Today’s post is from Paris-based Bryan Cave Leighton Paisner attorneys David Père, Ariane Dulcire and Cécile Terret.
The French Anti-Corruption Agency (AFA) was created by Law n°2016-1691 of 9 December 2016 known as the Sapin II Law. As part of its missions, Article 3 of the Law provides that it prepares an annual activity report that is made public. In these annual reports, the AFA sets out the actions, work and events it carried out during the past year, in accordance with the missions entrusted to it by the French legislator.
With its 2019 report, the AFA intends to demonstrate that three years after its creation, the AFA has firmly established itself in the French administrative and judicial landscape and is continuing to carry out the tasks entrusted to it, notably by carrying out an increasing number of audits and holding its first hearing before its Sanctions Commission.
Controls
The year 2019 was marked by the strengthening of AFA’s oversight activities vis-à-vis both private commercial and public actors.
36 “initiative verifications” were carried out in 2019 to oversee anti-corruption compliance programmes enacted by private or public entities, ranging from oversight of components or the implementation of recommendations. Out of these 36 “initiative verifications”, 20 involved private actors, as to which the AFA notes that most of the breaches found concerned non-compliance or failure to deploy measures rather than the non-existence of any anti-corruption measure. Conversely, the AFA’s 16 “initiative verifications” carried out on public actors in 2019 found that public actors are not very mature in preventing and detecting breaches of probity.
4 “execution verifications” were conducted in 2019 on behalf of judicial authorities to ensure that the compliance penalties imposed on the companies concerned following the signature of a Judicial Public Interest (consent) Agreement (CJIP) had been correctly implemented. In addition, 5 compliance programme monitoring reports were submitted to the Public Prosecutor’s Office.
At the request of the French National Financial Prosecutor’s Office, the AFA also carried out two preliminary assessments, consisting of analysing the ability of the Public Prosecutor’s Office to enter into a CJIP with two specific companies.
Sanctions Commission
For the first time in 2019, the AFA Sanctions Commission, which is an independent body from the AFA Directorate, issued a decision.
The Sanctions Commission has significant powers to impose penalties mentioned in Article 17 of the Sapin II Law, i.e., an injunction to comply with legal obligations within a maximum period of three years; a fine of up to €200,000 for individuals and €1 million for legal entities; publication, in whole or in part, of the decision.
In its first decision issued on 4 July 2019, the Sanctions Commission did not impose any sanctions on the company whose case was being considered at the hearing. The commission ruled that, after a long process of improvement and fine-tuning of the company’s corruption risk-mapping, the breaches of Article 17 of the Sapin II Law were no longer constituted at the date of the hearing. This decision is a message sent to companies that they have the opportunity to justify compliance with their legal obligations by demonstrating that they have followed the AFA’s recommendations.
According to the 2019 report, this first decision demonstrates the impact of the AFA’s oversight: the recommendation addressed in that case had an incentive effect; the company improved its anti-corruption system to avoid sanctions.
This first decision followed an AFA audit carried out between October and December 2017 on the S. group, the world leader in the distribution of electrical equipment to professionals. The audit focused on the compliance programme deployed by the S. group to prevent the risks of corruption, as required by Article 17 of the Sapin II Law. After extensive exchanges of documents between the two entities in the months following the audit, the AFA Director finally decided in March 2019 to submit S.’s case to the Sanctions Commission, whose hearing was held in June 2019.
During this hearing, the AFA invoked five breaches against S. in the establishment of its compliance programme: a non-specific risk map, a code of conduct not relevant with regard to the risks that should have been identified, non-compliant third party evaluation procedures, insufficient accounting control procedures to detect corruption, the inexistence of an internal audit system.
The Sanctions Commission rejected all the breaches denounced by the AFA, considering that they were no longer constituted on the day of the hearing. Before the Commission took a decision, S. had made significant efforts to comply with the points raised by the AFA at the end of the audit, which explained the Commission’s decision.
However, on 7 February 2020, the Sanctions Commission of the French Anti-Corruption Agency issued its second decision in which it found, for the first time, two breaches of the Sapin II Law. The first related to the corporate code of conduct and the second to specific accounting control procedures.
This second decision follows a control initiated by the AFA on company I. between February and April 2018. At the end of the audit, the AFA concluded that Company I. had committed three shortcomings in the implementation of its compliance programme: lack of risk mapping, absence of a code of conduct, and inadequacy of its accounting control procedures on the specific risks of corruption. The Director of AFA had referred these failures to the Sanctions Commission in September 2019.
In its decision of 7 February 2020, the Commission examined the three breaches raised by the AFA and upheld only two of them.
With regard to risk mapping, the Commission found that Company I. had adopted a risk map in accordance with a non-binding recommendation of the AFA; it was for the Director of the AFA to prove non-compliance with that recommendation, without being able to rely on a failure to comply with requirements not set out in that recommendation, as the AFA had believed it could do in the present case. This grievance was therefore not upheld.
As regards the Code of Conduct, the Commission confirmed the breach, taking the view that I. did not have a Code of Conduct, nor indeed a coherent and easily accessible set of documents which would serve as a Code of Conduct.
Concerning the accounting control procedures, the Commission acknowledged that Company I. was in the process of reorganising its accounting and financial services and therefore gave Company I. until 31 March 2021 to provide the Commission with any documents proving that it had completed the compliance of its accounting control procedures.
Despite all these efforts in 2019, France has dropped two places in the corruption perception index ranking from 21st to 23rd place out of 180 countries examined. Charles Duchaine, Director of the AFA to conclude, “Strengthening the Agency’s missions now seems necessary.”
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