France

Last updated 30/04/2008

CENTRAL AUTHORITY FOR REPORTING

TRACFIN (Traitement du renseignement et action contre les circuits financiers clandestins).

TRACFIN collects all information required to establish the origin of the sums or the nature of the transactions which are the subject of a declaration made to it (Article L562-4, Monetary and Financial Code).

If the information collected by TRACFIN reveals facts likely to relate to drug-trafficking, organised crime or the financing of terrorism, it refers the matter to the State Prosecutor and also the customs administration where applicable (Article L562-4, Monetary and Financial Code).

TRACFIN is informed by the State Prosecutor of all final court orders relating to suspicious transactions that have been reported (Article L562-4, Monetary and Financial Code).

ANTI-MONEY LAUNDERING REGULATOR(S)

None.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

The law implementing the Third EU Directive is currently being discussed between the government and the Conseil National des Barreaux. In the meantime, the Third EU Money Laundering Directive has had direct effect since 15 December 2007.

According to an European Union press release of 5 June 2008 (Ref: IP/08/860), the European Commission (EC) is pursuing infringement actions against 15 member states, including France, for failing to adopt and implement the Third EU Money Laundering Directive into national law by the deadline of 15 December 2007. Upon receiving the formal request, the infringing nations will have two months to provide an acceptable response or the EC may refer the issue to the European Court of Justice.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS

See Book V, Part VI – Obligations relating to the Prevention of Money Laundering, the Financing of Terrorist Activity and Prohibited Lotteries, Gambling and Betting of the Monetary and Financial Code;
Article 415 of the Customs Code, providing for sanctions for involvement in financial transactions between France and a foreign state(s) involving funds known to have been earned through drug offences.
Articles 222-38 (offence of money laundering funds obtained via drug related offences), 222-39-1 (inability to account for income corresponding to one's lifestyle while in habitual relations with persons engaged in drug related crime), 324-1 et seq (offence of money laundering of the proceeds of any felony or misdemeanor), 421-1 (money laundering offences as acts of terrorism when committed intentionally to seriously disturb the peace through intimidation or terror), 421-2-2 (financing a terrorsit activity) and 450-2-1 (inability to account for income corresponding to one's lifestyle while in habitual relations with a criminal group) of the Criminal Code. See the entire criminal code.

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

No, only those admitted to one of the French bars are subject to the local laws (Article L562-2-1 of the Monetary and Financial Code).

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE

The French bar association (Conseil National des Barreaux) has adopted professional guidelines on the obligations of lawyers under the anti-money laundering regime imposed by the Second European Directive, as transposed into French law by the law of 11 February 2004 and the decree of 26 June 2006.
The guidelines were published in September 2007, and are available in full form online here.

Note that these guidelines do not address the revised principles contained in the Third European Directive.

The guidelines are in six parts:

Practical commentary on the law of 11 February 2004 and the decree of 26 June 2006 in relation to the lawyer’s obligation of vigilance and the obligation to declare suspicious transactions;
Advice on internal procedures relating to the obligation of vigilance;
Suspicious transactions reports;
Internal controls;
Anti-money laundering education and training for lawyers and staff; and
Disciplinary measures.

The guidelines contain a set of standard forms, outlining the information to be provided by lawyers in relation to their obligations of vigilance and declaration of suspicious transactions. These include the following:

Client identification (where the client is physically present);
Client identification (where the client is not physically present);
Identification of the beneficial owner;
Declaration by the client of the actual beneficiary of the transaction; and
Suspicious transaction reports.

The guidelines do not provide a definition of “suspicion” – nor is there any in the relevant legislation.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

Lawyers do not currently report directly to TRACFIN, rather they must declare any suspicions of money laundering to the President of the relevant bar. The President then passes on such declarations to TRACFIN, unless he or she considers the suspicions to be unfounded (Article L562-2-1, Monetary and Financial Code).

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS

Please refer to the Professional Guidelines of the Conseil National des Barreaux, as discussed above.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes, please refer to the Professional Guidelines of the Conseil National des Barreaux, as discussed above.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

No. However, if a transaction is in excess of €150,000 and certain other risk factors apply then enhanced due diligence of the transaction is required (article L563-3 Monetary and Financial Code).

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Yes – financial institutions.

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes, but only for financial institutions.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Independent legal professionals (note that this covers lawyers in private practice but not in-house counsel) are under an obligation to declare particular suspicions “when within the framework of their professional activity, they carry out in the name of and for the account of their client any financial or property transaction“ or ”when they participate in assisting their client in the preparation or carrying out of transactions concerning the following activities:

buying and selling of real estate and business entities;
managing of client money, securities or other assets;
opening of bank, savings or securities accounts;
organisation of contributions necessary for the creation of companies;
creation, operation or management of companies;
creation, operation or management of trust companies or any other similar structure” (Article L562-2-1, Monetary and Financial Code).

However lawyers are not subject to reporting obligations when:

they give legal advice (consultation juridique), unless such legal advice is provided for money laundering purposes, or the advisor knows that the client is seeking legal advice for money laundering purposes; or
they represent clients in judicial proceedings (Article L562-2-1, Monetary and Financial Code).

Lawyers are required to declare their suspicion where any transaction involves a sum which might derive from (i) drug trafficking, (ii) fraud against the financial interests of the European Communities, (iii) corruption, (iv) organized crime, or (v) which might contribute to the financing of terrorism. (Article L562-2, Monetary and Financial Code).

For more information, refer to the Professional Guidelines of the Conseil National des Barreaux, as discussed above.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Yes, but only partial.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

In theory, reporting provides the reporting party with immunity from civil and criminal liability and disciplinary sanctions (Article L562-8, Monetary and Financial Code). However, this was applied restrictively by the Paris court of appeal in Vaghetti v Barclays Bank plc (9 April 2004).

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Where TRACFIN is advised of a transaction which has not yet been completed, it may block completion of the transaction for up to twelve hours, during which time a court order to prevent its execution permanently may be sought. The twelve-hour deadline may also be extended (Article L562-5, Monetary and Financial Code).

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Unlike other classes of individuals to whom the anti-money laundering legislation relates, lawyers (avocats and avoués) are currently allowed to tip-off their clients (Article L574-1, Monetary and Financial Code).

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

Documents to prove the identity of new clients must be sought (Article L563-1 Monetary and Financial Code).

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

Yes, the identity of the client must also be checked before undertaking any transaction (Article L563-1 Monetary and Financial Code).

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION

Main impact on transactions is to make bank documentary conditions precedent much more onerous. This causes additional costs and delays.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

Yes.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

No.

_______
Sources

Clare Calver
Partner
Banking & Capital Markets Practice
White & Case LLP
11, Boulevard de la Madeleine
75001 Paris, France
Telephone: + 33 (0)1 55 04 58 44
Mobile: + 33 (0)6 20 38 00 20
Fax: + 33 (0)1 55 04 15 16
ccalver@whitecase.com