French Financial Institutions Must Conduct Additional Due Diligence Measures to Combat Money Laundering

To combat money laundering and terrorist financing, French financial institutions are required to conduct additional due diligence measures on certain customers and transactions. According to a decree issued in 2009, these measures must be implemented under specific circumstances.

Politically Exposed Persons (PEPs)

The decree defines a PEP as an individual who holds or has held a high-level political position in their country of origin and resides outside of France. This includes heads of state, government officials, and parliamentarians. Financial institutions must collect additional documentation from PEPs, including:

• Official registry extracts
• Shareholders’ identity
• Justification for the registered office address

High-Risk Transactions

Financial institutions are required to apply strengthened due diligence measures when dealing with high-risk transactions, such as:

• Complex or unusually large transactions that lack economic justification or a legitimate purpose
• Gathering information about the co-contracting institution and evaluating its anti-money laundering and counter-terrorism financing measures
• Ensuring that the decision to establish a business relationship is made by a senior executive

Monitoring Customer Relationships

Financial institutions are required to conduct constant due diligence on customers throughout the duration of their relationship, including:

• Verifying the consistency of transactions with the customer’s profile
• Updating knowledge about customers in order to apply appropriate due diligence measures

Prohibition to Enter into Business Relationship

In certain cases, financial institutions may be prohibited from entering into a business relationship if they are unable to identify their customer or obtain information about the purpose and nature of the business relationship. In such cases, the institution must:

• Terminate the relationship
• Make a suspicious transaction report to TRACFIN

Obligation to Report Suspicious Transactions

The new French 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 the financial institution. Financial institutions are required to report suspicious transactions to TRACFIN, but not in cases where the transaction is deemed low-risk.

These additional due diligence measures aim to strengthen France’s efforts to combat money laundering and terrorist financing, and ensure that its financial system remains secure and transparent.