Anti-money laundering and financial crime prevention

Requirements

What are the main anti-money laundering and financial crime prevention requirements for private banking and wealth management in your jurisdiction?

Some obligations are applicable to entities regulated by the Financial Markets Authority (AMF).

 

Obligation of vigilance

This implies maintaining updated identification of clients, including occasional clients and effective beneficiaries of ‘legal personality’ clients. The level of vigilance depends on the level of risk incurred. This obligation requires professionals to perform their own classification of the risks and to implement a formalised control system for their activity developed in accordance with the AMF guidelines specifying certain provisions on the prevention of money laundering and the fight against the financing of terrorism.

 

Obligation to report any suspicions to TRACFIN

TRACFIN handles the processing of information and action against illegal financial circuits and is the French anti-money laundering unit. The obligation to report any suspicions is based on a money laundering risk analysis and applies to any suspicion of tax fraud or breaches of ordinary law punishable by a prison sentence of more than one year. In 2017, 71,000 reports were received by the department in charge of the fight against money laundering and terrorist financing.

Politically exposed persons

What is the definition of a politically exposed person (PEP) in local law? Are there increased due diligence requirements for establishing a private banking relationship for a PEP?

The 4th Money Laundering Directive and the provisions in paragraphs 2 and 3 of article L. 561-10 define PEPs as follows:

 

The client, where applicable his beneficial owner, the beneficiary of a life insurance or capitalisation contract, where applicable his beneficial owner, is a person who is exposed to specific risks because of the political, judicial or administrative functions he or she exercises or has exercised on behalf of another country or those exercised currently or in the past by direct family members or persons known be closely associated with him or her in the course of a business relationship.

The product or operation presents, by its nature, a particular risk of money laundering or terrorist financing, in particular when they promote anonymity.

 

The nature of the additional vigilance to be implemented with respect to business relationships with PEPs is specified within the organisation’s internal procedures. The measures implemented are based on objective elements according to the risk profile of each of the business relationships with PEPs.

Documentation requirements

What is the minimum identification documentation required for account opening? Describe the customary level of due diligence and information required to establish a private banking relationship in your jurisdiction.

The bank has obligations in terms of customer knowledge, particularly in the context of the fight against money laundering and terrorist financing. These obligations begin before entering into a business relationship with the client. As such, before opening an account a number of verifications must be carried out:

  • ensuring the identity of the applicant:
    • for an individual, by the production of a valid official document carrying his or her photograph (national identity card or passport generally); and
    • for a legal person, by the production of any act or official register extract dating from less than three months prior (KBis);
  • checking the applicant’s home address using a recent proof of address, such as a rental contract, telephone or electricity bill, rent receipt or insurance certificate;
  • asking about the purpose and nature of the business relationship and any other relevant information about this customer; and
  • requesting a specimen of the applicant’s signature.
Tax offence

Are tax offences predicate offences for money laundering? What is the definition and scope of the main predicate offences?

Regarding the general offence of money laundering, any misdemeanour or felony can constitute a predicate offence, including a tax or an embargo offence, if the perpetrator of the predicate offence results in a profit or receives an asset from that offence. The offence of money laundering is independent of the predicate offence. Therefore, French courts could consider that, under certain circumstances, a predicate offence exists even if:

  • it falls outside the territorial scope of French criminal law, as it was committed entirely abroad;
  • the perpetrator of the predicate offence was not charged or even prosecuted;
  • the statute of limitations applicable to the predicate offence has expired;
  • the perpetrator of the predicate offence is immune to prosecution; or
  • the circumstances of the predicate offence are not fully established.
Compliance verification

What is the minimum compliance verification required from financial intermediaries in connection to tax compliance of their clients?

The collection of proof of residence may be useful in the context of the implementation of obligations relating to the fight against tax fraud and evasion. Pursuant to article 1649 AC of the General Tax Code, financial institutions shall identify the tax residence of the customer and, where applicable, the beneficial owner.

In addition, financial institutions also take into account the risks related to:

  • the countries or territories of origin or destination of funds, particularly with regard to the lists published by the FATF, the blacklist published by the European Commission the list of uncooperative countries for tax purposes countries defined in article 238-0 A of the General Tax Code26 , lists of countries ‘under sanctions’ (restrictive measures, economic sanctions and the list of countries ‘under restrictive measures, economic sanctions, embargoes and press releases from the Minister in charge of the economy or the in charge of the economy or TRACFIN; and
  • the products, services and/or distribution channels used, taking into account the typological cases by TRACFIN or any other competent national or international body or authority in LCB-FT matters.

 

Moreover, in the context of the circular on ‘processing of amending declarations of taxpayers holding foreign assets’ of 21 June 2013 issued by the Minister Delegate in charge of the Budget, the taxpayer is obliged to submit a tax return to the tax authorities by 31 December 2017 at the latest. Since 1 January 2018, taxpayers have been following the ordinary law procedure to disclosure their assets held abroad by applying to the personal income tax department on which they are subject. The financial institutions will carry out an enhanced examination of any repatriation of funds from abroad with tax regularisation from abroad with tax regularisation.

Since 1 January 2018, financial institutions continue to carry out enhanced scrutiny on disclosure of assets held abroad and ensure:

  • either, that the repatriated foreign assets were properly declared to the tax authorities (in particular, collection of a tax certificate issued by the tax authorities)
  • either that the repatriated foreign assets were declared to the tax authorities (in particular, collection of a tax certificate issued by the authorities);
  • or, that the repatriated assets are part of a tax regularisation request (in particular, collection of the request filed by the tax authorities).

 

Then, on 13 March 2018, EU economic and financial affairs ministers adopted the European Commission’s June 2017 proposal on new transparency rules for intermediaries designing or selling potentially harmful tax regimes.

Article 1740 A-bis of the General Tax Code provides that where the tax authorities impose an increase of 80 per cent on the taxpayer (in the event of abuse of rights or fraudulent practices), any natural or legal person who, in the exercise of a professional advisory activity of a legal nature, financial or accounting or holding property or funds on behalf of a third party, intentionally provided that taxpayer with a benefit directly enabling the commission of the sanctioned conduct, is liable to a fine of €10,000, which may be increased to 50 per cent of the income derived from the benefit provided to the taxpayer.

Liability

What is the liability for failing to comply with money laundering or financial crime rules?

Disregard of professional obligations is punished by the Prudential and Resolution Control Authority (ACPR), usually by a reprimand, a financial penalty and public notification, the extent of the penalty depending on the number of grievances and breaches against the credit institution. However, disciplinary liability is not the only one that can be applied: so can civil and criminal liability.

The requirements for granting the licence must be maintained on an ongoing basis.

Law stated date

Correct on

Give the date on which the information above is accurate.

31 December 2019.