Société Générale / Risk report 2021 - Pillar 3 2020

13 COMPLIANCE RISK, LITIGATION COMPLIANCE PILLAR 3 - 2021 | SOCIETE GENERALE GROUP | 216 Acting in compliance means understanding and observing the external and internal rules that govern our activities. These rules aim to ensure a transparent and balanced relationship between the Bank and all of its stakeholders. Compliance is the cornerstone of trust between the Bank, its customers, its supervisors and its staff. Compliance with rules is the responsibility of all Group employees, who must demonstrate compliance and integrity on a daily basis. The rules must be clearly expressed, and staff are informed and/or trained to understand them properly. The compliance risk prevention system is based on shared responsibility between the operational entities and the Group Compliance Division: the operational entities (BU/SUs) must incorporate into their daily p activities compliance with laws and regulations, the rules of professional best practice, and the Group’s internal rules; the Compliance Division manages the Group’s compliance risk p prevention system. It ensures the system’s consistency and efficiency, while also developing appropriate relationships with bank supervisors and regulators. This independent division reports directly to General Management. To support the businesses and supervise the system, the Compliance Division is organised into: dedicated teams in each business line, liaising with the businesses p on all their compliance issues and responsible for most of the deal flow, except for the most sensitive transactions; central teams dedicated to oversight, the definition of standards p and controls, and key cross-business activities such as training and digital transformation. The Compliance Division is organised into nine main compliance risks, which are grouped into two major categories: financial security, which includes Know Your Customer (KYC) p processes, the observance of international sanctions and embargo rules, and antimoney laundering and counter-terrorism financing rules; regulatory risks, which cover customer protection, market p integrity, compliance with international tax regulations, antibribery and corruption, ethics and conduct, corporate social responsibility and personal data protection. Financial Security Regulatory Risk KYC AML Sanctions & Embargoes Customer protection Market integrity Tax transparency Anti-corruption, Conduct and Ethics Corporate Social Responsibility Data Know Your Customer Anti-money laundering and counter-terrorism financing MiFID II/MIFIR, PRIIPs, etc. EMIR/DFA, Volker, FBL, MAD/MAR, benchmarks, etc. FATCA, CRS, QI, etc. ABC, Sapin II, etc. CSR, ESG, etc. GDPR, Archiving, etc. COMPLIANCE 13.1 Financial security KNOW YOUR CUSTOMER (KYC) In 2018, the Group launched a programme to revamp its KYC functions in order to boost their operational efficiency ( via the simplification of standards, greater pooling of resources, optimisation of tools and processes) and to improve the customer experience. Placed under the responsibility of the Compliance Division, this four-year programme is closely and regularly monitored at the highest Bank level. Significant progress has already been made in terms of providing equipment to handle KYC analysis and with respect to process industrialisation. ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING (AML/CTF) industry-wide consultations and quarterly updates to the Societe Generale Code. It will be completed in early 2021. The Group has implemented all the measures linked to the Fourth Directive on antimoney laundering and counter-terrorism financing, as well as European Regulation 2015/847 on the quality of payment information. The transposition of the 5 th European Directive (officially applicable in French law via a decree dated 12 February 2020) into internal standards is advancing through recent The system for detecting suspicious or unusual transactions continued to be strengthened in 2020 with the roll-out of the most sophisticated surveillance tools, the optimisation of the scenarios used, and the use of new technologies. FINANCIAL EMBARGOES AND SANCTIONS In 2020, the international environment was impacted by the reinforcement of United States sanctions on China, with greater complexity in terms of implementation that may generate substantial operational risks for financial institutions. More broadly, Societe Generale Group has confirmed its position to abstain from any trading activity with Iran and to maintain transactions with Russia within a strict framework. The Group continued to strengthen its Embargoes/Sanctions system under the established remedial programme following agreements with the French and US authorities, in particular in terms of screening third parties and transactions, training employees and industrializing all processes involved in controlling this risk.