The fight against money laundering: a system with room for improvement

by | Apr 5, 2023 | IFI, Tax deductions, Tax inspection | 0 comments

In its report on developments in France’s anti-money laundering system between 2012 and 2022, published on February 23, 2023, the French Audit Office (Cour des Comptes) takes stock of the anti-money laundering system in place in France.

While, like the Financial Action Task Force (FATF) in its latest 2022 evaluation report, the Cour des Comptes notes significant progress in the fight against money laundering, certain shortcomings persist.

The fight against money laundering in France

The French anti-money laundering system relies on the police, the courts and the supervisory and sanctioning authorities (AMF, ACPR, Tracfin, etc.), as well as on the vigilance and reporting obligations of certain professions (articles 561-1 et seq. of the monetary and financial code), including financial professions (banks, etc.) and non-financial professions such as lawyers.

Since 2010, this system has been overseen by the Conseil d’orientation de la lutte contre le blanchiment des capitaux et le financement du terrorisme (COLB), which coordinates the various anti-money laundering departments, draws up a national analysis of the money laundering and terrorist financing risks to which France is exposed, and proposes improvements (article D. 561-51 of the French Monetary and Financial Code).

Insufficient international coordination

To combat suspicious transactions effectively, international coordination between countries is essential.

To this end, since 1989, the Financial Action Task Force (FATF) has been responsible for examining money laundering techniques and making recommendations to improve the fight against money laundering.
However, some countries fail to comply with the FATF recommendations, which undermines the effectiveness of the measures implemented by other countries.

Similarly, at European Union level, the harmonization of national legislation remains insufficient. Although a common legal framework for combating money laundering has existed since Directive 91/308/EEC of June 10, 1991, it does not allow for identical regulations in all member states.
For example, when it comes to registers of beneficial owners, the regulations applied in member states vary widely. While this register has been operational in France since 2017, some European countries like Italy still don’t have one, making it difficult to monitor transactions.

Heterogeneous commitment of professions subject to AML/CFT obligations

In France, more professions than elsewhere are subject to vigilance and reporting obligations. This broad coverage of financial and non-financial professions was intended to improve detection of money laundering attempts. But he didn’t achieve his goal.

Indeed, the Cour des Comptes notes that not all professions have the same level of commitment. While the financial professions play an effective role in the fight against money laundering, some non-financial professions are not sufficiently structured for this task, and do not always have a supervisory authority.
As a result, the number of suspicious transaction reports from certain professions is well below what might be expected given the risks assessed in their sector. This is particularly true of dealers in precious stones and metals, art and antique dealers, and sports agents.

To remedy these difficulties, the Cour des Comptes recommends defining a minimum level of training for all professions subject to vigilance and reporting obligations, so that they can participate effectively in the fight against money laundering.

Loopholes in the register of beneficial owners

The fight against money laundering and the financing of terrorism is facilitated by the transparency of financial flows and their beneficiaries.

To ensure this financial transparency, France has several files and registers designed to provide reliable, up-to-date information. These include FICOBA, the register of trusts and beneficial owners.

However, while the register of beneficial owners (RBE) has been operational since 2017, the commercial court clerks who manage this register estimate that of the 4,774,907 entities declared, only 3,827,846 were up to date on June1, 2022.
At the same time, a quarter of the companies subject to the BGR reporting obligation are still not listed.
The information that serves as a basis for monitoring, preventing and combating money laundering is therefore far from complete and up-to-date.

In the face of these failings, only one criminal conviction was recorded, concerning an entity that had not declared itself to the RBE. As a result, the sanctioning process doesn’t seem to be any more effective.
In order to improve this system, the Cour des Comptes notes that consideration is currently being given to the possibility of automatically deregistering entities that refuse to register with the RBE.

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