This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 PARIS 000096 
 
SIPDIS 
 
STATE FOR INL, EB, EUR/WE and EB/ESC/TFS 
JUSTICE FOR OIA and AFMLS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KTFN FR
SUBJECT: 2005-2006 INTERNATIONAL NARCOTICS CONTROL 
STRATEGY REPORT (INCSR) PART II, FINANCIAL 
CRIMES AND MONEY LAUNDERING: FRANCE 
 
REF: 05 State 210324 
 
¶1. The following text is our contribution to the INCSR, per 
reftel: 
 
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 
previously laundered assets) by buying up real estate, "a 
welcoming ground for foreign capital of criminal origin." 
The report estimates that between seven 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-627 of the Public Health Code).  In 1988, the Customs Code 
was amended to incorporate financial dealings with money 
launderers as a crime.  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 and the 
predicate offense were considered the same offense and could 
only be prosecuted as one offense. 
 
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.  The 1996 amendment to the 
law also obligates insurance brokers to report suspicious 
transactions.  In 1998, the covered parties were expanded to 
include non-financial 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 materials, antiques, or works of art.  Following 
the 2001 amendments, the law 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 include chartered 
accountants; statutory auditors; notaries; bailiffs; 
judicial trustees and liquidators; lawyers; judicial 
auctioneers and movable auction houses; groups, clubs, and 
companies organizing games of chance: lotteries, bets, 
sports and horse-racing forecasts; institutions/unions of 
pensions management and intermediaries entitled to handle 
securities.  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 
consistent with the Financial Action Task Force (FATF) Forty 
Recommendations. 
 
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), 
TRACFIN (the unit for Treatment of Intelligence and Action 
Against Clandestine Financial Circuits), and the Justice 
Ministry. It comprises representatives from reporting 
professions and institutions, regulators, and law 
enforcement authorities; its purpose is to supply 
professions required to report suspicious transactions with 
better information and to make proposals in order to improve 
the anti-money laundering system. 
 
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, and monitors 
the reporting compliance of the stock exchange and other non- 
bank financial institutions.  The Central Bank (Banque de 
France) oversees management of the required records to 
monitor banking transactions, such as for means of payments 
(checks and ATM cards), or extensions of credit.  Bank 
regulators and law enforcement also can access the system 
(FICOBA) managed by the French Tax Administration for 
opening and closing of accounts, which covers depository 
accounts, transferable securities, and other properties 
including cash assets that are registered in France.  These 
records are important tools in the French arsenal for 
combating money laundering and terrorism financing. 
 
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 the 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 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 STRs in 2001, 6,896 STRs in 2002, 
9,007 STRs in 2003, and 10,842 in 2004.  Approximately 83 
percent of STRs are sent from the banking sector.  A total 
of 226 cases were referred to the judicial authorities in 
2001, which resulted in 59 convictions of money laundering; 
291 cases were referred in 2002, which resulted in 57 
criminal convictions, 308 cases were referred in 2003, which 
resulted in 63 convictions, and 347 cases were referred in 
¶2004. 
 
Two other types of reports are required to be filed with the 
FIU.  A report must be filed with TRACFIN (no threshold 
limit), when the identity of the principal or beneficiary 
remains doubtful despite due diligence.  In addition, a 
report must be filed in cases where transactions are carried 
out on behalf of a third party natural person or legal 
entity (including their subsidiaries or establishments) by a 
financial entity acting in the form, or on behalf, of a 
trust fund or any other asset management instrument, 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 subsidiaries or establishments, that are 
domiciled, registered, or established in any country or 
territory included on the FATF list of Non-Cooperative 
Countries or Territories (NCCT).  As of the end of 2005, 
FATF listed Nigeria and Myanmar. 
 
Since 1986, French counter terrorist 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 (article 421-1- 
6 Penal Code), punishable by ten years' imprisonment and a 
fine of 62,000 euros.  In March 2004, the GOF passed a law 
that extends the scope of STR to terrorist financing. 
 
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.  In 2005, the GOF 
moved to strengthen France's anti-terrorism legal arsenal 
with a bill authorizing video surveillance of public places, 
especially nuclear and industrial sites, as well as airports 
and railway stations.  The bill requires telephone operators 
and Internet caf owners to keep extensive records, allows 
greater government access to e-communications, and allows 
flight passenger lists and identification information to 
become accessible to counter-terrorism officials.  It 
stiffens prison sentences for directing a terrorist 
enterprise to 30 years, and extends the possible period of 
detention without charge.  The bill permits increased 
surveillance of potential targets of terrorism. It empowers 
the Minister of the Economy to freeze the funds, financial 
instruments and economic resources belonging to individuals 
committing or attempting to commit acts of terrorism, or to 
companies directly or indirectly controlled by these 
individuals.  By granting explicit national authority to 
freeze assets, the bill plugs up a potential loophole 
concerning the freezing of citizen versus resident EU-member 
assets.  It was passed by both chambers of Parliament in 
December 2005 and only requires review by the Constitutional 
Council before publication and entry into force. 
 
French authorities moved rapidly to freeze financial assets 
of organizations associated with al-Qaida and the Taliban. 
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, which France chaired 
in 2003, 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, by offering technical 
assistance.  On the operational level, French law 
enforcement cooperation targeting terrorist financing 
continues to be good. 
 
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.  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 Australia, 
Italy, the United States, 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. It opened 
negotiations for information-sharing agreements in 2004 with 
Argentina, Bulgaria, Chile, Germany, Japan, Jersey, 
Liechtenstein, Maurice Islands, and Thailand. 
 
France is a member of the FATF, and assumed the FATF 
Presidency for a one-year term beginning in July 2004.  It 
is also a Cooperating 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 (GAFISUD).  France is a party to 
the 1988 UN Drug Convention; the Council of Europe 
Convention on Laundering, Search, Seizure, and Confiscation 
of the Proceeds from Crime; the UN Convention against 
Transnational Organized Crime; and the UN International 
Convention for the Suppression of the Financing of 
Terrorism.  In July 2005, France ratified the UN Convention 
against Corruption. 
 
The Government of France has established a comprehensive 
anti-money laundering regime.  France should continue its 
active participation in international organizations to 
combat the domestic and global threats of money laundering 
and terrorist financing. 
 
HOFMANN