In 2016, the Autorité de contrôle prudentiel et de résolution (‘ACPR’) and the Autorité des marchés financiers ( ‘AMF’) continued to pay particular attention to infringements in matters of anti-money laundering and anti-terrorism, internal control procedures, conflicts of interest and market abuse.
As in previous years, financial penalties dominate the wide range of sanctions available to the sanctions committees of these bodies. The level of fines imposed varies widely, having regard to the seriousness of the failure and remedial measures taken.
Matters of greatest concern to the French financial regulators
A review of the cases of the ACPR and AMF sanctions committees over the last five years reveals that several matters appear to be of special concern to the French regulators. Most of the decisions concern violations of statutory obligations in the following matters:
- Anti-money laundering and anti-terrorist financing
- Internal control procedures
- Conflicts of interest
- Market abuse (i.e. insider trading, market manipulation, misinformation)
Prevalence of pecuniary sanctions
The financial regulators’ powers of sanction have been significantly widened over the last decade to make sanctions a more effective deterrent. This follows a ten-fold increase in maximum fines from €10 million to € 100 million in 2010.
Banks and other financial market participants who are under the supervision of the French financial regulators may be subject to a wide variety of sanctions, ranging from a warning, a reprimand, a temporary suspension or a compulsory resignation of senior managers, to restrictions on the conduct of their activity and/or a financial penalty.
However, financial sanctions continue to be the most common penalty in 2016: more than 90 per cent of the decisions rendered by the sanctions committees of the French financial regulators over the last five years involve financial sanctions, with fines generally varying from €10,000 to €5 million.
In 2016, the maximum fine imposed by the AMF was €2 million (compared to €5 million in 2015) on a bank for failure to comply with the requirement to report financial transactions. For its part, the ACPR imposed in 2016 a maximum fine of €800,000 (compared to a €300,000 fine in 2015) for breach of rules relating to access to banking services and internal control procedures.
The amount of the fines can increase significantly where companies fail, or make no real effort, to implement remedial measures. Such inactivity exposes a company to an increased fine for failure of internal controls and monitoring procedures.
Criteria taken into account when fixing the fine
The amount of fine imposed generally depends on the seriousness of the failure and the profits resulting from any breach.
In that regard, it is worth noting that when determining the final amount of the fine, the sanctions committees of the French financial regulators often take into account the efforts undertaken to remedy the situation as well as the corrective measures that were taken by the company subject to investigation since the date of the breach subject to enforcement action.
For example, in June 2013, the banking regulator imposed an exceptional €10 million fine on a bank for failures of its compliance function. In this exemplary decision, the ACPR stressed the passive attitude of the bank in failing to undertake any measures to improve its internal control procedures over an 18-month period.
As fines are surging, the importance of internal control procedures will be an important issue to consider.
In 2016, the French financial regulators, the ACPR and the AMF, continued to pay particular attention to infringements in matters of anti-money laundering and anti-terrorism, internal control procedures, conflicts of interest and market abuses. Read our client alert below for more detail.