Anti-money laundering framework for financial institutions in France

Last updated
4th directive LCB-FT
4th directive on the fight against money laundering and terrorist financing (LCB-FT)
  • Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing
Enacted byEuropean Union
EnactedMay 20, 2015
Effective June 26, 2017
Status: In force

The anti-money laundering framework for financial institutions in France encompasses the key components of the country's regulations aimed at combating money laundering and terrorist financing. This framework includes the laws and regulations established for responsible parties, ensuring compliance with international initiatives.

Contents

History

In France, the anti-money laundering framework is based on Ordinance 2009-104 of January 30, 2009, which is codified in Articles L. 561-1 and subsequent articles of the French Monetary and Financial Code. [1]

Articles L. 561-1 et seq. of the CMF
Obligations relating to the fight against money laundering and the financing of terrorism
Territorial extentFrance
Enacted byJune 26, 2017
Type of vetoLaw
Status: In force

The fourth directive on combating money laundering and the financing of terrorism (AML-CFT), initiated on February 5, 2013, was adopted by committees of the European Parliament on January 27, 2015. This directive introduced several legal innovations, including the establishment of national databases. [2] It was transposed into domestic law by Member States by June 26, 2017, which marked its entry into force in France. [3]

The fifth European AML-CFT directive (Directive (EU) No 2018/843 of May 30, 2018) took effect in July 2018. [4] [5]

In addition to the European legislative framework, the regulatory requirements for governance and internal control related to AML/CFT were defined by the decree of January 6, 2021, [6] which came into effect on March 1, 2021. [7]

The Autorité de Contrôle Prudentiel et de Résolution (ACPR) oversees compliance with AML/CFT obligations, while a common supervisory framework by the European Union is anticipated to be implemented in 2023. [8]

The liable parties

The list of liable parties responsible for combating money laundering and terrorist financing is defined in Article L561-2 of the Monetary and Financial Code (hereinafter "CMF") and includes: [9]

Penalties incurred in case of non-compliance with regulations

The fourth AML/CFT directive establishes obligations regarding customer due diligence, suspicious transaction reporting, data retention, and internal control provisions in the event of serious, repetitive, or systematic breaches by obligated entities: [3]

The risk-based approach

The Third Anti-Money Laundering Directive 2005/60/EC, adopted on October 26, 2005, [10] was transposed into national law by Ordinance 2009-104 of January 30, 2009. [11] This transposition marked a shift from a threshold-based approach to due diligence to a risk-based approach that considers the actual risk of money laundering.

This "risk-based approach" was advocated by banking professionals, particularly in the Anglo-Saxon context, to ensure that resources are concentrated where they are most needed. Under this framework, the principle of due diligence is adjusted to account for various money laundering and terrorist financing risks associated with the customer, the product, or the distribution method.

The due diligence obligations are specified in Articles L. 561-5 to -10-2 of the aforementioned ordinance and in Articles R. 561-5 and -6 of the decree dated September 2, 2009.

Professionals are required to implement their due diligence obligations regularly, adapting their practices according to this new risk-based approach. Consequently, there are three levels of due diligence, with varying intensities of procedures: simplified, standard, and enhanced.

Simplified due diligence

The simplified due diligence level is justified by the presence of low risk in the business relationship, leading to a reduction in the obligations of the obligated party concerning certain categories of customers and transactions. When the risk of money laundering is assessed as low, due diligence can be performed in a simplified manner, both in terms of customer identification and transaction processing. This risk assessment can be based on various criteria, including the customer, the product, or its marketing method.

Article R561-15 of the CMF, derived from Decree No. 2009/1087 of September 2, 2009, specifies the conditions for applying these simplified control measures and outlines cases presenting a low risk of money laundering and terrorist financing. These cases include when the customer or the "beneficial owner" is:

Article R561-16 of the aforementioned text details the products for which these simplified due diligence measures will be applied, including:

These exemptions require obligated entities to gather the necessary information to confirm that the customer meets the specified conditions.

In the insurance sector, simplified due diligence is also addressed in the decree of November 10, 2009 (JORF No. 0264 of November 14, 2009).

Normal due diligence

This level of due diligence corresponds to a medium risk, which applies to the majority of customers. It necessitates the application of the following principles:

Enhanced due diligence

When the risk of money laundering and terrorist financing presented by a customer, product, or transaction is assessed as high, obligated entities must enhance the intensity of the measures outlined in Articles L561-5 and L561-6.

The strengthened due diligence measures specified in Articles L561-10-1 and L561-10-2 of the CMF are particularly applicable in the following situations:

Beyond these specific provisions, institutions may establish their risk management policies and adjust their controls based on the nature of the risks they face.

As part of the checks conducted by the French Prudential Supervision and Resolution Authority (ACPR) of the Bank of France, entities must be prepared to justify the nature of the measures implemented within the framework of their risk-based approach.

This approach is operationalized through the adoption of a risk mapping process, [14] which relies on an analysis of business processes that is cross-referenced with an operational risks typology.

Customer knowledge

Customer knowledge is a fundamental pillar of anti-money laundering efforts, as a thorough understanding of the customer base facilitates the detection of atypical transactions that may be linked to illicit activities and enables the reporting of suspicious activities. Customer knowledge primarily involves identification and verification (including identity, address, activity, etc.) through credible documentation, as well as gathering information related to the purpose and nature of the relationship, to determine the customer's risk profile. [15]

The ordinance imposes a duty of due diligence on entities specified in Article L.561-2 of the CMF, which consists of understanding the customer. [9]

This principle is internationally recognized as KYC (Know Your Customer). Therefore, professionals must ensure compliance with the information regarding their customers and, if applicable, the beneficial owners both before entering into a business relationship (Article L.561-6, para. 1 of the CMF) and throughout that relationship (Article L.561-6, para. 2 of the CMF).

Business relationship establishment

According to Article L.561-5 of the CMF, before entering into a business relationship or assisting a customer in preparing or executing a transaction, financial institutions must identify their customer and, if applicable, the beneficial owner of the business relationship through appropriate means. They must also verify these identification elements upon presentation of any supporting written documents. The term "customer" is understood in the broadest sense to include natural persons, legal entities, industrial, commercial, or service companies, guarantors, intermediaries, management companies, correspondent banks, and others.

A business relationship is established when a qualified professional initiates a professional or commercial relationship that is expected to last for a certain duration at the time the contact is established (Article L.561-2-1 CMF).

Thus, the establishment is required to identify its customer or beneficial owner before entering into a business relationship by collecting all relevant information related to the purpose and nature of that relationship, as well as any other pertinent customer information.

Customer or beneficial owner identification

The "beneficial owner" is defined in Article L.561-2-2 of the CMF as a natural person who: [16]

  1. Ultimately controls, directly or indirectly, the customer, or
  2. For whom an operation is carried out or an activity is conducted.

A decree by the Council of State clarifies the definition and the methods for determining the beneficial owner.

The decree of September 2, 2009, [17] specifies in Article R.561-1 of the CMF that the beneficial owner is the person who ultimately benefits from the transaction. [18] This individual must be a natural person who directly or indirectly holds at least 25% of the capital or voting rights of the company, or who holds control, administrative, or managerial authority over the company or its governing body.

For natural persons, the institution must verify the identity and authority of individuals acting on their behalf. The customer or beneficial owner must present a valid official document containing a photograph. The financial institution is then required to verify the following details: name, first name, date and place of birth, date and place of issue of the document, and the issuing authority.

Customer knowledge must also facilitate the identification of the customer's resources, necessitating an understanding of their economic situation. In relation to the economic situation of the customer or beneficial owner, the financial institution must obtain proof of the current address, details of current professional activities, and any information necessary for assessing assets, income, or other resources.

These elements allow for a concrete analysis of the customer's economic transactions to determine whether they align with the customer's economic capacity or exhibit suspicious characteristics. Certain attributes of the customer can significantly impact the risk associated with the relationship, particularly if the customer is a politically exposed person (PEP).

The regulations stipulate that all relevant information must be gathered regarding the customer, including an analysis of their economic, financial, and legal environment, as well as their reputation, to ensure a comprehensive understanding of the customer.

In some cases, customer knowledge requirements may be deemed automatically satisfied, resulting in the waiver of due diligence obligations. Article L.561-9, paragraph II of the CMF provides exemptions under specific conditions, as detailed in the implementing decree of September 2, 2009:

Before establishing a business relationship, the financial institution must perform "standard" due diligence, which includes continuous monitoring of the customer. [19] Pre-established information allows for the classification of customers into low-, medium-, or high-risk categories.

The Fourth European Directive of May 20, 2015, transposed into French law by Ordinance No. 2016-1635 of December 1, 2016, [20] mandates the establishment of "registers of beneficial owners" in all EU countries. These registers, which refer to individuals owning more than 25% of the capital or voting rights, must be publicly accessible. [21] The document filed with the commercial court registry must include, for each customer involved in a transaction, the name, first name, date and place of birth, nationality, personal address of the beneficial owners, the date they became beneficial owners, and the nature of control they exercise over the company. This requirement applies to new companies from August 1, 2017, and to existing companies from April 1, 2018. [22] [23] [24]

Relationship profile determination

Article L.561-6, paragraph I of the CMF stipulates that customer identification must encompass all information related to the purpose and nature of the relationship, along with any other relevant customer information.

The decree of September 2, 2009, further specifies that, as part of the knowledge of the business relationship, the financial institution must accurately identify the amount and nature of the planned transactions, the source of funds, the destination of funds, the economic justification provided by the customer, and the intended operation of the account.

The purpose and nature of the relationship must be defined based on the transactions anticipated with the customer. [25] In analyzing the nature of the relationship, it is essential to consider the types of operations requested by the customer.

In the context of certain transaction types, the financial institution must adopt a risk-based approach tailored to its specific circumstances and expertise. This approach involves implementing due diligence measures based on a risk matrix.

Transaction monitoring

The ordinance of January 30, 2009, distinguishes between two types of risk and three types of due diligence:

Low-risk: simplified due diligence

Article L.561-5 II of the CMF states: "Notwithstanding paragraph I, when the risk of money laundering or terrorist financing appears low and under conditions defined by decree of the Council of State, only the verification of the customer’s identity, and where applicable, that of the beneficial owner, may be carried out during the establishment of the business relationship."

The decree of September 2, 2009, which pertains to the obligations of due diligence and reporting for the prevention of the use of the financial system for money laundering and terrorist financing, defines the relevant conditions in Article R.561-15 of the CMF. [26]

Consequently, banks and financial institutions established in European or French territory are generally regarded as presenting a low risk. For an entity located in a non-European Union country to be considered low-risk, it must implement an equivalent anti-money laundering system, which underscores the importance of publishing AML/CFT questionnaires. [27]

Additionally, a listed company whose securities are admitted to trading on at least one regulated market in France or a state party to the Agreement on the European Economic Area, or in a third country with transparency requirements compatible with EU legislation, may also be deemed low-risk. For example, a company listed on the CAC 40 could qualify under this category.

The decree of September 2, 2009, [28] also identifies several types of activities considered to present a low risk of money laundering. These include life insurance contracts with an annual premium of less than €1,000, certain consumer credit operations, and specific insurance transactions.

Lastly, public authorities or public bodies whose identities are accessible to the public are also classified as presenting a low risk of money.

A special case of additional due diligence measures

Article L.561-10 of the CMF states that additional due diligence measures may be imposed on obligated entities beyond the obligations already stipulated in Articles L.561-5 and L.561-6.

These additional measures must be implemented under the following circumstances:

  • When the customer or the legal representative is not physically present during identification;
  • When the customer is a politically exposed person (PEP);
  • When the product or operation contemplated with the customer promotes anonymity;
  • When the operation is conducted with a person from a country or territory listed by the Financial Action Task Force (FATF) whose legislation or practices hinder the fight against money laundering and terrorist financing.

Politically Exposed Person

Article R.561-18 of the CMF, [29] derived from the implementing decree of September 2, 2009, defines a politically exposed person (PEP) as an individual "who is exposed to particular risks due to their functions," residing outside France and currently holding or having held, within the last year, one of the functions exhaustively listed in the article.

The previous political position of a PEP increases susceptibility to corruption. Therefore, it should be treated as an alert situation if, for example, a German PEP opens an account in another country, such as France. Identifying this status necessitates the implementation of additional due diligence measures.

The financial institution must collect various documents:

  • For corporate customers: This includes obtaining the official registry extract, the identities of shareholders or executive officers, justification for the registered office address, the articles of association, mandates, and powers of the company, and any documentation that allows for the assessment of the financial situation;
  • For asset management structures without legal personality, trusts, or comparable legal arrangements under foreign law: A document is required to justify the distribution of rights over the capital or profits of the entity on behalf of which the account is being opened or a transaction executed.

The decree of September 2, 2009, [30] specifies the additional measures that banking institutions must implement in these situations. Entities mentioned in Article L.561-2 of the CMF must: [9]

  • Obtain additional supporting documents to confirm the identity of the person with whom they are engaged in a business relationship;
  • Implement measures to verify and certify copies of the official document or the extract from the official register as mentioned in Article R.561-5 of the CMF by a third party independent of the person being identified; [31]
  • Require that the initial payment of transactions be made from or to an account opened in the name of the customer with an entity subject to regulation established in a Member State of the European Union or a State party to the EEA Agreement;
  • Obtain confirmation of the customer's identity from a regulated entity established in a Member State of the European Union or a State party to the EEA Agreement.

In conclusion, enhanced due diligence measures must be undertaken when the customer is a politically exposed person or when the identification of this individual is unclear. The ordinance also provides for strengthened vigilance measures.

High-risks: strengthened due diligence measures

The ordinance stipulates that strengthened due diligence measures must be applied when the risk of money laundering and terrorist financing presented by a customer, a product, or a transaction is deemed high.

Strengthened due diligence measures are required in the following situations:

  • When the transaction is particularly complex or involves an unusually high amount;
  • When the transaction lacks economic justification or a legitimate purpose;
  • When financial institutions engage in agreements for correspondent banking services, cashing or discounting checks, or establishing business relationships for the distribution of financial instruments.

The specific measures for strengthened due diligence include:

  • Gathering sufficient information about the co-contracting institution to understand the nature of its activities and to assess its reputation and the quality of oversight it is subject to, based on publicly available information;
  • Evaluating the anti-money laundering and counter-terrorism financing measures implemented by the co-contracting institution;
  • Ensuring that the decision to establish a business relationship with the co-contracting institution is made by a member of the executive body or an authorized individual designated by the executive body;
  • Including in the correspondent banking or financial instrument distribution agreement the modalities for transmitting information upon request by the relevant institution.

Given that medium-risk situations are not explicitly addressed in the regulations, each financial institution is required to establish its criteria for identifying and managing these intermediate-risk situations.

Monitoring the relationship: constant due diligence

Article L.561-6 of the CMF [32] mandates that obligated entities conduct ongoing due diligence on customers throughout the business relationship. The purpose of this continuous monitoring is to ensure that the oversight of customers is appropriately aligned with the money laundering risks they present.

This obligation requires obligated entities to carefully scrutinize the transactions conducted by their customers, verifying that these transactions are consistent with the customer's profile. This necessitates maintaining an up-to-date understanding of the customer.

According to Article R.561-11 of the CMF, obligated entities must perform a new identification of their customer when they have "good reasons to believe" that the information obtained regarding the customer's identity at the outset of the relationship is no longer accurate. [33]

It is essential to analyze any minor changes that may impact the assessment of the risk posed by the customer:

Financial institutions must regularly update their knowledge of customers to apply appropriate due diligence measures. All collected information must be documented in writing and retained for five years from the termination of the business relationship. [34]

Prohibition to enter into a business relationship

Article L561-8 of the CMF [35] outlines two scenarios in which a financial intermediary is prohibited from entering into a business relationship:

Furthermore, when an obligated entity terminates the business relationship under the conditions specified in Article L.561-8, it must file a suspicious transaction report with TRACFIN if it suspects or has reasonable grounds to suspect money laundering or terrorist financing offenses. [35]

Obligation to report suspicious transactions

The new French system is based on a dual set of complementary obligations:

France has not adopted an automatic reporting system based solely on predefined objective criteria. Instead, except for specific cases where the law mandates reporting under certain conditions, the system relies on a case-by-case analysis of sums and transactions, taking into account the profile of the business relationship and the risk classification established by the obligated entity.

As a result, organizations must analyze their customers' situations based on updated information, examine any suspicions of money laundering, and, if necessary, submit a report to TRACFIN (Intelligence Processing and Action Against Clandestine Financial Circuits). The obligations regarding the reporting of suspicions are outlined in Article L.561-15 of the CMF. [36]

Extending the scope of declarations

In France, legal obligations concerning anti-money laundering measures have continuously expanded since 1990, encompassing both national and European texts. This expansion has broadened the scope of professions subject to these measures and the obligation to report suspicions. [37]

The obligated persons include: [38]

Over the past two decades, the obligation to report suspicions to TRACFIN has been increasingly defined through various provisions, culminating in the transposition of the 3rd European Directive of October 26, 2005, into French law via the ordinance of January 30, 2009, along with related decrees and orders issued in 2009.

Article L.561-15 I of the CMF [36] now mandates that professionals report to TRACFIN any sums or transactions they "know, suspect, or have good reason to suspect" are derived from an offense punishable by imprisonment for more than one year or that contribute to the financing of terrorism.

Prior to the transposition of the 3rd European Directive, only five specific offenses fell under the scope of suspicious transaction reporting. [39]

Currently, the obligation encompasses all crimes and offenses punishable by imprisonment for more than one year, effectively targeting almost the entire French Penal Code, with the exception of misdemeanors. Consequently, this ordinance covers all financial crimes and offenses likely to generate proceeds, including money laundering related to offenses such as embezzlement, counterfeiting, fraud, and breach of trust. Notably, the ordinance also establishes the requirement to report any suspicion of money laundering arising from tax fraud.

Declaration for tax fraud

Ordinance No. 2009-104 of January 30, 2009, expanded the scope of suspicious transaction reporting to include sums or operations that may arise from any offense punishable by imprisonment for more than one year or that could contribute to the financing of terrorism. This extension now encompasses tax fraud, which in France is punishable by up to five years of imprisonment and a fine of €37,500. [40]

According to Article 1741 of the General Tax Code, a person is guilty of tax fraud if they have evaded or attempted to evade taxes fraudulently. Tax fraud can manifest through various actions, including:

The complexity of certain tax fraud cases has been highlighted in joint guidelines published by the Banking Commission and TRACFIN in December 2009. To assist professionals in detecting such offenses, the ordinance establishes specific criteria defined by decree. [41] [42]

These criteria are alternative, meaning that obligated entities must report to TRACFIN any transaction that meets at least one of them when they suspect tax fraud. The report must include the elements of analysis that led to the selection of at least one criterion.

The 16 criteria used to qualify for tax fraud can be categorized into five groups:

Declaration at the end of the enhanced examination

Financial institutions are mandated to conduct enhanced scrutiny on transactions that are particularly complex, unusually high in value, or lack clear economic justification. When such unusual transactions are identified, institutions must carry out a thorough and individualized analysis, which involves. [43] [44] [45]

To facilitate this process, the Financial Markets Authority has provided a non-exhaustive list of relevant information that should be collected and retained, including: [46]

If, after this enhanced scrutiny, suspicion remains unresolved, the institution must submit a report to TRACFIN. Importantly, reporting is not automatic; it follows a comprehensive analysis that fails to dispel suspicion.

Report on trusts and fiduciaries

Trusts and fiduciaries, rooted in Anglo-Saxon law, complicate the identification of ultimate beneficiaries since they often involve multiple parties: the settlor (who transfers ownership), the trustee (who manages the assets), and the beneficiary (who benefits from the trust). Due to this complexity, financial institutions must undertake diligent efforts to identify:

If the ultimate beneficiaries cannot be identified or if there are doubts regarding their identity, institutions are required to file a suspicious activity report. This proactive approach is crucial in maintaining compliance and mitigating risks associated with money laundering and terrorist financing. [47] [36]

Supplementary report

Article L.561-15 V of the CMF [36] mandates that professionals must promptly notify TRACFIN of any new information that could confirm, refute, or modify elements in an initial report. This includes details about the characteristics of reported transactions or any relevant information about the business relationship. If a financial institution suspects ongoing financial flows from a customer whose transactions have already been reported, a supplementary report can only be submitted if the new transactions involve significant amounts, typically at least equivalent to those previously reported.

Report following a business relationship termination

When a financial institution is unable to identify a customer or gather necessary information about the purpose and nature of a business relationship, it must refrain from conducting transactions or establishing the relationship. If the relationship is already in place, it must be terminated. In this scenario, the institution is also required to consider filing a suspicious transaction report. [48] [35]

The obligation to report after terminating a business relationship does not imply automatic reporting; instead, it necessitates a thorough, individualized analysis of the situation. The financial institution must evaluate the circumstances based on the information available to determine if a suspicious transaction report is warranted. This approach ensures that reporting is based on substantive findings rather than a blanket response to termination.

The materiality of the suspicious transaction report

Reporting procedures

Written suspicious transaction report

The written suspicious transaction report must be completed using a form available on the TRACFIN website. This form facilitates quick and automated processing of reports. The declarant is required to specify the legal or regulatory provision that necessitated the report. The online platform, TéléDS, allows for direct completion of the form and enables the simultaneous uploading of supporting documents.

Verbal report

While the written report is the standard procedure, a verbal report is also permitted under Articles L.561-18 and R.561-31 of the CMF. However, this option is limited to situations where the circumstances surrounding the operation warrant immediate verbal communication. In such cases, the declarant must visit TRACFIN's premises and present supporting documents.

Content of the report

Regardless of the reporting method, Article R.561-31 I of the CMF outlines essential content requirements for the report:

For reports related to tax fraud, the declarant must specify the elements that align with at least one of the 16 criteria outlined in Decree No. 2009-874 of July 16, 2009. All relevant documentation must be attached to ensure effective processing by TRACFIN.

The declarant has the option to provide additional information in a supplementary report, which can either confirm or refute initial suspicions. This mechanism allows for ongoing communication with TRACFIN and ensures that the agency has the most accurate and comprehensive information available.

Quality of suspicious transaction report

The quality of a suspicious transaction report (STR) is crucial for effective processing by TRACFIN. Deficiencies in the report can render it unusable. Common issues that may affect the report's quality include:

Reporting deadlines

According to Article L.561-16 of the CMF, [49] explicitly establishes the principle of suspicious transaction report prior to the execution of the transaction in order, if necessary, to allow TRACFIN to exercise its opposition right.

The professional must therefore refrain from carrying out any operation that he suspects is related to money laundering or terrorist financing. However, Article L.561-16, paragraph 2 outlines exceptions where the report may concern transactions that have already been executed. These exceptions include: [49]

In these cases, professionals must analyze the facts leading to the suspicion and submit the declaration without delay if their analysis confirms it.

Declarants need to avoid unnecessary delays between identifying the initial suspicious transaction and submitting the STR to TRACFIN. While regulations advocate for a priori reporting, practical scenarios often result in a posteriori reports. In retail banking, for example, customers may operate their accounts independently, which can complicate the detection of suspicious activities. Consequently, it is often a pattern of transactions or general account activity that raises red flags, rather than isolated transactions.

In summary, maintaining high-quality reports and adhering to prompt reporting protocols are critical components of effective anti-money laundering practices.

Financial institutions are required to retain specific documents related to suspicious transaction reports (STRs) for five years following the termination of the corresponding business relationship. These documents include:

It is important to note that, in compliance with Article 6 of the law of January 6, 1978, concerning data processing and freedoms, these retained documents can only be used for the purposes for which they were collected. They must not be kept longer than necessary for those purposes.

Confidentiality of the suspicious transaction report

Confidentiality surrounding suspicious transaction reports is critical. Key aspects of this confidentiality include:

Under Article L. 561-29 of the CMF, TRACFIN has the authority to disclose information to several French authorities, including: [53]

This framework ensures that while the confidentiality of STRs is upheld, necessary cooperation with judicial and regulatory authorities is maintained to combat money laundering and terrorism financing.

Communication of suspicious activity reports within establishment groups

Entities subject to reporting obligations, such as those within the same group, network, or professional structure, can share information about the existence and content of suspicious transaction reports (STRs). This exchange must follow specific procedures established by these entities. In exceptional cases, this sharing can extend to entities not belonging to the same group, provided they are subject to equivalent confidentiality obligations and have operations in an EU member state or a recognized equivalent third country.

Exoneration of criminal liability for the suspicious transaction report

Article L. 561-22 5° of the CMF outlines conditions under which professionals can be exempt from criminal liability for money laundering offenses when they submit a suspicious transaction report:

This framework encourages professionals to report suspicious activities without the fear of liability, provided they act in good faith and adhere to the established legal protocols. [54]

FATF

The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989, primarily aimed at combating money laundering and terrorist financing. It functions as a policy-making body that develops and promotes standards for effective legislative, regulatory, and operational measures in this domain.

The FATF has formulated a series of recommendations recognized as the international standard for anti-money laundering (AML) and counter-terrorist financing (CFT). These recommendations provide a framework for countries to establish and enhance their AML/CFT measures. Additionally, the FATF facilitates a coordinated global response to the threats posed by money laundering and terrorist financing, ensuring that countries work towards similar standards and practices. By providing a consistent set of guidelines, the FATF contributes to the harmonization of AML/CFT regulations across jurisdictions, which helps protect the integrity of the financial system worldwide. [55]

TRACFIN

TRACFIN introduction

Established by Law No. 90-614 on July 12, 1990, [56] following the G7 Summit at La Grande Arche in July 1989, TRACFIN [42] (Intelligence Processing and Action Against Clandestine Financial Circuits) contributes to the growing concern for combating money laundering and developing a healthy economy.

Originally a financial intelligence coordination unit within the General Directorate of Customs, TRACFIN became a national competence service by Decree No. 2006-1541 of December 6, 2006, [57] and gained its direction. The TRACFIN unit operates under the auspices of the Ministry of Economy, Finance, Industry, and Employment, as well as under the minister responsible for Budget, Public Accounts, Public Service, and State Reform.

The legislator has assigned TRACFIN three primary missions:

TRACFIN's role is to collect, analyze, and enhance reports submitted by obligated professionals. As an administrative investigation service, its actions occur upstream of the judicial phase, responding to alerts from entities regarding atypical financial transactions. [56]

The effectiveness of TRACFIN's system is largely due to its unique partnership with financial institutions. According to the 2008 annual report, out of the 14,565 reports received, 1,171 were submitted in a dematerialized form. A significant portion of these reports came from banks and credit institutions (79%), followed by manual currency exchangers (10%), insurance companies (5%), notaries (2%), and various other professions, including accountants, auditors, and auctioneers (4%). [59]

TRACFIN powers

To conduct cross-referencing of financial information on reported operations, TRACFIN is endowed with various powers that are strictly regulated by law:

However, these two prerogatives are subject to certain restrictions for specific professions, such as lawyers and solicitors. In such cases, approval from the Bar Council or the president of the company is required before any documents can be communicated or seized, unless the lawyer is acting in a fiduciary capacity.

This ability was not provided for by the New Economic Regulation Law of 2001, which had limited this possibility to only state administrations, local authorities, regulatory authorities, public establishments, and organizations mentioned in Article L.134-1 of the Code of Financial Jurisdictions. [62] The addition of new interlocutors as diverse as the URSSAF, professional unions, or sports leagues, often holders of information related to suspicious legal structures, will allow TRACFIN to obtain much more targeted and precise information effectively.

French Prudential Supervision and Resolution Authority (ACPR)

ACPR introduction

The ACPR (Autorité de Contrôle Prudentiel et de Résolution) is an institution integrated into the Bank of France, responsible for supervising the activities of banks and insurance companies in France. It was founded in January 2010 by Ordinance No. 2010-76.

It is responsible for ensuring compliance by the entities subject to AML/CFT obligations and, in this capacity, conducts both document-based and on-site inspections. [63] [64]

International cooperation

Egmont Group

In addition to the tools provided by the legislature, TRACFIN participates in the Egmont Group, [65] an informal forum established in Brussels. The primary objective of this group is to enhance international cooperation among various anti-money laundering units, particularly through improved information exchange among its members and the pooling of expertise. Notable achievements of the forum include the development of a standard bilateral agreement to facilitate cooperation between different financial intelligence units, the regular exchange of personnel, and the organization of regional training workshops.

This forum operates independently of police, judicial, or diplomatic structures, allowing for the implementation of practical solutions to address the daily challenges of anti-money laundering efforts. By circumventing bureaucratic hurdles associated with initiating judicial cooperation procedures, information flow becomes more agile, enhancing the responsiveness of these intelligence-gathering units. As of November 30, the Egmont Group recognized 58 financial intelligence units worldwide.

Summary of International Cooperation

Despite the ongoing capability for information exchange, this facility remains significantly underutilized. In 2008, TRACFIN made only 957 requests for information to its foreign counterparts, primarily within the EU, and received 951 requests from abroad, with 93% originating from European entities. Furthermore, this exchange capability is restricted to reconstructing transactions carried out by individuals or legal entities following a declaration, or to informing foreign financial intelligence units.

Special relationships with certain institutions

Towards an increase in the number of cases referred to the courts

The judicial authority is the primary recipient of the information gathered by TRACFIN. A thorough analysis is conducted based on all received declarations. If TRACFIN identifies sufficient elements suggesting that an offense has been committed, it can refer the case to the competent Public Prosecutor.

According to the 2008 annual report, out of the 359 declarations forwarded to the judiciary:

  • 85% of the declarations forwarded to the judiciary originate from the banking sector;
  • 6% from the gaming sector;
  • 3% from the real estate sector;
  • 6% from other sectors combined.

These declarations pertain to:

  • 50% primary offenses;
  • 26% concealment;
  • 13% placement;
  • 10% integration;
  • 1% terrorism.

In addition to processing forwarded cases, it has become customary for the most sensitive matters to undergo preliminary discussions before being transmitted to the judiciary. The Ministry of Justice is responsible for communicating the exact number and nature of convictions handed down for money laundering offenses. TRACFIN has the right to know the outcomes of its transmissions to the judiciary and to inform the reporting institutions about the status of their declarations.

Possibility of communication between TRACFIN and the tax administration

Since February 1, 2009, the tax administration has had the right to access information held by TRACFIN, as stipulated by Article L.561-29 of the CMF. [53] TRACFIN transmits information to the tax administration regarding facts that may constitute tax fraud or money laundering from the proceeds of such offenses. This information can be used by the tax administration in its functions, including tax audits and criminal enforcement. To enhance the efficiency of this collaboration, officials from the tax administration provide accounting and tax expertise on money laundering schemes within TRACFIN.

See also

Related Research Articles

<span class="mw-page-title-main">Financial Crimes Enforcement Network</span> Bureau of the U.S. Treasury Department

The Financial Crimes Enforcement Network (FinCEN) is a bureau within the United States Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes.

<span class="mw-page-title-main">Bank Secrecy Act</span> 1970 act of the United States Congress

The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law requiring financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports if the daily aggregate exceeds $10,000, and report suspicious activity that may signify money laundering, tax evasion, or other criminal activities.

Structuring, also known as smurfing in banking jargon, is the practice of executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file reports required by law, such as the United States' Bank Secrecy Act (BSA) and Internal Revenue Code section 6050I. Structuring may be done in the context of money laundering, fraud, and other financial crimes. Legal restrictions on structuring are concerned with limiting the size of domestic transactions for individuals.

In financial regulation, a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) is a report made by a financial institution about suspicious or potentially suspicious activity as required under laws designed to counter money laundering, financing of terrorism and other financial crimes. The criteria to decide when a report must be made varies from country to country, but generally is any financial transaction that either a) does not make sense to the financial institution; b) is unusual for that particular client; or c) appears to be done only for the purpose of hiding or obfuscating another, separate transaction. The report is filed with that country's Financial Intelligence Unit, which is typically a specialist agency designed to collect and analyse transactions and then report these to relevant law enforcement teams.

<span class="mw-page-title-main">Know your customer</span> Financial institution and company term

Know your customer (KYC) guidelines and regulations in financial services require professionals to verify the identity, suitability, and risks involved with maintaining a business relationship with a customer. The procedures fit within the broader scope of anti-money laundering (AML) and counter terrorism financing (CTF) regulations.

Australian Transaction Reports and Analysis Centre (AUSTRAC) is an Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism financing. AUSTRAC was established in 1989 under the Financial Transaction Reports Act 1988. It implements in Australia the recommendations of the Financial Action Task Force on Money Laundering (FATF), which Australia joined in 1990.

The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, each containing numerous sections. Title III: International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 is actually an act of Congress in its own right as well as being a title of the USA PATRIOT Act, and is intended to facilitate the prevention, detection and prosecution of international money laundering and the financing of terrorism. The title's sections primarily amend portions of the Money Laundering Control Act of 1986 and the Bank Secrecy Act of 1970.

A payable-through account (PTA) is a demand deposit account through which banking agencies located in the United States extend cheque writing privileges to the customers of other institutions, often foreign banks.

<span class="mw-page-title-main">Anti–money laundering</span> Financial integrity policy framework

Anti-Money Laundering (AML) refers to a set of policies and practices to ensure that financial institutions and other regulated entities prevent, detect, and report financial crime and especially money laundering activities. Anti-Money Laundering is often paired with the action against terrorism financing, or Combating the Financing of Terrorism, using the acronym AML-CFT. In addition arrangements intended to ensure that banks and other relevant firms duly report suspicious transactions, the AML policy framework includes financial intelligence units and relevant law enforcement operations.

The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11 attacks in 2001. It has ten titles, with the third title written to prevent, detect, and prosecute international money laundering and the financing of terrorism.

The Financial Transactions and Reports Analysis Centre of Canada is the national financial intelligence agency of Canada. FINTRAC was established in 2000 under the Proceeds of Crime Act to facilitate detection and investigation of money laundering. Its mandate was expanded in December 2001 following amendments to the Proceeds of Crime Act to also disclose financial intelligence to other Canadian intelligence and law enforcement agencies with respect to suspected terrorist financing. FINTRAC's mandate was further expanded in 2006 under Bill C-25 to enhance the client identification, record-keeping and reporting measures, established a registration regime for money services businesses and foreign exchange dealers, and created new offences for not registering.

A Customer Identification Program (CIP) is a United States requirement, where financial institutions need to verify the identity of individuals wishing to conduct financial transactions with them and is a provision of the USA Patriot Act. More commonly known as know your customer, the CIP requirement was implemented by regulations in 2003 which require US financial institutions to develop a CIP proportionate to the size and type of its business. The CIP must be incorporated into the bank's Bank Secrecy Act/Anti-money laundering compliance program, which is subject to approval by the financial institution's board of directors.

<span class="mw-page-title-main">Egmont Group of Financial Intelligence Units</span> Network of financial intelligence units

The Egmont Group of Financial Intelligence Units is an international organization that facilitates cooperation and intelligence sharing between national financial intelligence units (FIUs) to investigate and prevent money laundering and terrorist financing. National FIUs collect information on suspicious or unusual financial activity and are responsible for processing and analyzing the information received. FIUs are normally not law enforcement agencies themselves, findings are shared with appropriate law enforcement or prosecution bodies if sufficient evidence of unlawful activity is found. The Egmont Group is headquartered in Ottawa, Ontario, Canada.

Financial intelligence (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related activities. One of the main purposes of financial intelligence is to identify financial transactions that may involve tax evasion, money laundering or some other criminal activity. FININT may also be involved in identifying financing of criminal and terrorist organisations. Financial intelligence can be broken down into two main areas, collection and analysis. Collection is normally done by a government agency, known as a financial intelligence organisation or Financial Intelligence Unit (FIU). The agency will collect raw transactional information and Suspicious activity reports (SAR) usually provided by banks and other entities as part of regulatory requirements. Data may be shared with other countries through intergovernmental networks. Analysis, may consist of scrutinizing a large volume of transactional data using data mining or data-matching techniques to identify persons potentially engaged in a particular activity. SARs can also be scrutinized and linked with other data to try to identify specific activity.

<span class="mw-page-title-main">British Columbia Lottery Corporation</span>

The British Columbia Lottery Corporation is a Canadian Crown corporation that manages all legal gambling products in British Columbia including lottery tickets, casinos and online gambling. It is based in Kamloops, with a secondary office in Vancouver. It consists of three business units: Lottery, Casino and eGaming. Its annual revenues exceed CDN $1.6 billion. It has 890 direct employees. Its service providers, who run casinos on its behalf under contract, have an additional 8,300 employees.

A financial intelligence unit (FIU) is a national body or government agency or international organization which collect information on suspicious or unusual financial activity from the financial industry and other entities or professions required to report suspicious transactions, suspected of being money laundering or terrorism financing.

Anti-money laundering (AML) software is software used in the finance and legal industries to help companies comply with the legal requirements for financial institutions and other regulated entities to prevent or report money laundering activities. AML software can facilitate faster and more accurate compliance and investigations.

In financial regulation, a politically exposed person (PEP) is one who has been entrusted with a prominent public function. A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence they may hold. The terms "politically exposed person" and senior foreign political figure are often used interchangeably, particularly in international forums.

The Qatar Financial Information Unit (QFIU) is a Qatari government regulatory agency responsible for financial intelligence efforts to combat money laundering and financing of terrorism. Like other national Financial Intelligence Units (FIU) around the world, it requires banks, investment companies, insurers and other financial institutions to report suspicious financial transactions. QFIU then analyzes the information and disseminates the relevant data to law enforcement authorities for further investigation and action.

<span class="mw-page-title-main">Indonesian Financial Transaction Reports and Analysis Center</span> Government agency to counter money laundering

The Indonesian Financial Transaction Reports and Analysis Center or INTRAC or PPATK is a government agency of Indonesia responsible for financial intelligence. The agency was formed in 2002 to prevent and eradicate suspected illicit financial flows as money laundering and provide information on terrorist financing.

References

  1. ↑ "Lignes directrices ACPR AMF" (PDF) (in French). Archived from the original (PDF) on March 3, 2016. Retrieved March 1, 2024.
  2. ↑ Denis, Laurent (29 January 2015). "Blanchiment, luttle contre le financement criminel et terroriste: Des registres nationaux pour 2017 ?". village-justice.com (in French).
  3. 1 2 "La lettre d'information du TRACFIN : 4e Directive anti-blanchiment et financement du terrorisme" (PDF). Tracfin (in French). October 2015.
  4. ↑ "Un règlement pour enfin harmoniser la lutte contre le blanchiment de capitaux et le financement du terrorisme au sein de l'UE : le nouvel objectif de la Commission européenne ?". dalloz-actualite.fr (in French). Dalloz. March 3, 2020.
  5. ↑ "La lutte contre le blanchiment des capitaux et le financement du terrorisme". amf-france.org (in French). Autorité des marchés financiers. June 19, 2020.
  6. ↑ "LCB-FT.fr - Entrée en vigueur de l'arrêté du 6 janvier 2021". LCB-FT.Fr (in French). Retrieved April 7, 2021.
  7. ↑ "Quoi de neuf avec l'arrêté du 6 janvier 2021(LCB-FT)". Afges (in French). February 15, 2021. Retrieved March 23, 2021.
  8. ↑ "LCB-FT.fr - Vers une régulation européenne de la LCB-FT?". LCB-FT.Fr (in French). Retrieved March 23, 2021.
  9. 1 2 3 "Article L561-2 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  10. ↑ "3e Directive anti-blanchiment 2005/60/CE du 26 octobre 2005". Portail des données ouvertes de l'Union européenne (in French).
  11. ↑ "ordonnance 2009-104 du 30 janvier 2009". Légifrance (in French).
  12. ↑ "Article R561-21 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  13. ↑ "Article L561-10-2 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  14. ↑ L'article R561-38 du CMF states that the obligated entities "shall develop a classification of the risks of money laundering and terrorist financing presented by their activities, according to the degree of exposure to these risks, assessed based notably on the nature of the products or services offered, the conditions of the proposed transactions, the distribution channels used, as well as the characteristics of the customers."
  15. ↑ Raoul d’Estaintot, Revue Banque (in French). March 2009.
  16. ↑ "Article L561-2-2 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  17. ↑ "Décret n° 2009-1087 du 2 septembre 2009 relatif aux obligations de vigilance et de déclaration pour la prévention de l'utilisation du système financier aux fins de blanchiment de capitaux et de financement du terrorisme - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  18. ↑ "article R.561-1 du CMF". Légifrance (in French).
  19. ↑ Chantal Cutajar, Bulletin joly bourse (in French). March–April 2009.
  20. ↑ "Les sociétés en quête de leurs bénéficiaires effectifs". Les Échos . September 3, 2017.
  21. ↑ "Blanchiment d'argent: des registres centraux pour lutter contre les infractions fiscales et le financement du terrorisme". Parlement européen (in French). January 27, 2015.
  22. ↑ "Les bénéficiaires effectifs d'une société doivent être déclarés ! !". Les Échos (in French). August 30, 2017.
  23. ↑ "Registre des bénéficiaires effectifs". Infogreffe (in French). September 25, 2017. Archived from the original on May 27, 2022. Retrieved March 1, 2024.
  24. ↑ "Décret no 2017-1094 du 12 juin 2017 relatif au registre des bénéficiaires effectifs définis à l'article L. 561-2-2 du code monétaire et financier - Article 1". Légifrance (in French). Retrieved April 25, 2018.
  25. ↑ Article R.561-12 alinéa 1 du CMF in application of article L.561-6 of said Code. Légifrance (in French).
  26. ↑ "Article R561-15 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  27. ↑ Anti Money Laundering, questionnaire sur les dispositions prises par les banques concernant la lutte anti blanchiment instauré par le groupe Wolfberg (in French).
  28. ↑ "Décret n° 2009-1087 du 2 septembre 2009 relatif aux obligations de vigilance et de déclaration pour la prévention de l'utilisation du système financier aux fins de blanchiment de capitaux et de financement du terrorisme - Légifrance".
  29. ↑ "article R.561-18 du CMF". Légifrance (in French). Archived from the original on February 29, 2024.
  30. ↑ "décret du 2 septembre 2009". Légifrance (in French).
  31. ↑ "Article R561-5 - Code monétaire et financier - Légifrance". legifrance.gouv.fr. Retrieved 2024-03-04.
  32. ↑ "article L.561-6 du CMF". Légifrance (in French).
  33. ↑ "article R.561-11 du CMF". Légifrance (in French).
  34. ↑ "article L.561-12 du CMF". Légifrance (in French).
  35. 1 2 3 "article L.561-8 du CMF". Légifrance (in French).
  36. 1 2 3 4 "article L.561-15 du CMF". Légifrance (in French).
  37. ↑ Cutajar, Chantal (May 2009). "L'extension du champ de la déclaration de soupçon et ses conséquences". Revue de Droit bancaire et financier (in French). 3 (18).
  38. ↑ "article L.561-2 du CMF". Légifrance (in French).
  39. ↑ "Article L562-2 du CMF" (old version) (in French).
  40. ↑ Perrotin, Frédérique. (August 6–7, 2009). Blanchiment : fraude fiscale et déclaration de soupçon. Petites Affiches (in French). No. 156-157.
  41. ↑ "Décret n° 2009-874 du 16 juillet 2009 pris pour application de l'article L. 561-15-II du code monétaire et financier".
  42. 1 2 "Accueil Tracfin" (in French).
  43. ↑ "article L.561-10-2 du CMF". Légifrance (in French).
  44. ↑ "Règlement général en vigueur" (in French). Archived from the original on March 1, 2024. Retrieved March 1, 2024.{{cite web}}: CS1 maint: bot: original URL status unknown (link)
  45. ↑ "Lignes directrices conjointes de l'Autorité des marchés financiers (AMF) et de TRACFIN sur l'obligation de déclaration en matière de lutte contre le blanchiment et le financement du terrorisme" (in French). March 15, 2010.
  46. ↑ "Lignes directrices de l'Autorité des marchés financiers (AMF) précisant certaines dispositions du règlement général en matière de lutte contre le blanchiment des capitaux et le financement du terrorisme" (in French). March 15, 2010. Archived from the original on March 1, 2024. Retrieved March 1, 2024.{{cite web}}: CS1 maint: bot: original URL status unknown (link)
  47. ↑ "Article R561-1 du CMF" (in French).
  48. ↑ "Article R561-14 du CMF" (in French).
  49. 1 2 "article L.561-16 du CMF". Légifrance (in French).
  50. ↑ "article L.574-1 du CMF". Légifrance (in French).
  51. ↑ "article L.561-24 du CMF". Légifrance (in French).
  52. ↑ "article L.561-19 II du CMF". Légifrance (in French).
  53. 1 2 3 "article L.561-29 du CMF". Légifrance (in French).
  54. ↑ "loi du 12 juillet 1990". Légifrance (in French).
  55. ↑ "LCB FT Assurance : la lutte anti-blanchiment en assurance". assureurpro (in French). June 29, 2021. Retrieved July 6, 2021.
  56. 1 2 "loi no 90-614 du 12 juillet 1990". Légifrance (in French).
  57. ↑ "décret no 2006-1541 du 6 décembre 2006". Légifrance (in French).
  58. ↑ "article R.561-33 du CMF". Légifrance (in French).
  59. ↑ "rapport annuel de 2008". Tracfin (in French). Archived from the original on March 1, 2024. Retrieved March 1, 2024.
  60. ↑ "article L.561-29, II du CMF". Légifrance (in French).
  61. ↑ "ordonnance no 2009-104 du 30 janvier 2009". Légifrance (in French).
  62. ↑ "Code des juridictions financières - Legifrance". legifrance.gouv.fr (in French).
  63. ↑ "Rôle de l'ACPR en matière de LCB-FT". Banque de France (in French). July 28, 2017. Retrieved March 23, 2021.
  64. ↑ "Ordonnance no 2010-76 du 21 janvier 2010 portant fusion des autorités d'agrément et de contrôle de la banque et de l'assurance". JORF (in French). January 22, 2010. No. 18, p. 1392, NOR ECEX0929065R.
  65. ↑ "Welcome to the Egmont Group". egmontgroup.org (in French).
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.