France

1. Does France have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes. The French Criminal Code prohibits both money laundering (Articles 324-1 and seq. of the Criminal Code) and terrorist financing actions (Articles 421-1 and 421-2-2 of the Criminal Code).

Other specific provisions prohibit money laundering deriving from specific activities such as drug dealing (Article 222-38 of the Criminal Code), customs offenses (Article 415 of the Customs Code) or fiscal fraud (Article 1741 of the General Tax Code).

Violation of anti-money laundering due diligence obligations set forth in the Monetary and Financial Code (MFC) can also constitute criminal offenses (Articles 561-18 and 574-1 of the MFC).

2. To whom does the legislation apply?

General provisions for money laundering and terrorist financing set out in the French Criminal Code apply to all natural persons as well as legal persons.

Legal persons can be held liable for “offenses committed on their behalf by their organs and representatives” (Article 121-2 of the Criminal Code). An “organ” is defined as a person responsible for managing and directing a company, and “representatives” include persons to whom certain responsibilities have been delegated.

Obligations set forth in the MFC only apply to entities designated under article L. 561-2 et seq. of the MFC. The list includes credit institutions, investment service providers, insurance companies, investment funds, mutual organizations, payment institutions, etc.

3. What does the legislation prohibit?

Article 324-1 of the Criminal Code defines money laundering as:

• facilitating by any means the false justification of the origin of property or income of the perpetrator of a felony or a misdemeanor that has brought that person a direct or indirect benefit; or
• assisting by investing, concealing or converting the direct or indirect property obtained through felony or misdemeanor.

Article 421-2-2 of the Criminal Code defines terrorism financing as the supplying, pooling or directing of funds, value or goods, or providing advice to that end, with the intention or understanding that they will be used (in full or in part) to commit one or more acts of terrorism.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

Under French law, money laundering is generally understood as an operation that consists of concealing the fraudulent origin of property or sums of money, that is to say, making them appear legal when they are in fact the result of a crime. The offence is provided for in Article 324-1 as described above (see 3.).

To establish that money laundering has taken place, authorities must identify and provide evidence of an underlying criminal activity (or “predicate offense”).

The French government has adopted an all-crime approach to predicate offenses in respect of anti-money laundering and terrorism financing legislation. Therefore, any misdemeanour or felony can constitute a predicate offense if the perpetrator of the predicate offense obtains a profit or receives an asset as a consequence of that offense (which is then used in money laundering).

In practice, it is often difficult to provide evidence of a predicate offense, despite recent case law indicating a trend towards greater flexibility. In 2013 a presumption was introduced in the Criminal Code according to which goods and funds are presumed to be the direct or indirect product of a felony or misdemeanour when the material, judicial or financial conditions of the operation of placement, dissimulation or conversion could have no other justification than to conceal the origin or the effective beneficiary of the goods and revenues (Article 324-1-1-1 of the Criminal Code). Therefore, the burden of proof is reversed and the perpetrator must prove the legality of the funds or goods in question.

5. What level of intent or knowledge is required to establish a violation?

While the law does not make reference to intention in its definitions of money laundering, the act is always intentional, insofar as Article 121-3 of the Criminal Code specifies that “there is no crime or offense without the intention of committing it”.

Money laundering offenses thus implies actual knowledge of the fraudulent origin of property or funds involved to be prosecuted. Courts tend to deduce the intent to launder by relying on a set of clues such as the unusual nature of the operation, the method used to transfer smuggle funds abroad, reliance on unsecured bank checks based on false invoices, or the anonymous nature of investments involving large sums of cash.

The proof of intent for terrorist financing offenses is also simplified, since it is sufficient to demonstrate that the person providing the funds at least knew the funds were destined to be used by the terrorist enterprise to commit a terrorist act, regardless of whether that person actually wanted the funds to be used for that purpose.

6. What are the potential penalties for infringing the legislation?

Money Laundering

The following penalties apply to natural persons:

• A maximum penalty of five years imprisonment and a fine of €375,000 are applicable (Article 324-1 of the Penal Code). The fine can be increased to half the value of the laundered assets (Article 324-3 of the Criminal Code).
• For aggravated money laundering, a maximum penalty of 10 years’ imprisonment and a fine of 750,000 euros apply (Article 324-2 of the Criminal Code).
• If the predicate offense is punishable by a longer term of imprisonment than money laundering, the applicable penalty for these counts would be that of the predicate offense, provided that the defendant had knowledge of the predicate offense (Article 324-2 of the Criminal Code).

With regard to legal persons:

• The maximum penalty is five times the maximum fine for natural persons (1.875 million euros) (Article 324-9 of the Criminal Code). In the case of aggravated money laundering, the maximum penalty is a fine of 3.75 million euros.
• Additional penalties may be imposed (e.g., dissolution or prohibition from engaging in a professional activity for a maximum period of five years).

Legal entities convicted of money laundering are also automatically excluded from the register which lists companies that may have contractual relations with the public administration (Article 45 of Order no. 2015-899 of July 25, 2015).

Terrorist financing

Individuals face a maximum penalty of 10 years’ imprisonment and a fine of €225,000 (Article 421-5 of the Criminal Code).

Legal entities incur a maximum penalty of five times the fine for natural persons (€1.125 million) (Article 422-5 of the Criminal code). They may also be subject to additional penalties, such as those described above.

7. Does the legislation have extra-territorial reach?

According to the Criminal Code, French criminal law has extraterritorial application if :

• one of the activities at the origin of the offense took place on French soil;
• the perpetrator is a French national and the acts took place abroad, provided that the law of the foreign jurisdiction qualifies the offense as a criminal offense ;
• the perpetrator is a French national and the acts took place abroad, provided that the law of the foreign jurisdiction qualifies the offense as a crime or that the offense constitutes a misdemeanour under French law; or
• the victim is a French national.

Pursuant to this principle, French courts have extraterritorial jurisdiction if at least one of the constituent elements of money laundering is committed in France.

Furthermore, the French Court of Cassation held in a recent decision that there could also be extraterritorial jurisdiction over money laundering committed abroad when the money laundering offense is not separable from the principal offense committed in France (Cass. Crim., November 11, 2017, n° 17-81546). This decision is in contradiction with traditional case law which considered that money laundering is distinct from its principal offense.

Similar provisions on territoriality apply to terrorist financing. In addition, Article 113-13 of the Criminal Code states: “French criminal law applies to crimes and offenses qualified as acts of terrorism and punishable under Title II of Book IV when committed abroad by a French national or a person ordinarily resident in France”. These special provisions provide for an easier enforcement of French criminal law on terrorist acts committed abroad since the condition of dual incrimination is not required.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Yes, entities designated under article L. 561-2 et seq. of the MFC are subject to specific anti-money-laundering and counter-terrorist-financing obligations. The list includes credit institutions, investment service providers, insurance companies, investment funds, mutual organizations, payment institutions, etc.

The prevention of money-laundering and terrorist financing is based on two complementary obligations: (1) the obligation to conduct proper due diligence ; and (2) the obligation to report any suspicious transactions to the French Financial Intelligence Unit, TRACFIN (Unit for Intelligence Processing and Action Against Illicit Financial Networks).

The obligation to conduct proper due diligence, also referred to as obligation of vigilance, implies keeping an updated identification of customers and their effective beneficiaries and information on the purpose and nature of their intended operations. Thus, pursuant to article L.561-8 of the FMFC, where an entity subject to AML/CTF obligations is unable to identify its customer or to obtain information on the object and nature of the business relationship, it must not execute any transaction and must not establish or pursue any business relationship with this customer.

9. What are the potential penalties for failing to comply with these obligations?

Relevant supervising authorities may issue administrative sanctions, including fines and non-pecuniary sanctions (warnings, reprimands, bans on certain transactions, etc.) with regard to violations of AML/CTF obligations.

The Prudential Control and Resolution Authority (ACPR) supervises credit and payment institutions, investment firms, insurance and mutual insurance companies, insurance intermediaries, and money exchangers and may issue fines of:

• up to 5 million euros for individuals; and
• 100 million or 10% of annual net sales, whichever is higher, for legal entities (Article 561-36-1 of the FMFC).

The French Financial Markets Authority (AMF) is responsible for portfolio management companies, crowdfunding companies, and other investment firms such as asset management companies, financial investment advisors and crowdfunding intermediaries and may impose fines of:

• 15 million or five times the amount of profits made for individuals; and
• 100 million or ten times the amount of profits made for legal entities (Article 621-15 of the FMFC).

The National Sanctions Commission (CNS) is an independent institution responsible for the supervision of certain professionals, including real estate agents and gambling or betting operators, and can impose administrative sanctions. The criteria for examination, as well as the CNS’s decisions and guidelines, are publicly available and may issue fines of up to €5 million (Article 561-40 of the FMFC).

Furthermore, non-compliance with one or several of the AML requirements provided in Title VI of the FMFC can lead to sanctions. For instance, failure to carry out risk assessments or failure to report suspicious transactions, when required, could constitute a breach of AML obligations. Disclosure to third parties of the existence and content of the report on suspicious activities sent to the TRACFIN is punishable with a fine of up to €22,500 (Articles 561-18 and 574-1 of the FMFC).

Criminal and administrative sanctions may be applied jointly.

10. Who are the relevant enforcement authorities in France and what are their contact details?

The criminal offenses mentioned above would usually be investigated by a police division specialized in serious financial crimes, and a prosecutor. In complex cases, the investigation is conducted by an investigating magistrate in collaboration with the prosecutor.

In 2013, the National Financial Prosecutor (PNF) was created at the national level. The PNF prosecutes offenses in its areas of competence, which include:

• violations of probity (i.e., corruption, influence peddling, and cronyism) ;
• public finance offenses (i.e., tax fraud and money laundering); and
• market abuse (i.e. price manipulation and dissemination of false information).

Other relevant authorities include:

Finally, specific supervisory authorities of self-regulatory organizations and professional associations supervise the compliance of their members with AML requirements (such as the local Bar Councils for lawyers). Most of them make guidelines publicly available or establish training.