Societe Generale reaches agreements with the DOJ, the CFTC and the PNF to resolve their pending IBOR and Libya-related investigations
4/6/2018 - Extract from Societe Generale’s press release
• Societe Generale has reached agreements with the U.S. Department of Justice (“DOJ”) and the U.S. Commodity Futures Trading Commission (“CFTC”) to resolve their investigations relating to Societe Generale's IBOR submissions, and with the DOJ and the French Parquet National Financier (“PNF”) to resolve their investigations relating to certain transactions involving Libyan counterparties.The PNF and DOJ agreements have been submitted for approval to the competent French and U.S. courts for hearings on 4th June and 5th June, respectively. The Bank has been actively cooperating with the authorities to resolve these investigations.
• Societe Generale has agreed to pay penalties totalling approximately $1.3 billion to the DOJ, the CFTC and the PNF. These payments are fully covered by the provision allocated to the IBOR and Libyan matters and booked in Societe Generale's accounts. As a result, they will have no impact on Societe Generale’s results.
• The Bank has agreed to enter into a three-year deferred prosecution agreement in the IBOR and Libyan matters with the DOJ. The charges against Societe Generale will be dismissed if the Bank abides by the terms of the agreement, to which the Bank is fully committed. No independent compliance monitor has been imposed in connection with these settlements.
• Societe Generale has already taken extensive steps in recent years to strengthen its overall compliance and control framework, which is intended to meet the highest industry standards of compliance and ethics. As part of these resolutions, the Bank has committed to ensure that its internal policies, procedures and controls are designed to prevent and detect violations of the relevant anti-corruption, bribery, and market manipulation laws.
• These settlements are not expected to have any impact on services or activities offered by the bank to supporting its clients.
Q1/ What are the two investigations in this settlement?
One of the investigations is related to certain violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and French anti-corruption laws in connection with certain transactions involving Libyan counterparties, including the Libyan Investment Authority (“Libyan matter”) and the bank’s third-party intermediary.
The other investigation is part of an as part of an industry-wide investigation conducted by the DOJ and CFTC on interbank offered rates benchmarks, the matter of Societe Generale’s submissions for setting certain London Interbank Offered Rates and the Euro Interbank Offered Rate (“IBOR matter”).
Q2/ Why are the U.S. authorities competent for this matter?
In the Libyan matter, among other reasons, some of the relevant conduct took place in New York, and certain commission payments, denominated in USD, were also cleared through the Bank’s New York branch.
In the IBOR matter, the relevant authorities have stated that the Bank’s submissions to these benchmark panels have impacted the prices customers and counterparties in the United States have paid and/or received when trading in financial instruments tied to these benchmark rates.
Q3/ What are the terms of the settlement with the U.S. authorities (DOJ and CFTC)?
• With respect to the IBOR and Libyan matters, Societe Generale agreed to enter into a three-year deferred prosecution agreement (“DPA”). A DPA is an agreement between a prosecutor and a defendant in which a prosecutor defers the prosecution for a specified period of time. Provided that the defendant meets certain specified conditions, the prosecutor commits to dismiss the charges following the successful conclusion of the deferral period.
With respect to the IBOR and Libyan matters, the DOJ will end the procedure after a three-year period if Societe Generale abides by the terms of the DPA – which provides in particular for reporting obligations and internal remedial measures – to which the Bank is fully committed. No independent compliance monitor has been imposed in connection with these settlements.
As part of these resolutions, the Bank has committed, beyond the measures it has already taken, to further ensure that its internal controls, policies and procedures are designed to prevent and detect violations of the relevant anti-corruption, bribery, and market manipulation laws.
In addition, SGA Societe Generale Acceptance, N.V., a Group subsidiary of Societe Generale, has agreed to plead guilty in the United States in connection with the Libyan matter.
• In connection with the IBOR matter, Societe Generale has also agreed to a CFTC civil administrative order, without admitting or denying the findings or conclusions therein, ordering the Bank to pay a civil fine for violations of the Commodity Exchange Act.
Societe Generale has agreed to pay penalties totaling approximately $1.3 billion to the DOJ, CFTC, and PNF. These penalties include $275 million to the DOJ and $475 million to the CFTC in relation to the IBOR matter, and $292.8 million to the DOJ and €250.15 million ($292.8 million) to the PNF in relation to the Libyan matter.
Q4/ What is SGA Societe Generale Acceptance N.V. and what are the consequences?
SGA Societe Generale Acceptance, N.V. is a Group subsidiary dedicated to the issuance of investment products. This entity has agreed to plead guilty in the United States in connection with the Libyan matter. Such a guilty plea will not have any impact on SGA’s ability to perform its obligations as an issuer, which will continue to be guaranteed by Societe Generale.
Q5/ What are the terms of the settlement with the French Parquet National Financier (PNF)?
With respect to the Libya-related matter, the Bank has concluded a convention judiciaire d’intérêt public (“CJIP”) with the PNF. It allows a company to resolve a criminal investigation by agreeing to monetary and/or other penalties and remedial measures, but without pleading guilty.
The Bank has agreed to pay a monetary penalty of approximately €250.15 million ($292.8 million) to the PNF, which is a portion of the approximately $1.3 billion penalty to be paid by the Bank to the DOJ, CFTC and PNF.
Q6/ What are the financial consequences for the bank? Will it have an impact on the execution of your 2020 strategic plan?
These payments are fully covered by the provision allocated to the IBOR and Libyan matters and booked in Societe Generale's accounts. As a result, they will have no impact on Societe Generale’s results. Following these payments, the provision for litigation will amount to approximately 1.2 billion euro equivalent. Our 2020 Transform to Grow strategic plan disclosed at the end of 2017 remains unchanged.
Q7/ Will these settlements have an impact on your clients?
Settlements with U.S. and French authorities in the LIA and IBOR matters are not expected to have any impact on Societe Generale's clients or result in a disruption to the services and products provided to our clients.
Q8/ What are the measures taken by the bank to prevent such events from occurring in the future?
Societe Generale has reinforced over the past years its overall framework for ethics and compliance and has already undertaken remedial measures directly related to the two matters. The Bank has in particular:
• Developed since 2012 a series of policies and procedures designed to ensure the integrity of the IBOR process, in line with the best practices across the industry.
• Reinforced since 2011 its internal instructions related to the fight against corruption and launched a comprehensive review of the framework, putting in place dedicated personnel, implementing a detailed risk assessment and rolling out a new version of the Code of Conduct worldwide with a “zero-tolerance approach” and extended whistleblowing procedures. More recently, a new Anti-Corruption and Anti-Influence Peddling Code has been published taking into account the more stringent regulatory requirements, notably related to the law in France known as the “Sapin 2” law.
• Continuously reinforced its compliance setup with a significant increase in dedicated human and financial resources, the creation of a dedicated department in 2010, followed by the centralisation of all Compliance teams within this division and the establishment of a direct reporting line to one of the Bank’s Deputy CEOs. The Bank has also launched a wide-ranging, multiyear compliance transformation programme to upgrade and strengthen the Bank’s compliance capabilities worldwide which encompasses reinforced risk management, including data-driven risk assessments, strengthening controls, reviewing operations involving key risk areas, specific roadmap for each business, training and communication initiatives to foster an enhanced compliance-oriented staff culture.
• Deployed a large worldwide Culture and Conduct programme designed to ensure staff respect and act in accordance with the Bank’s values.
As part of these resolutions, the Bank has committed to ensure that its internal policies, procedures and controls are designed to prevent and detect violations of the relevant anti-corruption, bribery, and market manipulation laws.
Q9/ Do these agreements put an end to these investigations?
Societe Generale, while continuing its ongoing cooperation—for which it received significant credit from the authorities—expects the settlements with the DOJ, CFTC and PNF will conclude their investigations into the Bank’s conduct in these areas. The Bank will have ongoing requirements to fulfill under the terms of the agency agreements, as is typical in such situations.
In connection with the IBOR matter, the Bank continues to defend civil proceedings in the United States, and to respond to information requests received from other authorities, including the New York Department of Financial Services.
Q10/ When do you hope to settle the case with OFAC?
Societe Generale is in discussions with the U.S. authorities in order to reach an agreement to resolve the investigation into historic compliance with U.S. economic sanctions (OFAC). It is possible, without it being certain, that the pending discussions lead to an agreement in the next weeks or months.
Q11/ What is now the amount of your provision for litigation?
Provision for litigation amounts to €2.3 billion as of 31.03.2018.
Following the payments to DOJ, CFTC and PNF of approximately 1.3 billion USD related to IBOR and Libyan matters, covered by the provision of approximately 1 billion in euro equivalent allocated to these two cases, the provision for litigation will amount to approximately 1.2 billion in euro equivalent.
In line with IFRS accounting rules, the general provision for litigations, including OFAC, reflects all the information we have and our best estimate of the risks associated with the disputes included in this provision. Pending disputes are disclosed in the Registration document and its updates.