Financial Crime World

France’s Financial Regulators Crack Down on Money Laundering and Terrorist Financing: AML/CFT Compliance in the Land of the Hexagon

France, known for its economic powerhouse status within Europe, hosts a diverse business landscape that includes international banks and fintechs. Unfortunately, France’s economic standing makes it an attractive target for criminals seeking to launder money, finance terrorist activities, and engage in financial crimes.

To confront this growing threat, the French government imposes strict regulations aimed at preventing money laundering (ML) and countering the financing of terrorism (CFT) through its financial institutions. In order to avoid costly compliance penalties and contribute to the fight against financial crimes, firms operating in France must fully understand the AML/CFT regulations and efficiently meet their obligations.

French Financial Regulators: Who’s Who?

Three primary regulatory bodies oversee France’s financial sector. These include:

  1. Autorité des Marchés Financiers (AMF) The AMF is France’s leading financial supervisory authority responsible for regulating the country’s financial marketplace, its participants, and the investment products distributed via its markets. With the power to monitor, inspect, investigate, and enforce regulations within French jurisdiction, the AMF ensures firms operate in compliance with financial regulations and participates in the European Securities and Markets Authority (ESMA).

  2. Autorité de Contrôle Prudentiel et de Résolution (ACPR) An independent administrative authority, the ACPR regulates France’s banking and insurance businesses under the direct authority of the Banque de France. Its mission involves protecting France’s financial stability by maintaining a dialogue with financial sector organizations, while focusing primarily on compliance with AML/CFT regulations.

  3. Traitement du renseignement et action contre les circuits financiers clandestins (TRACFIN) Operating under the French Ministry of Finance, TRACFIN’s mission is to safeguard the health of the French economy by combating financial crime, ML, and the financing of terrorism. TRACFIN is tasked with the responsibility of analyzing and investigating suspicious activity reports submitted by French financial institutions.

As a member of the Financial Action Task Force (FATF), the French government implements FATF guidance into its domestic legislation, mandated for enforcement by financial authorities. Firms in France are obligated to comply with AML/CFT regulations, including key regulations like the French Monetary and Financial Code and French Criminal Code, which criminalize ML and terrorism financing within France.

France’s Key AML/CFT Regulations and Controls

French AML/CFT compliance is governed by several critical regulations and controls:

  • French Monetary and Financial Code and French Criminal Code: These laws criminalize ML and terrorism financing within France.
  • AMF General Regulation: This regulation establishes the AML/CFT compliance rules all French institutions must adhere to. The AMF consistently updates the general regulation to incorporate changes to French and European law.

Key AMF recommendations cover important aspects of AML/CFT laws. Some recent AMF recommendations include:

  • Guidance on implementing a risk-based approach to AML/CFT (AMF Doc-2019-15)
  • Guidance on establishing beneficial ownership (AMF Doc-2019-16)
  • Guidance on screening for politically exposed persons (PEPs) (AMF Doc-2019-17)
  • Guidance on reporting suspicious activity to TRACFIN (AMF Doc-2019-18)

Additionally, as an EU member-state, France is required to implement the anti-money laundering directives (AMLD). The most recent directive is the Sixth Anti-Money Laundering Directive (6AMLD), which entered into effect on 3 June 2021 and introduced significant regulatory changes:

  • A harmonized list of 22 money laundering predicate offenses
  • An expansion of the definition of money laundering to encompass aiding and abetting
  • Criminal liability for money laundering extended to legal persons
  • Increased punishments for money laundering, including a minimum prison sentence of four years
  • Information sharing requirements between different EU jurisdictions

How to Comply with French AML Regulations

To stay compliant with French AML/CFT regulations, firms should:

  1. Perform customer due diligence (CDD) to accurately identify customers and build risk profiles
  2. Conduct beneficial ownership checks to ensure customers are not attempting to obscure their ownership through corporate structures or shell companies
  3. Screen transactions against relevant lists and registers
    • PEP lists
    • Beneficial ownership registers
    • International sanctions lists such as the EU’s consolidated list
  4. Implement adverse media screening solutions to capture any risk-related stories involving customers from various media sources prior to official confirmation

Recent Developments and Updates in French AML/CFT

The AMF provides the latest updates on French AML/CFT regulations on their news page. Some recent developments include:

  1. MiCA: In July 2022, the AMF announced the provisional agreement on the EU’s new crypto regulatory framework. This includes regulatory guidelines for crypto-assets and stablecoins across the bloc.
  2. ESG data: In June 2022, the AMF called for a Europe-wide regulatory framework for environmental, social, and governance (ESG) data, recognizing its growing significance in financial risk management.
  3. Ukraine sanctions: Following Russia’s invasion of Ukraine, the AMF issued guidance for French firms on enforcing sanctions against Russia and against Russian individuals. In April 2022, it released guidance on economic sanctions directly impacting French asset management companies.

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