General climate and recent developments
State of legal development
In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?
In terms of combating money laundering and the financing of terrorism, the French regulatory system was previously less developed than in other jurisdictions. The Financial Action Task Force – as part of the French anti-money laundering (AML) and terrorism financing regime – emphasised that there was a lack of technical and human resources in self-regulated organisations entrusted with the task of ensuring compliance with AML and terrorism financing requirements. The Financial Action Task Force also highlighted a significant lack of regulation and supervision of non-financial institutions and professionals. However, in 2016 France significantly enhanced its internal AML and terrorism financing legal and regulatory framework by transposing the Fourth EU Anti-money Laundering Directive (2015/849/EU).
In terms of enforcement, France now has a strict regime with extensive reporting and due diligence requirements, especially in regulated sectors, which includes:
- banks and credit institutions;
- insurance companies;
- investment enterprises; and
- real estate agents.
Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?
The following are some of the recent developments in relation to the regulation of AML and terrorism financing in France:
- On 9 July 2018 the Fifth EU Anti-money Laundering Directive (2018/843/EU) came into force. This directive extends AML requirements to additional services, including cryptocurrency trading platforms, electronic wallet providers, tax-related services and art traders. The directive requires that EU governments create a list of national public offices and functions that identify politically exposed persons (PEPs). It also:
- provides for greater access to beneficial owner registers when performing AML due diligence;
- ends the anonymity of bank and savings accounts and safety deposit boxes; and
- boosts cooperation between EU financial entities.
- Once the new French bill concerning a plan of action for business growth and transformation is adopted, it will allow the French government to transpose into domestic law the Fifth EU Anti-money Laundering Directive and improve national asset-freezing mechanisms.
- On 23 October 2018 the Anti-Fraud Act was adopted to enhance the detection of fraud and strengthen the measures used to tackle taxpayer failure to comply with duties. There is no equivalent of mail fraud or wire fraud – under French law these only exist as tax fraud – which may also be connected to money laundering (eg, tax evasion schemes aimed at concealing money laundering). In this respect, a new financial police force attached to the Ministry for the Economy and Finance is entrusted with the task of carrying out tax fraud investigations. The act also increases penalties for tax evaders and other offenders and imposes new reporting obligations on digital platforms in order to allow the tax administration to track revenue which has not been duly declared. Lastly, the act establishes a naming and shaming procedure through the quasi-systematic publication of all criminal sentences for fraud.
The following are some recent highlights in case law concerning AML and terrorism financing in France:
- In 2017 the first deferred prosecution agreement was signed between the National Financial Prosecutor and HSBC Private Bank, which agreed to pay a fine of €300 million as a result of money laundering connected to tax evasion.
- On 10 January 2019 the Prudential Supervision and Resolution Authority (ACPR) imposed a €1 million fine on Western Union for AML violations, which included:
- shortcomings in the bank's procedure for identifying PEPs;
- non-compliance with enhanced due diligence obligations for high-risk transactions; and
- failure to report suspicious transactions to the Financial Investigation Unit of the Ministry for the Economy and Finance (Tracfin).
- On 21 December 2018 the ACPR imposed a €50 million fine on La Banque Postale for failing to detect and prevent transfers to and from individuals who had their assets frozen. An appeal was lodged with the French Supreme Administrative Court.
- In 2017 and 2018 the ACPR fined two entities of the Crédit Mutuel group €2.5 million, one bank of the Crédit Agricole group €2 million, Societe Generale €5 million and BNP Paribas €10 million for numerous AML violations (in particular, for failing to detect suspicious transactions and report them to Tracfin).
Legal and enforcement framework
What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?
The following legislation applies to anti-money laundering and terrorism financing:
- the Criminal Code (Articles 222-38, 324-1 and seq, 421-1 and 421-2-2);
- the Monetary and Financial Code (Book V, Title VI);
- the Customs Code (Article 415);
- the Insurance Code (Article L 310-1 and seq); and
- the General Tax Code (Article 1741).
To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?
Both natural and legal persons can be held liable under French law
Legal persons can be held liable only for "offenses committed on their behalf by their bodies and representatives" (Article 121-2 of the Criminal Code). A 'body' is defined as being responsible for the managing and directing of a corporation. 'Representatives' include persons to whom certain responsibilities have been delegated. To engage the liability of a legal entity, the body or the representative must have acted with wilful misconduct.
The French legislation has extra-territorial reach if:
- one of the activities leading to the offence took place on French soil;
- the perpetrator is a French national and the conduct took place abroad, provided that either the law of the foreign jurisdiction qualifies the offence as a crime or the offence constitutes a felony under French law; or
- the victim is a French national.
In a recent decision, the French Supreme Court held that there could also be extra-territorial jurisdiction over money laundering perpetrated abroad when money laundering is not separable from its predicate offence which is committed in France (Cass Crim, 11 November 2017, No 17-81546). This decision contradicts the case law which has found that money laundering is distinct from its predicate offence. In this respect, the French courts have held that they have jurisdiction over money laundering offences perpetrated in France, irrespective of whether the predicate offence was committed abroad.
Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?
France is a party to the following international agreements:
- the Financial Action Task Force;
- the International Organisation of Securities Commissions;
- the UN Convention against Corruption;
- the UN Convention against Transnational Organised Crime;
- the Council of Europe Conventions on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism;
- the Camden Assets Recovery Interagency Network (via the Financial Investigation Unit of the Ministry for the Economy and Finance (Tracfin)); and
- the Egmont Group (via Tracfin).
Originally published by Lexology
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