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Self-erasing hard drives. Logo-less business cards. Secret travel. Over a period of eight years, bankers from UBS reportedly used these and other “James Bond-like tactics” to clandestinely woo wealthy pawns at social events across France, including the opera, the French Open, and hunting trips, in order to enlist them in illegally laundering proceeds of tax fraud.
In December 2023, French courts upheld the firm’s guilty verdict, though its €1.8 billion fine could be further slashed from the staggering €4.3 billion originally ordered.
France may be famously casual when it comes to rules about smoking and drinking, but money laundering enforcement is de rigueur. If you are bringing your business to La République, ready yourself for its regulations.
AML in France
In France, the Autorité des Marchés Financiers (AMF) General Regulation, passed in 2009, sets the anti-money laundering (AML) compliance rules that apply to all companies that trade on French stock exchanges as well as banks and other obligated entities. The law specifies that businesses must collect a government-issued photo ID as well as other documents to verify address, occupation, and income.
The law is regulated by the AMF; the French stock market regulator; the Autorité de contrôle prudentiel et de résolution (ACPR), which oversees banking and insurance companies in France; and the Autorité de régulation des jeux en ligne (ARJEL), which serves as the national gaming authority. Traitement du renseignement et action contre les circuits financiers clandestins (TRACFIN) is also closely involved in anti-money laundering activities by monitoring financial intelligence and managing suspicious activity reporting filed by banks and financial institutions. Additionally, the French Commission nationale des sanctions (CNS), which supervises certain licensed professionals, such as real estate agents and gambling agents, has the ability to impose administrative sanctions for AML infractions.
France’s KYC and KYB regulations
Financial institutions and other related companies are on the front lines of combating money laundering. Criminals typically use their products to convert illegitimate and criminal proceeds into usable funds. French companies, like most in countries around the world, are obligated to build processes to understand more about their customers. These Know Your Customer (KYC) programs, required by EU AML directives, manage the process of onboarding and regularly reviewing individual customer activity and intel. When KYC involves business customers, it is often referred to as Know Your Business (KYB).
Designated businesses
Businesses subject to AML requirements in France include the following:
- Banks, including credit and payment institutions and intermediaries
- Electronic or digital payment institutions
- Insurance companies and intermediaries
- Mutual societies and credit unions
- Retirement funds
- Investment firms
- Money exchanges
- Online gambling and sports betting
- The following professions are also subject to AML rules:some text
- Lawyers (in certain circumstances, such as if the lawyers are authorized signatories, trustees, or are involved in mergers and acquisitions)
- Real estate firms and agents
- Accounting firms and accountants
- Auditors
- Auctioneers
- Notaries
- Sports agents
- Art and antique dealers
Required identity information
The following information is required to be collected and retained by businesses conducting KYC under French AML law:
KYC requirements for individuals
- Name
- Date of birth
- Place of birth
- Current and valid identification document such as an identity card, passport, residence permit, or driver’s license
Depending on the bank or company conducting the onboarding, self-employed individuals opening a business account will likely have to register concurrently as a legal entity with L’Institut national de la statistique et des études économiques (INSEE) in order to have proof of registration dated within the last three months. Alternatively, they may be able to provide proof of registration with the French Chamber of Commerce for commercial activities or the trade register for artistic endeavors.
KYC requirements for non-listed, non-publicly traded entities
- Legal name
- Registration number
- Address of registered office
- Certificate of incorporation (the Kbis extract in France is an acceptable version) dated within the last three months
- Signed and dated Articles of Association
- Beneficial ownership register or recent evidence (within the last year) of capital shares showing individuals owning or controlling 25% or more shares, such as legal minutes or a signed organizational chart; entities ultimately owned by publicly traded companies must also provide evidence of the shareholding structure
- Valid identification for ultimate beneficial owners with 25% or more shares or control of the company (only required if there are applicable beneficial owners)
- Valid evidence of and identification for a legal representative, such as an identity card, passport, residential permit, or driver’s license
KYC requirements for publicly traded companies in the EU or countries with equivalent risk
- Valid evidence of and identification for a legal representative, such as an identity card, passport, residential permit, or driver’s license
- Certificate of incorporation (Kbis extract) dated within the last three months
- If at least 76% of the shares are not public, all shareholders who own or control more than 25% of the company are considered ultimate beneficial owners and must be identified and verified
KYC requirements for associations
- Valid and current identification for the natural person representing the association (president, treasurer, or secretary) such as an identity card, passport, residential permit, or driver’s license
- Dated and signed Articles of Association
- A dated copy of the minutes of the last general meeting of the association, which must adhere to the frequency of general meetings stated in the Articles of Association
- Copy of the association listing printed in the Journal officiel des associations et fondations d’entreprise (JOAFE) for France
Identity verification challenges in France
Verifying documentation and identification is a critical component to remaining compliant with jurisdiction-specific KYC and AML standards. Concurrently, France has significant controls around protecting confidential information under the EU GDPR rules, making the process even more complex.
Remote verification
France has made strides to ease the process and give power back to the people when it comes to accessing personally identifiable information (PII). Since 2021, the French government has enabled an electronic ID to be connected to digital government services, allowing for millions of residents to complete online transactions using their smartphones.
This has also enabled remote verification to be possible for KYC and KYB:
- Individuals can obtain electronic Identification, Authentication and Trust Services (eIDAS) certificates as evidence that they hold a verified ID
- Certain businesses can obtain certified digital copies of their registration documents from issuing agencies; for example, the Centre des formalités des entreprises (CFE) processes registrations for all new businesses in France and provides a unique ID number for each
Penalties for non-compliance in France
By French law, individuals convicted of money laundering face a maximum penalty of five years in prison and a €375,000 fine. In cases of aggravated money laundering, the penalties are doubled. The maximum fines for legal persons and entities are €1,875,000 or €3,750,000 for aggravated money laundering. Penalties may also include prohibitions of professional or corporate activities, being removed from public trading, and even complete dissolution.
Agencies and commissions can also impose their own administrative penalties as well as fines. For example, the CNS can levy twice the amount of profits gained from the illicit activity, capped at €5 million for licensees. For banks and insurance companies, the ACPR can impose up to €5 million, with some exceptions of up to €100 million with a limit of 10% of the net annual profit. And the AMF Sanctions Committee fines can rise to €100 million or 10 times the profits for regulated professionals, or €15 million for those acting on behalf of a professional. The UBS case far exceeded these fines because it went to trial.
How businesses can prepare for KYC and KYB compliance in France
Designated businesses should be armed with risk assessment and compliance programs that adhere to respective regulators and include:
- Appointing a compliance officer with appropriate knowledge of the industry and regions and related risks of money laundering and terrorist financing
- Creating robust procedures for risk management, Customer Due Diligence, document retention, ongoing transaction monitoring, suspicious transactions escalations, and reporting
- Implementing internal controls and a process for amending and updating them in response to emerging risks and changing regulations
- Hiring appropriately (Know Your Employee (KYE) and training regularly
How Persona can help you handle KYC in France
France is the 7th largest economy in the world and continues to be a leading source of growth in Europe. If France is beckoning your booming business, Persona can be your partner wherever your operations are, just as we have done for global companies including Travelex and Brex. Our identity platform provides building blocks you can use to customize the KYC process to fit your exact onboarding and periodic review specifications. Choose which types of verifications and checks to implement, add fraud prevention, and integrate third-party data to make compliant and strategic decisions.
We also offer solutions for continuous monitoring for both AML compliance and fraud prevention. And Persona can securely store customer data, including users’ PII, to help stay GDPR compliant.
Start for free or get a demo today.
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