Corporate Compliance and the Extraterritoriality of U.S. Laws

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1 Corporate Compliance and the Extraterritoriality of U.S. Laws INGEER 2 Conference Caen, November 2016 Prof. Matteo M. Winkler Law & Tax Department, HEC Paris winkler@hec.fr 1

2 Summary Starting with a case: BNP Paribas Extraterritoriality is not simply a currency problem U.S. laws ordinarily and daily impact transnational business A new model of global regulation through a smart use of the criminal law arsenal Possible reactions 2

3 Starting with a Case: U.S. v. BNP Paribas A conspiracy with banks and other entities... to knowingly, intentionally and wilfully move at least $8,9 billion through the U.S. financial system on behalf of Sanctioned Entities in violation of U.S. sanctions laws BNPP Paribas S.A. and its Swiss subsidiary BNP Paribas Geneva S.A. provided sanctioned entities with vital access to the global financial system A paradigm of reiteration, concealment and lack of cooperation The largest criminal sanction in history 189,000 employees in 74 countries 42.9 billion in revenue 6.7 billion in net profit [Source: BNPP] $ 8,833,600,000 forfeited to the DOJ on June 30, 2014 [Source: DOJ] 3

4 A Spectacular Failure in Compliance In BNPP did: Cover the involvement of Sanctioned Entities in the transactions Embroil transactions with no other apparent business purpose than to conceal the Entities names and nationality Removed the information from payment messages Instructed business partners to take same actions Followed conspirators instructions likewise Additional conducts: Lack of reaction to desist warnings by U.S. governmental agencies Reliance on outside counsel Dismissal of concerns expressed by the compliance personnel 4

5 A Mere Currency Problem? BNPP was eventually defined An act of economic was by the U.S. against Europe (J. L. Mélenchon) An interference by the U.S. in France and Europe (L. Fabius) A spurious cash grab (B. Gollnisch) A matter of judicial authorities and not of the EU to solve (M. Barnier) Criticisms focused on the use of dollar If the transactions were realized in euros or in Iranian rials, BNPP would not have committed any wrong. 5

6 U.S. Laws Impacting International Business 1. Embargo measures against foreign entities (IEEPA) OFAC Specially Designated Nationals 2. Foreign Corrupt Practices Act 1977 (FCPA) 3. Securities Laws Criminal provisions under the 1933 Securities Act and the 1934 Securities Exchange Act 4. Taxation based on nationality 5. Anti terrorism and anti money laundering measures 15/12/2016 6

7 FCPA Siemens $ 800 Alstom $ 772 KBR/Halliburton $ 579 BAE $ 400 Total $ 398 Snamprogetti/ENI $ 365 Technip $ 338 JGC Corp. $ 218 Daimler $ 185 Alcatel-Lucent $ 137 Magyar Telecom $ DOJ SEC IEEPA BNP Paribas $ 8,833 HSBC $ 1,921 Standard Chartered $ 667 ING $ 619 Credit Suisse $ 536 ABN Ambro $ 500 Lloyds $ 350 Barclays $ 298 Bank of Tokyo - $ 258 Mitsubishi Year: FCPA criminal enforcement statistics (legal persons) (source: DOJ)

8 Grounds for Enforcement 68 Justifications: Presence on U.S. territory Exercise of regulated activity Access to the U.S. financial system Financial and accounting obligations A cultural shock Extraordinarily powerful enforcement capacity Capability to treat enormous masses of data Use of intelligence (CIA, NSA etc.) Progressive juridification of foreign policy 1.2 France U.S. Intelligence agencies budget, in bio. $ [Source: Berger Report 2016] 8

9 A Model of Global Regulation Public prosecutors Broad discretion; play prosecutor, judge and jury all at the same time Absence of judicial control An out of court system Self Defense Self policing, self reporting, selfcompliance, self monitoring Sanctions Arsenal License revocation; responsible contractor revocation Settlement not a choice A gun pointed at the firm s head

10 The Settlements Revocation of license + Loss of qualification + Costs of criminal trial + Loss of reputation = Compliance + Self reporting + Monitoring + Muzzle clause = Undeterminable risks Acceptable engagements Collateral damages: Derivative lawsuits by shareholders Class actions by the victims 10

11 The Reactions: Berger s Recommendations Approach to extraterritoriality: 1. Confrontation 2. Attempt to circumvent the difficulties 3. Reinforce cooperation to limit extraterritoriality Recommendations: Creating a statutory framework in France to exercise extraterritoriality on corruption Strengthening sanctions through criminal law Reinforcing a legal framework at the EU level Amending the Loi de blocage 1968 Promoting the use of euro in IBT Criticisms 15/12/

12 Thank you!