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France Expands AML Regulations via PEP Definition Changes

PEPsFrance Expands AML Regulations via PEP Definition Changes

March 17, 2023, saw the French Ministry of Economy bring about adjustments to the definition of politically exposed persons (PEPs), thus expanding the scope of anti-money laundering (AML) regulations. Despite the perceived magnitude of these changes, their impact is limited, affecting only a few PEP categories.

The “Law on Transparency” underpins France’s AML framework, aiming to counter corruption and boost transparency in public life. It covers various aspects like asset declarations, whistleblower protection, and lobbying transparency. Upholding ethical standards and public officials’ integrity, the law emphasizes France’s commitment to an open administration.

These modifications were introduced through the March 17, 2023 Order, which detailed the national functions list. Although minor, these changes directly influenced the PEP definition. To fully comprehend their implications for financial institutions (FIs) adhering to AML rules, it’s crucial to delve into the preceding legislation.

The previous version of the “Law on Transparency” applied mainly to high-level state executives, political party leaders, and parliament members. Its scope extended to State-Owned Enterprises (SOEs) in its third section.

However, recognizing differing AML risks, French legislators imposed limits. Previously, only local SOEs indirectly or directly owned by the French government with over €10 million annual revenue were regulated. This signaled that not all SOEs posed a risk, leading to relaxed controls. This stood until March 2023.

The Order of March 17, 2023, brought more leniency by raising the annual revenue cap to €50 million for local SOEs. It showcased French regulators’ reduced risk stance and enhanced trust in state-involved local businesses.

Moreover, the decree expanded the “Law on Transparency” to encompass smaller political parties operating in France without a strong parliamentary presence. This move aimed to curb unlawful funding in regions with limited oversight.

While the decree centers on PEP definitions related to local SOEs and foreign political parties, other aspects of the law remain unaffected. Starting November 1, 2023, these changes will be implemented to grant businesses ample adaptation time.

For businesses employing screening processes, partnering with a reliable entity that meticulously reviews details and ensures compliance with updated AML regulations is crucial.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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