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#Financial Crime Prevention

Focus on France: Football, Tennis, Cycling, Corruption…?

International Compliance Association

Corruption , Euro , France , Sapin legislation , Sport

It’s all focus on France at the moment.

A few weeks ago it was widespread strike action which was grabbing the world headlines as protests against reform of the French labour code caused significant disruption across the country.

And now, with the 2016 European Football Championships progressing towards its conclusion, the Tour de France will be hot on its heels showcasing the beauty and variety of the French way of life. 

And all of this after the drama of the French Tennis Open at Roland Garros.  

 

Indignity and Reputational Damage

Missing among the football dignitaries sat in the best seats viewing the culmination of Euro 2016 is one Michel Platini. 

Banned in December 2015 (along with Sepp Blatter, the president of FIFA - the body overseeing world football) from all football-related activities for eight years (subsequently reduced to four on appeal) for making a ‘disloyal payment’ of $1.8 million ‘for consulting services’, scandals surrounding Platini repeatedly resurface. 

Though still retaining the office of president of UEFA (the body overseeing football in Europe), Platini - in the 1980s, the highly-celebrated captain of a thrilling French national side - is persona non grata in Europe’s four-yearly festival of football. 

Focus on FranceAnd while the Tour de France continues its rehabilitation following the stunning implosion of Lance Armstrong and all those who corruptly went before and after him, is it really all that surprising that the perhaps more genteel pursuit of clay court tennis would be subject of a dawn raid at the beginning of May following an initial investigation ordered by the French Minister of Sport into whistleblower allegations of corruption? 

These events are in addition to the indignity and reputational damage France has suffered seeing a number of its flagship corporations embroiled in international corruption scandals. 

While the $9 billion penalty exacted by US authorities on BNP Paribas was not purely based on corruption, the ability of US authorities to impose such a fine on a French company was in stark contrast to what it appeared the French government was able to do at home.

Settlements paid separately to US authorities by Total and Technip in relation to allegations of bribing foreign government officials, coupled to the $772 million fine imposed on Alstom for worldwide bribery activities, served to bring into sharp focus the need for new laws aligned with the anti-corruption legal standards being set by other countries. 

Castigation by the OECD and the EU about the inadequacy of the existing legal framework added further impetus to the drive for reform, as has the continued low languishing of France in Transparency International’s yearly Corruption Perceptions Index (most recently placed 23rd in 2015 alongside Chile and Estonia).    

So, while the French public have taken to the streets in angry protest against labour law reforms, quietly, in the background, the Assemblée Nationale has with some efficiency been progressing new legislation with the stated aim of elevating France to the highest European and international standards for combating corruption and thereby creating a competitive advantage for French business. 

 

Appears to Have Teeth

The previous French legislation goes back to 1993, when it was stewarded to enactment by Michel Sapin, the then Economics & Finance Minister in the socialist government of Pierre Bérégovoy.

Monsieur Sapin is back in government with François Hollande, as Minister for Labour, Employment and the Social Dialogue. 

He is charged again with stewarding reform of France’s anti-corruption laws - hence, Sapin II. 

And like Jaws II, Sapin II appears to have teeth - even if some of them may have been extracted or somewhat blunted as the enabling bill has made its way through the various stages to enactment as legislation.

So what does ‘la Loi pour la Transparence de la Vie Économique’ contain - and what will be its effect?

Well, as ever, there will be much more to come on the detail of Sapin II’s contents as it is finally enacted, as well as much more to be understood about the actual effect of the new legislation after it becomes law.  Early 2017 is expected to be the point by which the measures additionally required by the legislation will be in place.  

For now though, here are the most salient points.

 

Major Reform

The major reform is the imposition on large companies an obligation to prevent corruption.

This obligation is reinforced by sanctions for non-compliance, with the statute creating a new national agency for the prevention and detection of corruption – le Service chargé de la Prévention et de l’Aide à la Détection de la Corruption. 

Companies of a certain headcount and activity level will be subject to a new criminally enforceable mandatory compliance standard requiring these organisations to have effective internal procedures to prevent and detect corruption committed in or outside France by their employees.

The requisite features of these internal procedures will come as no great surprise to anyone who has been tracking anti-corruption legislation developments in recent times. 

  • A compliance programme is required to be implemented, which includes rules and procedures specific to the anti-corruption risk.
  • Internal whistleblower processes are mandatory.
  • Organisations must have processes which ensure intermediaries (including suppliers) are evaluated for risk, this risk assessment reflecting the geographical location of the activity, the business sector and the nature of the contract.
  • There needs to be effective internal audit and control procedures for managing the risk presented by intermediaries, again including agents, suppliers, partners and representatives.
  • Internal and external accounting controls are an understandable requirement, as the law focuses on the efforts that can be made to hide financial transactions which would otherwise reveal corrupt activity.
  • Training focused on business leaders and those employees who would more likely find themselves exposed to anti-corruption risk is another key element that must be present.
  • And appropriate sanctions for employees in breach of the law and policy completes the list.    

Beyond these, another significant feature of Loi Sapin II is the possibility of a legal entity convicted of corruption being subjected to having a US monitor-type arrangement imposed upon it, at the guilty party’s expense and for a period of up to five years, this with the aim of ensuring that measures and obligations imposed by the French courts are duly acted upon.

 

Missing an Opportunity?

There are however two features of recent anti-corruption laws elsewhere which don’t appear to be adopted in this French legislation. 

  • While there is a requirement for internal procedures, as listed above, there is no ‘adequate procedures’ defence which companies can offer in mitigation.
  • And the idea of the deferred prosecution agreement - major features of the UK and US anti-corruption landscapes - while not completely discounted, at least in trans-national cases, seems to be a path down which the French administration and judiciary are culturally uncomfortable travelling. 

On the latter point, are the legislators perhaps missing an opportunity to encourage organisations to self-declare when they have suspicions of corrupt activity, being able to do so in the confident knowledge that they would not be criminalising themselves and therefore being automatically debarred from bidding on government contracts? 

 

Healthy Steps in the Right Direction

One of the most stinging criticisms of the French government by the OECD was that ‘No French companies have been convicted of bribery on French soil, while French companies have been convicted abroad for that offence’.  

This observation, coupled to a concern about ‘France’s lack of proactivity’ in tacking corruption is something which Loi Sapin II seeks to address. 

From everything seen so far, there are some healthy steps in the right direction. 

But what will be the effect of these developments once enacted? Well we need to be carefully observing that from the sidelines - much like Monsieur Platini.

 

 

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Read this article in French


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