The stakes of the 4th anti-money laundering and terrorist financing directive
- The anti-money laundering and terrorist financing scheme (LCB-FT) has been greatly enriched and intensified with the entry into force of Ordinance No. 2016-1635 of 1 December 2016 on combating money laundering and the financing of which transposed into French law directive (EU) 2015/849 of 20 may 2015 referred to as the 4th LCB-FT directive. The application of this Ordinance is partly conditioned by the publication of several decrees and orders which should have been published no later than 26 June 2017 date of entry into application of the 4th directive. To date, only a decree on the register of beneficial beneficiaries was published on 12 June 2017 and the other texts are expected by the end of the year 2017.
- On 5 February 2013, the European Commission publishes a proposal for a ' 4th directive ' combating money laundering and terrorist financing, which was definitively adopted by the European Union on 20 may 2015. With the ' 4th directive ', the European Union pursued four main objectives: ü to bring its legal framework into line with the 40 recommendations of the FATF revised in 2012, ü strengthen the preventive framework and the risk approach, ü no longer operate distinction between national and foreign politically exposed persons (PPE), ü specify the concept of beneficial owner. The main consequence of the transposition of the 4th directive into French law is the strengthening of the obligations and responsibilities of those subject to banking institutions.
1. the need to strengthen the obligations of banking institutions
A. The necessary enrichment of the KYC databases linked to the removal of vigilance exemptions
Subject persons must determine the risk profile of each client and assign them an adequate level of vigilance. This vigilance results in the identification and verification of the identity of the client and, where appropriate, of its beneficial beneficiaries, through the continuous control of the business relationship. This vigilance can be either:
* simplified when the customer or operation presents only a low risk of laundering or terrorist financing;
* strengthened when the customer or the operation presents a high risk of money laundering or terrorist financing (entry in an unusual or remotely related manner, politically exposed persons (PPE), banking correspondence relations...). The 3rd directive provided for exemptions in the area of simplified vigilance, particularly for listed companies and regulated establishments. The future Decree expected at the end of the year should remove these exemptions, which will result in the identification of previously exempted entities and the obligation to enrich the "know your customers" (KYC) databases.
B. Expanding the number of clients at risk from the removal of Politically Exposed Persons (PEPs)
The concept of politically exposed persons (PPE) was introduced by the 3rd directive and was enlarged by the 4th directive by abolishing the criterion of nationality. A PPE ' is a person who is exposed to particular risks because of the political, jurisdictional or administrative functions which it exercises or has exercised on behalf of a State or of those exercised or carried out by direct members of his family or persons known to be closely associated with him or becomes in the course of a business relationship "(C. Mon. fin., art L561-10). Thus, banks and other taxable persons must apply the enhanced vigilance measures to all natural persons exercising or having exercised important public functions in a third or European country (foreign PPE ), as well as persons exercising or exercising important public functions in the national territory (national PPE). A 12-month period of complementary vigilance is imposed after the termination of the PPE's functions.
This deletion of the nationality criterion of the PPE results in the consequent enlargement of the number of clients at risk in the bases of KYC of banking establishments and other persons subject in particular in France where the number of elected representatives is very important and that this notion extends to their relatives. Moreover, there is no official list of PPE which is a source of legal insecurity, which is why the banking profession would like the publication of a list of PPE or, a minimum of the functions referred to in the scheme.
C. Identification of the beneficial owner and creation of a register of beneficial owners
The beneficial owner is "the natural person or persons: either who controls the customer in the last place, directly or indirectly; for which an operation is carried out or an activity carried out. (C. Mon. fin., art L. 561-2-2). The future Decree, expected at the end of the year, will specify the definition and modalities for determining the beneficial owner. In fact, this concept had already been introduced by the transposition of the third directive. This means, through a chain of properties, any person possessing, directly or indirectly, more than 25% of the capital or voting rights, or failing that, the person exercising control over the management or managerial bodies, in the case of the companies and collective investment agencies.
Furthermore, the Decree of 12 June 2017 provides that all categories of legal persons are obliged to identify their beneficial beneficiaries (companies, economic interest groups, associations and foundations,...). These entities have a double obligation to obtain and maintain accurate and up-to-date information on their actual beneficiaries, on the other hand, to file an annex to the RCS with a document relating to these beneficial beneficiaries, as well as to the modalities of control they exert on the company. The communication of the information contained in the document concerning the beneficial beneficiaries is strictly framed (C. Mon. fin., art. R. 561-57 and R. 561-58). Banks and other taxable persons may make a request for communication, either as part of a statement of suspicion duly established by the authorised person or in the context of the implementation of at least one of the measures of customer vigilance (C. Mon. fin., art. L. 561-4-1 to L. 561-14-2).
The cases of request for communication authorized by the Decree of 12 June 2017 are numerous, ranging from investigations to the entry into relationship with a new client to those carried out in the context of a declaration of suspicion, the administrative formalism of this will certainly limit the number of applications. The register of beneficial beneficiaries must therefore be apprehended by the banking institutions and other persons subject to the LCB-FT as a complementary tool to their stagecoaches. It will not be able to be consulted systematically as a reference tool to complement the daily investigations necessary for the management of customer risks.
2. strengthening disciplinary and administrative responsibilities
A. Increasing the ceilings on sanctions and individual liability
Any breach by a person subject to LCB-FT obligations is likely to receive a disciplinary or administrative sanction. With regard to banking and financial law, control is provided by the supervisory and regulatory supervisory authority (ACPR) and the Autorité des marchés financiers (AMF) (C. Mon. fin., art. L. 561-36). the Ordinance of 1 December 2016 strengthened the supervision and sanction of the ACPR for the banking, insurance and means of payment sector and the AMF for the actors and products of the financial market, in accordance with this provided for in the 4th LCB-FT directive.
Before the PTRA, the penalties incurred by the taxable persons are the warning, the blame, the prohibition to carry out certain transactions for a maximum period of 10 years and any other limitation in the exercise of the activity, the temporary suspension of officers for a maximum period of 10 years, the resignation of the officers, the partial or total withdrawal of approval or authorisation, the cancellation of the list of approved persons. Either instead, or in addition to these penalties, a Pecan penalty of 100 million euros may also be pronounced (C. Mon. fin., art. L. 561-36-1).
The AMF has similar sanction powers. In addition to disciplinary sanctions (warning, blame, or temporary or definitive prohibition of the exercise of all or part of the services provided), the AMF sanctions Commission may impose pecuniary penalties up to 100 million for professional entities or individuals subject to AMF control, and from 1.5 to 15 million euros for non-professional individuals under the authority of entities controlled by the AMF.
In addition to the very significant increase in the ceilings for pecuniary penalties that may be imposed against the taxable persons, the Ordinance makes very significant changes in the liability of executives and other responsible persons within the banks. henceforth, the ACPR and the AMF may not only sanction disciplinary and financial officers when the breach found at the level of the reporting institution can be attributed to them, but also any other person considered responsible, provided that the latter occupies a high hierarchical position and has sufficient knowledge of the problem LCB-FT (which includes the compliance officer), even when it has not the quality of leadership (C. Mon. fin., art. L. 561-36-1 and art L. 561-32). In the two groups of individuals who may be financially sanctioned, the fine may amount to EUR 5 million. This is a major development insofar as, in the past, only the taxable legal person could be penalized financially in the event of a breach of the LCB-FT regulations.
B. Recent case law
To date, the case law of the ACPR is more abundant than that of the AMF in the area of AML/CFT, which has allowed to clarify the contours of the obligation of vigilance of persons subject in particular for the banking and insurance sector. The recent ACPR sanctions on AML/CFT in 2017 have not yet been based on the 4th directive, but there is a significant increase in the amount of sanctions. Indeed, the sanction of BNPP issued on 30 may 2017 for an amount of EUR 10 million and the sanction of the Société Générale published on 19 July 2017 for an amount of EUR 5 million are both based solely on breaches of Statement of suspicion accompanied by record sanction. These penalties are undoubtedly exemplary if they are compared with the previous ACPR sanctions for AML/CFT as they are 5 to 10 times higher than the average penalties.
With the entry into force of the 4th directive, one would think that this trend should continue for legal persons and the question of the penalties of natural persons remains at this stage still theoretical.
Following the disclosure of the "Panama papers", the European Commission adopted on 5 July 2016 a proposal for a new directive called "5th directive". This new text aims to further strengthen EU anti-money laundering rules in order to combat the financing of terrorism and to increase transparency with regard to the effective beneficiaries of enterprises and Trusts ("trusts"). Thus, the entry into force of the 4th directive takes place when the discussions between the European Parliament and the Council on the adoption of additional measures are very advanced. These discussions focus, in particular, on lowering the threshold for identifying beneficial beneficiaries from 25% to 10%, which would further complicate the KYC stagecoaches of the subject persons.