Right to collect information
Right of opposition
Right to transmit information
On July 26 2013 France adopted Law 2013-672 on the separation and regulation of banking activities, with the aim of increasing oversight of the banking sector, preventing banking crises and protecting clients. In addition to what the Ministry of Economy called the "excesses of financial activities", such as high frequency trading, oversight provisions cover the core mandate of Tracfin: money laundering and terrorist financing.
Created in 1990, Tracfin has seen the scope of its powers expand over time, especially in the last decade. The recent banking sector reform is the latest piece of legislation in an ensemble of laws, decrees, ordinances and ministerial orders, which have each helped to make Tracfin an increasingly relevant institution in the fight against financial crime.
The new legislation was finally adopted the day after Tracfin published its annual report for 2012, which highlighted a steep increase in the volume of information and suspicious transactions reports received. In this regard, the adoption of a law that reinforces the foundations of the Tracfin system was particularly timely.
The recent reform targets three key prerogatives of Tracfin.
The scope of the information collected and reviewed by Tracfin is expanding in two ways.
First, the obligation of banking and financial institutions to report suspicious transactions now expressly includes attempted transactions, which were not actually carried out.
Second, the banking reform creates a new obligation for most banking and financial institutions commonly subject to anti-money laundering procedures to systematically report to Tracfin information relating to financial transactions involving a high risk of money laundering or terrorist financing. The determination that such a high risk exists may be made on the basis of:
- the country or territory where the funds are coming from or going to;
- the type of transaction; or
- the legal structures involved.
More precise, objective criteria will be defined by decree.
This new obligation will likely help Tracfin to receive a larger quantity of information and will in turn enable Tracfin to monitor a larger number of transactions and potentially oppose these transactions.
The right to object to suspicious transactions is one of Tracfin's key tools in carrying out its mission. The July 26 2013 law strengthens this right by allowing Tracfin to oppose transactions before they are executed and regardless of the source of the information indicating a risk of money laundering or financing of terrorism, without being required to wait for a formal suspicious transaction report.
Additionally, whereas transactions could previously be suspended for two days only, execution of the transaction may now be stayed for up to five days after Tracfin objects. This provides a critical window for Tracfin to conduct a thorough investigation of the most suspicious transactions before making its final decision.
France has also lowered the threshold for information exchange between Tracfin and judicial authorities. Pre-existing legislation allowed Tracfin to refer transactions for which evidence of money laundering or terrorist financing existed to the public prosecutor. Tracfin may now transmit any information contained in the suspicious transaction reports it receives to judicial authorities, in addition to the police, the tax authorities and the customs administration.
Although the recent French banking sector reform is not focused on Tracfin, it contributes to the development of Tracfin's arsenal in the fight against money laundering and terrorist financing.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.