VZCZCXYZ0006
RR RUEHWEB

DE RUEHFR #7329/01 3131509
ZNR UUUUU ZZH
R 091509Z NOV 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 3019
INFO RUCNMEM/EU MEMBER STATES
RUEATRS/TREASURY DEPT WASHDC
RUEAWJA/DOJ WASHDC

UNCLAS PARIS 007329 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/WE and EB/ESC/TFS 
Justice for AFMLS, OIA, and OPDAT 
Treasury for FinCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN FR
SUBJECT: FRANCE 2007 INCSR Report, Part II 
 
REF: STATE 157084 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET 
 
¶1.  (SBU) Below is the proposed 2006-2007 INCSR Report for France, 
Part II, Financial crimes and money laundering. 
 
¶2.  (SBU) France 
 
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. However, France has put in place 
comprehensive financial controls, and it is an active partner in 
international efforts to control money laundering and the financing 
of terrorism. 
 
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.  Article 324-1 of 
the Penal Code provides that money laundering is punishable by five 
years imprisonment and a fine of 375,000 euros.  With aggravating 
circumstances (Article 324-2: habitual or organized activity, or 
Article 222-38: connection with narcotics trafficking), the 
punishment increases to ten years imprisonment and a fine of 750,000 
euros. 
 
As a member of the European Union (EU), France is obligated to 
implement all three EU money laundering directives, including the 
revision of 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 transposed into domestic French legislation in 
¶2004. The EU adopted the Third Money Laundering Directive 
(2005/60/EC) in late 2005, and must be implemented in France by 
December 15, 2007. 
 
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, 10,842 in 2004, and 11,553 in 2005. Approximately 82 
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, resulting in 87 convictions. 
 
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). 
 
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. 421-2-2 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 225,000 euros.  Since 2001, 
TRACFIN has referred 92 cases of suspected terror financing to the 
judicial authorities for prosecution. 
 
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 
antiterrorism 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 cafe owners to keep extensive 
records, allows greater government access to e-communications, and 
allows flight passenger lists and identification information to 
become accessible to counterterrorism 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 adopted in January 2006, 
and is expected to enter into force by presidential decree before 
the end of 2006. 
 
French authorities moved rapidly to freeze financial assets of 
organizations associated with al-Qaida and the Taliban under UNSCR 
¶1267. 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, and opened 
negotiations in 2004 for information-sharing agreements with 
Argentina, Bulgaria, Chile, Germany, Japan, Jersey, Liechtenstein, 
Mauritius, and Thailand. 
 
France is a member of the FATF, and held the FATF Presidency for a 
one-year term during 2004-05. 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. 
 
STAPLETON#