France recently enacted the amended SAPIN II Bill in an effort to be in tune with global anti-corruption regulations. SAPIN II bill introduces multiple measures to combat bribery and corruption among corporates and charts a holistic path to drive compliance. The legislation extends to foreign jurisdictions and calls for prosecution of foreign companies whose entities may have only a part of their operations in France. The rationale to strengthen France’s anti-corruption landscape through a stringent law stemmed in 2012 when the Organization for Economic Co-operation and Development (OECD) critiqued the nation’s lack of prosecution in matters of foreign bribery.
Significance to companies
This move by the French Government now mandates senior management in companies to mitigate corruption, introduce definite processes for complying with SAPIN II and provide protection for whistle-blowers. Under SAPIN II, any French company (which has more than 500 employees and a turnover of more than EUR 100 million) or an entity belonging to a French group of companies (which has consolidated more than 500 employees and consolidated turnover of more than EUR 100 million) would now be required to frame and implement an anti-corruption compliance program. The onus for creating such a program would rest entirely on the senior management. Companies would now also be required to strengthen their internal whistle-blower mechanisms. The legislation mandates potential whistle-blowers to first alert their superiors, then a public authority and finally the media as a last alternative. The whistle-blower can now report alerts in any field (in addition to corruption concerns), which may pose a potential threat to the interests of the public at large. Furthermore, as per the extra-territorial jurisdiction, any entity based in France and related to a foreign parent (having over 500 employees and turnover above EUR 100 million) would be required to be comply with SAPIN II.
Resolving the key issue of implementation, the French law has also specifically defined a new anti-corruption agency (Agence Française Anticorruption, under the French Ministry of Justice). SAPIN II can also impose sanctions against any entity that attempts to prevent officials of the new anti–corruption agency from carrying out their duties.
Repercussions of non-compliance
In the event of breach to implement the compliance program, the sanctions committee of the French Anti-Corruption Agency may issue a warning or impose compliance orders as well as sanctions and penalties (up to EUR 200,000 for individuals and EUR 1,000,000 for legal entities, together with possible publication of the sanction or penalty).
In case of violations, the company can choose to conclude a convention (negotiated justice) on a proposal from the Public Prosecutor, including:
A new penalty has been introduced for those convicted under a corruption offence (including tax fraud) in the form of ineligibility to run for public office, risk of heavy penalties and imprisonment.
What are companies required to do?
In wake of a new anti-corruption regulation, the primary challenge which could be faced by companies is driving compliance and demonstrating effective implementation of the law. Following are some of the areas where companies are required to initiate steps and safeguard themselves from the repercussions of potential non– compliance of SAPIN II:
As per this recent amendment, the final deadline to implement the above compliance measures is 01 June 2017.
Potential consequences for French companies operating in high risk locations
The French regulators have taken notable steps to take firm action in defending their stance around anti-corruption compliance. However, many French companies are still exposed to the provisions of Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA). The challenge for companies covered under the ambit of the SAPIN II will be balancing the existing international regulations and the newly introduced legislation.
SAPIN II also reiterates the need to invest more in compliance and maintain a steady check on the rapidly evolving modus operandi of perpetrators. In a nutshell, the endeavor of the French regulators to enforce the new anti-corruption legislation may be met by many challenges. Nevertheless, companies operating in high risk locations will need to revisit their compliance mechanisms and training measures or face increased scrutiny by international regulators.