New positions on money laundering and terrorism financing from France's AMF

The four documents issued on 29 November 2019 by the Autorité des Marchés Financiers (AMF) are intended to help financial entities under its supervision – collective investment management companies, self-managed branches of European management companies, financial investment advisors, and crowdfunding investment advisors – understand and fulfill their AML/CFT obligations under international and French regulations.

A risk-based approach to AML/CFT

Position-Recommendation DOC-2019-15 establishes procedures for accurately identifying and assessing risks, for ongoing due diligence and risk management, in accordance with the EU’s 4th Anti–Money Laundering Directive (AMLD IV).

• Risk classification: how entities are to identify, assess, and classify risks of money laundering and terrorist financing. Risk classification depends on factors like product risk, country risk, and customer risk.
• Weighting risk factors: obliged entities are advised to take a holistic view of AML/CFT risk factors, assigning different weights to them based on their importance.
• Asset due diligence: requirements for entities to assess risks in investments and disinvestments, particularly in the real estate sector.
  
  

Clients and their beneficial owners

Position-Recommendation DOC-2019-16 clarifies due diligence obligations regarding clients and ultimate beneficial owners (UBOs), as required by the French Monetary and Financial Code.

The document highlights the distinction between notions of business relationship, occasional client, client under the European Supervisory Authorities’ Joint Guidelines of Risk Factors, and UBOs. It outlines specific due-diligence obligations, such as identifying and verifying the identity of clients and UBOs, understanding the nature of business relationships, and implementing risk-based measures. Finally, it stresses the importance of tracing ownership through holding chains in companies, collective investments, trusts, and other legal entities.

Politically-exposed persons

Position DOC-2019-17 explains enhanced due-diligence measures related to politically-exposed persons (PEPs).

• Definition of PEPs: in line with Article 9 of AMLD IV, the AMF defines a 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.
• Risk identification and measures: additional due diligence measures to identify and monitor PEPs are to determine the source of wealth and funds, to enhance monitoring, and to require high-level decision-making for establishing or maintaining business relationships with PEPs.
• Procedural guidelines for identifying PEPs: those include the use of identification questionnaires and consulting public information sources. However, 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.
  
  

Suspicious activity reporting to Tracfin

Position DOC-2019-18 clarifies the obligation for financial entities to file a déclaration de soupçon – i.e. suspicious activity report (SAR) – to Tracfin, the French intelligence agency for action against clandestine financial circuits.

• It sheds light on the circumstances under which an SAR is mandatory, including suspicions of ML/TF as well as other fraudulent conduct such as tax fraud. Entities must implement internal systems to detect and analyse suspicious transactions, with an emphasis on a case-by-case approach rather than relying too heavily on automated systems. The position lists instructions on how to file an SAR, including the content and format required, as well as the obligations regarding the retention and confidentiality of documents related to reports made to Tracfin.

• It emphasises the need for a pragmatic and phased approach to detecting suspicious activity, aligning with broader international AML/CFT regulations. It also distinguishes between Tracfin reporting and more serious protocols, like assets freezing or crime reporting with the Public Prosecutor.
  
  

These guidances represent a step by the AMF towards clarifying the French AML/CFT framework, in alignment with FATF and EU standards – a framework which is bound to evolve with the impending transposition of AMLD V into French law.