Financial Crime World

Anti-Money Laundering Measures in French Financial Institutions

To combat money laundering and terrorist financing, French financial institutions must implement strict anti-money laundering (AML) measures. According to Article II of the CMF states, when the risk of money laundering or terrorist financing appears low, financial institutions may establish a business relationship with their customer without applying strengthened due diligence measures.

Strengthened Due Diligence Measures

However, if the risk is deemed high, financial institutions must apply strengthened due diligence measures, including:

  • Gathering sufficient information about the co-contracting institution
  • Evaluating its anti-money laundering and counter-terrorism financing measures
  • Ensuring that decisions to establish a business relationship are made by a member of the executive body or an authorized person

Monitoring Relationships: Constant Due Diligence

Financial institutions must conduct constant due diligence on their customers throughout the duration of the business relationship. This includes:

  • Scrutinizing transactions conducted by customers
  • Verifying the consistency of these transactions with the customer’s profile
  • Updating knowledge about customers to apply appropriate due diligence measures

Prohibition to Enter into a Business Relationship

There are two cases under which financial institutions are prohibited from entering into a business relationship:

  • When a financial institution is unable to identify its customer or obtain information about the purpose, nature, and business relationship
  • When a financial institution has not been able to identify its customer or obtain information about the purpose and nature of the business relationship, but the relationship has already been established due to a low risk of money laundering. In this case, the financial institution must terminate the business relationship.

Reporting Suspicious Transactions

France’s new system is based on a dual set of complementary obligations: due diligence obligations and reporting obligations to TRACFIN. The system relies on a case-by-case analysis of sums and transactions based on the profile of the business relationship and the risk classification established by financial institutions.

In cases where the law mandates reporting, financial institutions must report suspicious transactions to TRACFIN. This includes situations where financial institutions terminate a business relationship due to a low risk of money laundering or terrorist financing.

Conclusion

France’s new anti-money laundering regulations aim to combat money laundering and terrorist financing by implementing strict due diligence measures. Financial institutions must conduct constant monitoring of their customers, update knowledge about them, and report suspicious transactions to TRACFIN. Failure to comply with these regulations may result in serious consequences, including fines and penalties.

The French financial regulator will closely monitor the implementation of these regulations to ensure that financial institutions are adequately equipped to combat money laundering and terrorist financing. By doing so, France aims to maintain its reputation as a leading global financial center while ensuring the integrity of its financial system.