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What Is Money Laundering in France?

The fight against money laundering and terrorist financing (AML-CFT) is a top priority for the French financial authority, AMF. In 2020, France transposed the Fifth Money-Laundering Directive into its laws, aimed at combating terrorist financing more effectively and guaranteeing greater transparency in financial transactions. Here’s a comprehensive guide to the reference legislation.

Mandatory Obligations from the Fourth Directive

The obligations derived from the Fourth Directive, which were incorporated into French law through an order on December 1st, 2016, include:

  • Risk assessment: Identify potential risks and vulnerabilities in your business relationships.
  • Identification and verification of client and beneficial owner identities: Verify the identity of clients and beneficial owners to prevent fraudulent activities.
  • Due diligence measures upon entry and throughout business relationships: Conduct thorough due diligence on new and existing clients to ensure compliance with AML-CFT regulations.
  • Filing suspicious transaction reports to TRACFIN: Report any suspicious transactions to TRACFIN, the French financial intelligence unit.
  • Internal audit and reporting to the AMF: Conduct regular internal audits and report findings to the AMF.
  • Implementation of asset freezing measures: Freeze assets linked to terrorist financing or money laundering activities.

The Fifth AML-CFT Directive: An Overview

The Fifth Directive was proposed by the European Commission in July 2016, following the 2015 Paris terrorist attacks and the “Panama Papers” scandal. It sets out measures aimed at combating terrorist financing more effectively and guaranteeing greater transparency in financial transactions.

Transposed into French law at the beginning of 2020, the Fifth Directive (EU Directive 2018/843) aims to:

  • Make legal entities and structures more transparent: Extend access to beneficial owner registers.
  • Harmonize enhanced due diligence measures for high-risk third countries: Implement stricter due diligence measures for high-risk countries.
  • Specify measures for remote business relationships: Provide guidelines for conducting business with clients remotely.
  • Regulate virtual asset service providers under AML-CTF rules: Regulate the activities of virtual asset service providers, such as cryptocurrency exchanges and wallets.

International Level: FATF Recommendations, Risk-Based Approach Guidance, and European Directives

The French financial authority is committed to implementing international standards to prevent money laundering and terrorist financing. Relevant reference legislation includes:

  • FATF Recommendations: The Financial Action Task Force (FATF) provides guidelines for combating money laundering and terrorist financing.
  • Risk-based approach guidance: Guidance on conducting risk assessments and implementing AML-CFT measures in the securities sector and virtual assets.
  • European directives: Directives issued by the European Union to combat money laundering and terrorist financing.

National Level: French Laws and Regulations

France has implemented various laws and regulations to combat money laundering and terrorist financing. Key national-level references include:

  • The Monetary and Financial Code: The primary law regulating financial activities in France.
  • AMF General Regulation: The regulation governing the activities of the AMF, including AML-CFT measures.
  • Position-Recommendations on risk-based approaches, client obligations, politically exposed persons, and suspicious transaction reporting: Recommendations from the AMF on implementing AML-CFT measures.

Risk Assessments: Identifying Threats and Vulnerabilities

To help identify threats, vulnerabilities, and risk levels, European and national authorities regularly publish their risk assessments. Below are key risk assessments from the European Commission, European Supervisory Authorities, and AMF:

  • European Commission’s risk assessment: The European Commission publishes regular risk assessments to identify potential money laundering and terrorist financing risks.
  • European Supervisory Authorities’ risk assessment: The European Supervisory Authorities (ESAs) publish risk assessments on specific sectors, such as banking and insurance.
  • AMF’s risk assessment: The AMF publishes its own risk assessments on the French financial sector.

The fight against money laundering and terrorist financing is an ongoing effort in France, with a focus on risk analyses to ensure effective implementation of AML-CFT measures.