In a co-ordinated release of four new documents on 29 November, the Autorité des Marchés Financiers (AMF) is going all out to help financial entities under its supervision fulfill their AML/CFT obligations, with a notable emphasis on the impact of new rules surrounding data and automated systems.
Position-Recommendation DOC-2019-15 provides a high-level framework for identifying and assessing risks, for ongoing due diligence and risk management, in accordance with the EU’s 4th Anti–Money Laundering Directive (AMLD 4). Obliged entities are advised to take a holistic view of ML/FT risk factors, assigning different weights to different factors based on their importance. It also specifies requirements for entities to assess risks in investments and disinvestments, particularly in the real-estate sector.
Position-Recommendation DOC-2019-16 focuses on due diligence obligations regarding clients and ultimate beneficial owners (UBOs), as required by the French Monetary and Financial Code. It sets out the distinction between notions of business relationship, occasional client, client under the European Supervisory Authorities’ Joint Guidelines of Risk Factors, and UBOs. Entities must trace ownership through holding chains in companies, collective investments, trusts, and other legal entities. In addition, the document outlines due diligence obligations in terms of identifying and verifying the identity of clients and UBOs, understanding the nature of business relationships, and implementing risk-based enhanced due diligence (EDD) measures.
In line with Article 9 of AMLD 4, Position DOC-2019-17 defines a politically-exposed person (PEP) as an individual who performs or has performed significant political, jurisdictional, or administrative functions, along with their immediate family members and persons known to be close associates. EDD measures for PEPs are to determine the source of wealth and funds, to monitor more closely their transactions and changes to their business structure, and to require executive-level decision-making for establishing or maintaining relationships with PEPs. Procedural guidelines include the use of identification questionnaires as well as publicly available information, like appointment notices in the Official Journal (as can be found here in French). The position stresses that automated PEP detection tools are not mandatory, but recommends systems tailored to the specific activities and risks of the obliged entity.
Position DOC-2019-18 clarifies the obligation for financial entities to file a déclaration de soupçon – a suspicious transaction report (STR) in French law – to Tracfin, France’s intelligence agency for action against clandestine financial circuits. It sheds light on the circumstances under which an STR is mandatory, including suspicions of ML/FT as well as other fraudulent conduct such as tax fraud. Entities must implement internal systems to detect suspicious transactions, with an emphasis on human, case-by-case analysis – as opposed to overreliance on automated systems, which are deemed “neither mandatory nor sufficient”. Filing an STR is subject to new content and format requirement, with explicit reference to obligations regarding the retention and confidentiality of documents related to reports made to Tracfin. (This is to align financial entities’ obligations with new data protections introduced by Law nº 2018-493 of 20 June 2018 transposing GDPR into French law.) The position recommends a pragmatic and phased approach to detecting suspicious transactions and activity, aligning with broader international AML/CFT regulations while also drawing the line between Tracfin reporting and other reporting mechanisms involving the French Public Prosecutor and, in the event of asset freezing, the Treasury Directorate General.
These supervisory efforts represent a step by the AMF towards clarifying the French AML/CFT framework, which is bound to evolve with the impending transposition of AMLD 5 into French law.