Compliance glossary
Definitions, useful reminders, updates and new features for all our clients, from the uninitiated to the experts.
1. Beneficial owner
The beneficial owner is defined as the natural person(s) who owns or controls, directly or indirectly, the reporting company. In no case, it can be a legal entity.
The beneficial owner is :
- either, the individual or individuals who hold, directly or indirectly, more than 25% of the capital or voting rights of the reporting company;
- or, the natural person(s) who exercise(s), by other means, a power of control over the management, administrative or executive bodies of the reporting company or over the general meeting of its partners or shareholders;
- or, only in the absence of identification of a beneficial owner according to the two previous criteria, the individual(s) who directly or indirectly (through one or more legal entities) holds the position of legal representative of the reporting company.
Read on SKAN1 Outlook > Verifying the beneficial owner: a crucial challenge
Source : Infogreffe
2. Compliance
The definition of compliance in legal terms can be defined as follows:
“a set of actions aimed at making the measures as well as the behaviors of managers and staff within public or private organizations (non-profit associations, companies, trade unions, etc.) as well as vis-à-vis third parties conform to the external and/or internal norm applicable to the place where they operate.”
By norm, we refer to the relevant elements of law (legal norms, directives, laws, and regulations) without forgetting the internal norms of the organization of soft law that can be assimilated to unilateral commitments.
Read on SKAN1 Outlook > All our articles on compliance
Source : wikipedia
3. Conflict of interest
Conflict of interest refers to “any situation of interference between a public interest and public or private interests which is likely to influence or appear to influence the independent, impartial and objective exercise of a function”.
Conflict of interest is not a criminal offence. Illegal taking of interest (see definition) is the penal translation of the conflict of interest (when it is proven).
Read on SKAN1 Outlook > All our articles on the issue of conflicts of interest
Source : Transparency International
4. Public Interest Judicial Agreement (PIJA)
The Sapin 2 law introduced a procedure whereby the Public Prosecutor can enter into a Judicial Agreement of Public Interest (CJIP) with a legal entity suspected of breaches of probity. This measure replaces prosecution and concerns companies, associations and local authorities accused of corruption, influence peddling, tax fraud or tax fraud laundering and other related offences.
Its effect is to extinguish the public prosecution on the condition that the accused and signatory legal entity fulfills the obligations to which the agreement commits it. These obligations, which may be alternative or cumulative, are
- the payment of a public interest fine. The amount of the fine may not exceed 30% of the average annual turnover;
- compliance, under the supervision of the AFA, with its anti-corruption prevention and control procedures, over a maximum period of 3 years;
- compensation for damages suffered by the victim.
Initiated by the Public Prosecutor and accepted by the legal entity, the judge must still validate the CJIP in open court. The agreement and validation decision are then published by AFA on its website.
Read on SKAN1 Outlook > CJIPs signed by Egis Avia, EDF, Kaefer Wanner, Set Environnement and Poujaud
Source : AFA
5. Corporate
In the broadest sense, a corporation is a lasting assembly of persons pursuing a common purpose, whose status does not depend on the change of its members. The word comes from the Latin corporari (“to form a body”), and designates a legal person whose members (natural and/or legal persons) generally possess the same characteristic (for example, the exercise of a function). Corporations can be of private law but are generally (in a more contemporary sense of the term) instituted by law and of public law.
Source: Wikipedia
6. Corruption
Corruption is an old offence (already referred to in the 1810 Penal Code), which was for a long time unique in the category of breaches of the duty of probity, before the addition of trading in influence at the end of the 19th century.
It concerns the behavior by which offers, promises, gifts or presents are solicited, accepted or received in order to perform or abstain from an act, to obtain favors or particular advantages.
Over the years, the scope of the offence has been constantly extended: civil servants, foreign public officials, elected representatives, but also people working in the private sector.
Active and passive bribery are two complementary but independent offences. The actions of the briber (active bribery) and those of the bribe-taker (passive bribery) can be prosecuted and judged separately and the punishment of one is in no way subordinated to the punishment of the other.
In fact, the bribe-taker accepts promises, gifts and donations and can even solicit them, whereas the bribe-taker offers gifts and donations, makes promises and even gives in to the bribe-taker’s solicitations by handing over the object of the corruption.
(Cf. articles 432-11 et seq, 433-1 1° et seq, 434-9 et seq, 435-1 et seq, 445-1 et seq of the Criminal Code)
Some examples from case law:
- an agent of a department who solicits and receives donations from disaster victims in order to check their files, and then hand them over to the fund authorization service
- a vice-president of the departmental council and chairman of the bidding committee who requires certain companies that are candidates for the award of a contract to pay sums of money directly or indirectly, or to cover certain personal expenses
- an elected official who solicits funds for political activities
- an employee in charge of negotiating the best rates with his employer’s suppliers who obtains false rebates on which he receives commissions
- a magistrate who, in disregarding the secrecy imposed by his duties, discloses documents containing confidential information on a pending case in exchange for the promise of employment from a friend
- the payment by the director of a subsidiary of bribes of up to €455,000 and the giving of watches from a major luxury brand to foreign public officials as gifts in connection with a contract
- the fact that the head of a company offered a sum of money to a police inspector so that he would refrain from drawing up an official report
- a police officer cancelling a report in exchange for sexual favours
- a member of the prefecture who promises to speed up the processing of a request for authorization in exchange for a 200 k€ envelope
Read on SKAN1 Outlook > Our latest articles on anti-corruption issues
Source : French Anti-Corruption Agency (AFA)
7. Due Diligence
Definition : due diligence is a complete and comprehensive analysis of an entity’s business. The objective of due diligence is to confirm the validity and integrity of all financial and accounting records of the said entity, in M&A proceedings as well as in intellectual property offices.
Issues: a well-managed due diligence process cannot guarantee that a transaction will be successful. It can only improve its chances. Risk may not be totally eliminated by due diligence and success can never be guaranteed. The main issue is therefore to reduce as much uncertainty as possible.
Read on SKAN1 Outlook > Our latest articles on the importance of conducting due diligence
Source : Business Intelligence Portal
8. Discreet phone calls
In progress
9. Governance
Corporate governance is the name given by business practice to all the techniques by which companies are controlled and managed. It relates to the distribution of the rights and obligations of the various parties involved in the company, such as shareholders or managers, and defines the rules and procedures by which decisions are made.
Source: Private Law Dictionary – Serge Braudo
10. Artificial intelligence
Artificial intelligence (AI) is “the set of theories and techniques used to create machines capable of simulating intelligence”. It therefore corresponds to a set of concepts and technologies rather than an autonomous discipline.
Source : Wikipedia
11. LBO
An LBO (Leverage Buy Out) is a financial operation consisting in buying a company through a debt mechanism. The funds borrowed to finance the LBO are repaid thanks to the profits generated by the target company
12. Open Data
Open Data is data that is fully public and free to access, use and reuse.
The term Open Data refers to data that anyone can access, use or share. The essential criteria of Open Data are availability, reuse and distribution, and universal participation. This is the definition given by the Open Knowledge Foundation in 2005.
Source: The Big Data
13. Related party
A “related party” transaction involves a firm and another entity to which it is related, such as a subsidiary, affiliate, controlling shareholder, director, officer, etc.
Source : Cairn.info
14. PEP
The concept of politically exposed persons (PEPs) was introduced at the time of the transposition of the 3rd European Directive (October 2005) on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
Politically exposed persons are natural persons who hold or have held important public functions, not necessarily political, linked to significant decision-making power. Persons who are known to be closely associated with a PEP client are also included. The functions of PEPs are listed in article R.561-18-I of the Monetary and Financial Code, it includes in particular:
- Head of State, Head of Government, member of a national government or of the European Commission;
- Member of a national parliamentary assembly or the European Parliament;
- Member of a supreme court, constitutional court or other high court whose decisions are not, except in exceptional circumstances, subject to appeal;
- Member of a court of auditors;
- Officer or member of the governing body of a central bank;
- Ambassador, chargé d’affaires, consul general and career consul;
- General officer or senior officer in command of an army;
- Member of the administrative, management or supervisory body of a public company;
- Head of a public international institution established by a treaty.
The 4th Directive has broadened the notion of Politically Exposed Persons (PEPs). In addition to persons who exercise or have exercised important public functions abroad, it now includes executives of international organizations as well as persons who exercise or have exercised important public functions on national territory (domestic PEPs). The distinction between domestic PEPs and foreign PEPs is intended to ensure that national standards comply with the FATF Recommendations. Individuals who are or have been entrusted with important public functions by a third country are referred to as foreign PEPs, while individuals who are or have been entrusted with important public functions by a Member State are referred to as domestic PEPs.
Source : LexisNexis
15. Praiseworthy name
The nominee is the person, natural or legal, who, in the eyes of third parties, appears to be the apparent partner of the company.
In reality, the nominee is not acting on his own behalf. He acts on behalf of another person who does not want to disclose his identity. The true partner wishes to remain anonymous for various reasons, for example
- not to reveal himself to his competitors,
- commercial discretion,
- desire for anonymity,
- etc.
Source : Valoxy.org
16) Country Risks
Country risk is a concept that is regularly compared to political risk. The birth of this concept corresponds to the nationalization of the Suez Canal by Nasser in 1956. The definition of country risk has been the subject of several works. Bernard Marois’ definition is: “Country risk can be defined as the risk of a loss occurring as a result of the economic and political context of a foreign country in which a company carries out part of its activities1 “. Some countries may present vulnerabilities to international investment. The analysis of vulnerability to this type of risk is becoming a necessity in financial risk management.
The three pillars put forward by Coface to assess this country risk are the macroeconomic, financial and political prospects of the country in question. This rating indicates the risk of non-payment by considering macroeconomic, financial and political influences.
Country ratings are based on a multi-criteria analysis: political context, external financial situation, government solvency, vulnerability to capital withdrawal, fragility of the banking sector, long-term growth and strength of growth, macro-economic indicators of industrialized countries, and payment behavior for large contracts.
These scores are then weighted and result in a final score that ranks the country on an 8-level scale.
Source : Wikipedia
17. Sapin 2 law
The law on transparency, the fight against corruption and the modernization of economic life, known as “Sapin 2”, aims to bring French legislation up to the best European and international standards in the fight against corruption, and thus contribute to a positive image of France internationally. The bill was adopted by Parliament on November 8, 2016, and definitively validated by the Constitutional Council on December 8, 2016.
Source: economie.gouv.fr – the portal of the Economy, Finance, Action and Public Accounts
18. Public electronic sources
In progress…
19. Influence peddling
(articles 432-11 and following and articles 435-10 and following of the penal code)
Influence peddling refers to the fact that a person receives – or solicits – donations with the aim of abusing his or her influence, real or supposed, over a third party so that the latter takes a favorable decision. It involves three actors: the beneficiary (the one who provides benefits or gifts), the intermediary (the one who uses the credit he or she has because of his or her position) and the target person who holds the power of decision (public authority or administration, magistrate, expert, etc.).
The criminal law distinguishes between active influence peddling (on the side of the beneficiary) and passive influence peddling (on the side of the intermediary).
The penalties incurred can be up to 10 years in prison and a fine of €500,000, which can be increased to twice the amount of the proceeds of the offense.
Source : Transparency International
19. Web 2.0
Web 2.0″, sometimes called participatory web, refers to all the techniques, functionalities and uses that have followed the original form of the web, www or World Wide Web1, characterized by more simplicity and interactivity (sociability). It concerns in particular the interfaces and exchanges allowing Internet users with little technical knowledge to appropriate new web functionalities. On the one hand, Internet users can contribute to the exchange of information and interact (share, exchange, etc.) in a simple way, both at the level of the content and structure of the pages, and on the other hand, among themselves, creating in particular the Social Web2. Thanks to the tools made available to him, the Internet user becomes an active person on the Web.
Web 2.0 is therefore the evolution of the Web towards interactivity through an internal complexification of the technology but allowing more simplicity of use, the technical and computer knowledge not being essential for the users.
Source : Wikipedia
20. Invisible Web
The invisible web, also called hidden web or deep web refers to the part of the web not indexed by the main generalist search engines such as Google, Bing or Yahoo. This term is sometimes also abused to designate the shocking and not very visible contents found on the web.
The invisible web is neither the dark web (web content on darknets), nor a darknet (overlay network with anonymizing features), nor the opaque web (web content indexable but not indexed), nor an anonymizing network (web services that can be accessed via tools such as Tor, Freenet, I2P…)
Source : Wikipedia
21. Whistleblower
Law n°2016-1691 of December 9, 2016, on transparency, the fight against corruption and the modernization of political life, known as the Sapin 2 law, published in the official gazette on December 10, 2016 defines in Article 6, the whistleblower as follows:
“(…) a natural person who discloses or reports, disinterestedly and in good faith, a crime or misdemeanor, a serious and manifest violation of an international commitment regularly ratified or approved by France, of a unilateral act of an international organization taken on the basis of such a commitment, of the law or of the regulations, or a serious threat or prejudice to the general interest, of which he or she has personal knowledge”.
It gives it a unified status and an alert procedure. However, the law excludes from its field of application information covered by national defense secrecy, medical secrecy or the secrecy of relations between a lawyer and his client.