FRANCE - 2005 MONEY LAUNDERING CONTRIBUTION FOR

UNCLAS SECTION 01 OF 03 PARIS 000365

SIPDIS

INL, EUR/WE FOR LEVIN, TREASURY FOR IRELAND, JUSTICE FOR
OIA AND AFMLS, TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: KTFN KCRM PTER KSEP SNAR EFIN FR
SUBJECT: FRANCE - 2005 MONEY LAUNDERING CONTRIBUTION FOR
2005 INCSR

REF: STATE 254401

All text is unclassified.

France remains an attractive venue for money laundering
because of its sizable economy, political stability, and
sophisticated financial system. Common methods of laundering
money in France include the use of bank deposits, foreign
currency and gold bullion transactions, corporate
transactions, and purchases of real estate, hotels, and works
of art. A 2002 Parliamentary Report states that,
increasingly, Russian and Italian organized crime networks
are using the French Riviera to launder assets (or invest
those previously laundered) by buying up real estate, "a
welcoming ground for foreign capital of criminal origin."
The report estimates that between seven billion and 60
billion euros of dirty money have already been channeled
through the Riviera.

The Government of France (GOF) first criminalized money
laundering related to narcotics trafficking in 1987 (Article
L-267 of the Public Health Code). In 1988, the Customs Code
was amended to incorporate financial dealings with money
launderers as a crime. In 1990, the obligation for financial
institutions to combat money laundering came into effect with
the adoption of the Monetary and Financial Code (MFC) and
France's ratification of the 1988 UN Drug Convention. In
1996 the criminalization of money laundering was expanded to
cover the proceeds of all crimes. In January 2004, the
French Supreme Court judged that joint prosecution of
individuals was possible on both money laundering charges and
the underlying predicate offense. Prior to this judgment,
the money-laundering charge that the predicate offense were
considered the same offense and could only be prosecuted as
one offense.

The amendment to the law in 1996 also obligates insurance
brokers to report suspicious transactions. In 1988, the
obligated parties were increased to include nonfinancial
professions (persons who carry out, verify or give advice on
transactions involving the purchase, sale, conveyance or
rental of real property). In 2001, the list of professions
subject to suspicious transaction reporting requirements
expanded to include legal representatives, casino managers
and persons customarily dealing in or organizing the sale of
precious stones, precious metals, antiques or works of art.
The law now covers banks, moneychangers, public financial
institutions, estate agents, insurance companies, investment
firms, mutual insurers, casinos, notaries, and auctioneers
and dealers in high-value goods. In 2004, the list was
expanded again to included lawyers, chartered accountants,
statutory auditors, notaries, bailiffs, judicial trustees and
liquidators; judicial auctioneers and movable auction houses;
groups, clubs and c
ompanies organizing games-of-chance lotteries, bets, sports,
and horse-racing forecasts; intermediaries entitled to handle
securities; and institutions or unions of pension management.
As a member of the European Union (EU),France is subject to
EU money-laundering directives, including the revised
Directive 91/308/EEC on the prevention of the use of the
financial system for the purpose of money laundering
(Directive 2001/97/EC),that was enacted into domestic French
legislation in 2004. The GOF has enacted legislation that
codifies that Financial Action Task Force (FATF) Forty
Recommendations concerning customer identification,
record-keeping requirements, suspicious transaction
reporting, internal anti-money laundering procedures, and
training for financial institutions.

The Banking Commission supervises financial institutions and
conducts regular audits of credit institutions and the
Insurance and Provident Institutions Supervision Commission
reviews insurance brokers. The Financial Market Authority
evolved from the merger of the Securities Exchange Commission
and the Financial Markets Council to monitor the reporting
compliance of the stock exchange and other non-bank financial
institutions.

Decree No. 2002-770 of May 3, 2002, addresses the functioning
of France's Liaison Committee against the Laundering of the
Proceeds of Crime. This committee is co-chaired by the
French financial intelligence unit (FIU),the Unit for
Treatment of Intelligence and Action Against Clandestine
Financial Circuits (TRACFIN),and the Justice Ministry. It
comprises representatives from reporting professions and
institutions, regulators, and law enforcement authorities,
with the purpose to supply professions required to support
suspicious transactions with better information and to make
proposals in order to improve the anti-money-laundering
system.

TRACFIN is responsible for analyzing suspicious transaction
reports (STRs) that are filed by French financial
institutions and non-financial professions. TRACFIN is a
part of FINATER, a group created within the French Ministry
of Economy, Finance, and Industry in September 2001 in order
to gather information to fight terrorist financing. The
French FIU may exchange information with foreign counterparts
that observe similar rules regarding reciprocity and
confidentiality of information. TRACFIN works closely with

SIPDIS
the Ministry of Interior's Central Office for Major Financial
Crimes (OCRGDF),which is the main point of contact for
Interpol and Europol in France.

TRACFIN received 3,598 suspicious transaction reports (STRs)
in 2001, 6,896 STRs in 2002, and 9,007 STRs in 2003. The
changeover from the French franc to the euro in 2002
generated many additional reports, which accounts for the
significant increase over 2001. In addition approximately
200 separate reports on transactions were sent to TRACFIN
relating to possible terrorist-financing activity.
Approximately 83 percent of STRs are sent from the banking
sector. A total of 291 cases were referred to the judicial
authorities in 2002, resulting in 14 criminal prosecutions;
and 308 cases were referred in 2003, which resulted in 55
preliminary investigations and 21 judicial procedures.

There are two other subsidiary types of reports that are
required to be filed with the FIU. A report must be filed
(no threshold limit) when the identity of the principal or
beneficiary remains doubtful despite due diligence. In
addition, a report must be filed with TRACFIN in cases where
transactions are carried out by a financial entity acting in
the form of or on behalf of a trust fund or any other asset
management instrument, on behalf of a third party (natural or
legal),including their subsidiaries or establishments, when
legal or beneficial owners are not known. The reporting
obligation can also be extended by decree to transactions
carried out by financial entities, on their own behalf or on
behalf of third parties, with natural or legal persons,
including their subisidiaries or establishments, that are
domiciled, registered or established in any country or
territory included on the FATF list of Non-Cooperative
Countries or Territories. Currently, a reporting decree
exists for Nauru and Burma.

Since 1986, French antiterrorist legislation has provided for
the prosecution of those involved in the financing of
terrorism under the more severe offense of complicity in the
act of terrorism. However, in order to strengthen this
provision, the Act of November 15, 2001 introduced several
new characterizations of offenses, specifically including the
financing of terrorism. The offense of financing terrorist
activities (art. 41-2-2 of the Penal Code) is defined
according to the UN International Convention for the
Suppression of the Financing of Terrorism and is subject to
ten years' imprisonment and a fine of 228,600 euros. The Act
also includes money laundering as an offense in connection
with terrorist activity (art. 421-1-6 of the Penal Code),
punishable by ten years' imprisonment and a fine of 62,000
euros.

An additional penalty of confiscation of the total assets of
the terrorist offender has also been implemented. Accounts
and financial assets can be frozen through both
administrative and judicial measures. The Perben II law,
which took effect in January 2004, enhanced French
authorities' capacity to arrest and extradite suspects and
cooperate with other judicial authorities in the EU. In
March 2004, the GOF passed a law that extends the scope of
STR to terrorist financing.

French authorities moved rapidly to freeze financial assets
of organizations associated with al-Qaida and the Taliban,
and took the initiative to put the two groups on the UN 1267
Sanctions Committee consolidated list. France takes actions
against non-Taliban and non-al-Qaida-related groups in the
context of the EU-wide "clearinghouse" procedure. Within the
Group of Eight, France has sought to support and expand
efforts targeting terrorist financing. Bilaterally, France
has worked to improve the capabilities of its African
partners in targeting terrorist financing. On the
operational level, French law enforcement cooperation
targeting terrorist financing operations continues to be good.

TRACFIN is a member of the Egmont Group and is the Egmont
Committee Chair of the newly created Operational Working
Group. TRACFIN has information-sharing agreements with 27
FIUs in the United States, Australia, Italy, Belgium, Monaco,
Spain, the United Kingdom, Mexico, the Czech Republic,
Portugal, Finland, Luxembourg, Cyprus, Brazil, Colombia,
Greece, Guernsey, Panama, Argentina, Andorra, Switzerland,
Russia, Lebanon, Ukraine, Guatemala, Korea, and Canada.
France is a member of the FATF and a Cooperation and
Supporting Nation to the Caribbean Financial Action Task
Force, as well as a Supporting Observer to the Financial
Action Task Force of South America Against Money Laundering.
France is a party to the 1988 UN Drug Convention; the Council
of Europe Convention on Laundering, Search, Seizure and
Confiscation of Proceeds from Crime; and the UN International
Convention for the Suppression of the Financing of Terrorism.
In October 2002, France ratified the UN Convention against
Transnational Organized Crime. The United States and France
have entered into a Mutual Legal Assistance Treaty (MLAT),
which came into force in 2001. Through MLAT requests and by
other means, the French have provided large amounts of data
to the United States in connection with terrorist financing.
France has established a comprehensive anti-money-laundering
regime. The GOF should also continue its active
participation in international organizations to combat the
domestic and global threats of money laundering and terrorist
financing.

Wolff