Société Générale to Pay $1.3 Billion to Resolve U.S. Sanctions, Money Laundering Violations -- 2nd Update

By Samuel Rubenfeld 

French bank Société Générale SA agreed to pay $1.34 billion in penalties to settle allegations by U.S. and New York state authorities that the bank had processed and concealed billions of dollars in transactions related to countries under sanctions.

New York regulators said Société Générale conducted transactions involving parties in Iran, Cuba, and Sudan between 2003 and 2013. Federal prosecutors, meanwhile, said the bank engaged in more than 2,500 transactions valued at about $13 billion from 2004 to 2010. The transactions violated U.S. sanctions laws, authorities said.

The majority of the transactions and much of the total value involved a dollar credit facility designed to finance oil transactions between a Dutch commodities trading firm and a Cuban company with a state monopoly on the production and refining of Cuban crude, federal prosecutors said.

Société Générale avoided detection, in part, by making inaccurate or incomplete notations on payment messages that accompanied the transactions, prosecutors alleged. The department that managed them "engaged in a deliberate practice of concealing the Cuban nexus of U.S. dollar payments," prosecutors said.

The total penalty amount is the second-largest imposed on a financial institution for violations of U.S. sanctions, federal prosecutors said. "Other banks should take heed: Enforcement of U.S. sanctions laws is, and will continue to be, a top priority of this office and our partner agencies," said U.S. Attorney Geoffrey Berman, in a statement.

Frédéric Oudéa, Société Générale's chief executive, said in a statement that the bank regrets the shortcomings identified in the settlements.

The bank cooperated with authorities and has taken a number of steps in recent years to enhance its sanctions and anti-money-laundering compliance programs, Mr. Oudéa said.

He also referenced the bank's settlement in June with U.S. and French authorities concerning its alleged manipulation of Libor rates and transactions involving Libyan counterparts.

"These resolutions, following on the heels of the resolution of other investigations earlier this year, allow the bank to close a chapter on our most important historical disputes," Mr. Oudéa said in the statement.

The penalty is fully covered by a provision for disputes in its books, the bank said, noting that it won't have any additional effect on the bank's results for the year. The bank in September forecast an expected $1.3 billion penalty over the sanctions violations, saying at the time it had entered into a phase of active discussions with U.S. authorities over the matter.

Société Générale struck a deferred-prosecution agreement with the U.S. Justice Department, and agreed to forfeit $717.2 million in a civil forfeiture, prosecutors said. The bank also agreed to pay $325 million to DFS, $162.8 million to the Manhattan district attorney's office, $81.3 million to the Federal Reserve and $53.9 million to the U.S. Treasury Department's sanctions office. It also agreed to continue to cooperate with U.S. authorities in the future.

A second consent order with New York's DFS requires the bank to pay an additional $95 million relating to anti-money-laundering and compliance deficiencies, and it mandates the New York branch to continue a series of enhancements to its compliance program. Under the terms of the consent order, an independent consultant will assess the branch's progress after 18 months.

The Société Générale settlements follows a pattern frequently seen during the Obama administration, in which a bank would reach simultaneous agreements with multiple U.S. state and federal authorities regarding sanctions violations. The pace of these settlements, however, had slowed in recent years.

The largest involved BNP Paribas SA, another French bank, which agreed in 2014 to pay nearly $9 billion. Others include HSBC Holdings PLC, which agreed to pay $1.92 billion in 2012, Switzerland's Credit Suisse AG, which paid $536 million in 2009 and the Netherlands' ING NV, which agreed to pay $619 million in 2012.

--Alberto Delclaux in Barcelona contributed to this article.

Write to Samuel Rubenfeld at [e-mail]

(END) Dow Jones Newswires

November 19, 2018 15:46 ET (20:46 GMT)

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