This Week in Markets and Democracy: New French Anticorruption Law, More Panama Papers Fallout, India’s Big Currency Ban

A man displays a new 2000 Indian rupee banknote after withdrawing from a bank (Reuters/Mukesh Gupta).

France’s Anticorruption Reforms
After years of criticism for failing to prosecute foreign bribery, France adopted a new anticorruption law that will force companies doing business on its soil to take more aggressive preventative measures, and also gives the government stronger tools to fight corruption. The Sapin II law—named for French Finance Minister Michel Sapin—makes compliance programs mandatory for companies with over 500 employees and €100 million in revenue, and creates a new anticorruption agency that can impose fines up to €200,000 for individuals and €1 million for companies that fail to comply. Sapin II also expands whistleblower protections (though some say they do not go far enough), and introduces deferred prosecution agreements similar to those used by the U.S. Department of Justice—allowing prosecutors to fine companies for wrongdoing without a criminal conviction. These changes should help France make good on its OECD Anti-Bribery Convention commitments. Until now, only U.S. courts—not France’s—have sanctioned French multinationals for bribery abroad.

Panama Papers Fallout Continues in Pakistan and UK
Seven months after the Panama Papers revealed a vast network of often-stolen wealth hidden in shell companies, government-led investigations continue. In Pakistan—where the leaks revealed that Prime Minister Nawaz Sharif’s family (long dogged by corruption scandals) used offshore companies to buy real estate near London’s upscale Hyde Park—the Supreme Court is setting up a commission to look into opposition claims that the money came from graft. And this week the United Kingdom announced it is investigating over thirty people and companies for potential tax fraud and financial crimes based on the papers’ revelations. The government also placed dozens of wealthy individuals under “special review” and is looking into the activities of twenty-six no longer anonymous offshore companies. The UK’s message: it wants to shed its reputation as an offshore tax haven and hub for illicit finance.

India Strikes “Black Money”
Research shows that removing large denomination bills from circulation can help cut back on corruption, tax evasion, and terrorist financing. Cash makes illicit payments hard to trace, and high-value notes especially allow people to discreetly move large sums of money around the world—a million dollars weighs fifty pounds in twenty dollar bills, but just 2.2 pounds in 500 euro notes. This week India put this theory into practice, abolishing its highest currency notes—500 and 1,000 rupee bills (worth about $8 and $15, respectively). The immediate aftermath was chaotic, as ATMs were overrun with citizens looking to deposit or exchange their bills. But Prime Minister Narendra Modi hopes the move will cut back on crime and replenish government coffers. Its moves follow those of the European Union, which discontinued €500 notes earlier this year.