LAW ON TAX FRAUD AND SERIOUS ECONOMIC AND FINANCIAL CRIME ADOPTED BY THE FRENCH NATIONAL ASSEMBLY

As noted in previous updates (see July and August 2013), a proposed law on tax fraud and serious economic and financial crime has been the subject of heavy debate in the French National Assembly and Senate. Following a vote in the National Assembly, the measures were finally adopted on 5 November 2013.

One of the most important reforms is the creation of a financial public prosecutor (procureur de la République financier) with national jurisdiction. The new prosecutor will have exclusive jurisdiction over infringements relating to market abuse (insider trading, market manipulation, misinformation), and will share jurisdiction with the Paris Tribunal de grand instance for offences relating to corruption, VAT fraud, tax fraud and money laundering of a significant scale and complexity.  

Other important measures adopted include:

  • A significant increase in the fines which may be imposed on legal persons.
  • Heavier penalties in cases of corruption and misuse of company assets (abus de biens sociaux).
  • In respect of money laundering, the introduction of a presumption that property or income is of unlawful origin where the only possible justification for the form of a transaction is concealment of the source or beneficiary of the property or income.
  • An extension of the tools available to the police when investigating tax fraud.
  • Heavier penalties in respect of certain tax offences, and a doubling of the limitation period for tax-related criminal prosecutions to six years.
  • Regarding certain offences, the halving of (and in some cases exemption from) the applicable penalties where the cooperation of an accomplice/perpetrator has allowed the authorities to prevent the offence or identify those involved.
  • A measure enabling registered organisations to exercise the rights of civil parties in corruption cases.
  • Permitting tax and customs authorities to make use of evidence brought to their knowledge, even if the evidence is of unlawful origin.  
  • The introduction of measures aimed at protecting whistle-blowers.

Significantly, however, the new law maintains the much criticised "bolt of Bercy" (verrou de Bercy), which grants the Ministry of Finances a monopoly in the initiation of criminal tax investigations.

REFORMS RELATING TO TRANSPARENCY IN PUBLIC LIFE

Measures concerning transparency in public life (Law no. 2013-907 and organic law no. 3013-906) were published in the Official Journal in October 2013.

Notable aspects of these new measures include:

  • The introduction of a definition of conflicts of interest in the public sphere as "any situation of interference between a public interest and public and private interests of a sort which influences or appears to influence independent, impartial and objective exercise of an office".
  • An obligation on elected representatives and those in public service to declare their assets and interests on entry into and exit from office (and in the event of a significant change while in office).
  • The declarations are to be made to a new statutory authority(Haute autorité pour la transparence de la vie publique), which will be responsible for auditing the declarations and ruling on potential conflicts.
  • The declarations of deputies and senators will be made available to all voters on the electoral roll. However, following a ruling by the Conseil constitutionel, members of ministerial cabinets and independent administrative authorities will not be required to publish their declarations.
  • The new authority will ultimately take the decision as to whether there is a conflict of interest.
  • Specific provisions aimed at protecting whistle-blowers who have disclosed, in good faith, situations of conflicts of interests.

FRANCE SIGNS AN AGREEMENT ON THE FATCA WITH THE UNITED STATES

On 14 November 2013, France signed an agreement with the United States concerning the application of the American fiscal measure, the Foreign Account Tax Compliance Act (FATCA). The Franco-American agreement establishes a framework for the implementation of a system of automatic exchange of information between the US and France.

FATCA, which was enacted in the US in 2010, sets out a series of obligations in respect of accounts held abroad. Its most controversial provision is an obligation on foreign financial institutions to disclose information about clients taxable in the US or become subject to a 30% withholding tax on US-sourced income.

CREATION OF A CENTRAL OFFICE FOR FIGHTING AGAINST CORRUPTION AND FINANCIAL OFFENCES

By virtue of Decree No.2013-960, a new Central Office for fighting against Corruption and Financial Offences was created on 28 October 2013. The office is linked to the Directorate General of the National Police (Direction générale de la gendarmerie nationale) and the Ministry of Finances, and its responsibilities include white collar crime, tax fraud and influence-peddling, along with money laundering offences connected with these activities.