The International Monetary Fund (IMF) published a detailed assessment report for France in 2005, wherein it also assessed France's compliance with the Financial Action Task Force (FATF) 40+8 Recommendations, as issued in October 2002. Per the report, France has a comprehensive Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime, a sentiment echoed by the 2007 U.S. Department of State report on France. Further, according to the IMF, France maintains a high level of compliance with the FATF Recommendations with a comprehensive overall legal and institutional framework and an AML/CFT regime that in many areas goes far beyond the FATF requirements for compliance. Some areas where France could improve, per the IMF report, are fully implementing the United Nations Security Council Resolution 1373; improving the quality of suspicious transaction reports; expanding the scope of the AML/CFT requirement to cover a wider range of financial and non-financial sectors; and strengthening the internal controls and due diligence obligations of reporting entities. The FATF methodology and recommendations were, however, revised in 2004 and there is little subsequent information assessing France's compliance with the revised AML/CFT methodology. France was expected to implement the third European Union (EU) Money Laundering Directive by December 2007. This directive, by various accounts, requires subscribing states to implement the FATF requirements. Nevertheless, there is little subsequent information publicly available as to whether France adopted the third EU Money Laundering Directive into legislation.

General Overview

The 2007 U.S. Department of State (DoS) report on France notes that the country is an attractive venue for money laundering because of "its sizable economy, political stability, and sophisticated financial system." As a consequence, the country has put in place comprehensive and effective systems of financial controls and is at the forefront of reform domestically and internationally to fight money laundering and terrorist financing. France is an EU country, and thus is obliged to implement all three EU money laundering directives. The First EU Money Laundering Directive (91/308/EEC) was transposed into French law in 2004 and the Second Directive (2001/97/EC) in 2006, with Decree 2006-736. The U.S. DoS report notes that the Third Directive (2005/60/EC) was to be implemented in France by December 2007. The adoption of the Third Directive requires EU member countries to implement the FATF requirements based on the 2004 (revised) methodology. The 2005 U.S. DoS report attested that the Government of France "has enacted legislation consistent with the Financial Action Task Force (FATF) Forty Recommendations."

The IMF published a detailed assessment for France in 2005 that included an evaluation of France's compliance with the FATF 40+8 Recommendations, based on the 2002 (old) methodology. The FATF methodology and recommendations were, however, revised in 2004, and there is little subsequent information on which to assess France's compliance levels in the area of AML/CFT. Per the 2005 IMF assessment, France has a "comprehensive AML/CFT regime" (p. 303), a sentiment echoed by the 2007 U.S. DoS report. Further, as the IMF notes, France "maintains a high level of compliance with the FATF 40+8 Recommendations," (p. 304) with a comprehensive overall legal and institutional framework and an AML/CFT regime that in many areas goes far beyond the FATF requirements for compliance. The key areas where the IMF found France deficient were: (1) the implementation of United Nations Security Council Resolution (UNSCR) 1373; (2) overall quality of suspicious transaction reporting (STR); (3) scope of the AML/CFT requirement with respect to sectors other than credit institutions and some investment firms; and (4) internal controls and due diligence obligations of reporting entities.

According to the 2005 assessment by the IMF, France has adequate legal provisions in place to criminalize money laundering and terrorist financing. Articles 222-38 and 324-1 of the French Penal Code and Article 415 of the Customs Code (Code des Douanes) have provisions to criminalize money laundering. Further, Article 222-39-1 of the Penal Code, promulgated in 1996, covers more money laundering offences. Terrorist financing is comprehensively criminalized by Article 421-2-2 of the Penal Code. The 2007 U.S. DoS report provides further detail on the criminalization of money laundering and terrorist financing in France. Money laundering related to narcotics trafficking was first criminalized in France in 1987. In 1988, the Code des Douanes was amended to make financial dealings with money launderers a crime, and in 1996, Law No. 392 expanded the offence to include the proceeds of all crime. A 2004 Supreme Court judgment made money laundering an independent offence without requiring a predicate offence. The Penal Code makes the offence punishable with five years imprisonment and a fine of €375,000, and this can increase with aggravated offences to ten years and €750,000. Further, per the U.S. DoS report, "since 1986, French counterterrorism legislation has provided for the prosecution of those involved in the financing of terrorism under the severe offense of complicity in the act of terrorism." A 2001 law specifically included terrorist financing as an offense, and the definition of terrorist financing in Article 421-2-2 of the Penal Code is in accordance with the UN International Convention for the Suppression of and Financing of Terrorism. Terrorist financing is punishable with ten years imprisonment and a fine of €225,000.

Processing of Information and Action Against Clandestine Financial Networks (Traitement du Renseignement et Action contre les Circuits Financiers Clandestins, or TRACFIN) is the French Financial Intelligence Unit (FIU). It was created in 1990 by Act No. 614, which has since been amended several times. The 2005 detailed assessment report by the IMF states that the TRACFIN is part of the Ministry of Economy, Industry and Employment (Ministère de l'Économie, de l'Industrie et de l'Emploi, or MINEFE), and has been an Egmont Group member since 1995. The TRACFIN receives and analyzes STRs from reporting entities, both domestic and overseas branches and subsidiaries. It also has a broad legal basis to obtain additional information from reporting entities as well as other relevant authorities and classified records. It refers its findings to the Public Prosecutor or the judicial authorities. The IMF finds the TRACFIN to be operationally independent and able to honor confidentiality of information. As the 2007 U.S. DoS report notes, the TRACFIN received 12,047 STRs in 2006, with more than 80 percent emanating from the banking sector. The TRACFIN referred 411 cases to the judicial authorities in 2006; and has since 2001 referred 92 cases of suspected terrorist financing to the judicial authorities.

Per the 2007 U.S. DoS report, France is a member of the FATF, a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force (CFATF), and an observer to the Financial Action Task Force of South America (GAFISUD). France is a party to the 1988 UN Drug Convention; the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime; the UN Convention against Transnational Organized Crime; the UN International Convention for the Suppression of Financing of Terrorism; and the UN Convention against Corruption.

The Principles

1. Legal Systems and Related Institutional Measures

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The IMF's 2005 assessment of France's compliance with the FATF 40+8 Recommendations is based on the 2002 (old) methodology. The FATF methodology and recommendations were, however, revised in 2004, and there is little subsequent information as to France's compliance levels with the requirements for this principle. According to the 2005 IMF assessment, France has adequate legal provisions in place to criminalize money laundering and terrorist financing. Articles 222-38 and 324-1 of the French Penal Code and Article 415 of the Code des Douanes have provisions to criminalize money laundering. Further, Article 222-39-1 of the Penal Code, promulgated in 1996, covers more money laundering offences. A money-laundering conviction in France does not require a predicate offence. Also, the scope of predicate offences for money laundering is very broad. Terrorist financing is comprehensively criminalized by Article 421-2-2 of the Penal Code. The 2007 U.S. DoS report adds that money laundering related to narcotics trafficking was first criminalized in France in 1987. In 1988, the Code des Douanes was amended to make financial dealings with money launderers a crime, and in 1996, Law No. 392 expanded the offence to include the proceeds of all crime. A 2004 Supreme Court judgment made money laundering an independent offence without requiring a predicate offence. The Penal Code makes money laundering punishable with five years imprisonment and a fine of €375,000, and this can increase with aggravated offence to ten years and €750,000. Further, per the U.S. DoS report, "since 1986, French counterterrorism legislation has provided for the prosecution of those involved in the financing of terrorism under the severe offense of complicity in the act of terrorism." A 2001 law specifically included terrorist financing as an offense, and the definition of terrorist financing in Article 421-2-2 of the Penal Code is in accordance with the UN International Convention for the Suppression of and Financing of Terrorism. Terrorist financing is punishable with ten years imprisonment and a fine of €225,000.

Per the 2005 IMF assessment, law enforcement authorities in France have legal powers to seize and confiscate as well as identify and trace proceeds of crimes used for money laundering or terrorist financing. In France, the Treasury Department implements United Nations Security Council Resolutions that impose asset-freezing requirements in relation to terrorist financing. UNSCR 1390 has been transposed into French law through the EU Regulation 881/2002, and UNSCR 1373 has been transposed into French law through the EU Regulation 2580/2001. However, this implementation is flawed, in that the EU Council Regulations do not cover terrorists or terrorist groups within the EU, as stipulated in the UNSCR 1373. The IMF therefore recommended that France: (1) adopt a domestic law that would enable the country to fully comply with UNSCR 1373; and (2) establish a central body for the management of seized and confiscated funds, and compilation of statistics.

As noted by the 2005 IMF assessment, TRACFIN -- the French FIU -- was created in 1990 by Act No. 614, which was subsequently amended on several occasions. TRACFIN is part of the MINEFE and has been a member of the Egmont Group since 1995. TRACFIN receives and analyzes STRs from reporting entities, both domestic and overseas branches and subsidiaries. It has a broad legal basis to obtain additional information from reporting entities as well as other relevant authorities and classified records. It refers its findings to the Public Prosecutor or the judicial authorities. The IMF finds TRACFIN to be operationally independent and able to honor confidentiality of information. The Director General of the Custom Services is the Secretary General of TRACFIN. Its staff has recently seen a trend towards skill- and expertise-based diversity, although the training system is internal and slightly ad hoc. TRACFIN provides general feedback in its annual report, and offers typological information on the training programs it organizes. It has established a Liaison Committee to guide reporting entities on their reporting obligations. TRACFIN is also working towards establishing an electronic system to file STRs, so as to improve the analytical capacity of the reporting entities and TRACFIN, as well as the quality of the reports. TRACFIN stores STRs in its database and keeps extensive statistics on receiving and transmitting STRs. The IMF recommends that TRACFIN consider increasing its staff and be more proactive in issuing guidelines and national and international typologies to help reporting entities better understand their AML/CFT obligations and to improve their STRs.

The 2005 IMF assessment further observes that law enforcement authorities conduct AML/CFT investigations under the supervision of the judiciary. Key law enforcement authorities are the Judiciary Police (Police Judiciaire), the Préfecture de Police, the National Gendarmerie, and the Customs Service, and they have separate divisions to deal with economic and financial crimes, including money laundering. Investigative techniques employed by these agencies include surveillance, infiltration, interception of mail, wire tapping, etc. The Tribunal de Grande Instance de Paris tries AML/CFT cases and the Paris Prosecutor's Office has two divisions to prosecute money laundering cases. Finally, the Ministry of Justice also plays a major role in prosecution activities of the different authorities. The IMF report finds that the enforcement authorities are short of time and resources to try all AML/CFT cases. It notes that an amendment to a law that came into effect in October 2004 has established specialized jurisdictions within the Office Central pour la Répression de la Grande Délinquance Financière (OCRGDF), the National Gendarmerie, the Préfecture de Police, and the judiciary, and this promises to enhance the judicial system's capacity and resources. Per the IMF's 2005 assessment, the Code des Douanes requires persons to declare all cash and monetary instruments above a threshold of €7600 leaving or entering French territory.

2. Preventive Measures - Financial Institutions

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The IMF's 2005 assessment on France's compliance with the FATF 40+8 Recommendations was based on the 2002 (old) methodology. The FATF methodology and recommendations were, however, revised in 2004, and there is little subsequent information as to France's compliance levels with the requirements for this principle. According to the 2005 detailed assessment by the IMF, "the legal framework for AML/CFT preventive measures is comprehensive and the regulation and supervision of credit institutions and investment firms other than portfolio management firms is of a high standard. The scope of sectoral application extends well beyond the standard" (p. 307). The regulatory framework, however, does not fully cover insurance companies and brokers, individual and collective portfolio management firms, direct marketers, or currency exchangers. Nevertheless, as the IMF notes, France is taking steps in the right direction to expand regulations and meet the revised FATF Recommendations revised in 2004. Financial sector regulation, licensing, and supervision are organized on a sectoral basis with distinct authorities in each sector to take care of the different functions. The 2003 Financial Securities Act designates the Minister in charge of the economy as the regulation-making authority in the financial sector. The Committee of the Credit Institutions and the Companies of Investment (Comité des Établissements de Crédit et des Entreprises d'Investissement) licenses credit institutions and investment firms, except portfolio management firms; the Insurance Companies Committee (Comité des Entreprises d'Assurance, or CEA) licenses insurance companies; and the Financial Markets Authority (Autorité des Marchés Financiers, or AMF) licenses portfolio management firms, direct marketers of financial products, investment advisors, and other such entities. Licensing involves fit and proper testing of managers and significant shareholders in various degrees across sectors. Licensing, however, does not take into account AML/CFT internal control policies and procedures of institutions. As for supervision for AML/CFT compliance, the Banking Commission (Commission Bancaire, or CB) handles this responsibility with respect to credit institutions and investment firms; the Insurance Auditing Board (Commission de Contrôle des Assurances, or CCA) with respect to insurance companies and brokers; the AMF for portfolio management firms, direct marketers and investment advisors; and the General Inspectorate of Finance (Inspection Générale des Finances) for the supervision of postal's (La Poste) financial services.

France, per the 2005 detailed assessment by the IMF, has "an adequate framework for customer identification" (p. 307) provided by the Monetary and Financial Code (COMOFI) and Decree 91-160 of 1991. These two sources also set out legislative requirements for enhanced vigilance. They involve transactions that are complex, above €150 000, have no apparent economic purpose, and larger than the customer's usual transaction size. This requirement has loopholes in terms of threshold, definition of complex and unusual, and therefore falls short of the FATF requirement to exercise enhanced diligence on all complex or unusual transactions. The report also finds that guidance on customer acceptance policies, procedures, and identification of beneficial ownership is insufficient and that the monitoring of accounts and transaction requirements is not comprehensive. The MINEFE updates reporting entities on countries with inadequate AML/CFT systems, but the entities are not obliged to exercise caution in their dealings and transactions with persons from such countries. Practice shows, nonetheless, that entities generally comply with such advisories from the MINEFE. Compliance with these advisories is also monitored in depth during on-site inspections. Financial entities are required to screen their employees before hiring, but the screening focuses on competence, not integrity. The IMF finds training to be effective in credit institutions, investment firms, insurance companies, and La Poste. The CRBF regulations oblige currency exchangers to maintain a transaction register in which to enter customer identification data. There are no additional regulatory requirements or supervisory/professional recommendations for customer identification by other sectors. There are also no rules for financial entities to identify customers and originators during wire transfers. The rules promulgated by the Centrale des Règlements Interbancaires and conduct standards issued by the Association Française des Banques on customer identification apply to banks and do not cover non-bank financial institutions like the La Poste. The IMF, however, finds evidence to support the fact that the CB exercises broad authority to ensure compliance with professional rules and codes of conduct. There are also steps being taken at the EU level to establish such rules in legislation. As for Special Recommendation VII, the IMF notes that France has not been rated because countries had until February 2005 to comply with the SR VII, and EU level initiatives are being taken to comply with it.

Per the 2005 IMF assessment, "the legislative and regulatory provisions [for record keeping] are comprehensive and appear to be effectively implemented" (p. 331). Financial entities are required to keep customer identification records for five years after the termination of the relationship, as also to keep records of transactions for at least five years. TRACFIN and other supervisory authorities can request submission of documentation on transactions in conjunction with the STRs, or in due performance of their duties, or to share information with their foreign counterparts. The CB, CCA, AMF and other law enforcement authorities are not bound by professional secrecy in the exercise of their powers. The IMF assessment further notes that the STR requirement for financial institutions has been expanded over the years. However, its scope is narrower than the money laundering predicate offenses, and in some places, they do not align with each other. The IMF report fears that this may result in weakening the effectiveness of the regime. Introduction of additional reporting requirements has the potential of spreading supervisory resources thin, and their benefits are also unclear (especially in the case of trusts).

The 2005 detailed assessment by the IMF notes that the AML/CFT-related internal controls framework for credit institutions and investment firms is comprehensive, supplemented as it is by expansive regulations in the sector. However, it is not as comprehensive in the insurance sector and for portfolio management firms and relies on non-binding and non-enforceable supervisory and professional recommendations. Also, comprehensive application of AML/CFT requirements is not universally ensured throughout the financial sector, with the requirement that branches and subsidiaries of French entities operating in foreign jurisdictions comply with customer due diligence requirements of France being limited to credit institutions and currency exchangers. Further, the licensing process does not take into account the internal control policies and procedures of applying institutions, and the hiring process within entities focuses on competency rather than integrity.

According to the IMF's 2005 assessment, "enforcement and sanction powers of supervisory authorities are generally appropriate" (p. 338) with the CB, CCA, and AMF having a "good range of enforcement actions" (p. 338) that they can take against non-compliance by their respective supervised entities. The IMF, however, recommends that their enforcement powers with regard to La Poste and unlicensed informal funds transfer businesses be increased. The report also calls upon the supervisory authorities to "develop complementary public outreach/awareness raising activities" (p. 339).

3. Preventive Measures - Designated non-Financial Business and Professions

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The IMF's assessment of France's compliance with the FATF 40+8 Recommendations was based on the 2002 (old) methodology. The FATF methodology and recommendations were, however, revised in 2004, and there is little subsequent information as to France's compliance levels with the requirements for this principle. According to the IMF assessment, "the regulatory and supervisory framework for non-financial businesses and professions is incomplete" (p. 325). The AML/CFT supervisory rules and regulations that apply to banks do not in equal measure apply to non-bank financial institutions, although a 2004 reform of the scope of the STR obligation broadened the coverage to include the legal and accounting professions. The 2005 U.S. DoS report, however, informs that amendments to the COMOFI in 1998 expanded the scope of STR requirements to cover non-financial businesses and professions. A 2001 amendment expanded the scope to cover, inter alia, moneychangers, estate agents, casinos, notaries, and auctioneers and dealers in high value goods. The COMOFI was further amended in 2004 to cover chartered accountants, statutory auditors, bailiffs, judicial trustees and liquidators, lawyers, judicial auctioneers and movable auction houses, groups, clubs, and companies organizing games of chance such as lotteries, bets, sports and horse-racing forecasts, and pension-management institutions or unions.

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available as to France's compliance with the FATF requirements for this principle.

5. National and International Co-operation

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The IMF's 2005 assessment of France's compliance with the FATF 40+8 Recommendations was based on the 2002 (old) methodology. The FATF methodology and recommendations were, however, revised in 2004, and there is little subsequent information as to France's compliance levels with the requirements for this principle. According to the 2005 IMF assessment, the COMOFI "provides for a legal framework for comprehensive cooperation between supervisory and licensing authorities in the financial sector. These bodies [have] explicit legal authority to share specific, as well as general information with each other as necessary and appropriate to fulfill their own missions" (p. 340). Further, the licensing and supervisory authorities and TRACFIN have a long legacy of cooperation and information sharing. The CB has also concluded bilateral agreements with foreign supervisors, and its international level cooperation is "extensive and long standing" (p. 341). As a rule, "assistance to a foreign authority may only be refused if it jeopardizes French sovereignty, security, or public order or if criminal proceedings have already been initiated against the same persons for the same acts, or when the persons concerned have already been sanctioned by a final decision relating to the same acts" (p. 341). However, the CCA, despite having similar powers as the CB for foreign cooperation, does not have bilateral agreements with its foreign counterparts and does not routinely share information with them. As for TRACFIN, the COMOFI enables it to cooperate with foreign FIUs for AML/CFT intelligence information and data sharing on the basis of reciprocity and subject to equivalent professional secrecy requirements. The IMF report comments that TRACFIN "takes into account the Best Practices of the Egmont Group regarding the exchange of information" (p. 317). TRACFIN is also involved in the FIU.Net and uses this channel to securely transmit and receive information. The 2007 U.S. DoS report adds that TRACFIN is a member of the Egmont Committee and has information sharing agreements with 30 foreign FIUs. Domestically, it participates in the FINATER, an informal group started by the MINEFE in 2001 to collect information in combating terrorism. TRACFIN also works closely with the OCRGDF, which has direct ties with the Interpol and the Europol in France. TRACFIN's information sharing arrangements, per the report, encompasses the State Prosecutor, senior police officers and central and local governments.

Per the IMF's 2005 assessment, France has ratified the 1988 United Nations Convention on Illicit Drugs and Psychotropic Substances, the UN International Convention for the Suppression of the Financing of Terrorism, and the UN Convention Against Transnational Organized Crime. It is also a party to the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (Strasbourg Convention). France also implements UNSCR 1267, 1269, 1333, and 1390 through the direct application of relevant EU legislation in the domestic framework. However, since EU regulations do not cover the application of UNSCR 1373, France does not fully comply with this UNSCR. The IMF assessment team reported that France was working on a draft bill to address the gap, but its adoption is not likely in the near future. Per the 2007 U.S. DoS report, France has also signed and ratified the UN Convention against Corruption.

As reported in the IMF's 2005 assessment, France has "an impressive set of bilateral and multilateral treaties for MLA [mutual legal assistance] and extradition" (p. 321) for use in AML/CFT cases. Further, MLA does not require dual criminality, except in the case of the use of coercive measures. If an assistance treaty is absent, France provides MLA on a case-by-case basis and subject to reciprocity. MLA, "in a manner as close as possible to that provided for in the legislation of the requesting state," (p. 321) is allowed by the Code of Criminal Procedure (Code de Procédure Pénale). France provides timely and effective MLA on request, and keeps statistics on MLA requests related to money laundering, terrorist financing, or predicate offences, made or received, and the outcome of those requests. However, the statistics are quantitative, not qualitative. The IMF report recommends that France provide greater detail on MLA requests in its statistics, so as to allow them to better gauge the effectiveness of the regime.