Société Générale. Picture: BLOOMBERG
Société Générale. Picture: BLOOMBERG

New York/Paris — Société Générale settled its longstanding sanctions violations case with US authorities, entering a deferred prosecution agreement with federal prosecutors and paying $1.34bn to regulators in New York and Washington.

As part of the settlement announced on Monday, 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 $1.34bn in all to settle the matter, the US Federal Reserve said.

For the sanctions violations, it will pay $717m to the US justice department, $325m to New York’s department of financial services, $163m to the Manhattan district attorney’s office, $81m to the US Federal Reserve and $54m to the US treasury. It will pay an additional $95m to the financial services department for weak controls to fight money laundering.

The settlement “will remove the bulk of the bank’s legal risks in the US”, according to a report by Bloomberg Intelligence.

“Société Générale 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,” US attorney Geoffrey S Berman said 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 financial services department, said: “The absence of an effective, global sanctions-compliance infrastructure and lack of management oversight allowed Société Générale employees to ignore the scope and applicability of laws governing economic sanctions.”

Legal provisions

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,” CEO Frederic Oudea said. SocGen “has already taken a number of significant steps in recent years and dedicated substantial resources” to improve its compliance programmes 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 $1.3bn in June.

The latest settlement is the first major sanctions settlement involving a global bank during the Trump administration. In 2015, Credit Agricole settled a sanctions matter with US authorities for $787m.

Starting in about 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.

After sending the blind instructions to the US 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 US authorities its ongoing business on behalf of entities in Cuba.

Credit lines

The French bank also extended lines of credit to various Cuban entities. Between 2003 and 2010, SocGen processed more than $15bn worth of transactions for Cuban clients, including a sanctioned Cuban bank, the filings said.

In 2004, after noting aggressive enforcement actions by the US 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 financial services department 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 $8.3bn, in violation of US sanctions laws.

Bloomberg