Financial Crime World

France’s New Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Framework

A recent report by the Financial Action Task Force (FATF) has evaluated France’s new AML/CFT framework, which was introduced in 2009. The framework aims to combat money laundering and terrorist financing by providing a comprehensive legal and regulatory framework for all financial institutions.

Key Findings

The report finds that the French framework is largely compliant with FATF recommendations, but notes that some aspects require further improvement. The framework builds upon the previous legal framework, providing more details and clarifying methods for implementation by covered institutions and professions.

Identification of Customers and Beneficial Owners

  • Article L.561-5 of the French Code Monétaire et Financier (CMF) requires financial institutions to identify the beneficial owner of a business relationship through any appropriate process and verify this identification data through any submitted valid written document.
  • The report highlights the importance of identifying customers and beneficial owners in AML/CFT efforts.

Ongoing Due Diligence

  • Article L.561-6 of the CMF provides that financial institutions must exercise ongoing due diligence throughout the duration of a business relationship, including an attentive examination of transactions executed to ensure they are consistent with the current knowledge of the customer.

Sector-Based Regulations

  • The report notes that sector-based regulations were adopted in 2009 to supplement the legal and regulatory provisions applicable to all financial institutions.
  • These regulations provide more specific measures for certain industries and activities.

Anonymous Capitalization Bonds

  • France’s provisions prohibiting the holding of anonymous accounts or accounts under fictitious names are largely compliant with FATF recommendations, except for anonymous capitalization bonds.
  • The purpose of anonymity in these bonds is exclusively tax-related, but additional due diligence measures are required to identify and verify the identity of the person and beneficial owner.

Implementation Challenges

  • The report notes that while the French framework appears to meet many of the requirements set out in Recommendation 5, it was not possible to fully assess how effectively some provisions were implemented.
  • The implementation period for existing customers has been extended until September 2010, which may impact the effectiveness of the new measures.

Conclusion

Overall, the report concludes that France’s new AML/CFT framework appears to meet many of the requirements set out in Recommendation 5, but notes that some aspects require further improvement. The French authorities should consider repealing provisions authorizing and organizing the issuance of anonymous capitalization bonds and provide more guidance on implementing ongoing due diligence measures.

Recommendations

  • Repeal provisions authorizing and organizing the issuance of anonymous capitalization bonds.
  • Provide more guidance on implementing ongoing due diligence measures.
  • Ensure that sector-based regulations are fully implemented and monitored.

By addressing these areas, France can further strengthen its AML/CFT framework and contribute to the global efforts to combat money laundering and terrorist financing.