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BNP Paribas and La Résistance: Why Compliance is Not Capitulation and Cooperation Could Save an Economy - France

We will start by saying we are proud Francophiles. We love many things about French culture; from the just-right draw of their espresso (sorry, Italy, that ristretto is just too short and bitter) to the sacrosanct treatment of time for leisure and family. Indeed, most attempts by the country to preserve la vie Française are idealistic efforts to protect what we see as a beautiful way of life (perhaps excluding some of the Académie Française’s more laughable efforts to provide French alternatives to borrowed English words). And some of the country’s biggest companies represent not only the economic engines of France but also embody national pride in global market power.

However, as news breaks of the unprecedented sanctions penalty currently under discussion for BNP Paribas, there is a risk that the reaction from the country and the company may set a tone that will be counterproductive for French business. French politicians have scrambled to defend the bank, threatening to scrap TTIP negotiations with the United States. French headlines and many conversations we had in Paris last week ring with indignation.  BNP Paribas is the national team of the French economy. Justifiable national pride in the company has clearly been injured by U.S. enforcement actions.

Leaving aside whether the penalty is too big, politically motivated, or a slight to sovereignty, let us look at the allegations underlying the penalty.

The Alleged Violations

Details of the allegations are not public, but reports indicate that BNP Paribas is accused of stripping identifying information from wire transfers from Sudan, Iran, and other sanctioned countries so that the transfers could pass through the U.S. financial system without raising red flags. If these allegations are true, they mean that BNP Paribas took active steps to subvert U.S. law, hide the violations, and profit by the unlawful use of the U.S. financial system.  Rhetoric that the company was unaware of the violations, that the enforcement is some sort of “gotcha” moment created by the U.S. authorities, is much deflated if the bank made affirmative efforts to thwart U.S. shields against sanctioned transfers.

The Reaction

Instead of – or along with – outrage, let us propose another reaction for French companies: Compliance. Specifically, we propose that French business leaders equip their companies to succeed in the international economy.  French companies involved in cross-border transactions know, and have now seen, that they will have to play by rules set by parties outside of l’Hexagone. The U.S. sanctions regime, overreaching or not, is a reality. Sophisticated sanctions such as prohibiting U.S. Dollar clearing on sanctioned country transfers, are a reality. French companies, like all others reaching into the global marketplace, can greatly benefit by understanding and preparing for such foreign regulations. By looking outward, understanding the terrain, and planning to navigate within the applicable legal framework, companies can continue to grow and prosper without risking violations – particularly violations that are so enormously costly to company and country.

The compliance model is not necessarily a complete concession to some externally imposed rule. It is formulating a strategy to succeed in the world economy.  It is learning the rules you must play by and then playing the best possible game by those rules. By investing a modicum of resources in good policy and practices, French companies can prevent potential contretemps with all manner of extraterritorial controls imposed by many countries, including the United States: sanctions, anti-corruption, and even export controls.

The Lessons

You can bet that other French banks are keeping a close eye on the BNP Paribas matter and are learning some very useful lessons. We hope that other companies in the country are watching not only the BNP case, but also learned from the Total case, a nearly $400 million FCPA penalty.

Arguments might be made on what punishment is due for the offenses committed, but we hope that the lesson is that by investing appropriate resources in compliance now, French companies can detect and prevent potential future violations. With good compliance infrastructure in place, they can grow internationally without fear of heavy penalties for violating the rules of the global game. We should all be able to agree that these instances of deception and graft do not make up part of the France we all so admire. The integrity of French business, through investment in compliance, is certainly worth defending.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume IV, Number 164

About this Author

Reid Whitten, partner, Sheppard Mullin Law Firm

Reid Whitten works with clients around the world to plan, prepare, and succeed in global business transactions.

In the areas of U.S. and international sanctions, export and defense export controls, and anti-corruption regulations, he supports clients in detecting and deterring potential compliance issues as well as conducting and defending investigations and enforcements. Mr. Whitten also advises on anti-dumping, anti-money laundering, and anti-boycott regulations.

Mr. Whitten is a thought leader on cross-border business regulations. He teaches a seminar on The Law of...

J. Scott Maberry, Lawyer, Sheppard Mullin, International Trade, Trade Practice

Mr. Maberry is an International Trade partner in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office.

Areas of Practice

Mr. Maberry's expertise includes counseling and litigation in export controls, the Foreign Corrupt Practices Act (FCPA), anti-terrorism, economic sanctions, anti-boycott controls, and Customs.  He also represents clients in negotiations and dispute resolution under the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and other multilateral and...