US embassy cable - 05PARIS365

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