This week, White Collar Post features a guest post from Frédéric Ruppert1 and Maria Lancri2
One year after the enactment of the Sapin II Law, that set up the French Anticorruption Agency "AFA" and authorized Deferred Prosecution Agreements "DPA" à la française, the first DPA was approved by the Paris Tribunal.
Although the investigation started years before the Sapin II Law enactment and the matter involved money-laundering of tax evasion proceeds rather than corruption, this French DPA is being watched with attention as a guidance for future settlements.
It was brought together by i) the French National Financial Prosecutor NFP, who contributed to the Sapin II law and the DPA, with a clear understanding that business requires a dedicated and efficient tool against white-collar crimes, and ii) the negotiations with the defendant's lawyers, after the Sapin II Law enactment.
The DPA statement of facts state that HSBC group and particularly its Swiss affiliate HSBC Private Bank (Suisse) SA "PBRS," sent its salespeople to France to prospect new French clients or offer new products to existing clients. Most, also French tax residents, did not declare their Swiss accounts, contrary to French legal requirements. PBRS thus assisted them in illegally concealing these assets from the French tax administration. A judicial investigation was then opened; PBRS was indicted for unlawful financial and banking solicitation and aggravated money-laundering of tax evasion proceeds.
As PBRS admitted to the facts and accepted their legal characterization, which was necessary because an investigation was opened, the NFP proposed a DPA that the Tribunal approved.
Because the Justice Ministry has not yet issued any guidelines, the HSBC/PBRS DPA is valuable in understanding how authorities determined the fine paid by PBRS. It describes i) PBRS' activity in France, ii) the number of its employees, iii) the value of the undeclared assets managed for its French clients, iv) its profits, and v) its profits derived from assets managed for French clients. From this, the authorities calculated a 86,400,000 fine for disgorgement of profits.
The compliance program of HSBC group at the time, is described by the DPA as less developed than today. It also notes that its subsidiaries, including PBRS, were allowed to conduct their business quite independently. HSBC group has since overhauled its compliance program, increased its control over its subsidiaries, withdrawn from...