Oh, Hadn’t You Heard? You’re Violating French Law Right Now! France Gets Serieuse about Anti-Corruption

Originally published by Reid Whitten.

Ok, ok, don’t panic. Maybe not all of the millions of dedicated readers of this blog are in violation.

Nevertheless, as of June 1, if your company does business in France, it may be time to check your anticorruption compliance obligations.

New French Anti-Bribery Law: The Basics of the Sapin II Statute

The French Anti-Bribery Law, known as Sapin II differs somewhat from the FCPA and the UK Bribery Act in four main ways:

1. Affirmative Obligations. Companies covered by the new law are required to implement an anti-corruption policy infrastructure. The company management and the board of directors will be held to the standard of that policy.What’s different? The biggest difference in the new Sapin II law is that it requires companies to implement a compliance policy. If a company does not have an adequate policy in place, the company may be subject to liability and company executives and directors may face individual liability. As of now, a failure to implement policy is a violation of Sapin II. Thus the title of this article.
2. Extraterritorial Application. Sapin II applies to any company or group of companies with 500 employees or an annual turnover of EUR 100m, including the French subsidiaries of any foreign company meeting that standard. Also under the law, criminal penalties may be applied to any person “exercising some or all of its economic activity in France or French territory”[1] What’s different? The extraterritorial application of the FCPA and the UKBA are not dependent on a company’s size or income.
3. New Anti-Corruption Agency. The law creates the Agence Française Anticorruption (AFA), an agency empowered to sanction companies that fail to implement the required compliance policies. Penalties may range from a formal warning to fines of €1 Million for companies and €200,000 for individuals.Whats different? In the UK and United States, prosecutors are dedicated to enforcing anti-corruption. France has established a new civil regulator, the AFA, solely to provide support and enforce compliance with Sapin II.
4. 
   Deferred Prosecution Agreements. Investigations under the new law may result in a civil settlement in which the company does not admit guilt, but may face a penalty and a monitorship of up to three years (paid for, of course, by the subject company).What’s different? Not much. The U.S. Department of Justice has made great use of DPAs and the UK Serious Fraud Office is ramping up its reliance on such agreements.

How to Protect your Business

The good news is that if your company has robust compliance procedures in place to comply with the FCPA or UKBA, you may well be in compliance with Sapin II already. However, you will want to check the eight required policy elements that the law outlines and make sure they are incorporated into your policy, as follows:

1. A company must integrate a code of conduct explaining the prohibited activity into the its internal regulations of the company;
2. A company must provide an internal system by which an employee may report violations of the company’s anticorruption policy;
3. A company must conduct ongoing risk assessments to identify and prioritize its corruption risks;
4. A company must undertake due diligence on its transaction partners, including customers, suppliers, and intermediaries;
5. A company must implement accounting controls to ensure transparency in its records;
6. A company must train employees and management on the risks of prohibited corrupt activity;
7. The company must institute a regimen of disciplinary measures that may be imposed if an employee violates the anticorruption policy; and
8. The company must create an internal review of its anticorruption program to assess its effectiveness.

The bad news is, if you find that your anticorruption policy is missing one or more of these elements and you are covered under the law, you need an immediate upgrade.

In any case, if your company is covered by the new law, or if you believe your company may be required to comply with the new law, you should consult with compliance experts. They should be able to help prevent your company from becoming the test case for this new form of French justice.

[1] Translated from the original by the author who speaks French at least well enough to order at a bar and argue about international soccer.

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