 US investigations — relating to bribery in Libya and the manipulation of interest rates — for a total of $1.3 billion in June. Today’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 US authorities for $787 million.
Starting around 2002, SocGen concealed many of its illegal transactions by sending cover payments with wire transfers from US banks to foreign lenders that omitted the name of the beneficiary, according to the statement of facts filed in federal court.