The Government of France issued an ordinance (n° 2020-115), which transposes the EU Directive (2018/843) of 30 May 2018 of the European Parliament and of the Council, known as the “5th Anti-Money Laundering Directive”, on 12 February 2020 to aid in the efforts to combat money laundering and the financing of terrorism in France. This ordinance has been supplemented by two decrees (n° 2020-118, n° 1010-119) adopted on the same day.
Covered institutions with a presence in France should carefully analyze the ordinance and its supporting decrees and, where necessary, review and adapt their processes to ensure compliance with the new regulatory framework. In particular, client identity checks need to be adapted.
In More Detail
On 12 February 2020, an ordinance was passed pursuant to Article 203 of the PACTE law No. 2019-486 of 22 May 2019 on business growth and transformation, which provides measures to transpose the EU Directive (2018/843) of 30 May 2018 of the European Parliament and of the Council, known as the “5th Anti-Money Laundering Directive”. The PACTE law already transposed some of the AML/CFT duties with regard to service providers on digital assets.
The ordinance reinforces the national framework of France against illicit financial transactions to thwart the possible risks and threats these pose to the French economy.
To this end, the ordinance:
- broadens the scope rationae personae of obliged entities by including:
- certain branches of financial sector entities
- tax advisory activities carried out by legal professionals
- the autonomous funds of lawyers’ pecuniary settlements (CARPA)
- commercial court clerks
- limits the scope rationae personae of obliged entities by excluding:
- art professionals (for transactions of less than EUR 10,000)
- real estate rental professionals (for transactions of less than EUR 10,000)
- co-ownership trustees
- enhances the customer due diligence obligations
- by requiring that customer identity be verified in certain cases through two measures listed in the decree
- by requiring complementary vigilance measures for business relationships or transactions that involve high-risk third countries
- a remote business relationship or the remote identification of an occasional client is not qualified as representing a high risk any more necessitating complementary vigilance measures; but the customer must either be identified through a strong electronic identification scheme or an identification scheme notified to the European Commission according to Regulation 910/014 or by using two measures listed in the decree
- remodels the reporting and information obligations on the beneficial owner; beneficial owners must now provide the entity with certain information on their identity; in case of non-compliance there is a risk of criminal liability
- increases the transparency obligations related to the register of beneficial owners of legal persons, trusts and trust funds, which are key in the prevention of money laundering and terrorist financing, by requiring mandatory consultation of it by obligated entities, widening access to it and introducing a mechanism for reporting discrepancies to ensure it is as comprehensive and up-to-date as possible under penalty of sanctions
- the protection to persons who have reported a divergence on the identity of the beneficial owners or a suspicion of money laundering or terrorist financing in the context of internal procedures is enhanced
- increases the effectiveness and relevance of actions taken by the supervisory authorities, which are crucial in the prevention, as well as the capacity for communication between European authorities
- strengthens the ability to exchange information regarding the freezing of assets between various authorities
- the PACTE law already submitted custodian wallet providers and digital asset/fiat money exchange service providers to AML/CFT duties.
The ordinance aims to strengthen France’s legal framework against money laundering and the channels of terrorist financing.