AXA Drops the ICC, KPMG Pays Beijing: Compliance Follows Power
A French insurer has dropped the International Criminal Court because US sanctions outrank EU law, and China's regulator fined KPMG Huazhen 29.02 million yuan, about 0.6% of its revenue. Multinationals now take their rules from the government with the sharpest teeth, and Thursday showed both versions.
A French insurer has dropped the world's war-crimes court because it fears Washington more than it trusts Brussels. AXA's health contract with the International Criminal Court ended on Thursday "by mutual agreement", after months of talks on workarounds that found none, the Financial Times reported (Reuters recap). A day earlier, China's securities regulator fined KPMG Huazhen 29.02 million yuan, a figure built to be felt and survived. The two stories share a lesson for any multinational: the compliance perimeter is drawn by whichever government can hurt you most, and that is seldom the one that issued your licence.
The insurance account is small, which is what makes the decision so telling. Thirteen court officials, including half of its 18 judges, are under US sanctions. Sanctioned individuals lose US credit cards, phones and couriers, and have seen hotel bookings cancelled. Both sides feared that broad sanctions on the institution itself would force AXA to stop serving the court or be punished for continuing, and a staff health plan in The Hague is not worth a fight with the US Treasury. AXA called it a "complex and sensitive case given the risks arising from the extraterritorial application of US sanctions".
Brussels owns a tool for exactly this. The Blocking Statute, Council Regulation 2271/96, forbids European companies from complying with listed American laws, and the EU reactivated it in 2018 to shield business with Iran. It did not work then. Large European firms left Iran anyway, because a company that can be shut out of dollar markets weighs a fine from a European court lightly. Today the statute is not even offered: the ICC sanctions are absent from its annex, MEPs are asking for them to be added, and the Commission says "diplomatic outreach remains our preferred option". Meanwhile Marco Rubio has promised to take the court apart "brick by brick" and Donald Trump has called its people an "evil group".
One insurer is not a trend, and the ICC found another provider. That is true, and the unnamed replacement is the evidence. The court can now buy services only from companies with no US exposure, a pool that excludes most large European banks and insurers. The court has already moved its office software from Microsoft to Germany's openDesk, and its deputy prosecutor, Nazhat Shameem Khan, speaks of "ensuring that we are autonomous for the future". Autonomy of that kind is expensive and thin. It leaves the court shopping among small suppliers, and six states have notified the court of their withdrawal this year, among them Venezuela, Mali and Niger.
The consequence for European financial firms is plain. Their compliance officers will treat US sanctions as binding whatever the EU says, and will cut the exposure before anyone asks. A bank that clears dollars has more to lose than AXA ever did, and its lawyers will read the AXA decision as a template. Shareholders in those banks should assume that any client the US sanctions will be dropped, with no appeal to Brussels. Brussels, by declining to extend the statute, has told them the template is correct.
Beijing handles its foreign auditors differently, and more cleverly. The Liaoning bureau of the securities regulator, in a penalty notice disclosed on Wednesday, found that KPMG Huazhen failed in its work on Shenyang Chemical's 2018 to 2021 accounts, issuing four straight clean opinions while a subsidiary shifted profit between years by manipulating production inputs and delaying inventory recognition. The listed failings are the basic ones: understanding the crude oil purchase process, watching inventory counts, testing cut-off, confirming who owned the 2020 crude.
The penalty follows a formula the Chinese call "confiscate one, fine three". The firm forfeits the 7.255 million yuan it earned in audit fees and pays a fine of 21.765 million, which makes 29.02 million, roughly $4.1 million and four times what the work paid. Against the 4.869 billion yuan KPMG Huazhen booked in 2025, that is 0.6%. The two signing accountants were fined 500,000 and 200,000 yuan. It is the firm's first administrative penalty in securities services in recent years; before this it had collected only a warning letter.
Beijing can punish much harder when it wants to. In 2024 it fined PwC Zhongtian 441 million yuan, about 15 times this sum, and suspended it for six months over Evergrande. A year before that, Deloitte Huayong paid 211.9 million yuan and had its Beijing branch suspended over China Huarong. Set beside those, the KPMG fine is a rung on a ladder, placed there so the next rung is visible. The regulator wants the Big Four disciplined and in place. KPMG Huazhen earned 1.12 billion yuan of securities-services revenue last year, about 7% of the 15.9 billion yuan earned by the 100 firms in the regulator's tally, and a regulator that needs auditors to certify the listed market cannot afford to delete one.
KPMG appears to have read the signal correctly. On the same Wednesday, it named Zou Jun, who joined its Beijing office in 1993 and has chaired KPMG China, as chairman for Asia Pacific. A firm that expected to be in serious trouble in Beijing would hardly promote its China chief to run a region on the day the penalty was published. The lawyer Sun Yuhao reads the market as heading toward concentration, with large networks advantaged by the cost of compliance. The two stories point the same way. Where a government can enforce, firms comply, and where the enforcer chooses a fine over a ban, they stay.
Washington's next step decides the first story. It has so far sanctioned individuals; sanctioning the court as an institution, as AXA and the ICC both feared, would reach every bank that holds its accounts. We think those banks will start to leave within months, probably before the end of March, and that the Commission will still not have extended the Blocking Statute by then. Brussels will keep its preference for outreach, and the court will keep looking for a bank that has never touched a dollar.