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AML Procedures in French Southern Territories: A Guide to Compliance

The French Southern Territories (FST), a collection of islands in the southern Indian Ocean, are subject to strict anti-money laundering (AML) regulations due to their geographical location and financial sector activity. In this article, we will provide an overview of the AML procedures in place in FST banks, highlighting key requirements, obligations, and guidelines.

Transposition of the Fifth Money-Laundering Directive

The Fifth Money-Laundering Directive (2018/843) was transposed into French law at the beginning of 2020. This directive aims to strengthen the fight against money laundering and terrorist financing by introducing new measures such as enhanced due diligence, beneficial owner identification, and stricter reporting obligations.

Key Obligations for FST Banks

FST banks must comply with the following AML obligations:

  • Risk Assessment: Conduct regular risk assessments to identify potential threats, vulnerabilities, and risks associated with clients, transactions, and business relationships.
  • Client Identification and Verification: Verify the identity of clients and their beneficial owners through reliable documentation and sources.
  • Due Diligence Measures: Implement enhanced due diligence measures for high-risk clients, transactions, and business relationships.
  • Suspicious Transaction Reporting: File suspicious transaction reports to TRACFIN, the French financial intelligence unit.
  • Internal Audit and Reporting: Conduct regular internal audits and report any findings to the Autorité des Marchés Financiers (AMF), the FST’s financial regulator.

Regulatory Framework

The regulatory framework for AML in FST banks is based on a combination of international, European, and national regulations, including:

  • FATF Recommendations: The Financial Action Task Force (FATF) provides guidelines for combating money laundering and terrorist financing.
  • European Level Regulations: Directive 2015/849 and Directive 2018/843 set out the AML requirements for EU member states.
  • National Level Regulations: The Monetary and Financial Code (in French only) sets out the specific AML obligations for FST banks.

Risk Analysis

FST banks must conduct regular risk analyses to identify potential threats, vulnerabilities, and risks associated with clients, transactions, and business relationships. This includes analyzing the following factors:

  • Supranational Risk Assessment: The European Commission’s risk assessment of money laundering and terrorist financing risks affecting the EU.
  • Sector Risk Assessment: The European Supervisory Authorities’ risk assessment of money laundering and terrorist financing risks in the financial sector.
  • National Risk Assessment: The AMF’s risk assessment of money laundering and terrorist financing risks in FST banks.

By understanding these AML procedures, FST banks can ensure compliance with regulations, mitigate risks, and protect their reputation and customers from money laundering and terrorist financing activities.