France's Sapin II will make compliance a legal requirement

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France introduces Sapin II, aimed to tackle bribery and corruption. Meant to be similar to Deferred Prosecution Agreements (DPAs) will come to force in June 2017 that will mandatorily require all large companies to implement a compliance programme.

Sapin II makes compliance a legal requirement

The pre-requisite for the application of Sapin II is employment of over 500 people with a turnover of more than 100 million Euros. This anti-corruption compliance programme mandatorily will require such companies to implement procedures for conducting due diligence on clients, suppliers and third parties aiming towards assessing corruption risks. Sapin II also requires a code of conduct in place as part of the company's internal regulations and a procedure for assessing and measuring the effectiveness of the programme. In case of non-compliance of Sapin II, punitive measures are suggested which includes fine up to one million Euros to be paid by the company and fine up to 200,000 Euros to be paid by the company executives.

While speaking on the Sapin II, Nicolas Tollet, an anti-corruption lawyer, involved in drafting Sapin II, stated that the regulation "institutionalizes compliance programmes and the compliance profession" in France and will "necessitate tremendous efforts from companies". For the complete interview, please click here. As an effective mechanism to curb bribery and corruption, it is of utmost necessity that large companies as per specifications given in Sapin II comply with the requirements and thus are better equipped to perform due diligence on all clients and direct suppliers. With an effective due diligence process, companies will be in a much better position to screen thousands of entities against a wide range of sources including legal rulings, sanctions watch lists and negative news coverage. The results of this monitoring should be updated regularly and automatically.

Sapin II, does away with the current anti-corruption agency and mandates the setting up of the French Anti-Corruption Agency (AFA), a new anti-corruption agency with a staff count of 60 to 70 employees, who will primarily be responsible to enforce these compliance requirements, issue guidance on anti-corruption compliance, be in charge of assisting companies to set up compliance programmes, investigate the effectiveness of these programmes, and issue sanctions to companies if its programme is ineffective.

Sapin II establishes  'French DPA'


Acting on similar grounds of that in US, Sapin II mandates a French equivalent to the Deferred Prosecution Agreement (DPA), frequently used in anti-bribery and corruption enforcement in the US. This agreement will permit France's regulatory authorities to enter into an agreement with a company before prosecution begins, which must be agreed by a court after a public hearing. If the agreement is approved, the firm will avoid a conviction and will not be registered in the criminal record. While the company will avoid automatic debarment from public procurement contracts, it may still have to pay a fine and implement a compliance programme as per the law. It is expected that these settlements will mainly be used for acts of corruption, money laundering and tax fraud.

Following the footsteps of US and UK to act against corruption and bribery, France is the latest country to join the bandwagon. In January, Rolls-Royce had agreed to pay £497 million as punitive damages in a settlement with the UK authorities. As per the Serious Fraud Office's Joint Head of Bribery and Corruption, DPAs have become the "new normal" for companies that self-report evidence of bribery and corruption and co-operate with subsequent investigation.


France aims to improve record on prosecuting bribery cases

With several news on corruption and bribery and constant criticisms of the Government of its failure to tackle such incidents, Sapin II seems to be the just response. It was noted that the biggest fines of French companies in recent years have been from US Foreign Corrupt Practices Act (FCPA) enforcement. The OECD Working Group on Bribery said in 2014 that although 24 new corruption cases were opened since 2012, no French company had been convicted of a foreign bribery offence. Yet in 2014, the French power and transportation company Alstom agreed to pay $772 million to resolve foreign bribery charges under FCPA.

While time will tell the effectiveness of the new law and its effect in curbing the two biggest demons in the corporate world, Sapin II can atleast be regarded as a renewed commitment by France's legislators to improve corporate transparency governance while aiming to tackle the demons and bring the culprits to notice.