This report provides a summary of anti-money laundering and countering the financing of terrorism (AML/CFT) measures in place in France as at the date of the on-site visit (18 January - 2 February 2010) or immediately thereafter (up to 31 March 2010). It describes and analyses those measures, and provides recommendations on how certain aspects of France's AML/CFT system could be strengthened. It also sets out French levels of compliance with the FATF 40+9 Recommendations.
- This was the FATF's third mutual evaluation of France. The implementation of the transposition into French law of the Third European Directive, 2005/60/EC, on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing by the Ordonnance No. 2009-104 of 30 January 2009 and the subsequent implementing decrees are the latest step in strengthening its preventive regime. Among some of the main new measures introduced in 2009 include: (1) increasing the number of sectors covered by AML/CFT provisions to include in particular domiciliation companies ; (2) submitting all covered institutions/professions to an AML/CFT oversight and sanction system; (3) adopting a risk-based approach to due diligence measures; (4) extending the obligation to report suspicious transactions to all offences under “ordinary law”, including tax fraud, and increasing the powers of the financial intelligence unit (Tracfin); (5) introducing a licensing system for the money changing profession to replace the previous simple registration requirement and (6) broadening the prohibition from making payments in cash.
- In addition to the creation of an AML/CFT advisory committee, which is intended to strengthen the co-ordination of the effort of the relevant state authorities and the supervisors of the institutions/professions covered by AML/CFT obligations, one major recent institutional innovation (March 2010) has been the grouping of the licensing and supervision responsibilities regarding banks, payment institutions, investment firm (with the exception of portfolio-management firms) and money changers together with insurance companies, mutual insurance, provident insurance institutions under one independent government agency called the Prudential Supervision Authority (Autorité de contrôle prudentiel – ACP).
- Ordonnance No. 2009-104 of 30 January 2009 and its implementing decrees revised and supplemented customer due diligence obligations. These new obligations, which apply to both financial institutions and non-financial professions, together with record-keeping and suspicious transaction reporting (STR) obligations, are very comprehensive and largely compliant with FATF requirements. The level of compliance of non-financial professions with their AML/CFT obligations, however, is not completely satisfactory. The authorities will therefore need to make a considerable effort in this area.
- The French prudential supervision authorities have sufficient powers to carry out their inspections (whether specifically AML/CFT-related or not) and exercise them conscientiously. The oversight system revolves around co-ordinated use of ongoing off-site inspections and on-site inspections to make the supervisory system effective and efficient. In addition, all relevant authorities have the power to take sanctions in AML/CFT matters, and they have, in most cases, made effective, proportionate and dissuasive use of them.
- In terms of the number of convictions, fraud and drug trafficking are the most common predicate offences for money laundering in France. The money laundering offence, which is largely in compliance with international law, is being progressively appropriated into case law and by the Cour de cassation. The assessors noted as well that France introduced in 2005 the offence of non-justification of resources which enables “laundering by association” (blanchiment de proximité) to be targeted in that the offence aims to penalise individuals for whom the evidence of participation in an act of money laundering cannot be proven even though circumstantial elements appear to show the contrary. Despite a continuous increase in the number of convictions for money laundering, the assessors observed quite a strong tendency among courts to prosecute on the charge of the predicate offence. They thus recommend enhancing the judicial resources made available for investigations and, more generally, for law enforcement measures against economic and financial crime. France has a very comprehensive array of legal tools for criminalising terrorist financing; likewise, law enforcement authorities have the investigative techniques and powers for combating terrorist financing and money laundering, which are compliance with FATF requirements.
- France is able to offer extensive mutual legal assistance for investigations and prosecutions relating to money laundering and terrorist financing. Available measures relating to extradition are also satisfactory, even if the lack of adequate statistics makes it very difficult to determine exactly how effective the current system is.
- This mutual evaluation of France considered the matter of the local government authorities (collectivités territoriales) located overseas to determine their role and contribution regarding the country's AML/CFT policy. It is important to note that despite their differences in status, these territories are an integral part of the French Republic and, as such, are governed by the same AML/CFT rules as those in force in metropolitan France (apart from a few highly specific sector-based or geographical characteristics referred to in the report ). The report therefore focuses mainly on how the AML/CFT standard is implemented in these territories and on how effective it is, taking into account the financial weight that these territories represent. The assessment team particularly targeted some of these regions because of their exposure to certain risks relating to AML/CFT and other phenomena that lead to crime . This detailed analysis shows that while the strong financial connection with metropolitan France facilitates the implementation of AML/CFT legislation in these territories, it is also true that the geographical remoteness of these territories lessens the impact of the authorities’ communication and awareness efforts regarding the covered professions. Although the legislation in force is, apart from a few minor exceptions, the same throughout France, the assessors highlighted in the report several situations that raise doubts as to how effectively AML/CFT measures are implemented in overseas France. Thus, there remain serious doubts as to the full implementation of the STR obligation in certain territories situated overseas (this point applies to both the financial and non financial professions). In this regard, it should be noted that no resources – or almost none – are devoted by Tracfin in territories located overseas to dialogue and exchanges and, more particularly to awareness raising on STR obligations among covered professions. At the level of AML/CFT compliance inspections for financial professionals, the evaluation report notes the virtual absence of on-site inspections by the AMF in these territories and the necessity for the ACP to increase its inspection activity. Regarding the non-financial professions, the assessors learned through interviews with a sampling of professions carrying out such activity overseas that they are confronting significant challenges in implementing their AML/CFT obligations, in particular when they do not have a professional organisation in a position to guide and assist them in their efforts in this area. The absence of government authorities clearly identified for dealing with AML/CFT matters in these territories is especially viewed as a difficulty. French authorities should rectify these shortcomings and, more broadly, improve knowledge of the risks of money laundering and terrorist financing in every region of the country.