Financial institutions, French or foreign, have remained the focus of white-collar crime investigations, most often in relation to tax fraud, money laundering, fraud, mis-selling, and corrupt practices. ESG continues to draw attention too, driven largely by criminal complaints filed by NGOs.
Enforcement trends/developments
Enforcement actions against financial institutions relating to tax fraud, money laundering, fraud, mis-selling, and corrupt practices continue to develop in scale and number, including unprecedented investigations by the PNF into multiple financial institutions in relation to alleged CumCum tax fraud, in coordination with their German counterparts. Criminal proceedings initiated by French criminal authorities (including the National Anti-Terrorism Prosecutor (PNAT)) against industrial and financial institutions on the grounds of crimes against humanity and terrorist financing committed overseas follow complaints filed by NGOs and refugees in France.
French criminal authorities are exerting even more pressure on businesses to cooperate in the context of external investigations, making it clear that the pace and duration of an investigation, and the possibility of being offered a negotiated settlement, are dependent on cooperation. Despite this pressure, businesses (and the authorities) should not forget the fundamental principles of the French criminal justice system, such as the right not to self-incriminate, applicable privilege, and professional secrecy rules.
Law reform on tax evasion facilitation, confiscation and rights of defense
There were three key law reforms in 2024 relevant to businesses:
- A new offense of facilitating tax fraud targets individuals or legal entities which offer legal and financial tools specifically designed to help conceal income or assets from public authorities. The new offense is punishable by up to three years’ imprisonment and/or a maximum fine of EUR250,000 for individuals and EUR1 million for corporates. Such penalties are increased to five years’ imprisonment and/or a maximum fine of EUR500,000 for individuals and EUR2.5 million for corporates if the services are offered using an online communication service. Additional penalties such as exclusion from public procurement may also be imposed.
- Inspired by recent EU legal developments, new additional rights of defense for both individuals and entities came into force in September 2024 in the context of external investigations led by French criminal authorities. These are both positive developments:
- “Assisted witnesses” have been given a new right to request a judicially appointed expert, who they may ask to be accompanied by their own expert. An assisted witness is a special status under French law—someone who is not under formal investigation but who may have been named in the investigation file, for example. We have seen both companies and individuals with this status. While there is still no right to a judicially appointed expert (which tends to carry more weight with an investigating judge than a party’s own expert), the investigating judge must give reasons for refusing one, and there is also a right of appeal.
- Access to the investigation file has been granted for both individuals and entities earlier on in the investigation. Parties and their counsel now have the right to obtain a copy of the investigation file (including the evidence collected as part of the investigation, whether it be through dawn raids, MLAT requests, judicial requests for information, interviews, notes filed by the parties, etc.) as soon as they receive a summons for interview, as opposed to just being able to consult the file immediately prior to interview, thus helping businesses and their representatives to better prepare for interview. It will still be important to double check the investigation file the day before the interview, to ensure that no new exhibits have been added since the copy was provided.
- The confiscation regime has been tightened.
- Now seizure of property that constitutes the object, proceeds or instrument of the offense has become automatic upon conviction. Confiscation is often used by the French criminal courts to recover “proceeds of crime” in white-collar crime cases (e.g., as against a major bank).
- Additionally, the confiscation of a convicted individual or entity’s entire assets has been extended to a wider range of white-collar crime offenses, including aggravated corruption and influence peddling.
- Assets seized during criminal proceedings can now be relinquished to the French State as part of a CJIP.
New guidance regarding internal investigations into sexual harassment claims
Although none of the key soft law guidelines on how a corporate should conduct an internal investigation changed in 2024, internal investigations remain very much under the spotlight of French criminal authorities, particularly in cases where there is a potential CJIP. There is often a balance to be struck between a willingness to cooperate with the French criminal authorities and preserving the rights of defense and legal privilege.
The French institution known as the “Defender of Rights” issued a decision in July 20241 emphasizing the employer’s potential2 obligation to launch an internal investigation into sexual harassment claims to satisfy its safety obligation, and giving guidance on how to do so. This includes:
- Specifying what would be a reasonable duration for an internal investigation, giving an example that an internal investigation launched in May 2021 with interviews being conducted in June 2021, and findings issued in February 2022 may be deemed excessive.
- Suggesting who should be interviewed, e.g., where an interview with a particular individual is key to ascertaining the truth, the employer should ensure that the internal investigator conducts it, whether the victim has explicitly asked for it or not.
The decision is likely to be used by the Defender of Rights when ruling on new cases and so will impact outcomes for businesses conducting these types of investigation.
Financial institutions and sports sector targeted for criminal enforcement
Recent years have seen a significant surge in criminal proceedings brought against French and foreign financial institutions, which is likely to continue. The PNF has been a key driver in this surge, handling an increasing number of proceedings since its creation over ten years ago, leading to mass dawn raids and unprecedented fines against the financial sector.
As a result of hosting the 2024 Olympic Games, France may also see new enforcement action against the sports sector, particularly corruption related, following on from inspections and investigations initiated by the PNF and French Anti-Corruption Agency ahead of the Games.
French authorities coordinate with counterparts overseas
Cross-border coordination involving France is very common. For example:
- The PNF has taken part in a series of simultaneous dawn raids in France and abroad in coordination with its foreign counterparts, including with Dutch prosecutors, as part of an investigation into tax fraud and concealed employment against a leading worldwide streaming service.
- The PNF reached a CJIP with a leading bank in September 2024 in the context of a criminal investigation into alleged laundering of the proceeds of tax fraud, following on from settlements reached by the bank with the U.S. and Danish authorities at the end of 2022.
The European Public Prosecutor's Office has also seen an increase in its activity to fight cross-border organized white-collar crime, with approximately 50 investigations open in France for an estimated amount of around EUR130 million.
Predictions for 2025
- Criminalization of ESG issues is an ongoing trend, with an increased number of CJIPs in this area. Over 25 environmental CJIPs have been concluded to date since their entry into force at the end of 2020, in the context of criminal proceedings related to the French Environmental Code. The French Supreme Court confirmed in January 2024 that French courts have jurisdiction over international crimes against humanity that companies commit overseas. The ruling is likely to drive more NGO action in this area.
- In the context of a merger by absorption, a recent decision handed down by the Criminal Chamber of the French Supreme Court on May 22, 2024, has extended the transfer of criminal liability from the absorbed company to the absorbing company. Those involved in due diligence in 2025 will therefore be under more pressure to detect potential criminal risks which may add delay to transaction timetables.
- The scope of legal privilege between lawyers and clients is increasingly being challenged by French enforcement authorities and in the courts. Advice from in-house lawyers still does not benefit from privilege despite several proposals for reform over recent years (one of which has been put on hold). We expect to see more disputes on the scope of privilege, with increasingly difficult calls being made on what is or could be privileged.
- How businesses deal with whistleblowing is becoming increasingly important given enhanced protections for individuals who seek to benefit from whistleblower status and the legal technicalities on how and when a whistleblower should be dealt with. The way in which employees claiming to be whistleblowers are dealt with from an employment perspective is becoming more contentious, particularly where dismissal is envisaged. Employers may also find themselves at a disadvantage because of a lack of information. For both financial and non-financial institutions, the Defender of Rights may recognize an employee’s whistleblower status without even consulting their employer. An employee at a financial institution may report to their employer’s regulators using a direct whistleblowing channel without their employer knowing. If an employee claims to be a whistleblower, the need for careful advice, not just from an employment perspective, but also potentially from a criminal and regulatory perspective depending on the nature of their allegations, is paramount.
- We expect the effectiveness of internal systems and controls, not just in financial institutions, but also other businesses, to be more scrutinized. It involves ensuring not only that systems and controls are in place, but also that they are working to prevent and detect misconduct. Hence the need for significant and regular training and awareness campaigns by in-house legal teams and GCs, tailored to French law requirements, as well as robust internal investigations by in-house investigations teams.
- Further on the horizon, tax fraud remains a top priority for French criminal authorities, and this is unlikely to change soon. Increasing fines and other types of financial penalties (including confiscation) is a key objective for public authorities in the current context of rising public debt. New reforms are expected to further strengthen the resources of the French tax administration to detect and sanction tax fraud, particularly in the financial sector. Tax compliance is therefore likely to remain on the horizon for in-house legal and investigations teams.
- Likewise, the recent financial market trends and volatility, as well as the general slowdown in the economy, are likely to trigger a wave of investigations into suspected mis-selling and unfair commercial practices.
- Compliance with the national and international sanctions applicable in France is also likely to lead to increased enforcement risk in the upcoming years, particularly should the PNF be given jurisdiction over such cases (as it would like to).
Directory quotes
- “[Denis Chemla] keeps us abreast of what is going on in litigation. He explains clearly the French litigation process and is knowledgeable of the law. He is also timely, organized and thinks outside the box on difficult issues.” Chambers Global 2024 (Litigation Elite).
- “Dan Benguigui’s expertise in handling combined complex white-collar crime and regulatory enforcement cases stands out.” Legal 500 EMEA 2021—France (White-collar crime) “Dan Benguigui is praised for his ‘unrivalled knowledge and experience’ in white-collar crime and regulatory enforcement cases involving banking and financial institutions.” Legal 500 EMEA 2024—France (Compliance).
- “Hippolyte Marquetty is a highly regarded lawyer known for his skilful approach to disputes involving elements of tax fraud, corruption and money laundering. He counts large financial institutions and multinationals amongst his clients, as well as private individuals.” Chambers Europe, 2023—France (White-collar crime).
Footnotes
1. Accessible in French at: https://juridique.defenseurdesdroits.fr/doc_num.php?explnum_id=22290.
2. The decision is not aligned with a recent ruling of the French Supreme Court, accessible in French at https://www.legifrance.gouv.fr/juri/id/JURITEXT000049733698 init=true&page=1&query=23.13975&searchField=ALL&tab_selection=all
This article is part of the A&O Shearman Cross-Border White-Collar Crime and Investigations Review. Please click here for our overviews and insights in other jurisdictions.
