TRACFIN ANNUAL REPORT 2017 tracfin France’s Financial Intelligence Unit (FIU)

TRACFIN - ANNUAL REPORT 2017

FOREWORD 5 KEY EVENTS IN 2017 6

PART 1: TRACFIN’S SOURCES OF INFORMATION

1. REPORTING ACTIVITY OF REPORTING ENTITIES 10

1.1 FINANCIAL SECTOR REPORTING ENTITIES 12 Fact sheet 1 – Credit institutions and issuing institutions 12 Fact sheet 2 – The insurance sector 18 Fact sheet 3 – Money changers 20 Fact sheet 4 – Payment institutions 20 Fact sheet 5 – Electronic money institutions 22 Fact sheet 6 – Crowdfunding intermediaries and crowdfunding investment advisers 23 Case study 1: Terrorist financing in connection with crowdfunding 24 Fact sheet 7 – Financial market professionals 25

1.2 NON-FINANCIAL SECTOR REPORTING ENTITIES 26 Fact sheet 8 - Notaries 27 Case study 2: Fraud, document forgery and money laundering in the real estate sector 28 Fact sheet 9 – The Caisse des Dépôts et Consignations 29 3 Fact sheet 10 – Real estate professionals 30 Fact sheet 11 – Bailiffs 31 Fact sheet 12 – Court-appointed receivers and trustees 31 Fact sheet 13 – Commercial registered office providers 32 Fact sheet 14 – Auditors and chartered accountants 33 Fact sheet 15 – Lawyers 34 Fact sheet 16 – Gaming sector professionals 34 Case study 3: Misuse of company assets and money laundering in the football sector 37 Fact sheet 17 - Auctioneers and auction houses 38

2. ADMINISTRATIVE REPORTING 40

3. SYSTEMATIC INFORMATION DISCLOSURES (COSIS) 41

PART 2: TRACFIN’S ACTIVITY IN 2017

1. HOW INFORMATION IS PROCESSED 50

1.1 INTEGRATING INFORMATION 50 1.2 ANALYSING AND REDIRECTING INFORMATION 51 1.3 INFORMATION ENHANCEMENT 51 1.4 DISCLOSING INFORMATION 52 DISCLOSURES TO COURTS 52 DISCLOSURES TO PARTNER AUTHORITIES 58

2. FINANCIAL INTELLIGENCE AND ITS ROLE IN COMBATING THE FINANCING OF TERRORISM 64 PART 3 NOTEWORTHY CASES

Case study 4: Tax evasion – using a foreign entity for inheritance purposes 68 Case study 5: Tax evasion and social security fraud through the use of a private hire vehicle (VTC) platform 69 Case study 6: Organisation of insolvency to prevent the tax authorities from issuing a garnishee notice 70 Case study 7: Money laundering using online gaming websites 71 Case study 8: Diamond fraud and use of the right of opposition 72 Case study 9: Tax evasion, social security fraud and money laundering in vehicle trading 73 Case study 10: Economic and financial predation 74 Case study 11: Terrorism financing via a fund collector 75

PART 4 TRACFIN ABROAD

1. TRACFIN WITHIN THE INTERNATIONAL COMMUNITY 78 1. 1 TRACFIN’S CONTRIBUTION TO THE FATF AND MONEYVAL 78 1. 2 INTERNATIONAL COOPERATION BOOSTED BY THE EGMONT GROUP 78 1. 3 TRACFIN’S CONTRIBUTION TO EFFORTS WITHIN THE EU 79 1. 4 BILATERAL COOPERATION AND TECHNICAL ASSISTANCE 79

2. PROCEDURES FOR INTERNATIONAL INFORMATION SHARING 80 2.1 REQUESTS FROM FOREIGN FIUS 80 2.2 DISCLOSURES TO FOREIGN FIUS 81 4 2.3 TOOLS FOR INTERNATIONAL OPERATIONAL COOPERATION 82

PART 5 ABOUT TRACFIN

1. ORGANISATION 86

2. TRACFIN: EXPANDING TO MEET NEW CHALLENGES 88

APPENDICES

AML/CFT-RELATED LEGISLATIVE AND REGULATORY DEVELOPMENTS IN 2017 90

ACRONYMS 92

TEAR-OFF REPORTING SLIP: HOW TO SUBMIT AN STR 93 FOREWORD

Once again, 2017 saw a substantial increase in Tracfin’s This has been reflected in a sharp increase (38%) in notes activity. Information flows received and analysed by the transmitted during the year. Unit grew by 10% in one year and by 57% in two years. We The strategic challenge for Tracfin is to maintain balance bolstered both the resources and methodologies used to and improve its working methods to meet demand and fight money laundering, fraud involving the public purse anticipate needs. and terrorist financing. Strengthening links within the intelligence community Tracfin has received strong support from its line ministry, should make it possible to ensure better use of intelli- which approved a progressive increase in staff of 27% gence techniques and a better integration of financial over two years. intelligence into joint action strategies. Coordinated work The increase in reporting activity is the result of active on shared objectives with several partner departments vigilance on the part of professionals subject to AML/CFT was trialled in 2017, and the first results augur well for requirements, particularly by adapting the compliance the expansion of such initiatives. mechanisms set up by certain professions in the non- Many strategic and tactical challenges remain in terms financial sectors. It is also part of a profound process of improving collective performance, promoting an intel- of change initiated by the Unit. The use of data science ligence culture that integrates the specific nature of has been developed to support the analytical work of our financial intelligence, defining a clearer outline for eco- officers, and the adaptation of our new IT system is in its nomic intelligence and generating actions in favour of final phase. the detection of tax intelligence. These challenges must In 2017, we also focused on ensuring that our business be reconciled with secure information sharing, effective processes are in sync with these changes. Tracfin has set legal proceedings, greater pooling of resources, and up additional accelerated («Flash») means for submit- bolstered national, institutional, bilateral and multi- ting reports, making it possible to disseminate financial lateral cooperation. 5 information almost immediately. This has made it possible The prospect of the FATF’s evaluation of France’s entire to provide factual information based on financial intel- AML/CFT system planned for 2020 is the priority roadmap ligence in the fight against tax fraud, and to alert our for the action of Tracfin and of its officers. Tracfin remains partners to an imminent CFT risk. When it comes to the an administrative start-up on a fast development track. courts, the system for referring additional notes concer- Bruno Dalles, ning pending cases has been expanded. Director of Tracfin KEY EVENTS IN 2017: AFTER A RECORD-SETTING YEAR IN 2016, REPORTING ACTIVITY REMAINED HIGH IN 2017 +10% MORE REPORTS RECEIVED IN 2017

* Change 31 December 2017/2016 in % RECEPTION ANALYSIS DISCLOSURE

+10% –8% +38% 71,070 Reports submitted to Tracfin 12,518 Investigations carried out in 2017 2,616 Referral notes

68,661 +10% 61,128 Investigative acts +6% 891 +35% Suspicious Transaction Reports Judicial referrals (STRs) 29,194 –5% Requests for information 468 1,398 –4% Notes concerning +21% suspicions of one Incoming requests 1,762 or more criminal (foreign FIUs and judicial Requests sent offences requisitions) to foreign FIUs 423 6 1,011 –8% +18% Other disclosures 30,172 to courts, law enforcement Administrative reports Searches (consultation and judicial customs of files and open databases, departments questioning of institutional units) 1,725 +43% Disclosures to government departments

ÆÆ After a record-breaking 2016 in terms ÆÆ During the year, Tracfin carried out of reports received (a 43% increase over 12,518 investigations. These investiga- 2015), the number of reports received tions were the result of 8,478 reports and analysed by the Unit continued received in 2017, and 4,040 reports to increase in 2017, with 71,070 reports submitted in previous years. (a 10% increase). Reporting entities alone submitted 10% more STRs than ÆÆ 61,128 investigative measures were in the previous year (68,661 in 2017 carried out to add substance to existing compared with 62,259 in 2016). data. Information flows received by Tracfin during the year grew by 10% in 1 year, ÆÆ These investigations resulted in the by 57% in 2 years and by 160% in transmission of 2,616 notes: 891 5 years. All reports received were ana- notes to the courts (including 468 lysed by Tracfin. notes concerning suspicions of one or more criminal offences triggering a cri- ÆÆ Over the past decade, there has been minal Investigation) and 1,725 notes to more than a fivefold increase in the partner authorities (including the tax, number of reports received, and the social, customs and intelligence admi- number of referrals to the courts and to nistrations). These represent a 38% Tracfin’s partner authorities has risen increase in information notes in 1 year by a factor of 5.5. and a 118% increase in 5 years.

ÆÆ Staff levels expanded by 14% in a single year, by 27% in 2 years and by 74% in 5 years.

7 8 TRACFIN - ANNUAL REPORT 2017 OF INFORMATION SOURCES TRACFIN’S

9 TRACFIN - ANNUAL REPORT 2017 10 TRACFIN - ANNUAL REPORT 2017 Laundering Directive». Laundering ving France, 53.1 to EUFIUsandmadeavailable by to latter Article the pursuant ofDirective 2015/849 Anti-Money known «Fourth asthe by comesfrom asystem ofspontaneous provision taxpayers from*The Crossboarder anEUMemberState, ofinformation information invol- and Financial Code). ofOrder 2016-1635 terms under the andintermediaries, traders digital currency of 1 December 2016 L.561-2 (7°bis of Article Monetary of the developments. to These are keepPlease note: economicandregulatory upwith entitieshave new groups beenring-fenced ofreporting • • • requirethat analysis: Tracfin to submitted typesofreports There are several 1. REPORTING ACTIVITYOFREPORTING ENTITIES Total for all non-financial reporting entities entities reporting Total allnon-financial for Total entities reporting Sports agents Sports Commercial registered office providers officeproviders Commercial registered Lawyers Bailiffs Bailiffs Real estate professionals professionals Real estate Notaries Total for all financial reporting entities entities reporting Total allfinancial for Auditors Auctioneers, auctionhouses Auctioneers, Casinos sports and horse-racing betting betting andhorse-racing sports Gaming circles, games ofchance, FIUs –Crossboarder* Dealers inprecious goods Dealers Chartered accountants accountants Chartered Online gaming operators Online gaming operators Court-appointed receivers Court-appointed intermediaries intermediaries andpayment service Bank transaction Digital currency traders and intermediaries andintermediaries traders currency Digital Crowdfunding intermediaries Crowdfunding intermediaries Electronic money institutions institutions Electronic money Investment management companiesInvestment intermediaries Insurance Financial investment advisers advisers investment Financial Money-issuing institutions institutions Money-issuing Payment institutions institutions Payment Investment companiesInvestment Mutual companies andprovident institutions companies Insurance changers Money Credit institutions Credit institutions Reporting entities Reporting (FIUs). Intelligence Units from Financial foreign Information bodies State sentby Reports requirements AML/CFTreporting ties subjectto enti- sentby Suspicious Transaction (STRs) Reports applicable applicable 26,011 24,264 19,288 1,059 1,218 2,104 1,747 2012 995 120 436 145 127 171 Not Not 34 54 52 21 38 20 52 35 13 14 0 4 7 – 3 – – applicable applicable 27,477 21,950 25,579 1,898 1,199 1,169 2013 153 259 970 195 127 181 831 Not Not 54 25 82 20 25 18 20 12 46 60 72 0 3 6 – – – Suspicious Transaction up10% Reports, over 2016). Tracfin were entities (68,661 sent by reporting In 2017, received closeto 96%ofthe by reports origin. suspectaregood reason of fraudulent to know, they sumsthat tions relating suspect orhave to - Tracfinto ortransac their books all sums recorded in report obligations must reporting Entities subject to 36,715 34,268 29,508 1,040 2,447 1,423 1,641 1,141 2014 450 254 185 270 139 215 100 84 23 26 29 23 62 25 16 51 0 8 1 – – – 0 1 43,231 40,414 31,276 4,535 1,709 2,159 2,817 2015 996 286 422 528 320 212 146 142 105 39 33 35 88 29 58 65 35 10 0 3 0 – – – 0 62,259 46,901 58,517 1,044 3,200 2,255 3,742 5,110 2016 442 995 132 601 120 213 272 107 477 84 20 36 60 32 15 73 51 0 9 4 – – – 6 68,661 64,044 46,882 8,603 4,939 1,401 1,810 4,617 2017 259 932 209 929 570 109 291 103 178 178 151 514 241 38 23 63 67 13 62 31 57 0 0 8 Change (2016- +244% +283% +394% –100% +112% 2017) +10% +23% +49% +34% +55% +90% +54% +68% –39% –48% –20% +31% +13% +14% +16% –47% +78% +9% –5% –6% +5% –4% – – – – =

ment. It should be noted that obligations in the fight obligations inthe that ment. Itshouldbenoted ofinvolve levels - variable their very ties, areflection of enti- reporting wide discrepancies between very masks trend, iswelcome, nevertheless which This upward guidelinesare which beingdrafted. for professions (111.9%) professionals real estate (49.3%), and bailiffs increases insubmissionsfrom werethere alsonotable received remains low, numberofSTRs the Although publication of guidelines. from the casinos, following increase also a 54.6% in reports Thereimpetus. was provided that efforts awareness-raising of Tracfin’s – aresult (34.2%) from notaries number of reports increased the (23.4%)dueto also trended upward entities ofnon-financial reporting The participation increase,(a 54.3% 1,739 more reports). companies from insurance asdidthose value), absolute in 68.4%(3,493more shotupby reports institutions from payment (46,882),those atahighlevel stabilised credit by institutions submitted numberofSTRs the In 2017, entities,although financial reporting amongst 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 0 2009 and non-financial reporting entities, reporting and non-financial Reporting activityby financial Reporting 2010 Total forallnon-financialreportingentities Total forallfinancialreportingentities 2011 2009–2017 2012 2013 2014 2015 2016 2017 are the entities’ pointsofcontact. are the entities. Referents financial ornon-financial reporting several remit. referent isincharge Each ofmonitoring TwoAML/CFT system). this divisionsare to dedicated on what it receives quality of an entity’s and not on the Tracfin in mindthat canonly comment vement (bearing impro and areas for - practices onreporting lar feedback activity, regu reporting and provide with monitor them better professionals, reporting closertieswith foster to Since 2015, Tracfin organisation itsinternal hasadapted itself*. entity reporting protect the butalsoto sion, ofcourse, mis- Unit’s of the effectiveness ensureclient, the to the notbedivulged to Finally, measures must these anSTR. for diligence obligation is never sufficient grounds per se is an enhanced due there (PEP) or that Exposed Person aclientisPolitically that picion. Inparticular, fact the agenuine sus- into anatypical transaction concerning analert transforms that result ofananalysis be the onemust each STRs: are no automatic there out that Itshouldalsobepointed analysis. arigorous following besuspicious deemedto sumsortransactions concerns have a hand, they other entity. each based approach developedby Onthe risk- of the relevance knowledge and the ting of this upda- constant entities have clients, the that of their knowledge qualityobligation of the , based on the onehand,entitieshave onthe aduediligence twofold: financingare andterrorist laundering money against Article L.561-31 1° of the Financial and Monetary Code. L.561-31* Article andMonetary Financial 1°ofthe disclosure obligation, which -

11 TRACFIN - ANNUAL REPORT 2017 12 TRACFIN - ANNUAL REPORT 2017 It should also be seen against backdrop ofdiscussions It shouldalsobeseenagainst in2016. experienced sector the surge insubmissionsthat 50% seemingly the to abacklash banks, by submitted STRs the numberof was zero in theregrowth time, first at 46,882 (compared 46,901 with in 2016).off the For In 2017, levelled submissionsfrom credit institutions 1. Volumetric analysis 68%, down from 72.3% in2015 and75% in2016. and 80% in 2016. submissions was STR Its share of total significantlymissionsto fell vs. 73%, 77.4% in 2015 in 2017,of STRs sub- financial sector its share of total source primary the was banking sector the Although and issuinginstitutions Fact sheet1–Credit institutions REPORTING ENTITIES 1.1 FINANCIAL SECTOR 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 100% 5,000 20% 40% 60% 80% 0% 0 9,785 9,785 2 262 2006 2006 182 10,047 10,047 2 423 2007 STRs submitted by banks, credit submitted andissuinginstitutions institutions by banks, STRs Banks andcreditinstitutions 2007 233 Banks andcreditinstitutions 11,511 11,511 3,049 2008 2008 200 in comparison to all other reporting entities to allother reporting in comparison 12,254 12,254 5,056 2009 2009 675 Submissions by credit institutions 13,206 13,206

6,002 2010 2010 608 Total reportingentities(excl.banksandcreditinstitutions) Money-issuing institutions 15,582 15,582 7,274 2011 2011

779 immediately, shape. Readers as soon as a suspicion takes besent must reports that stipulate Code,which Financial and Monetary provisions ofthe the it isalsoinlinewith planitsprocessing Unit tasks; better basis. Thishelpsthe on a regular Tracfinto submit reports expects institutions STRs. monthly anaverage of3,464 ofJune),with exception the (with and September April between observed low activity was of per day.average of 208 STRs Alongand unusual period Unit the received month, an latter inthe and October; Two in March activity occurred spikes in reporting second, representing average of3,906reports. amonthly halfof201722,972 first inthe and23,910 reports the in year, balancedwith the activitywas Within reporting them. of Tracfinexpected the regulator and what understand better entitiesto reporting these provisions andallowed ofcertain aclarification led to This andResolution Authority. Supervision Prudential the and banks the placebetween took that and meetings 19,288 19,288 6,723 2012 2012 436 21,950 21,950 5,527 2013 2013 259 29,508 29,508 2014 7,207 2014 Polynomial trendcurve 254 31,276 11,955 31,276 2015 2015 142 46,901 15,358 46,901 2016 2016 477 46,882 2017 21,779 46,882 2017 291

received in2017 sixmajor players sector’s from the increase inSTRs landscapecanbeseeninthe reporting banking inthe The increasing presence of«onlinebanks» entitiesinvolved. of the the AMLsystems efficiencyof the to are detrimental that delays results inlonger processing timesandreporting Thisgenerally anincreased volume ofalerts. generating canresult computer which frombacklogs, tools upgraded build-upin the entitiesto would like alert to Tracfin ACPR. the audits by following and AML reorganisingservices backlogs their decreaseslargest in 2017 reducing to due, in part, the increases in2016 largest the alsoexperienced 31.5%. from 8.5%to ranged with Thetwo banks decreases, which registered 50%), whereas three trend (increases of 5.5%, 9%, 14.5%reporting and emerged in 2017. continued on an upward banks Four two trends numberofreports, board increase inthe year, previous the to anacross-the- was whenthere in 2016from 42,528 STRs 41,681 to in 2017. In contrast from 421 to 608, i.e. an increase of 44.5% (against arise (against from 421 608,i.e.anincrease of44.5% to Direc 2 andHSBC. BPCE, Groupe Crédit Mutuel-CIC,LaBanque Postale 1 banks seven largest Submissions from the • Quantitative data ACPR the andTracfin. by drafted obligations andinformation guidelines onreporting 133 joint 135 to ofthe paragraphs to refer may wishto 2. Analysis ofsubmissionpractices Boursorama, Hello Bank, Fortuneo, Monabanq,Bfor-Bank andING HelloBank, Fortuneo, Boursorama, BNP Paribas, Groupe Crédit Agricole, Société Géné-rale, Groupe Géné-rale, Société Groupe Crédit Agricole, BNPParibas, 1,000 1,500 2,000 2,500 3,500 3,000 4,000 4,500 5,000 500 t. 0 Jan. 17 3,558 Feb. 17 4,012 Monthly andcredit in2017 submissionsfrom institutions banks March 17 4,527 April 17 3,216 1 fell by 2%, 2%, by fell May 17 3,525 June 17 2 4,134 ,

amounts of less than €100,000,amounts oflessthan €100,000 39%between concern andincome). Thus, 38%ofreports assets to according (selectivity of customers segments concerned customer the banking,inlinewith ofretail from that amountsdeclared by differs The breakdown ofSTRs sector. inthis practices declarative ofthe in terms decrease over 2016.to uneven involvement Ittestifies bankingsector, an8% private entitiesinthe by ted 1,031 SuspiciousTransaction were submit- Reports mechanisms. its monitoring andboost analyses itsinvolvement, itsrisk then adapt streng- to the sector 0 in2016)for the need to testifies financing(4in2017 compared with onterrorist reports applying AML/CFTprovisions.to Thelow numberof notresult inanerosion ofvigilance whenitcomes must customers, with contact absenceofphysical the due to fraud) asdocumentary (such risks certain to exposed are which more ofonlinebanks, The surging popularity oneonlinebank. for rate 20-pointdrop inthis tous, Unit, aprecipi alsonoted - the which within questions 52.4%,alsoraised from 3.8%to ranging STRs, these of rate investigation inthe marked difference The very decrease from 2016. a each, entities sent about twentyThree reports other in2017. 200declarations more submitted than both active: –were year previous very of only oneinthe Two – instead institutions. these major stakeholders amongst practices discrepancies inreporting mask the of 70%in2016). However, shouldnot figures these July 17 3,585 Aug. 17 3,311 Sept. 17 3,687 Oct. 17 4,580 Nov. 17 4,446 Dec. 17 4,301

13 TRACFIN - ANNUAL REPORT 2017 14 TRACFIN - ANNUAL REPORT 2017 the reports received. reports the entity. allows Tracfin that Itof is an indicator the relevance to assess areporting by number ofSuspiciousTransaction submitted Reports total andthe andin-depth) preliminary (both inquiry for referred 3 rate The investigation reports. relevant and andsubmitcomplete them suspicions,analyse form to etc.) assets, aboutcustomers, information mented anddocu- elements(regularly-updated necessary have allthe large banks within tions ordepartments activity,- nature oftheir institu these very By the are high. quite banks ofprivate Tracfin’sexpectations 2017. above €10m. in stakes stable Thesefigures remained concern €1mand€10m, between and1%ofreports and €500,000,10% €500,000and€1m,12% between party representation of customers, andsoon). ofcustomers, representation party third- trusts, arrangements, tional dimension,complex out (large amounts, interna carried transactions the nature of the aswell asto etc.), parties, tions viathird business rela into of non-residents, entrance portion PEPs,alarge anddomestic (foreign customer the with relationship nature of the the This is due to exposed. are institutions these which to risks the witness to vate banks, nearly double that of retail banks, bears banks, ofretail doublethat nearly banks, vate The investigation rate is the ratio between the number of cases the between ratio is the The investigation rate 10% 39% 12% Private bankingsector Private €1,000k –€10,000k < €100€ 1% 3 - pri by submitted ofSTRs 0% 38% > €10m €100K –€500k - -

should help clarify reporting expectations in this area. inthis expectations reporting should helpclarify New ACPR PEPsare dueoutin2018. guidelinesfor They 34%. to ranging from titutions recorded asignificantdrop, 18% decreased 11% by in2017, from 397 352.Three ins- to entities largest seven the by ofPEPsreported portion 467 was (compared 475 to PEPs reported in 2016). The in2017. observed phenomenon was Thenumberof However, persons. these concerning opposite the numberofreports anincrease inthe level, heralded the domestic to definitionofPEP the extended which Directive 2016, inlate Fourth The enactmentofthe Politically Exposed Persons (PEPs) diligence measures with regard to this clientele. owners due ofthe effective are anintegral part andthedocumentation knowledge ofthe beneficial out. Supporting ciated with the carried transactions the complexity asso- ofthe financialarrangements attention bepaid to must the reasonsParticular for analyses. quality ofthe andthe quantity ofdeclarations of the interms both efforts, continuetheir banking sector private inthe allstakeholders that It isimportant 21,3% 3,8% Not defined €500K –€1,000k Banking sector 4,1% 0,3% 1,4% 69,1%

rate, and increased for three others. others. three andincreased for rate, banking groups, average were two ofwhich below the four for fell underinvestigation The share ofreports sector.homoge-nisation inthe 4in2016, 1to aratio pared to isapositive signof 10%of between 2,com- of1to and20%,i.e.aratio a «corridor» into of investigation The rates tightening received. information process the and its human technical resources to bolste-ring was 11more than Unit points,atimewhenthe percentage 2013 Between 10 and2017, reports). by fell rate this same as in 2016 remainedwhich the over 1 in (just rate, investigation on the hadnoeffect banking sector the by submitted numberofSTRs inthe The stability • including mutualnetworks. entities, allreporting for continued andexpanded This trend be needs to reported. schemes fraudulent ofthe entityandawidervariety reporting the gies for typolo- identificationofnew quality ofanalyses, in the animprovement by concerned, institutions among the ofamountshasbeenaccompanied, tranche lowest the STRs concerning Tracfinthe reduction in that ispleased crime. fightingfinancial services of efforts ofthe focus bethe must that transactions latter Itisthese transactions. fraudulent elaborate ofmore detection the with than massreporting with andwere more littleornoanalysis inline contained They cashwithdrawals. donations andunjustified small-scaleissues undeclared for work, undeclared tax smallsumsmainly had dowith concerning STRs 2016) – orremained stable. €500,000 and €1 million (3% inamounts between €100,000 and€500,000(21% in2016), and3.8%for increased slightly – 21.3%either amountsbetween for highersumsofmoneyCorrelatively, concerning STRs activity. reporting intheir recorded a10%entities that fall-off 71.5% year. previous the two Thisdecrease isdueto compared under with €100,000 category), lowest (the amounts dowith 69%hadto sumsofmoney: limited In 2017, dealingwith anincrease inSTRs was there Amounts declared inSTRs Following up on STRs Following uponSTRs

resulting disclosures. 4 trend in the disclosure rate trend inthe apositive was all,there at200%.Above highest and the at7% lowest the about20%,with average increase was The more orlessalllarge institutions. concerned STRs numberofdisclosures basedontheir The increase inthe residents ofFrance. were notpermanent they led that recipients by committed whose banking activity revea 2017) includedasignificantincrease in residency fraud bodies (a35%increase in socialsecurity Disclosures to companies. by fraud bankruptcy as the involved legal of entities issues, that such a wider range to individualsand STRs relating a significantnumberof Unitdonations andundeclared alsoprocessed the work, involve undeclared accounts,undeclared foreign banks by typologiesreported tax traditional the Although financing. in 2015 combatingterrorist ofaspecialiseddivisionfor creation andalsothe authorities, tax the to information sending rapidly for channel new Unit’s result of the disclosures isthe inadministrative uptick This sharp increase). (a 43.5% authorities disclosures partner to nistrative (8.5%) and in admi- courts the of disclosures to terms resulted indisclosure increased in2017,that in both banking sector the by submitted The numberof reports • drop of3pointsover 2016, and10 pointsover 2015. recorded a both rates investigation highest the with two banks the that notes basis. It thus entity-by-entity change onan andhow they ofreports relevance the to correlates which rate, Tracfinthis attentively monitors analyses. poorqualityamounts andbasictypologies,with low concerned that recorded adrop inSTRs tions that institu amongst increasesThe largest were observed this is a sign of a defective internal process. isasignofdefective internal this STRs, into transformed systematically are alltoo alerts When to applyremove a filter that may any arise. doubts itisto andhow important alerts, these analyse it isto Tracfinsubmitted. stresses how important would liketo information quality of the in place and the systems alert an improvementof the cates relevance in the this development, asitindi- Tracfin interest with notes 4% in2017 the seven large five institutions. of for Ratio between the number of STRs submitted and the numberof and the submitted numberofSTRs the between Ratio authorities authorities andpartner Disclosures to the courts 4 , which rose, which from 0.5%to - -

15 TRACFIN - ANNUAL REPORT 2017 16 TRACFIN - ANNUAL REPORT 2017 unusual debit transactions by individualswithout by unusual debittransactions dealingwith aswell asothers funds’ origin, the donotexplore ofcashthat withdrawals relating to receives alarge number of STRs constantly Tracfin indicator. changes inthis to had disappeared 2017, by butTracfin remains attentive intwo entitiesin2016 timesobserved long reporting consequently, creation of a backlog.The abnormally the them and, adelay inprocessing examined, to be of files might have number an increasethis led in to the past, itssituation.Inthe examine entityto lead areporting should Too manyalerts efforts. andfiltering analysis to given andfollow-up completeness relevance, assess the positionto best are inthe authorities The supervisory entities. reporting upby set system laundering money the anti- the highlights of isoneof alerts Configuring activities. has adirect impact onentities’ reporting exercise that isatricky criteria Similarly, alert setting cases. incharge ofthese partners the disclosed to Unit the quickly processed that and information passon entitiesto of certain know-how the trated demons- financing.Thesescenarios terrorist constitute may ofactsthat detection regarding the scenarios their in 2017, that, interest with entities perfected several notes Code.Finally, andFinancial Tracfin Monetary provisions of the suspicious under the was detected atypicaltransaction the show that to fragmentary too were analyses bankinggroups: the certain by submitted quality ofSTRs lower the to tended cash transactions focusing onsmall scenarios Tracfinthat certain notes hand, other added typologies. Onthe reveal high value isto purpose whentheir more relevant are allthe they atypical transactions, activities. detect Developed to now play role akey inentities’ reporting Scenarios analyses. from cursory suffer still banks cooperative from certain STRs scenarios, ofquality detection implementation the and AMLdepartments reorganisationthorough oftheir a insomeentities,following observed vement was 2017concerning are mixed. some impro Although ourobservations indicators, ofthese inboth rioration - amarked dete by 2016, characterised was which After information. cessing ofthe Tracfinensure that anefficient pro- canproceed with analyses quality oftheir andthe ofSTRs The relevance Qualitative data -

to continue these efforts. efforts. continuethese to component entities and all their Unit banks encourages in2017,observed The two institutions. for particularly phenomenonwas Theopposite rates. reporting in their adrop hadexperienced mes. In2016, institution every - sche fraud of high-stakes as vectors serve tions that legal outby entities,companies andassocia- carried transactions to professionals bankingsector alerting has been Tracfin years, Lastly, several over past the reason isnotinitselfgrounds suspicionoffraud. for togive with a refusal Aclient’s Tracfin. files a report 3. 16 oneofthe meets which criteria evasion, from tax are derived sums involved transaction inthe the abanksuspectsthat evasion: tax relating to STRs casewith more Thisiseven the financing. terrorist are connected with unless they Tracfin to interest are notof andthey banks, cooperative from certain common are alltoo suspicious. Thesetypesofreports shouldbetreated as transaction ofwhy the analysis fundsorany ofthe ofdestination any explanation Article L.561-32-1 of the French Monetary and Financial Code. and Financial L.561-32-15 Article French ofthe Monetary bankingcustomers, private (concerning its expectations clarify to analysis), more in-depth groups needfor (the specificmessages Unitto certain across get the to for Thisisanopportunity atallinstitutions. staff Security Financial by attended inmeetings Tracfintakes part now received bankingsector. from the In 2017, sessions covered feedback 89% ofreports these meetings. for «activity review» financialkey institutions Unit with the meets April to yeareach from February Since Tracfin of advisers, up an in-house network set 4. Awareness-raising Tracfin easier. much of work madethe which format, ments inspreadsheet in2017,Furthermore, - sentbankstate allinstitutions noted. were asdelays sometimes requests, typesof these vigilantto beparticularly to institutions expects Tracfin request. inthe isstipulated which neededanurgent Somerequests response,requests. answer the to 3and8days between taking ness overall, showed goodresponsive- banks the The Unit that notes 27% in2016). year (compared the for requests with Unit’s of the 31.5% for accounted which main banking institutions, In 2017, were the sent 9,221 to information for requests Power torequest information 5 , and thus , andthus

the Unit’s attention to these sectors. these to attention Unit’s the currency, reflecting areas ofcrowdfunding andvirtual inthe andprofessionals institutions, tions, e-money Similarly,- payment were institu heldwith 26meetings will continuein2018. They andareas offocus. itsexpectations clarify and to practices, reporting their review activities, to banks’ these of enabled Tracfin understanding to gain a better 22 resulted in bankingsector private onthe The focus Tracfinthese initiatives in2018. is repeating andpayment institutions. banks primary the the sameday with was heldon financing, terrorist fightagainst the to devoted A secondmajor meeting, Tracfin/ACPR guidelines. Tracfinthe joint to revising the aview and ACPR, with ofboth expectations the clarify to achance This was financialinstitutions. seven largest the with meeting Tracfinquality STRs, the and ACPR jointly organised a 2017,In January increase inpoor- asharp with faced entity. reporting of the sole responsibility which are the scenarios, detection inimplementing others support andto example), for meetings in 2017 meetings (15 in 2016). These meetings French Polynesia (198), Guadeloupe(190), French Guiana(73) andMayotte (27). contributor, Réunion by followed largest (222), (257), the New Caledoniawas submitted, Martinique STRs 404 With inmainlandFrance. whose AML/CFTfunctionshadbeencentralised (major groups AML/CFTactivity)and539from orsubsidiaries) 40institutions their (includingfor 20 localbanks by activity, Tracfin ofreporting of In terms total received1,371 a the bankingsector,STRs from including832submitted this is. entitieshave doneso,andTracfinstronglyNot how allreporting important underscores identify. easierto STRs making the identification keys establish to overseas institutions for submittingSTRs ofmainland banks AML/CFTdepartments the STRs, of asked Tracfin benefitfrom more andto precise monitoring departments, reallocation ofreporting this Faced with situation. economic andtax localcriminological, the to mapadapted have arisk must institutions systems, in2017. restructuring such by affected was Regardless locationoffinancialflow monitoring only oneinstitution ofthe mainlandFrance, to in2015 occurred that and2016, ofAML/CFTservices of localbanks repatriation accompanied the by the large andacquisitions numberofmergers After inmainland France. by banks andothers areby localbanks filed somereports areas, inthat from somewhat other differ France inOverseas bankingsector inthe practices Reporting THE BANKING INOVERSEAS SECTOR FRANCE

financing was expanded andclarified. was financing terrorist fightagainst the Finally, to sectiondevoted the report). trends andanalysis risk and the are (annual publishedinTracfin’sreport they reports The guidelinesnolonger propose typologies,since – – – concerned: this Inparticular, beclarified. neededto expectations andTracfin beupdated, to the and ACPR’s guidelinesneeded received, the information of the quality inthe accompanied adeterioration by activityin2016, upsurge inreporting the After guidelines publishedinNovember 2015. halfof2018. the previous first replace They the Tracfin/ACPRthe guidelines were publishedin European Directive, Fourth provisions ofthe of the enactment regulatory the In compliance with GUIDELINES IN2018 UPDATING THEJOINTTRACFIN/ACPR – – – the steps taken are documented. taken steps the facts; the ofanalysing purpose the outfor carried be to investigations lightofthe assessed inthe being this reporting, immediate The needfor the oneof fulfilatleast (which 16 criteria) offences ortax criminal suspected Reporting analysis asubstantiated unusual ones –after – notmerely suspicioustransactions Reporting …/… 17 TRACFIN - ANNUAL REPORT 2017 18 TRACFIN - ANNUAL REPORT 2017 Analysis and Activity Report (p. 18) is very relevant in this regard. inthis relevant (p.18) isvery andActivity Report Analysis no.3inTracfin’s objectives. Casestudy 2013 original from their measures diverted Attention ontax isonceagain focused Africa). to ofmoney transfers involving advertisements Internet andfake order networks transfer (false fraud deposits) aswell asinternational cheque embezzlementofpublicfunds,fraudulent (breach oftrust, fraud domestic To dealtwith they alesserextent, dealings,etc.). concealedreal estate purposes, professional accountsfor accountsorthird-party use ofpersonal declare, undeclared bankaccounts, to donations,possessionofforeign (concealmentofrevenue, failure evasion of tax forms entitieswere geographic andvarious undeclared from work these ofSTRs themes The common,recurring 10.3%. was localinstitutions by submitted those for rate the at12%, whereas stood France Overseas concerning institutions centralised by submitted ofSTRs rate The investigation same. remained aboutthe from Réunion andNew Caledonia(13%in STRs and30%,respectively), from GuadeloupeandMartinique whereas those upswing anotable was from hand,there French other Polynesia (–50.6%).Onthe inreports falloff asharp dueto primarily 15.3% by entitiesfell year, previous over the localreporting by The numberofSuspiciousTransaction submitted Reports against 107against ofsignificant ayear growth. in2016), after (103 in2017 STRs intermediaries from insurance inreports sector,Insurance aslightfalloff was there the by background this ofincreasingAgainst reporting 2015 (320 STRs). in2016 level of sharply reporting butdidnotreach the group,tive ofapositive hadfallen which this trend for in2017institutions 213 (against in2016) are indica- The 241 mutualsandprovident by submitted STRs 47% submitted. with tors, ofreports - contribu primary remained bankinsurers the category, in2017. submitted 2016) 4,939reports with this Within (compared 91% with STRs in sector’s 93.5% of the for companies increased,The share accounting ofinsurance compared –33.4%in2016). with increased significantly in 2017institutions (+13.1%, activityfrom mutualcompanies andbenefits Reporting in2016). anincrease of64.6% of3.7%vs. falloff decline (a a sharp posted intermediaries insurance trend of2016 upward onthe (48.2%),while carried companiesAt submissionsfrom +54.3%, insurance sector.However, the within were there disparities in 2016 (38%). observed that 50% increase, iseven higherthan which 3,520in2016). (against 5,283 STRs Thisrepresents a in2017 since2012, grew further rise with been onthe sector, insurance activity of the has which The reporting Fact sheet2–Theinsurancesector

files. Tracfin’s as shown by sectors, insurance investigation andnon-life life inthe financing terrorist with ted typologiesassocia- fraud regard the to with and alert remain mobilised needsto sector Finally, insurance the in recent years. 7%in2016),red to Tracfin’s despite appealsrepeated in2017ties now represent only 6.7%ofSTRs (compa- Legal enti- hasdeclinedeven further. ofreporting rate As regards legal entities, Tracfinthe lowthat regrets area. on this attention their focus to professionals urges insurance ficant amounts of money. therefore once again Tracfin andinvolve topics remain current signi- nevertheless ving fictitious companies), arewhich less well reported, those invol- (particularly and benefitshealthcare sector inthe observed andfraud Misuse ofcompany assets abuseofweakness. alongwith reported, main suspicion remains the assets) session of foreign pos- the undeclareda lesser extent, donations and, to (particularly evasion respect typologies, tax to With bearer bonds. policiesand insurance purchase oflife remain the tor sec- the by reported vectors laundering The mainmoney AML/CFTsystem. ment inimplementing the involve their - bolster to bemaintained must insurance, individual source for largest third representwhich the madein2016 professionals, these by The efforts

risk-based approachimplementing is arisk-based . Thisconcept of importance Unit the the underscores ofthis, As part asin2017. practices, best concerning 2018, Tracfin activities will continue its awareness-raising in institutions sector with meetings itsbilateral During correspondents. entitiesandTracfin reporting activitiesfor training their Consequently, strengthen to Unit the callsoninstitutions facts). ofrelevant presentation suspicion orsimply the of the description the basis of a report, the do with has to it (whether practices This hasamajor impact onreporting isfrequently noted. AML/CFTsystem knowledge ofthe of alack factors, Amongother quality ofreports. in the beenaccompanied animprovement by sing, ithasnotyet increa- activityisconstantly flow of reporting While the 12 PEPs). domestic ding 17 52in2016, PEPs,against domestic including PEPs declared in 2017, PEPs (44 concerning STRs inclu the numberof adrop in Tracfin surprise with alsonotes at nationallevel). including orPEPstatus, insegmentation (factoring profiles andcustomer sellinginparticular) (distance channels distribution insurance), andnon-life (life products onoffer regard the to with mapping exercise arisk approach goeshandinwith A risk-based – – – Thisclassificationshallcovers: assess risks. classifyand to asystem I. Companies shallestablish risks. financing andterrorist laundering identifying, assessing,managingandcontrolling money for upasystem Code,companies shallset Financial and R.561-38 Article Monetary to ofthe «Pursuant A-310-8Paragraph IofArticle ofthe Code: Insurance insurance. andnon-life life both This approach appliesto A RISK-BASED APPROACH – – – or to the freezing ofassets.» the or to European Union Councilofthe regulations ofthe to taken pursuant measures specific restrictive to subject orcountries country inthe establishments or subsidiaries outby Activities carried Code andFinancial Monetary L.561-15 VIofArticle mentioned inparagraph ofthe orterritories countries inthe establishments or subsidiaries outby Activities carried Code andFinancial R. 561-18 French ofthe Monetary inArticle to referred Transactions persons the with

-

of the CMF.of the L. Article ACPR, to the pursuant to bereported to of duediligence likely obligations, andare therefore can be qualified are as breaches elements that reports are Tracfin anongoingfeature. STR thatlate the notes of drafting andthe transaction ofthe completion the between Finally, delays unusually longandunjustified origin. fundsare ofcriminal the cion that strong suspi- there isa cific conditions,includingwhen Unit isaprerogative underspe- exercises the that right Tracfinwhen fundsarethis disbursed. that pointsout ofopposition right mentionthe systematically almost However,executed. someentities that notes Tracfin being a transaction to Unit object, if necessary, the to out.Thisallows iscarried suspicioustransaction the are now before submitted STRs Code, and most Financial and 561-16,in Article Monetary 1ofthe paragraph out set principle reporting prior the compliance with In 2017, amarked improvement in observed Tracfin transactions. insurance customer’s ifithasasuspicionaboutthat samecustomer about the about acustomer, aninsurer willonly submitareport anSTR hassubmitted case where abankinginstitution entity. Thus,ina typeofreporting remain linked the to obligations. However, obligations reporting reporting duediligence and ofboth cation hasincreased, interms suspicion. Tracfin communi- that intra-group ispleased in the of STRs transmission namely the in2017,observed amongbankinsurers, particularly It shouldmake avoid itpossibleto aphenomenon compared 10.5% with in2016). (7.2% ofreports rate investigation falling in2017,the andwillhelpboost professionals, from insurance of STRs quality process isanessentialelementinthe reporting the streamlining of financing.This suspicion ofterrorist ora offence ortax criminal beanunderlying must suspicion of the origin Code (CMF), the and Financial Monetary suspicion.According the to this to gave rise elementsthat factual the statement explanatory in the manner present inaclearandrelevant andto of areport soundbasis makes identifythe itpossibleto description entityshouldbeemphasised. A reporting the picion by aspect of the The fundamental invested. the funds of the origin financialenvironment and client’s a are prerequisites understanding knowledge current for arelationship andkeeping into customer one’s Entering (2015). Sector-Specificrevised Implementing Principles ACPR/Tracfin inthe the guidelines,as well asin described description of the sus- description absence of any 561-28

19 TRACFIN - ANNUAL REPORT 2017 20 TRACFIN - ANNUAL REPORT 2017 red with 81.1%red with in 2016). number of the By contrast, decline(63.7%in2017tutions, continuedto compa- - activityofpayment insti reporting the has dominated sector, fund transfer The share of the past in the which rise (+12.7%). the was already on flow of reports saw a68.4%increase year, previous over the whenthe 5,110 (against reports transaction in2016), sector the 8,603suspicious With paymentactivity by institutions. In 2017, an unprecedented was surge there in reporting Fact sheet4–Paymentinstitutions – – – To submitted by amoney changer beuseful,anSTR should: changers. money submissionsby 12 ofSTR 2017 October interms practices Unit best exchange present the andto to the SyndicatNationalTracfin of on desChangeurs et Auxiliairesthe annualmeeting (SNCAF) Financiers attended year. the during 10 reports in2016),54% and59bureaux atleast (70%) submitted 1,81059% ofthe in2017 submitted STRs (compared with were responsible for operators largest Thefour persist. year previous inthe observed disparities The reporting 46.6%in2017,tively stable: 47.7% against in2016. 2017)bureaux de change (asat 1 January remained rela- number of 180 ACPR-accredited total compared the with one STR The number of bureaux submitting at least France. events in Overseas weather caused by disruption to buted 2016- (+49%)and2015 (+31.9%). attri Itcanbepartly upswings of This 19.7% sharp the decrease puts an end to 86 bureaux submitted by de change in 2016.2,225 STRs bureaux dechange, compared Unit 84 with by the to 1,810 SuspiciousTransactionwere submitted Reports stable. numberofbureaux dechange remainedthe relatively sector, money-changing the by submitted whereas STRs In 2017, a significantthe number drop of was inthere Fact sheet3–Moneychangers – – – party, andsoon). party, ornothesheisaccompanied athird by show ID,whether to attitude,reluctance orhostile anevasive (particularly profile –age, nationality,even (ifknown), profession and behaviour customer’s regard the to with transaction, (e.g.typeofcurrency, gold orthe transaction exchange foreign denominations,etc.) ofthe context Provide adetailed identification appliesregarding applicationofduediligence customer rules strict purchases where the currency Internet-based to possession.Attention professional’s shouldbepaid documentinthe IDoranyother person’s ofthe Include acopy address, number, telephone involved person(s) ofbirth, e-mailaddress, (fullname,date etc.) identifythe Accurately

mentioned above. 19.7%, by fell as numberofSTRs whereas the courts), compared 21 to in2016courts), the (including5to the (including year 4 to the 28during increased, with mixed numberofreferrals record, this Despite the transaction. the to contributed elementsthat other financialand andthe tity, etc.) profession, reputation, (iden- customer ithasaboutthe account information into taking requested, transaction lawfulness ofthe the question entity to leads the result of a doubt that is the entity. It the reporting of resultthe part of reflection on the Tracfinthat asuspicionis changers reminds money be actingstrangely”. “seemedto acustomer that indicating, asananalysis, sometimes transaction, of the characteristics ling the - detai without transaction, exchange aforeign report simply Manyare to suspicioninperspective. content the includingresearch andputting facts, ofthe per analysis outapro- Toosaction, etc.). carry changers money few - tran exchange foreign the suspicionasto PEP without presence ofa isexceeded, threshold mined transaction as soon as an arbitrarily-deter declarations (systematic of quality, year remain In terms last issues raised the that have a strong technological aspect, to which the the which aspect, to have technological that astrong areas are active infast-changing that of stakeholders emergence the by gies. Thistrend hasbeensharpened typolo- associated andthe reported ofrisks variety the have increased arrivals newest the ting activityby upswing inrepor andthe sector payment institution make upthe that professions ofthe Diversification 2017, of two impetus institutions. under the particularly in increased sharply parties) lecting onbehalfofthird specialising in col- payment account orinstitutions a offering providers (neo-banks paymentnew services - -

response time. asufficient quality level and maintain to tional efforts andorganisa- adaptation their boost to institutions payment needfor the illustrate year the mings during - occasional shortco afew sector.of the Nevertheless, responsiveness overall and emphasises excellent the requests, these respond to beingmadeto efforts of the who received Tracfin 87% requests. Unit’s ofthe is aware firms, transfer money concerned upswing particularly 3,007against in 2016, an increase of 35%. This notable issued in 2017cing. The number of requests 4,051, was finan- terrorist as fightregards against the particularly Tracfin, by of numerous information focus for requests Once again in2017, were the payment institutions characteristics. their detailing outand carried suspicioustransactions the listing table ofFacts» a by andbesupplemented «Statement in the beincluded must STR the ledto suspicionthat the to ted to Tracfin». to ted be suspicious should be repor deemed to transactions only those transactions; unusual, atypical or high-risk all organisations are report notobliged to «Financial entity». legal identity ofthe the concerning and/or«Information details» 7 system. ERMESreporting capacity of the limitofthe the 6 Within details contact complete their with together bereported, must of fundtransfers) case andrecipients inthe (remitters transaction in the manner,processed inanoptimum involved allpersons To them. to connected arethose make STRs sure that or reports subjectsofthe identifyingthe relating to ishampered poorpractices by The processing ofSTRs that were in2016. noted deficiencies about recurring From aquality pointofview, Tracfin remains concerned below). onDSP2 inset (seethe adapting Unit isconstantly of the STR of the requirements of the joint Tracfin/ACPR guidelines: requirements jointTracfin/ACPR ofthe the inaccordance with detected, atypical transactions the entity concerning reporting the by analytical work of Tracfinthe importance etc.). to underscore wishes ofresearch lack usingpublicdatabases, phrases, stock useof analysis, without oftransactions (mere reporting suspicion basisofthe the formed the facts sis ofthe from insufficientanaly suffer Similarly, manyreports transaction. reported the respect to with main actors are the basisofananalysis, who,onthe persons those identify entity to reporting involved, the itisupto In particular «Individual’s civil status» and «Individual’s contact and«Individual’s contact «Individual’s civilstatus» Inparticular 7 . Where a large number of stakeholders are . Where alarge numberofstakeholders 9 Thus, an analysis of the facts giving rise giving rise facts of the Thus, an analysis 6 in the relevant fields relevant inthe - - 8

and Disclosure Obligations with Respectand Disclosure Tracfin». Obligations with to 9 Tracfin». Respect and Disclosure Obligations with to Guidelines onReporting 8 See paragraph 74 Seeparagraph «ACPR/Tracfin ofthe JointGuidelineson Reporting Specifically, paragraphs 71 Joint «ACPR/Tracfin paragraphs 85 of the to Specifically, Creation of two new payment service categories: categories: • Creation payment oftwo new service consumer protection: andbolster sector inthe innovations technological 2018.as from provisions 13 Thesenew cover January payment services, applicableto framework regulatory 2017,the to includessignificantamendments French(known into asDSP2),enacted law inautumn Directive (EU)2015/2366 of25November 2015 GOVERNING PAYMENT SERVICES DSP2: THECHANGING FRAMEWORK LEGAL •  •  •  •   who manage accounts providers payment accountsheldby service concerning data ofaccessto right are basedonthe These services – – standards between institutions between standards introduction ofcommon,secure communication and authentication customer Expansion ofstrong authorisation without beoffered to allowingmechanisms payment services applicationofexemption regarding the Details asregards payment services Authority the European Banking the role of Definition of cross-border operators for supervisors country Redefinition andhome the respective of roles ofhost – – Account information service (AIS) service Account information (PIS) initiationservice Payment 21 TRACFIN - ANNUAL REPORT 2017 22 TRACFIN - ANNUAL REPORT 2017 from comparable institutions. from comparable received reports whereas Tracfin submit a single STR, didnot collectionsectors prepaid card andmoney the samesector. inthe ders Thus,two leadingcompanies in - stakehol between There are alsosignificantdifferences including107establishment, from asingle stakeholder. of right under the of entities operating representatives volume, camefrom amere 5permanent total 70% ofthe 178 i.e. nearly received. The125 reports, other reports roughly 30%ofthe alone,accounting for 53STRs mitted ACPR- ved sector)sub the represent (which by 5%ofthe 7EMIsappro - Thus,the representatives. permanent the involvement andthe of institution ofthe status on the depending in reporting, significantdisparity There was notshared allEMIs. greater by into account,itwas AML/CFT risks is taking sector the growth that shows this sion of178 year. previous 36the against Although STRs, submis- Thisresulted inthe a394% increase inSTRs. with In 2017, EMIs, activityby asurge inreporting was there as soonpossible. representative permanent oftheir details contact the D.561-3-1 CMF, ofthe with provide Tracfin must they provisions under the of Article that, establishment freedom of underthe reminds EMIsoperating Tracfin provide freedom to services. the institutions same basis as payment on the provide payment services 12 Code. 11 issuer. electronic money the than legal entity other » L.133-3 or person by anatural as definedinArt. isaccepted andwhich ofpayment transactions purposes the offundsfor remittance the against issuer, representing aclaimonthe form, including magnetic isissued that 10 of business course normal in the money tions (EMIs)issue,manage andmake electronic available - institu Code,electronic money andFinancial Monetary L.315-1 French meaningofArticle ofthe the Within institutions Fact sheet5–Electronic money the freedom ofestablishment the included 14 scheme under operating European passport underthe (ACPR). entitiesoperating Theother Authority andResolutionregulator, Supervision Prudential the French hadbeenapproved France the products by within 2017,As at 1 January 132 only 7 EMIsdistributing of the regulations. the applicable by asdefined orpayment services money Electronic money is a «monetary value that is stored in electronic form, in electronic form, isstored that value is a «monetary Electronic money In accordance with Article L. 314-1 of the Monetary and Financial andFinancial L.314-1 Article Monetary Inaccordance with ofthe Including one branch and13 EMIsusingATMs. Includingonebranch 11 , as well as services related to electronic related to , aswell asservices 12 and111 under operating 10 . They may also may also . They

that made it easier for the Unit process them. the to madeiteasierfor that documentation tion andare accompanied supporting by - precisefrom informa French companies, contain which received, particularly reports andquality ofthe relevance Finally, pointofview, from aqualitative Tracfin the notes Code. andFinancial L.561-27° bis ofArticle Monetary ofthe ofparagraph requirements, terms underthe reporting AML/CMF aredoing businessinFrance subjectto 2017, financing.Asof1January and terrorist EMIs platforms haveFrench involve soughtto legislators trading VIRTUAL CURRENCY does not comprise areceivabledoes not comprise heldover issuer.” the butwhich inorder to acquireor transferred agoodorservice, may be kept that unitsinelectronic format non-monetary acquisition the for orsaleofany containing instrument orintermediary, of itsbusiness,actsasacounterparty operators asfollows: “Any course normal who,inthe person 14 currency. and virtual 13 at international level. at international stance remains amore proactive regulatory system real prerequisite aneffective the for Notwithstanding, providers. as well aswallet initsscope, exchanges includes cryptocurrency amendment in2018. isexpected which Thedraft Directive, Laundering European Anti-Money Fourth the amendment of the by bolstered will beconsiderably currencies digital respect to with The AML/CFTsystem activity. reporting itsmore sustained outdueto stood institution homogeneous, butone fairly was topic on this received major bankinggroups from the of STRs bankingsector,and the inequal measure. Thenumber percent were payment by institutions submitted Eighty-five total. only six,about2%ofthe submitted exchanges French currencies. cryptocurrency virtual In 2017, Tracfin received 357STRs inconnectionwith authority. supervisory no dedicated procedure iscurrently andthere anyauthorisation to are notsubject asthey insofar isincomplete players ofthese supervision diligence measures. Regulatory procedures, as well asadequate due verification implement identificationand must Therefore, they

These platforms ensure exchange between real ensure between exchange Theseplatforms Article L.561-2, currency Article CMFdefinesvirtual 7°bisofthe 14

13 laundering money fightagainst inthe

30 May 2014 crowdfunding. relating to 2014 on1October force into ofOrder 2014-559 entry since the of 16 France. Participatif Financement 15 AML/CFTsystem the now subjectto are advisers andinvestment funding intermediaries in 2016 crowd and 2017 that fact the not due to was increase in STRs sharp This breakdown the showsthat (23). advisers and investment crowdfunding intermediaries (79),andonly 7%from bankingsector 22% from the (250), institutions payment andelectronic money represents a142% 69%were from increase. Ofthese, were submitted in 2017 149 (against in 2016), which of361 A total crowdfunding relating to platforms STRs halfof2016). first compared the with (Anincrease inFrance of48% sites such by raised halfof2017, first In the of€153.5was million total a this project. finance to ofagiven project promoters andpeoplewilling website, together,Crowdfunding involves meansofa by bringing advisers andinvestment intermediaries Fact sheet6–Crowdfunding are used for fraudulent purposes. purposes. fraudulent are usedfor platforms iftheir reputation canimpact their that risks active andaware ofthe beparticularly appearto forms crowdfunding with plat partner that institutions money andelectronic Thepayment institutions cing methods. finan- new these with associated risks of the fessionals pro- reporting other awarenessheightened amongst Thesetwo groups have AML/CFTobligations beensubjectto According to the 2017 According the to crowdfunding published by barometer 16 15 , but rather to a to , butrather

- -

declarant andacorrespondent. declarant a designate obligations to their with date are upto 2017,1 January (47 now 85platforms IFPand38CIP) only 14 onERMESasat registered hadcorrectly ofthem Whereas obligations have fruit. borne registration their 2017in spring remind of to crowdfunding platforms actionsundertaken ispleasedthat Finally, Service the hadnoattachments. submitted STRs halfofthe more than tion records inparticular): - (copiesofIDandtransac documentation supporting respect to bemadewith needsto However, more effort were relatively clear and concise. offacts statements quality. Individualswere declared properly andthe were of high sector generally the by submitted STRs French onthe crowdfunding players key scene. the STRs from someof of the lack by Tracfinwas surprised two donationplatforms. were by SMEs.Theremaining submitted third loans to provide which crowdlending by platforms, submitted (6in2016).25 STRs were ofthese two-thirds More than largely uninvolved. In2017, submitted nineplatforms remain advisers andinvestment funding intermediaries entities, crowd of reporting world the to As newcomers - 23 TRACFIN - ANNUAL REPORT 2017 24 TRACFIN - ANNUAL REPORT 2017 funds for personal expenses. expenses. personal funds for association association’s bankaccount,healsousedthe the over abroad inparticular. Having power ofattorney trips for usingthem collectionwebsite, money viathe fundsraised the out,MrA, aboard member,it turns from personally benefited As initialpurpose. their associationnorusedfor the paid to were channels neither camefrom these The donationsthat €8,000. raised nearly specific project, and a anappealinconnectionwith launch to collection website (€10,000). hadalsousedamoney board members Oneofthe its website through well as via an online payment service chequesby donationsin cash and financed (€30,000), as hadasingleThe association,which bankaccount, was movement. – – andpossibly terrorist aradical close to was indicated had departments fit Organisation X,which partner Tracfin’s the financing ofTracfin’s Non-Pro- to was drawn attention with crowdfunding financinginconnection Terrorist 1 Case study €8k Supporters €10k 1 1 €30k €8k 2 €5k 2 Board

2 €8k €5k • • • • • • Warning signs: the cause. to devoted offinancialcollectors network zoneviaa inawar known jihadists to orders via money prepaidsend funds cards to cash using these He withdrew prepaid purchase foreign cards. accountto «mirror» fundsfrom this usedthe amountof€5,000.MrAthen the association,in the for donationsinitially intended of the Thissecondaccountreceived apart European country. ther He hadopenedasecondonlinepayment accountinano- €25k Transfers of funds to a war zone Transfers awar offundsto Use ofprepaid cards collectionwebsite Use ofamoney Opening ofonlinepayment accounts aboard member association’s accountsto fromFlows the ment move- and a radical person targeted the between Links 2 Projects €5k 3 €5k 4 bank cards Prepaid to tax evasion. evasion. tax to related inparticular analyses, detailed contained that in 2017 did receive good-qualitytheless reports several never Tracfin disappointingfindings, these Despite elements. these contain rarely advisers cial investment However, assets. from finan- customers’ those reports and customers their by requested transactions the between consistency the check responsibility to is their From pointofview,duce good-quality analyses. this it suspicionsandpro- their substantiate transactions, suspicious detect have elementsneededto sers the advi- clients,financialinvestment knowledge oftheir in-depth nature activities and ofthe By their the brokers. orreinsurance insurance activitiesas oftheir bemadeaspart nals continueto - professio these by submitted obligations. ManySTRs itsAML/CFT respect to haswith sector slight regard this management the consulting,shows andwealth etc.) increases, capital growth transactions, nesses, external finance consulting activities (sale orhanding on of busi - corporate both appliesto which This observation, compared 32in2016), to isasource which ofconcern. (57 figure terms remains low the inabsolute reports, in2017 increased sharply advisers investment (+78%), financial by submitted numberofSTRs the Although Financial investmentadvisers professionals Fact sheet7–Financialmarket - the Monetary and Financial Code. andFinancial Monetary the Tracfin to be submitted out in the conditions set under must report financing, a suspicious transaction terrorist orare linked to imprisonment oneyear’s atleast by punishable from anoffence are derived assets these suspectsthat Ifan institution with. them entrust mers - custo their fundsthat ofthe origin the concerning bevigilant management companiesinvestment must management, asset regard discretionary to With etc. transactions, real estate to involving employee savings plans,suspicionsconnected fraud management ofassets, ofdiscretionary as part evasion Tracfin.tax to Theseincludesuspected reported of types of cases variety the ber of areas, explains which inanum- management companiesInvestment operate ment companies were 56% ofallSTRs. responsible for manage- investment entities:three reporting afew just (63 in2017). of work were Asin2016, the reports most 2011), remained submitted low numberofreports the (continuoussince rise this Despite year). previous the management companies investment by (5%overmitted In 2017, sub- increase inSTRs another was there companies Investment management

25 TRACFIN - ANNUAL REPORT 2017 26 TRACFIN - ANNUAL REPORT 2017 within the non-financial sector in2017within the non-financial entities Breakdown ofreporting within the non-financial sector in2016within the non-financial entities Breakdown ofreporting REPORTING ENTITIES 1.2 NON-FINANCIAL SECTOR Receivers andtrustees,20.2% Receivers andtrustees,26.6% Sports agents, 0.0% Online gaming operators, 0.5% Commercial registered office providers, 0.2% Lawyers, 2.0% Bailiffs, 0.1% Auctioneers, auction houses, 1.4% Dealers in precious goods, 0.4% Auditors, 3.5% Real estate professionals, 2.2% Chartered accountants, 11.8% Organisers of games of chance and sports and horse-racing betting, 7.3% Sports agents, 0.0% Online gaming operators, 0.8% Commercial registered office providers, 0.7% Lawyers, 0.0% Bailiffs, 2.4% Auctioneers, auction houses, 1.5% Dealers in precious goods, 0.2% Auditors, 3.3% Real estate professionals, 3.9% Chartered accountants, 11.1% Organisers of games of chance and sports and horse-racing betting, 5.6% Casinos, 16.1% Notaries, 27.9% Casinos, 20.1% Notaries, 30.3% of a copy of a notarial deed; rather, expression it is the of a notarial of a copy merely shouldnotconsist offacts statement the beaware that needto dence ofsuspicion.Notaries - evi andtangible analyses lacking incomplete, are reports the often, Alltoo of attachments. were devoidof quality. halfofallreports Nearly improvement room for considerable intermsstill is there reveals that ananalysis rise, isonthe ries - volume ofsubmissionsfrom nota the Although ofshares. ofleases andtransfers transfers extent, lesser amuch and,to transactions dential real estate resi- concerned They reports. submitted ofthe matter represented which 97%transactions, subject of the exclusively onreal estate almost focused Notaries remains acknowledgement ofreceipt confidential. the andensures that entry secure data for ERMES allows via SendinganSTR bined, 143 notaries. concerned all professions com for 256 inadmissible STRs the were deemedinadmissible.Of whosereports notaries numerous too still the for asanexample should serve procedures. paperless Thisembracing positive result are resolutely ERMES (81% in2017) notaries that shows via transmitted The ever-increasing numberofreports unevenly. very regions reported in other Notaries notaries. sentby 58%ofallSTRs account for regions alone These three profession. the by submitted began in 2016, that advances 13% reports with of the d’Azur region consolidated regions (15%). Est TheGrand region (30%)andProvence-Alpes-Côte Greater Paris camefrom the ofSTRs submissions. Alarge portion in disparities geographical There were noteworthy ofsuspicions. analysis quality ofthe the compared 1,546,455 with in2017. 17 rise. onthe constantly number of sales and fixed recordedyear is each assets as the and maintained, be encouraged upsurge must non-financial sector, This aheadof gaming operators. the leadingpositionwithin profession’s the scoring pointsince1998, highest under sactions, reached their - tran whoplay role akey inreal estate from notaries, an increase year. previous over of34% the Submissions in2017 –1,401 Tracfin, were sentto notaries by reports STRs a significant upswing in was there market, estate real were conditionofthe regardless submitted, ofthe some1,000 inwhich anumberofyears STRs After Fact sheet8–Notaries 1,366,000 in2016 inFrance salesregistered (source: DGFIP), 17 Itshouldalsobereflected in - -

Awareness-raising efforts by Tracfin by efforts Awareness-raising signs. ofwarning note take andto risks, laundering money to them expose to specifically identifysituationslikely to enable notaries office.Thisapproach will notary level ofeach at the mapping up risk set bemadeto needto still Efforts issues. evasion tax inconnectionwith primarily fraud, use of shell companies) and revealed cases of tax buyer, (a«straw» the transaction the of or beneficiary real impossible identifythe to itwas tions inwhich situa- alsodescribed sanctions.They or international national subjectto persons by purchases ofreal estate duly reported year, the during notaries Nevertheless, inquestion. transaction the to elements relating financialandcontextual the for sameistrue beimproved andthe still alarge to extent, Tracfin sent to knowledge information could customer The lawfulness ofatransaction. the of adoubtasto in 2017. 18 rements for the past two decades. past the rements for AML/CFTrequi- the hasbeensubjectto that profession The 2018year a be an ambitious for year should thus year. end ofthe the CSN by the by bepromoted casestudies concrete delines with gui- that itisimportant ofawareness-raising, In terms profession. the policyatalllevels of AML/CFTtraining sustainable itisaccompaniedshould yieldresults provided a by that and Thisapproach shouldbeencouraged analyses. andimprove guideprofessionals yearto the their during deploy anITsystem CSNplans to In addition,the involved inacase. parties on the information obtaining andfor persons tically exposed poli- detecting for tool willbearelevant that database shouldhave acommercial accessto In 2018, notaries occasions. –CSN)onseveral dunotariat rieur (Conseilsupé- HighCouncilofFrenchfrom the Notariat representatives with alsomet TheService département. Hauts-de-Seine the for ChamberofNotaries the before II,Nîmesand of Douai,Agen, Aix-en-Provence, Paris ofAppeal Courts ofthe jurisdictions actionsinthe took canactivelyfession fulfilitsobligations. In2017, Tracfin pro- notarial the bodies,sothat sion’s representative - profes helpofthe the upwith haveyears beenstepped Six awareness actions carried out by Tracfin with respect to notaries Tracfin out by to notaries respect with Six awareness actions carried 18 over the past few few past over the

27 TRACFIN - ANNUAL REPORT 2017 28 TRACFIN - ANNUAL REPORT 2017 • • • • Tracfin’s investigations revealed: Tracfin’s investigations • • • • • characteristics: sameunusual displayed allofwhich the transactions, of these a large for part representative buyer’s as the appointed was region, Greater Paris employed amunicipalityinthe by was €8million.Mr X,who ofmore than atotal from BankZ,for by loans hadbeenfinanced transactions Allofthe notary. the same by had been certified that transactions real estate dozen several The Unit concerning received information The facts inthe real estate sector laundering andmoney Fraud, forgery 2 Case study repair, consulting, metal trading, etc.) unrelated to real unrelated to repair, etc.) trading, consulting,metal fields (automotive companies active several invarious to transferred €2million)was (nearly money ofthe The rest sellers the refunded to was saleprice ofthe A portion bank allfundsreleased the deposited by The notary from amountsborrowed BankZ andthe purchase prices the properties’ gap between A significantand recurring documents from BankZusingfalse Loans obtained ever livingthere buyers the without purchase Quick and resale of properties, office notary’s from the far located Properties loan the financial to resourcesrepay necessary the lacking Buyers buyers the mation concerning address infor- andprofessional orobsolete Incorrect Payment of sale price loans in property €8 million Property Notary Bank Z sellers 2 3 Mr X loan payments loan payments of monthly Payment borrowed: $2million Excess amounts property loans to obtain False documents

• • companies’ signsrelatingWarning to bankaccounts: • • • BankZ by loansgranted signsrelatingWarning to • • • anotary: signsfor Warning Warning signs organised crime. inconnectionwith laundering andmoney fraud forgeries, anduseof forgery for courts the to referred This casewas • 5 from BankZ repay sumsto employees. loans Theseindividualsusethese multipleindividualswhoare not to ofsalaries, suggestive sameamounts, the chequesCompanies for issuingmonthly payments from anotary non-justified fields,includingsubstantial, in various accountsofcompanies operating inthe noted Irregularities customers have their that noknown connectionwith parties from third loanpayments viapayments makingmonthly Borrowers loanapplications Similar anomaliesinthe are unrelated intheory, manyloanswhich, relating to transactions real estate certify to samenotary Use ofthe purchase price property’s the socio-economicprofile and buyer’s Incompatibility ofthe livingthere buyers the without purchase Quick and resale of properties, office notary’s from the far located Properties BankZ by loanpayments granted many monthly above-mentionedThe repayment, companies, the by of managed MrY by part, most the for activitiesandwere, proceeds ofcriminal the of laundering Thesecompanies were transactions. alsosuspected estate 1 4 of companies properties to finance Borrowers Manager Money recycling Group Mr Y

DGFiP). 21 CDC. are ofprofessionals notrequired have to anaccountatthe categories these because,unlike notaries, particularly (AJMJ) orauctioneers, receivers andtrustees court-appointed concerned reports 20 Few 19 base. customer to itsnotary flows related exclusively concerned CDCalmost the by submitted STRs AML/CFTteams. of the in 2017, part aswell asgreater onthe professionalism market the real estate the of It isareflectiongrowth of recent years. in trend observed the upward 20% increase confirms 1,023 received, compared STRs 847 with in 2016. This Consignations (CDC), with Caisse des Dépôts et the by submitted As in2016, anincrease inreports was there entities.) accounts ofreporting managementdiscussed here the inconnection with of itssubmissionsare sector establishment, a financial CaissedesDépôts the (Although et Consignations is et Consignations Fact sheet9–TheCaissedesDépôts the real estate sector represents. sector real estate the that significantamountsofmoney regard the to with issignificant,particularly potential The CDC’s reporting duediligence measures. appropriate takes CDCusefully identifiesPEPsandconsequently the were madein2017.analytical efforts More specifically, beimproved, couldstill significant quality ofreports the although Overall, documentation. supporting were all Nearly with submitted of them transaction. and the on customers lity, information and contained were of good qua CDC’s STRs speaking, the Generally typology involved undeclared assets. foreign common most nature the (some30%).Assuch, a tax of quite often was offence underlying the transactions, real estate to do with them had significant number of CDC’s obligations in terms of customer knowledge. This ofcustomer CDC’s obligations interms the fulfil to are necessary requests Such CDC’s requests. the respond refused to to a large numberofnotaries in2017 submitted ofSTRs An analysis alsoshowed that The number of STRs rose 15% by in2016. ThenumberofSTRs In 2016, real estate transactions totalled €200billion(source: totalled In2016, transactions real estate 19 21

20 Although a Although -

tax evasion risks to which these areas are exposed. areas are exposed. these which to risks evasion tax and laundering money ofthe CDC’s analyses about the questions raises which from France, Overseas reports alow of level (70%).There was reports transaction lion’s share of suspicious the regions for accounted region andGreater Paris North-West The South-East, €100,000 ofbetween transactions with and€500,000. do hadto ofSTRs sactions over €1million.One-quarter (37%)- tran related to An increasing numberofreports notary. the by inparallel reported CDCare rarely the by reported more problematic astransactions and is all the STRs, submissionofunsubstantiated the leadsto trend thus matters. inAML/CFT two groups outhow the willcooperate sets 2012, which CDCinApril andthe Association ofNotaries National the upbetween drawn was aCharter As such, the CDC. the nameof STRs onbehalfofandin CSBs file area. geographical their within département accounts inevery bank customer’s maintaining in connectionwith CSBs are processing responsible bankingtransactions for and inRéunion Réunion for andMayotte. Antilles-Guianazone the for created inMartinique Versailles. Recently, were pooleddepartments Mâcon,Rouenregions and inAngoulême, Metz, France’s are five there mainland France, CSBsserving 2014. upinSeptember set was (CSBs), which In Centres ofBankingService network DGFiP’s on the AML/CFTrequirements, CDCreliesWhen itcomesto the AML/CFT OF THECDCWITHRESPECTTO THE ORGANISATIONAL STRUCTURE 29 TRACFIN - ANNUAL REPORT 2017 30 TRACFIN - ANNUAL REPORT 2017 logies were few and far between amongst the STRs the amongst between logies were and far few Tax transactions. typo- amount ofthe the evasion andthe buyers profilediscrepancies of the between In 2017, concerned regularly areport reasons for the seemslow. this market, real estate the to non-financialprofessions related other by submitted in 2016. andSTRs region’s exposure ofthe Inview samenumberas the reports, suspicious transaction Provence-Alpes-Côte d’Azur (PACA) region sent 21 in the Professionals total. representing 56%ofthe region region 101 submitted The Greater Paris STRs, base. amore localcustomer with those to properties from agencies specialisinginprestigious spectrum: real came from estate across the Reports over €1 million. transactions do with –hadto total the 30%of –nearly year, the of56reports During atotal transactions. to high-value isnotconfined laundering risk ofmoney the that €500,000. Thisfigure shows oflessthan transactions related to reports Fifty-one buildingmanagement by agents. lesser extent, afar independentagencies and,to afew networks, agencies were by ofreal submitted estate The others In 2017, were only responsible 20reports. these for of banks. subsidiaries real estate the by submitted were not STRs Unlike most two previous years, the laundering. money fightagainst inthe plays sector real estate the role that central show the evasion tax by aggravated laundering high-profile cases of money professionals. Recent real estate amongst of reporting would beahigherrate have there fuelledhopesthat might market 2016, real estate upswing in the the on from involved. numberof professionals the Carrying volume ofsubmissionsremains insufficientgiventhe However, two-year trend (140%), upward this despite in2016.compared 84 to in2017:professionals Tracfin received 178 reports, real by estate submitted anincrease inSTRs There was professionals Fact sheet10–Realestate

the sector will continue its efforts. willcontinueitsefforts. sector the andthat professionals, ting obligations ofreal estate duediligence andrepor onthe nation ofinformation dissemi- the to ControlFraud (DGCCRF)willcontribute and Policy, Competition for General ConsumerAffairs Directorate the with joint actions taken that is expected 2018, For it AML/CFTsystem. entitiesinthe reporting by begreater participation must andthere risks, ring launde- money to isexposed sector The real estate forward. be carried must submitted, reports enhances the which k-bisassociation (extrait Thistrend,), web pages, etc.). of andarticles memorandum ofthe agreement, extract sales e-mailexchanges, (identitypapers, mentation docu- 2016, morewith supporting contained STRs Compared expressed. ornotclearly rarely suspicion was Inaddition,the transaction. andthe customer the respect to with incomplete often alltoo was of facts Thestatement qualityment asregards ofreports. the previous year,As in the room improve for was there led gifts. andconcea- properties ofundervalued risks identified Tracfinthat the given received, isofconcern which Monetary and Financial Code. andFinancial Monetary ofthe terms obligations underthe ofprofessionals the terms inconcrete explain to anddiagrams case studies Thisdocument willbeaccompanied bytransactions. leasing building management agents andproperty include obligations to scopeofreporting the expand to – notably willbeasked participate professionals to isinprogress, and sector obligations. Ajointdraft their fulfil helpthem to ausefuloverview with professionals sector. provide to berecast Theguidelinesneedto the real estate the landscape of significantly altered AllurAct Directive have andthe Laundering Anti-Money are from 2010. Fourth the Sincethen, Control andFraud (DGCCRF) Policy, ConsumerAffairs for Competition General Tracfinby the Directorate and jointly were recent drafted guidelinesthat The most PROFESSIONALS REALESTATEGUIDELINES FOR - -

professionals to continue efforts undertaken in2017. undertaken continueefforts to professionals encourage to documentisexpected maps. Thenew uprisk draw helpbailiffs guidelinesare to intended the suspicions; accompanied illustrations, by report ment to require relative legislationinforce the - to the explains obligations. It their fulfil helpthem to tool working AML/CFT obligations. as a The document is intended (CNHJ) are jointguidelinesonbailiffs’ developing Tracfin Justice the Chambre Nationale desHuissiers and funds. ofthe origin the suspicions asto to cash, givingrise in fee bailiff’s the settling sums, andhave dowith to modest concern received from bailiffs allSTRs Almost notspelledout. elementsare generally contextual and explained Suspicionsare rarely unsubstantiated. and brief are generally bailiffs upby drawn The STRs year. previous the electronically in 2017,transmitted compared 88% with were only 70%ofreports system: ERMES e-reporting make to useofthe have efforts slackened their Bailiffs economicandfinancial weight. strong such for regions with well below Tracfin’sexpectations respectively,PACA regions (4and5reports, in2017) is region and Greater Paris inthe bailiffs by submitted numberofreports hand,the other pectively). Onthe and Auvergne-Rhône-Alpes regions (56 and 31, res - Grand-Est inthe located professionals ofafew work the in2017 submitted Reports buted. were primarily - momentum is unevenly distri the sions reveals that breakdown geographic ofsubmis- of the An analysis on aregular basis. documentation laundering anti-money with ded bailiffs provi- years, several past has,over(CNHJ), which the deJustice Chambre Nationale desHuissiers ment ofthe involve trend shouldbeseeninlightofthe - This upward increase inrecent years. hasbeenasteady there 3,294 bailiffs (source: Ministry ofJustice). (source: Ministry 22 3,294 bailiffs entities, numberofreporting the with in comparison remains low (73 in2016 and109 in2017, a49%increase) bailiffs by submitted numberofSTRs the Although Fact sheet11–Bailiffs 22

regions ofwere uneven. various ofvolume, assubmissionsfrom the in terms Agreat date. to dealofprogress bemade remains to from Tracfin which Corsica, STR hasnot received asingle ifany. casewith Thisisthe reports, few high submitted 18%.by Moreover, are someareas where AML/CFTrisks from PACA were down 29%andthose by New Aquitaine from Auvergne-Rhône-Alpes 30%,those by region fell from the from the STRs inrecent years. off been falling 2016. regions, however, Submissionsfrom other have received. Thisrepresentsall STRs a17% increase over year, the 28%of active during cularly accountingfor - region were parti Greater Paris nomies. AJMJsinthe eco- thriving are from submitted areas with STRs Most entities. smallernumberofreporting much a lesser degree, and, to a casinos, with notaries par with non-financialsector, groups inthe highly-compliant on most beoneofthe continueto These professionals respectively). (995 and932STRs, 2016 between butplateaued in recent years, and2017 increasing (AJMJs)hasbeensteadily andtrustees vers recei- court-appointed by submitted The numberofSTRs receivers andtrustees Fact sheet12–Court-appointed •  TRANSACTION REPORT: SUBMITTINGBEFORE ASUSPICIOUS •  •  – – – – – – following contextual elements: contextual following the itcontains andthat itisdescriptive sure that ofFacts» section,making «Statement the Complete found, etc. found, ofanauction,amountcash amount paidaspart recovered, amountofmoney tab: «Summary» the under sumsinquestion the state Systematically K-bisextrait accountingdocuments,etc. , etc.), (nationalIDcard, identitypapers a mandate, from aruling, asanexcerpt such documentation, anyusefulsupporting Remember attach to A description of the suspicion ofthe A description suspicioustransactions ofthe A presentation suspicion subjectofthe are the that individualsandlegal entities ofthe A presentation

31 TRACFIN - ANNUAL REPORT 2017 32 TRACFIN - ANNUAL REPORT 2017 pany assets, the amount of the potentially fraudulent fraudulent potentially amount of the the pany assets, misuseofcom- mightbelinked the to that withdrawals of cash an estimate example, (for be fraudulent to amountssuspected ofthe anestimate to correspond (14%).tor Asareminder, amountsinvolved the should non-financialsec- entitiesinthe reporting other with in2016than high compared too butitisstill (54%), score involved. financialflows better the Thisisa report Moreover, AJMJsdid not by submitted 46%ofreports admissibility. report’s ofa in terms consequencespotential ofshortcomings and the in reporting, rigour need for underscores the appendices.Tracfin inthe attachments the reference to and simply a of facts a statement without reports ted of 2017, entitiessubmit- asmallnumberofreporting file. However, process the needs to the closing weeks in Tracfin that documentation supporting the come with now reports Most submit a report. to led them that duediligence andthe facts the state to now working suspicions, AJMJsare unexplained contained least, very entityor, reporting by lacked ananalysis atthe reports progress. many Whereas years inprevious definite hasbeen there quality ofreports, the When itcomesto outonFrench soil. carried practices or even predatory may reveal laundering cases of money funds source ofthe Indeed,the «sensitive» countries. provisions nationals of funds from by so-called the to attention shouldpay particular and trustees receivers court-appointed that believe tion leadsusto in2017 submitted - STRs right ofinforma and Tracfin’s of conciliation).Thisbeingsaid,ananalysis dates, proceedings and amicable procedures (ad hoc man insolvency ofboth aspart placeboth sactions took Thesetran- becriminal. appeared to whose origins andbenefits-related), as well asprovision offunds tax- (both involving public purse the andschemes, fraud fraud of misuse of company and of bankruptcies, assets AJMJsincludedmanycases by The typologiesreported 2013 83 receivers between andtrustees 2013 and2017 Number of STRs submitted by court-appointed Number ofSTRs 2014 101 - 2015

to the resources put in place by the Directorate General General Directorate resources the putinplaceby the to 2016The increase between and2017 canbeattributed level remains low. companies reporting 2,500 and (between 3,000), the numberofsuch estimated 2016. the with Incomparison 31 submitted Tracfin, sector to the 9 in STRs against hasbeenconspicuouslyoffice providers low. In2017, commercial activityby registered reporting Historically, office providers Fact sheet13–Commercial registered maps. uprisks draw asthey obligations, particularly their understand better to CNAJMJ, willenableprofessionals sessionsorganised the by as well asupcomingtraining beissuedin2018),AML/CFT obligations ofAJMJs(to the guidelinesrelating to The jointCNAJMJ/Tracfin information. tory manda- Tracfinthe the absenceofcertain and website on available electronic form lity were ofusethe lack 11%.it was frequent grounds The inadmissibi- most for entitiescombined,in2017 allreporting inadmissible for in 2016 declared roughly 20%ofallreports was AJMJs by submitted of inadmissible STRs percentage However, whereas the outthat, itshouldbepointed submitted. the data providesfor confidentiality and of security ahighlevel features ERMES system 76%with non-financial as a whole. Thesector of the entities used ERMES, compared reporting from these 41% platform: received online reporting of reports Moreover, ERMES usethe to reluctant AJMJsare still used. ofsuspensionpayments date may be atthe reported liability amountofthe the anycertainty, amount with these state Ifitisnotpossibleto provision, etc.). 528 2016 995 2017 932

but also – as previously noted in2016 noted but also–aspreviously initiatives to –to out, degree the ofcontrols carried anaudit),to subject to companies are inremits (only certain difference the to canbeattributed To difference this alarge extent, in2017,saction reports filedonly auditors 151. 514 submitted accountants Although suspicioustran- reveals disparities. andauditors accountants chartered increase in2016 noted (53%). The breakdown between the than alesserextent continues,butto of recent years accounting trend submitted by professionals. The upward In 2017, a 16% was there number of STRs increase in the accountants Fact sheet14–Auditorsandchartered networks. fraud to its permeability sector, onmanyfronts, asshown by isvulnerable which ofthis potential reporting the This demonstrates financialoffences. businessmanknown aforeign for by acquisitions viareal estate laundering a caseofmoney build madeitpossibleto andonereport schemes, fraud revealed submitted several reports mination ofthe - exa received Adetailed were investigated. thoroughly reports ofthe athird Unlike almost years, inprevious company address.the useof fraudulent company. casesalsoreported Several domiciled leaseagreement the by the compliance with grounds are onthe ofnon- submitted cion, andoften suspi or of the facts of the no analysis contain They companies substantiated. are, inmanycases,poorly these by submitted STRs From aquality standpoint, region. Greater Paris inthe providers wereregion. office by Theremaining submitted third Est came from alarge Grand businesscentre inthe uneven: two-thirds was ofSTRs origin The geographic Tracfin. a suspicion to report to CNS sanctioned a failure the time, 2016the first for and, officeproviders concerned officeproviders. Ninecasesincommercial registered brokers and real estate concerning received 62 reports since2014, that, In 2016, ithad CNSreported the obligations. imposes breaches ofthese sanctionsfor that authority National Commission (CNS), the Enforcement and the officeproviders, obligations ofregistered and reporting duediligence the Control monitors (DGCCRF),which andFraud Policy, Competition for ConsumerAffairs -

23 Source: INSEEasat31 December2015. improves. reports quality ofthe more the submit,the accountingprofessionals that more reports the that issues.Also,itappears criminal and tax-related Unit the towards have helpedsteer facts of statements carefully-drafted the these, For one STR. whohave already atleast submitted among accountants or legal entities.However, apositive shift was there identificationofindividuals oreven the documentation supporting without described are briefly Thefacts tiated. andsuspicionsare notsubstan- analyses panied by of quality, are not accom In terms many reports too located. 134,000, where more companies than are département Seine-Saint-Denis from submitted the was a single STR number ofcompanies. Thus, the inrelation to reports of and low proportions Martinique), AML/CFT (Corsica, of identifiedassensitiveterms in nals indepartments TracfinSTRs from- accountingprofessio of alack noted Provence-Alpes-Côte d’Azur hand, other regions. On the region, Auvergne Rhône-Alpes, and Greater Paris the economically, including are thriving tion onzonesthat Tracfin- to strong concentra a shows reports submitted have entitiesthat breakdownThe geographic ofreporting potential. reporting still considerable profitthere organisations), is companies, SMEs,non- are (listed audited that structures of variety audit(220,000)andthe astatutory subject to numberofFrench are the companiesprofessionals, that of accounting ber of companies employing services the thelarge num- (€2.6billion), infinancial flows question Moreover,20,000 accountants). volume of given the and 13,500 (nearly number ofprofessionals auditors in 2017tants remained low compared overall the to and accoun auditors submitted by The volume of STRs groups. regional various by from initiatives isolated undertaken come continuedto awareness-raising for (H3C); impetus HighCouncilofAuditors unaware the ofsimilaractionsby was Tracfin accountants. halfofallchartered at least concerned They specificcontent. with forward carried (CSOEC)in2015 Accountants were Council ofChartered in2015 Governing tiated ofthe AMLCommittee the by ini- accountants chartered sessionsfor Thus, training remain which unequal. professions, both bodies for andrepresentative authorities supervisory mobilise the 23 - -

33 TRACFIN - ANNUAL REPORT 2017 34 TRACFIN - ANNUAL REPORT 2017 the weak signals of terrorism anditsfinancing. weak signalsofterrorism the detecting meansfor of€153,000,excess isanimportant that receiveof non-profit publicsubsidiesin associations accounts the whocertify The unique positionofauditors, financing. ofterrorist in terms risk at fundsfrom acountry financedwith of worship ofaplace construction the amount inconnectionwith the company investment hadsettled areal estate that show ableto was auditor the work, electrical paid for In 2017, hadbeen auditofacompany that the during financing. terrorist fightagainst in the that non-profitwere organisations of real interest within atypicalflows highlighted reports Several offences. ofunderlying reveal France ofawidevariety throughout control andauditcompanies they that fact and the Accounting professionals’ comprehensive vision, ACCOUNTING ANDCFT PROFESSIONALS andawareness. areas oftraining the in groups both sations of professionals, for particularly organi- representative ofthe andleadership support continuein2018 to This trend the isexpected with organised crime. with inconnection laundering andmoney fraud forgeries, ofuse the offences Tracfinto uncoverthus able was accountant, from a chartered areport Thus, following number of types of fraud. also an increase in the was In2017,cases ofmisusecompany assets. there detect makingitpossibleto includedinSTRs, regularly are accountsofshareholders also current involving the VATinvoices inconnectionwith Transactions fraud. whouncovered casesoffalse accountants chartered camefrom high-quality reports year, the certain During accountingprofessionals. by submitted STRs of the As in 2016, typologies represent a significant share tax

origin of funds used to pay adeposit. offundsusedto origin the determine and also to evasion, large-scale tax to may have ofasaledeedsthat given rise context the offundswithin destination alsorevealed the They payout. ofaninsurance of abuseweakness aspart asuspicion substantiate to example, it possible,for CARPAs in2017 the sentto requests Information made financing. terrorist and laundering money the fight against efficiencyin for question secrecy professional compliance and the with instrict forward beganwhich in2016, becarried must CARPA representatives, with cooperation constructive This beusedappropriately. suppliedto information the responses provided allowed rapid CARPAs andthe the 1 December2016 French into law. of Thecooperation Directive of Laundering Anti-Money Fourth ting the order enac made possible the by was that an option Funds (CARPAs), Settlement Lawyers’ Financial various the respect to timeswith four information to its right year, the exercised Thus, during Tracfin CFT system. involvementof increasing AML/ the oflawyers inthe are developments capable legislative andregulatory and authorities regulatory only the that It appears in France. laundering money fightagainst and the of Tracfin’s activities,concerns heart are which at the ortrust real estate involving financial, transactions complex arelawyers likely beinvolved to inparticularly phenomenoniscounter-intuitive, asThis structural Tracfinto in2017. not submitting a single by report AML/CFTsystem the to itsindifference confirmed profession from the lawyers, 2016Although STRs offour receipt the marked by was Fact sheet15–Lawyers regard onlinegaming. to with momentum, particularly its forward maintained sector betting in2016,trend sports observed andthe growth continuingthe by itsrecovery ispursuing sector casino enjoy a same dominant position. time, Atthe the 70%ofgross nearly gaming for revenueaccounted – in2017 –which exclusive rights with Gaming operators gross gaming revenue ofover 2%. in2017,confirmed growth in registered sector asthe was gambling sector ofthe economichealth The robust professionals Fact sheet16–Gamingsector -

for facilitating FDJ’s reporting activity. reporting FDJ’s facilitating for d’État. However, ofvalue were developedare typologiesthat still the Code,were annulledon4May 2018 Conseil Security the by Internal L. 321-1 and L. 321-3 basis French of Articles on of the the authorised gaming responsible andbetting, for anddirectors representatives AML/CFTobligations incumbentuponlegal the relating to Tracfin * assets. misuse ofnot companyheld in bank accounts and the by cash financed revealed gaming practices STRs best In2017, origin. of cashcriminal processing ofthe the circulation address issuesofthe effectively possible to entitiesmadeit (few) these by submitted and analyses Thedocuments isnotmerely theoretical. practices gaming andtheir customers abouttheir information simple andreport gather abilityto sector’s the that diligent casinos show most the by submitted reports few asthe more regrettable are allthe These shortcomings ornon-existent. incomplete rally Moreover, example). nings, for were gene analyses - the win concerning books establishment’s as(such the are simple conductinginvestigations butessentialfor casinos were documentswhich notaccompanied the by by submitted guidelines.STRs inthe available tools the entitiesdid notmake sufficientuseof reporting Most improvement.room for significant offers which reports, inthese contained the analytical work to bedoneon figures,remains work involvementthe the ofcasinosisreflected in Although up reports.* in writing and assistance analysis for tables with staff casinosandcompanies, provided which their certain and Tracfin. Theseguidelines wereby passedonlocally andGamingUnit Racing (SCCJ) Central the by drafted secondhalfof2016,the ofsector-specific guidelines during distribution, the to attributable This ispartly year. the during oneSTR submitting atleast entities increasingly 78% widespread, with ofreporting year. previous isbecomingthe Inaddition,reporting gaming (957) circle sector grew 46%compared by to in2017 submitted The numberofSTRs casinoand the by The casinoandgamingcircle sector circle sector. received casino and gaming from the number of reports year. growth inthe strong Thistrend ismainly dueto entities represented a 37% increase previous over the The 1,226 reporting gaming by sector submitted STRs The joint guidelines of the Central Racing and Gaming Unit Racing Central The and joint guidelines of the - to FDJ’s AMLdepartment. FDJ’s to madeavailable tools new ofthe ajointstudy shops for continue in2018, work- planningoftechnical the with andTracfin,to expected are AMLdepartment FDJ’s by Exchanges quality, concerning were which initiated sensitive pointsofsale. most the to adapted are applicationofduediligence measuresallow that the approach should arisk-based Lastly,analyses. taking outmore thorough entities carry reporting reports, submitting to prior Itisalsohopedthat, tickets. repurchase of winning issues around the complex the anemphasis onscopingout with networks, crime specific issuesrelated to groups andorganiseddetect able toIn 2018, will be better FDJ it is hoped that problem ofrepurchase ofwinningtickets. regard the to with particularly FDJ, issuesfacing dering laun- of money and prevent understanding a complete The typologiesidentifiedare notsufficiently diverse, through cashdeposits. gaming resources beingjustified cases of illegal describe regularly The company’s STRs reports. ofFDJ’s asignificantproportion for accounted ned increasesturnover of some points of sale in the In 2017,- ofunexplai reports years, asinprevious couldnotbeachieved. sensitive gaming operations most progress inidentifyingthe expected As aresult, the practices. itsreporting increase andperfect to tools designed the development ofIT finalise to frame, initialtime- the unable,within company was one –the asatransitional 2016 described FDJ that –ayear After samenumberasin2016.essentially the in2017, 120 submitted desJeux(FDJ) La Française STRs La FrançaisedesJeux the typologies reported were more diverse, opening the were more opening the diverse, typologies reported the improvement Lastly, analytical work. inupstream notable also There was collection and retrieval. information has finally allowedthe areas of progressto bemadein year. AMLunit provided the tools to ofthe Optimisation previous 8%over anincreasesented ofmore the than The 111 received repre- reports suspicious transaction quantity andquality.of both progress secondhalf of 2016, it had made inthe in terms In 2017, MutuelUrbain (PMU)continuedthe Paris PMU report, continued to deteriorate in2017. deteriorate continuedto report, tive year’s organisations, were which outinlast pointed - representa sector’s the relationsshould benoted, with SCCJLastly, the frequent with exchanges although

35 TRACFIN - ANNUAL REPORT 2017 36 TRACFIN - ANNUAL REPORT 2017 the online gaming vector by complex networks involving networks complex onlinegaming by vector the useof the entityhighlighted areporting by submitted areport following courts the to areferral As such, accounts. between ofmoney andtransfers system banking the into origin introducing cashofcriminal number ofsector-specific Theseinclude vulnerabilities. Directive have acertain highlighted Fourth ment ofthe enact- ofthe discussionsheldaspart the Nevertheless, transactions. andof financialflows gaming monitoring the concerning adequate legal framework down an lays onlinegaming sector regulation ofthe Act 2010-476 competition opening and up to on the gamingOnline laundering. money the fight against in PMU could become a flagship partner identifyingitscustomers, commitsto If itdeterminedly submission. to analytical sectionprior STR’s improving an sensitive pointsofsaleandsystematically most of the increased surveillance networks, nised crime issuesinvolving specific detecting groupsto andorga- shouldbepaid attention ofthis, will continue.Aspart upswing in reporting In 2018, this that itisexpected ofillicit resources. justification the to related a number of STRs Like PMU submitted FDJ, crime. undeclared were some work, of which linked organised to goodsand handlingstolen misuse ofcompany assets, as issuessuch into investigations significant door to

vis such accounts. vis such duediligence defineheightened measures vis-à- must mapping,and uprisk anddraw criteria alert establish must ving multipleplayer accounts,stakeholders issuesinvol complex - grasp inorder to ofthis, As part activities. training and involvement the submitted, ofstakeholders STRs in2018, volume overall of sector ofthe the interms of expectations As a result, will be specific there self-imposed duediligence obligations. complyingtheir are truly with operators these whether in 2017 ordidsoonly rarely, asto concern iscausefor didnotsubmitasingle report whoeither stakeholders, leading certain by weak participation Thevery STRs. possibilityofgreater volumes opensthe ofbetting, sports by driven economichealth, robust sector’s Moreover, agreaterlead to number ofreports. the should benefits sector from the which transactions gambling bidsandtheir accounts,their fund their how they about customers, information that It is true results shouldbeseenincontext. these Nevertheless, two operators. year. previous the were by submitted ofthese Most (ARJEL)represented a90%increase over Authority have OnlineGamingRegulatory beenapproved the by entitiesthat reporting by submitted The 38STRs origin. ofcriminal money laundering of purpose a large the numberofplayer accountsfor

invested in several life insurance policies taken out for the outfor policiestaken insurance life inseveral invested MrZ’s accountsand into consolidated These fundswere then his companies. receivedCompany €1.2 nearly Athus millionfrom MrXand YandZMrX’s companies. Mr Y, brothers the Mr Zand Concurrently, between sectors. were there manyfinancialflows andreal estate construction inthe ofcontacts pany’s network the com- one ofMrX’s companies, benefitfrom enablingitto Company Asignedafinderagreement with inexperienced, was upanditsmanager ithadonly recently beenset Although The facts companies. oneofhisconstruction tion with MrXinconnec- with MrZhaspartnered past, Inthe services. andbusinessnetworking provides consulting,businesssupport manager ofCompany andthe Mr ZisY’s brother A,which companies hisfamily. for viaone of Mr ship. In addition, he purchased a property champion - American inaSouth athlete Mr Yisaprofessional club. sports manager of a professional and general board of directors the sector. of chairman He isalso the and real estate construction headofagroup inthe ofcompaniesMr Xisthe operating The participants policies. insurance inlife fundsbeinginvested well asto as sectors, and real estate sports professional in the managers their between entitiesand to financial flows Tracfinwas alerted inthe football sector laundering Misuse ofcompany assets andmoney 3 Case study Company A €10 3 0k Mr Z 4 4 Life insurance Brothers Cash €60 €20 policies 0k 0k 1 "Fictional" finderagreement 2 X’s

€40 • • • • Warning signs assets. and misuse of company laundering of money indicators turn, €100,000) (almost purposes are, personal in pany’s funds for MrZofhiscom- useby systematic €200,000)andthe than The widespread Mr Y, use of cash by Mr Z and Company A (more YandZ. thers bro- Mr X and the between of services an exchange similar to these flows are football club, to Mr X’s financial support YandZprovided ofbrothers family agent. Sincethe sports andMrZcouldactasY’s «unofficial» purposes personal for MrXcouldusehiscompanies’ funds Under arrangement, this estate). and real sports (professional sectors from highly profitable launderfunds to chance the Mr Y andXgivingthem role, actingasalinkbetween MrZplayedscheme, acentral particular Company AonbehalfofMrX’s entities.Inthis provided by services reality ofthe doubtonthe ved cast invol- companies, agreements ofthe andparties An analysis Tracfin’s investigations oneofMrX’s companies. €400,000 to YandZ.Mr benefit ofMessrs transferred for hispart, Y, M 0k r insurance policies. insurance Frequent widespread useof life useofcashandthe structure recently-created Large-scale agreements signedandamountsreceived a by sports andprofessional asconstruction unrelated, such are theoretically that sectors Connections between purposes personal for money useofthis andthe managers between their companies and Significant financial flows Y €80 3 0k €40 0k 2 companies group of Manager Mr X's M r X

37 TRACFIN - ANNUAL REPORT 2017 38 TRACFIN - ANNUAL REPORT 2017 involvement of reporting entities in AML/CFT matters entitiesinAML/CFT matters involvement ofreporting reveal an inverse relationship the Statistics between in 2017. filed of entitiesreports that list absent, from the bined, com- allsectors profession 20intheir top among the ranked Auction Houses (VSOs), traditionally Voluntary Normandy. by year this Alpes, followed dynamicregion remained Auvergne-Rhône-second most sector. The art from the submitted half ofallreports – almost Ten were 29STRs responsible for stakeholders region -region. Greater Paris were inthe located report 2017,For 31 ofthe one-third a entitieswhosubmitted However, result shouldbeseeninperspective. this Auction Houses (SYMEV). Union the by of Voluntary and December, ahelpfulcommunicationeffort following 51of the received inNovember were concentrated reports year, the throughout regularly unlike in2016, whenhalf year. the throughout were submitted its STRs regularity behaviour is reporting The positive sideofauctioneers’ with too few STRs received Tracfin by STRs few too (67with andauctionhouses, activityofauctioneers reporting situation has had little impactThis excellent on the 37% for accounted total. ofthe alone.Web-based andcollectibles»sector sales «art €3 billion, including €1.47 to amounted the billion for combined, amountofauctions,allsectors The total United Kingdom. andthe United States behind China,the worldwide, fourth ranks which inFrance, market art of the economic importance Council (CVV) reveal the Auction Voluntary The 2017 the publishedby figures auctionhouseshave traditional adopted. that salesmethod significant upswingine-auctions,anew a to isalsoconnected auctionsector momentum ofthe forward Thestrong investment. as well asatax-free circles, wealthiest especially in the prestigious, is both art rates; especially low by interest of liquidity fostered abundance ageneral These goodresults canbeattributed Claudel collections). Givenchy and CamillePrat, hammer (including the the major collectionsgoingunder houses combinedwith major auction ofthe goodhealth the dueto cularly parti- market, 2017 art world the a good for year was and auctionhouses Fact sheet17–Auctioneers Combined total for both auctionhousesandauctioneers. both for 25 Combinedtotal 24 2017 annual report by the Voluntary Auction Council. 2017 Voluntary the by annualreport 26 were under-represented, if not completely 24

25 in2017).

National Auctioneers Council (CNCPJ), the Voluntary National Council(CNCPJ), Auctioneers Voluntary the bodiesasthe such with activities,meeting raising In 2017, andawareness- continueditsefforts Tracfin AML/CFTefforts. to usefully contribute improve professionals are to to sector if they art for isroom there are proof sector that art anomalies inthe on These reports accountants. and chartered notaries receivers, companies, court-appointed insurance banks, Tracfin. There in2017,were 163 such reports mainly from to STRs art-related entitiessubmitted reporting Other liquidation. company’s court-ordered ofa aspart observed was which assets, and itsfixed the company in officialactivityof question the between havens and discrepancies in tax located structures involvement about the of Unitthe received reports of weakness were Tracfin’s brought to Finally, attention. likely saleofitems result from to abuse cions aboutthe of suspi- and some reports thresholds authorised the Attempts make to cash payments of inexcess reported. were beneficial owner ofatransaction concealing the by use ofbankcheques likely cloudatransaction to payment. Casesofthe accountissuingthe der ofthe hol- successfulbidderandthe nameofthe the between frequent discrepancies to typologiesrefer The most to use. difficult also makes reports these facts of the understanding the help with to documentation absence ofsupporting The vague. andextremely isshort offacts description the often and usable, all too be substantiated to found were someanalyses itself,although report regard the to beaddressed. quality With issuesneedto report ring, launde- suspicions of money TracfinFor to substantiate 27 CVV’s in-housewebsite. frompublicly the available Auction Council(CVV), 26 According a2016 to Voluntary the by ranking equal amountauctioned. share of47% total ofthe of2016, from that hadan both inwhich differs sectors equipment» and «second-handvehicles andindustrial andcollectibles» «art This breakdown the between Tracfin. received by STRs ofthe third final sales make upthe vehicle relating to non-residents. Reports concerned andcollectibles»sector, «art andhalfofthese the with do hadto Tracfin to submitted Two-thirds ofreports risks. laundering money to exposed most the and are therefore large sums very are dealingwith stakeholders as these turnover. moreand their worrisome is all the This fact 2016 annual report by the Voluntary Auction Council. Voluntary 2016 the by annual report 27

few enforcement decisionspublishedon its website enforcement few the have implemented AML/CFT measures. Infact, rity - entitiesunderitsautho reporting the onwhether check outasingle CVVhasnotcarried creation in2000,the Sinceits authority. andenforcement as asupervisory CVVinitsrole the by more comprehensively supported entities would benefit Tracfin from being and reporting both by actionstaken the bewelcomed. Ingeneral, to initiatives are various SYMEV’s scope,the limited their actions. Despite are awareness-raising receptive to They AML/CFTobligations. implementingare opento their discussionshave auctioneers These fruitful shown that (CNE). Experts National Council of Art and the (CPGA) Committee Galleries Art Professional the (SNCAO), Galleries Art andContemporary Second-Hand Goods,andModern National Union Trade(SNA), the for inAntiquities and National Union the ofAntique Dealers Houses (SYMEV), Auction Union ofVoluntary Sales Council(CVV),the

art sector. art the financingin andterrorist laundering money against fight the concerning isbeingdrafted letter informational Lastly, an galleries. andart antique dealers (DGDDI) for andExcise ofCustoms General Directorate the and by salesprofessionals, voluntary CVVfor the guidelines, by place. This will involve take to developing expected 2018, entitiesisFor areal mobilisationofreporting law since2001. professionals who have by the been subject to system AML/CFT ofknowledge lack ofthe revealed astriking also galleries andart antique dealers Discussions with two missions. out the if need separating be by priorities, address both meansto putinplacethe must everyone issuesinvolved Given the inAML/CFT, laundering. money incombating than profession regulation ofthe general in Council is more interested the tions. This that shows mainly involved obliga VSOs’ breaches ethical of the -

39 TRACFIN - ANNUAL REPORT 2017 40 TRACFIN - ANNUAL REPORT 2017 The courts, legal courts and CID officers may also submit information to thesamepurposes. may for alsosubmitinformation andCIDofficers Tracfin legal courts The courts, •  •  itsduties,Tracfin has: ofperforming purposes the For entities. from these information and canrequest outitsmandate, required carry to information allofthe mandate, apublicservice entitywith Code,andanyother Courts L.134-1 inArticle French to organisations ofthe Financial referred the institutions, government-funded authorities, L.561-23, local The Unit, ismentionedinArticle departments, which government initiative receives, ofcentral atthe L.561-27ARTICLE OFTHEFRENCH MONETARY ANDFINANCIAL CODE adecrease of8%overreports, the previous year. In 2017, Tracfin received 1,011 administrative tigations Tracfin. by inves- in-depth and can be used as a basis for Reports, asSuspiciousTransaction have samelegalway value the inthis transmitted duties.Reports oftheir tions aspart by activitiesidentified money-laundering with connected TheUnit mandate. alsoreceives reports public service a entitywith oranyother ment-funded institutions - govern local authorities, departments, government mandate. Theseinclude bodies with apublicservice publicbodiesor from various receives information Tracfin also reports, Aside from suspicioustransaction 2. ADMINISTRATIVE REPORTING including data concerning ongoing court proceedings but excluding those relating to persons registered asvictims. registered persons relating to those proceedings butexcluding ongoingcourt concerning including data Procedure, CodeofCriminal 230-6ofthe outinArticle set data processing ofpersonal the ofaccessto 2) Adirect right taxes tax assessments,auditandcollectionof of the purposes for filesused ofaccessto 1) Adirect right andprofessional associa- authorities supervisory STRs being submitted to Tracfin. to beingsubmitted STRs CSPA the with continuedin2017, resulting inquality on numerous occasions.Thehighlevel ofcooperation the by ACPR STRs hadbeennoted file to whose failure 2016 oversight oftwo major stakeholders related to AMF,the in exchanges stepped-up a27% drop, after ACPR the were and by submitted of280reports A total inparticular. onecourt to canbeattributed 89, which from 149 fell which to from courts, ofreports terms in a40%falloff was there order fraud, about transfer DGFIP the discussionswith to thanks 566, particularly (DGFiP,Finance increased from 500to DGDDI,DGT) Economy and the for Ministry community and the intelligence inthe partners departments, government received from central numberofreports Whereas the allows financial reporting entities to submit entities COSIs. financial allows reporting that system the ERMES e-reporting profile in is the 28 A«reporter» reporters. ofnew arrival over previous year. the the mainly due to This was an18.6% transactions, increase fundtransfer ting to In 2017, Tracfin received some3.3million COSIs rela- regarding transfersoffunds disclosures information Systematic subjectofaCOSI Tracfin. alsobethe sentto must €10,000 ofmore than onemonth tive withdrawals within orfrom depositaccounts,andcumula- into withdrawals Cash deposits and and credit institutions: banks for Banking Act ofJuly 2013, introduced obligation anew oftheThe Decree of25March 2015, issuedaspart month. per calendar and €2,000 per customer per transaction €1,000 exceed currency, transactions whenthese digital or using a acash transfer out through sactions carried - tran were fundtransfer transactions funds. Thefirst ofthe source ordestination orthe country the due to financing andterrorist laundering ofmoney a highrisk identifiedby order, transactions, as presenting certain to sendTracfin relating must which information institutions, currency credit, payment for anddigital (COSI) system CommunicationofInformation Systematic duced the Regulation ofBankingActivities Act of26July 26intro- Act 2013-100 2013 and Separation and the of 28 January (COSIS) 3. SYSTEMATIC INFORMATION DISCLOSURES 28 More specifically, recorded

networks). asorganised typologies(such crime more complex family, economically identify orby areted alsousedto areindividuals apparently or entities that unconnec can link up which visualisation tools, New network cases underexamination. in the enhance cluesfound to is used This data America. in South from a country drugs saleof andthe country ments from aWest African announce- real estate fraudulent from Asiancountries, items purchase ofundeclared goodsandcounterfeit andincludethe are quite varied, The typesoffraud ongoinginvestigations. to can helpprovide clarity similarcases grouping schemes; together of fraud types of certain extent the below) can reveal or confirm (see flows financial ofthese analysis A geographic COSIs.in the mentioned beneficiary another or redirect ittowards asuspicion confirm to legal entitiesmentionedinSTRs aboutindividualsand enhanceinformation in order to gative COSIs powers. Unit received the are by checked give Tracfin They investi heightened AML/CFT risks. are that transactions andconcern of objective criteria basis onthe COSIs are transmitted STRs, to In contrast 21.5%.by offundsgrew 17.9%, by transfers andfundreceptions - -

41 TRACFIN - ANNUAL REPORT 2017 42 TRACFIN - ANNUAL REPORT 2017 COSI Fund Transfers –Recipients (number) COSI Fund Transfers –Senders (number) COSI Fund Transfers –Recipients (invalue) COSI Fund Transfers –Senders (Invalue) 43 TRACFIN - ANNUAL REPORT 2017 44 TRACFIN - ANNUAL REPORT 2017 Monetary and Financial Code. Code. andFinancial Monetary L.561-2 7°ofArticle French in1°to ofthe listed persons names of the opened in the of those exception the with and payment accountsofindividualsand legal entities, all deposit COSIs currencies). concern inother equivalent €10,000more than (in euros and/or their in one month deposit or paymentto accounts whenever payments total respect outwith are carried inquestion The transactions Code: credit, institutions. payment andelectronic money andFinancial 561-2of Article French ofthe Monetary entities involved in 1°,1bisand ter are listed reporting 2016. on1January force enteredThe into withdrawals Disclosures requirements cashdepositsand concerning regarding cashdepositsandwithdrawals disclosures information Systematic • • • quality five ismeasured according criteria: to received. Data data quality ofthe onthe reporters to isprovided Tracfin by feedback regular customised data, To madeusing these of analyses improve relevance the Promptness ofsubmission COSI 1 QUALITY INDICATOR sactions sent in duplicate sactions sentinduplicate Uniqueness: number of tran- measurement ofthe type) expected value matches fields (example: mandatory ofconsistent percentage Correctness: empty) offieldsfilledin(not percentage Completeness: Completeness 3,313,808 Correctness COSI payments andcashwithdrawals –Qualityindicators andyear-on-year total numbers ofCOSI 1 Uniqueness Regularity Year-on-year numberofCOSI 1s 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 500,000 0 264,716 498,654 February 800,666 1,038,504 April 1,337,370 certain types of fraud schemes specific to certain areas. to certain specific schemes typesoffraud certain of extent the (seebelow) canreveal orconfirm flows financial ofthese analysis Ageographic tioned inSTRs. about individuals and legal entities men- information enhance checked inorder to issystematically This data individuals. were 320,000 legal entities and 285,000 totals these 138,000entities andnearly individuals,whereas in2016, 270,000 more than concerned legalThe transactions year. previous 52.9millionthe against saction reports, In 2017, received 56.1 more than Tracfin milliontran- for 2016. figures the helped perfect ofdata categories certain for Eliminating duplicates the 2016 refine hasalsomadeitpossibleto data figures. of categories Theduplicationofcertain predefined lists. values from their taking fields of the consistency the to attention quality, particular data with factory in 2017,operations below asatis- shows chart the (COSI COSI 1) «fundstransmission» total Out ofthe • • the year year the ofCOSIs across submitted Distribution Regularity: 60 days sentwithin oftransactions Promptness: percentage 1,612,773 2017 June 1,913,643 2,215,932 August 2,476,053 2,765,782 October 3,047,742 3,313,808 December

COSI payments andcashwithdrawals –withdrawals (number) COSI payments andcashwithdrawals –deposits(number) 45 TRACFIN - ANNUAL REPORT 2017 46 TRACFIN - ANNUAL REPORT 2017 COSI payments andcashwithdrawals –withdrawals (value) COSI payments andcashwithdrawals –deposits(value) as increasing the security of the IT system. ITsystem. ofthe security as increasing the aswell search engineandouranalytical tools, our text infrastructures, includeredesigning ourstorage Efforts COSI 1sandhave ledTracfin itsITcapacities. to bolster the process are higherthan to much The volumes ofdata Promptness ofsubmission COSI 2 QUALITY INDICATOR COSI payments andcashwithdrawals –Qualityindicators andyear-on-year oftotal numbers ofCOSI 2 56,118,389 Completeness Correctness Uniqueness Regularity Year-on-year numbers ofCOSI 2s 20,000,000 40,000,000 60,000,000 0 9,359,406 February 14,197,495 18,457,064 April 22,492,049 most reporters. most received from data highquality ofthe the indicates below 2017 respect to With chart rity. submissions,the uniqueness,ness, correctness, promptness and regula - complete measure their assessed usingguidelinesto is data COSI quality ofthis the 1s,the asfor Just 27,202,698 2017 32,252,074 June 37,243,133 41,871,174 August 46,794,912 October 51,598,786 56,118,389 December - 47 TRACFIN - ANNUAL REPORT 2017 48 48 TRACFIN - ANNUAL REPORT 2017 ACTIVITY IN2017 TRACFIN’S

49 TRACFIN - ANNUAL REPORT 2017 1. HOW INFORMATION IS PROCESSED

From the STR to the completion of an investigation

How information is processed within Tracfin

Arrival Information Initial of an alert entered assessment / or a report into database redirecting

Information Investigation put on hold

DISSEMINATION to the courts Information note or to Tracfin's partner authorities

50 1.1 INTEGRATING INFORMATION ADMISSIBILITY CONDITIONS FOR SUSPICIOUS TRANSACTION REPORTS The Unit is authorised to receive information about poten- Decree No. 2013-480 of 6 June 2013 sets the tially illicit financial flows from reporting entities subject conditions for the admissibility of STRs submitted to AML/CFT requirements. Tracfin neither self-refers nor in accordance with Article L.561-15 of the Monetary processes anonymous accusations. and Financial Code. Aside from rewording the requirements for the form of STRs, it introduces Once the quality of the information and the formal a procedure for their admissibility if these admissibility of the STRs and reports received have been requirements are not met or the correct submission verified, they are entered into a secure database. The qua- methods are not used. This procedure for non- lity is checked by a formal control of incoming information admissibility does not concern the content of STRs, and correlation with individuals in the database (merging such as the quality of the information sent and the or creating links and aliases). Reporting entities must analysis of suspicions, but only their form. supply the precise identity of individuals (first and last Accordingly, any reporting entity that does not use names, date and place of birth) and legal entities (SIREN/ the ERMES platform or the mandatory electronic form SIRET no.). In 2017, this information was supplied for (for the individuals and legal entities referred to in 76% of individuals reported, but for 20,787 individuals, point 2 and points 6 to 17 of Article L.561-2 of the the profile was incomplete. For legal entities, profiles Monetary and Financial Code), or that fails to provide were complete in 85% of cases. one or several mandatory items of information, will be asked to rectify its STR within one month. In 2017, out of the 68,661 STRs, 1,136 were received Otherwise, the entity will be informed by Tracfin in paper format, down 18% compared to 2016. In 2017, of the inadmissibility of its STR. This inadmissibility 255 STRs were subject to amendment requests, compa- has significant consequences for the reporting red to 298 in 2016 (-14%). 113 reports were able to be entity, as it will be deprived of the benefit of the amended following positive replies to these requests. provisions of Article L.561-22 of the Monetary and For the remainder, 142 letters were sent to the relevant Financial Code absolving it of civil, criminal and entities to advise them that their reports were definitively professional liability. inadmissible. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT investigation departments, customs, intelligence THE ERMES E-REPORTING SYSTEM services, tax authorities, social services, etc.). Public- access databases are also consulted. Non-financial reporting entities, for whom ERMES is not mandatory, used it for 75% of their submissions Redirecting is the first step in processing information. in 2017 (compared with 63% in 2016). Information either leads to an investigation or is put on hold (if the report appears to be potentially unusable, Breakdown by means of transmission of STRs received from non-financial reporting entities (ERMES e-reporting the suspicion is unclear, or any doubts are resolved after system/printed form) enquiries). It may, however, be reactivated in light of new information later received by the Unit. Tracfin analyses and redirects all the information it

3,481 receives. In 2017, 12,518 reports led to an in-depth 2017 analysis – 8,478 based on information received in 2017 1,136 and 4,040 based on information that had been received ERMES e-reporting system earlier and reactivated.

Printed form 2,363 2016 1,379 1.3 INFORMATION ENHANCEMENT

- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 A suspicious transaction report or information lea- ding to an investigation being opened is then subject to a number of analyses that are more or less in-depth The main non-financial reporting entities using the 51 printed STR Form depending on the complexity of the suspicion and the traceability of the financial flows. The initial analyses Reporting entities 2017 focus on contextual details concerning the individuals Court-appointed receiver and trustee 551 mentioned in STRs. Then, additional information is Notary 268 used to round out the context of the suspicion reported and/or enhance it so as to assess whether or not an Chartered accountant 132 information note should be sent to the public prose- Casino 65 cutor’s office, partner authorities or foreign financial Auditor 56 intelligence units. These searches are carried out Bailiff 32 through investigative measures. Real estate professional 10 Investigative measures involve directly or indirectly Auctioneer and auction house 8 consulting files (the national bank accounts register Ficoba, tax authority or customs files, company data, gendarmerie or police files), mining open databases 1.2 ANALYSING AND and questioning other members of the intelligence REDIRECTING INFORMATION community, foreign intelligence units or other central government departments. Once information has been integrated, it is compared Foreign FIUs are also consulted when financial or legal with any other pre-existing data. Tracfin retains informa- connections (registration of companies, etc.) are disco- tion for ten years, and this time period can be extended vered to obtain fresh evidence that could help identify for another ten years in the case of disclosures to the the beneficial owners of a financial flow. courts. Finally, using its power to request, Tracfin staff gathers If the information received can be used, Tracfin and analyses any relevant documentation received from employees contextualise the suspicion by compa- reporting entities (bank statements, notarised deeds, ring the information received with any other relevant articles of association, accounting documents, invoices, data that they find among the administrative files to documents required to open bank accounts, etc.). which they have direct or indirect access, and with data from partner government departments (criminal TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT In 2017, the Unit carried out 61,128 investiga- tive actions, including 29,194 uses of the power to REQUESTS FOR INFORMATION request, 1,762 requests sent to foreign FIUs and 30,172 consultations of files, open databases and To carry out its assignments, Tracfin may obtain information from various sources. This power to request is governed questioning of institutional departments. by legislation which stipulates to whom these requests may be made. The use of the right of opposition Since it was set up in 1990, Tracfin has had a power to Tracfin may also exercise its right of opposition in order request vis-à-vis all reporting entities (Article L.561-25 to postpone a transaction that has been reported, and to of the Monetary and Financial Code). suspend its completion for 10 business days, after which The Unit may obtain information from central government the judicial authorities can take over and, where neces- departments, local authorities, government-funded sary, order a seizure. institutions, the organisations referred to in Article L.134-1 In 2017, the Unit exercised its right of opposition of the French Financial Courts Code, and any other entity 24 times, an increase over 2016, when it was exercised with a public service mandate (Article L.561-27 of the 19 times. Monetary and Financial Code). The Unit uses this power very cautiously. It is used in Lastly, Tracfin may also request information from certain strict consultation with the judicial authorities and private entities that are not subject to these obligations but that possess information useful for Tracfin’s investigations: only when there is an immediate risk that the funds will CARPAs, Lawyers’ Financial Settlement Funds (Article disappear (cash withdrawals, transfer to non-cooperative L.561-25-1 of the French Monetary and Financial Code), jurisdictions, etc.). travel agencies and vehicle rental companies, the Bank Card Economic Interest Group, online money collection 52 1.4 DISCLOSING INFORMATION and donation platforms (Article L.561-25 of the French If, at the end of its investigations, Tracfin discovers Monetary and Financial Code). evidence of the laundering of money derived from an offence punishable with a custodial sentence of DISCLOSURES TO COURTS more than one year, or of terrorist financing, the Unit submits an information note to the public prosecutor In 2017, Tracfin submitted 891 notes to the courts, with territorial jurisdiction.29 compared with 662 in 2016: Independently of any criminal classification of • 468 notes concerning suspicions of one or more the facts, the Unit may decide to disclose to other criminal offences recipients stipulated in the French Monetary and • 325 disclosures to judges and the criminal investiga- Financial Code, any information that may be relevant tion departments (of which 224 related to terrorism), for carrying out their assignments. These recipients including three responses to judicial requisitions may include, inter alia, foreign financial intelligence • 98 disclosures to police, gendarmerie and judicial 30 services, judicial authorities and criminal inves- customs departments, including 84 responses to tigation departments, various public services or judicial requisitions bodies such as tax authorities, various administrative authorities such as the Prudential Supervision and Disclosing notes concerning Resolution Authority (ACPR) and the Financial Market a suspicion of a criminal offence Authority (AMF), and other specialised intelligence to the courts services, when the information relates to acts with one of the purposes listed in Article L.811-3 of the French In 2017, 468 cases concerning a suspicion of a criminal Internal Security Code.31 offence were referred by Tracfin to the courts, compared to 448 in 2016 (+4%). The financial amounts at stake in these disclosures total €993m in 2017, compared with €1.517bn in 2016 and €896m in 2015.* 29 See Article L.561-30-1 of the Monetary and Financial Code.

30 See Article L.561-29-1 of the Monetary and Financial Code. * The peak observed in 2016 is due to an unusually large case involving 31 See Article L.561-31 of the Monetary and Financial Code. over €500m. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Sums involved in cases referred to the courts The notes referred to the courts contain a potential by Tracfin since 2010 (€m) categorisation of the offences behind the suspicious financial flows. This categorisation is purely a sugges- 1,600 1,517 tion and in no way commits the judicial authorities, 1,400 1,146 which are solely authorised to decide what action to 1,200 993 896 take in response to the Unit’s reports. It merely reflects 1,000 868 861 766 800 Tracfin’s assessment based on the information at its 524 600 disposal at the time of its investigations. 400 200 A court referral may also help to later reveal other 0 facts that could not have been detected by the reporting 2010 2011 2012 2013 2014 2015 2016 2017 entity or by Tracfin, either at the STR stage or during In 2017, out of the 468 notes referred to the courts, the subsequent administrative investigation by the 12% concerned amounts of less than €100,000, 48% Unit. amounts between €100,000 and €1m, 37% amounts Referrals to the courts relating to suspicions of crimi- between €1m and €10m, and 3% amounts in excess of nal offences also contain (except for urgent cases) the €10m. These proportions are roughly the same as in opinion of the Unit’s legal adviser, who is a seconded 2016. judicial magistrate. The opinion states whether the These sums correspond to the amount of money uncove- evidence referred by Tracfin to the courts provides red by the Unit’s investigators during the investigation sufficient proof of the offences (Article R.561-34 of the phase. Following a court referral, the proceedings often Monetary and Financial Code). reveal much higher amounts of money. Nevertheless, Court referrals by category of primary underlying they serve as a benchmark to value Tracfin’s activity. offence 53 Origin of reports and definition In 2017, as in prior years, the five categories of predi- of the offences resulting in a referral cate offence that were the most frequently reported were undeclared work, scam (ordinary or aggravated), to the courts breach of trust, tax evasion and misuse of company A court referral may result from one or more reports assets. received by the Unit. Many cases may be put together There is a certain consistency in the type of offences by combining reports from different reporting entities that are most often reported by the Unit to the courts. operating in separate sectors.

Estimated sums involved in cases in 2017

3% 12%

37% Less than €100,000

Between €100,000 and €1m

Between €1m and €10m

More than €10m

48% TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Primary offence observed principales Number of cases Money laundering 144 Undeclared work 124 Breach of trust 100 Tax evasion 91 Scam 91 Misuse of company assets, misuse of credit, abuse of power 76 Abuse of weakness 52 Other crime or offence 39 Forgery / Falsifying certificates / Use of forgeries 36 Aggravated fraud 27 Handling stolen goods 25 Fraudulent organisation of insolvency 6 Illegal practice of an industrial and commercial business 5 Theft 5 Falsifying, using stolen or falsified means of payment 5 Corruption 4 Extortion 4 Embezzlement of public assets 4 Violation of legislation on poisonous substances, 3 54 narcotics and doping agents Bankruptcy 2 Procuring in prostitution 2 Terrorism 2 Conspiracy to commit a crime 2 Influence peddling 1 Unlawful taking of interest 1

WHITE CERTIFICATE (CEE) FRAUD

At the operational level, 2017 saw a significant rise in cases related to White Certificate (CEE) fraud.

The White Certificate system is designed to encourage legal entities operating in the energy industry to carry out energy savings work or to have such work carried out. However, a number of significant cases of documentary fraud have been reported. As a result, many White Certificates are unduly delivered.32

Cases successfully investigated by Tracfin have almost always resulted in the Unit submitting an information note to the public prosecutor with territorial jurisdiction.

In 2017, Tracfin submitted 14 information notes involving cases totalling more than €80m. Organised crime was linked to 12 of these referrals. In six of the cases, the Unit was not able to find proof that any work had actually been done, which suggests that the White Certificate application was in fact based on false documents.

The Unit exercised its right of opposition five times in this area, involving over €4m. After investigating these cases, criminal investigation departments ultimately seized over €10m.

32 See Tracfin’s 2016 report on trends and risk analysis regarding money laundering and terrorist financing, pp. 9-14 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Courts of Appeal receiving Tracfin’s information notes

2012 2013 2014 2015 2016 2017 PARIS 214 182 197 207 195 246 VERSAILLES 31 54 39 45 36 44 AIX-EN-PROVENCE 58 46 36 31 41 34 DOUAI 19 22 28 9 18 22 LYON 23 21 19 13 19 18 TOULOUSE 10 9 9 7 2 13 RENNES 15 7 9 14 17 10 MONTPELLIER 16 12 5 8 11 7 REIMS 8 5 1 4 1 7 BASTIA 14 14 7 11 3 6 CHAMBERY 7 5 7 6 6 5 BORDEAUX 16 10 15 10 6 5 COLMAR 11 6 7 11 7 4 ROUEN 6 6 6 8 7 4 GRENOBLE 4 7 4 5 6 4 AMIENS 11 6 10 9 4 4 ORLEANS 3 5 3 2 7 3 55 RIOM 3 3 6 6 6 3 NIMES 9 2 6 4 5 3 POITIERS 2 3 4 3 3 3 CAEN 2 2 2 4 3 3 BESANCON 2 1 3 1 2 3 METZ 3 3 2 5 7 2 PAU 4 4 7 4 5 2 NANCY 5 5 7 2 4 2 BASSE-TERRE 2 2 2 1 3 2 BOURGES 2 1 2 1 3 2 ANGERS 4 5 9 3 2 2 LIMOGES 0 0 2 1 2 2 DIJON 2 3 1 2 6 1 PAPEETE 3 0 1 1 2 1 FORT-DE-FRANCE 6 1 2 3 1 1 NOUMEA 1 0 0 2 4 0 AGEN 3 3 2 2 3 0 CAYENNE 1 2 1 1 1 0 SAINT-DENIS-DE-LA-REUNION 2 1 3 2 0 0 Grand total 2,012 2,013 464 448 448 468 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT In 2017, as in 2016, three Courts of Appeal received Disclosures to the courts and criminal most of the Unit’s referrals: Paris, Aix-en-Provence and investigation departments Versailles. In addition to disclosures concerning a suspicion of a The Paris Court of Appeal received 246 referrals, over criminal offence, Tracfin can provide the courts with any 50% of the Unit’s referrals (versus 195 in 2016). Paris’s relevant information for the latter’s assignments. Tribunal de Grande Instance (Court of First Instance, TGI) was the primary recipient with 114 referrals (117 in In this respect, the Unit may send evidence which does 2016). The Parquet National Financier (French Financial not establish a suspicion of an offence itself but that Prosecutor’s Office)33 received 23 referrals (15 in 2016). may enrich or shed light on an ongoing judicial inves- The TGIs of Bobigny, Créteil and Evry received 51, 28 and tigation, in particular concerning the financial circum- 14 referrals respectively, versus 39, 13 and 6 in 2016. stances of the persons being investigated. Adding the 44 cases received by the Versailles Court It may also provide the competent courts with infor- of Appeal (versus 36 in 2016), public prosecutor’s mation relating to the non-criminal assignments of the offices in the Greater Paris region received nearly 62% judicial authorities, especially as regards commercial of Tracfin’s disclosures in 2017 (compared to 51% in matters or to draw their attention to vulnerable persons 2016). who may require protective measures.

Breakdown of court referrals in the Greater As with any disclosure, the source of the information Paris region’s départements: will be strictly protected. The Unit’s legal adviser, who is not obliged to issue an opinion in such cases, will also Paris: 114 (117 in 2016) be consulted before information is sent to the judicial Bobigny: 51 (39 in 2016) authorities. 56 Créteil: 28 (13 in 2016) The information note sent to the competent judicial Nanterre: 26 (14 in 2016) authority on this basis will constitute an exhibit that Evry: 14 (6 in 2016) may be included in the case file. Melun: 9 (1 in 2016) In 2017, 322 information notes were sent to the judicial Pontoise: 9 (13 in 2016) authorities versus 125 in 2016. This upswing in referrals is partly due to an increase in information exchanges Versailles: 7 (6 in 2016) between the Unit and the counter-terrorist unit of the Meaux : 6 (2 en 2016) Paris public prosecutor’s office, which received 224 Fontainebleau: 1 (2 in 2016) information notes related to terrorism financing in 2017, up from 36 in 2016. Breakdown of court referrals in France’s Among the 98 notes transmitted to judges in criminal overseas départements: court (excluding terrorism), 30 bolstered proceedings Basse-Terre and Pointe-à-Pitre: 1 (3 in 2016) initiated by the French Financial Prosecutor’s Office. Cayenne: 0 (1 in 2016) Fourteen information notes were sent directly to the Fort de France: 2 (1 in 2016) police and gendarmerie criminal investigation depart- Nouméa: 0 (4 in 2016) ments. This was the case when the notes complemented Papeete: 1 (2 in 2016) Tracfin’s prior responses to judicial requisitions from these services, or when they involved investigations Saint-Denis de la Réunion: 0 (0 in 2016) opened by these services independently and not handled by a public prosecutor at the time.

33 This figure does not include cases initially referred to the public prosecutors’ offices with territorial jurisdiction, and then taken up by the French Financial Prosecutor’s Office due to its concurrent jurisdiction. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Judicial requisitions Daily, active interactions Both magistrates and criminal investigation depart- with the judicial system ments may send two types of judicial requisitions to Tracfin’s Legal and Judicial Division provides a perma- Tracfin’s director as part of their investigations. nent interface with the courts and CIDs to better The purpose of these requisitions may be to obtain: coordinate the Unit’s work with that of the judicial authorities. • Any information held by Tracfin that may shed light on an ongoing investigation Its staff provide support services and explain the notes sent by Tracfin to the legal authorities. They also • Disclosure of a suspicious transaction report, solely contact magistrates and judicial investigators to find in cases where a criminal investigation reveals that out whether certain information received by the Unit the reporting entity might be involved in the money- may be useful for ongoing proceedings. laundering or terrorist-financing scheme exposed (Article L.561-19(2) of the Monetary and Financial Moreover, they answer requests from the judicial Code). In this case, the requisition may only come authorities regarding any information that Tracfin may from the judge in charge of the investigation. possess relating to their proceedings. The judicial authorities or Criminal Intelligence Direc- Every year, the Unit’s Legal and Judicial Division torate (CID) officers cannot use a warrant or requisition receives inquiries from judicial authorities and criminal to obtain the disclosure of a suspicious transaction report investigation departments seeking information about directly from a reporting entity. several thousands of individuals and legal entities or bank account references. The range of subject matters The principle of confidentiality in the reporting of covered is wide: complex tax evasion, laundering of the suspicious transactions is in fact enforceable against proceeds of fraud or of undeclared work, corruption and the judicial authorities and CID officers, who can only 57 misappropriation of public funds (and their subsequent request the disclosure of a suspicious transaction report laundering), both in France and abroad. in the above-mentioned case (Article L.561-19(2) of the Monetary and Financial Code). Tracfin’s exchanges with judges and judicial investiga- tors are extremely beneficial when information sent to Certain reporting entities may, however, inform judicial the Unit uncovers that funds derived from fraudulent authorities or CID officers that they have disclosed infor- activities may be at risk of disappearing. The money- mation to Tracfin. Pursuant to Article L.561-19(2) of the laundering networks identified by the Unit specialise Monetary and Financial Code, these authorities may ask in collecting funds for quick transfer abroad. In 2017, Tracfin for confirmation of the existence of this report. the Unit was postponed 24 transactions involving an These rules, which are derogations from ordinary law, are average of €360,000 and froze a total of €8.7m. The justified by the priority afforded to protecting the repor- total sums at stake in these cases amounted to nearly ting entity and the source of the information received by €57m, of which €13.5m was seized by judicial autho- the Unit. rities or returned to the victims. Tracfin received 87 judicial requisitions in 2017 (versus However, despite the provisions of Article L.561-30-134 61 in 2016): Three requisitions were received from the of the Monetary and Financial Code, Tracfin receives Financial Prosecutor’s Office, 60 from the police and little feedback from the judicial authorities on the gendarmerie departments, and 24 from the National outcome of these disclosures: the Unit is rarely infor- Customs Judicial Department (SNDJ). med when they initiate legal proceedings following a preliminary inquiry or judicial investigation, as several One requisition was sent by an investigating judge to years may have elapsed since the initial disclosure was obtain the disclosure of a suspicious transaction report made. involving a notary implicated in the laundering of misappropriated public funds.

34 Article L.560-30-1 of the Monetary and Financial Code: «in cases for which information notes were sent under the terms of this article, the Public Prosecutor or the General Prosecutor informs the Unit when proceedings are initiated, when the case is closed without further investigation, or when decisions are taken by an enforcement jurisdiction». TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT LIAISON OFFICERS SECONDED FROM POLICE, GENDARMERIE AND JUDICIAL CUSTOMS DEPARTMENTS Within the Legal and Judicial Division, two liaison officers seconded from the Central Office for the Fight against Corruption and Financial and Fiscal Crime (OCLCIFF) and the Central Office for the Prevention of Serious Financial Crime (OCRGDF) coordinate operations between Tracfin and police departments. A lieutenant colonel, seconded from the gendarmerie, and a liaison officer from the customs department coordinate relations with these departments. They respond to inquiries from investigation departments seeking Tracfin’s help with cases they are investigating. They typically provide information on: –– Suspicious flows and operations carried out by the persons being investigated and reported to the Unit –– Foreign assets and bank accounts held by the persons under investigation, and more generally, any information regarding their financial and wealth circumstances –– Potential financial connections between the persons being investigated and other persons yet to be identified, who may be linked to the offences being investigated Every year, liaison officers respond to inquiries involving several thousand individuals and legal entities.

They analyse the judicial requisitions received from the various departments, make sure that they are admissible and that the replies of the Unit to these requisitions are relevant. In 2017, liaison officers processed 84 judicial requisitions.

In parallel, liaison officers are contacted by Tracfin’s officers when information received by the Unit might help ongoing investigations. They then contact the departments in charge and, similarly to what is done when responding to judicial requisitions, they make sure that all information shared by the Unit with investigators (or if necessary, with the judge handling the case) is relevant. In 2017, liaison officers contributed to the targeting of 322 information notes sent to judicial authorities and 14 notes sent directly to investigation departments. 58 In highly complex cases that necessitate deeper interaction and coordination with investigation departments, the liaison officers set up operational meetings between investigators and Tracfin’s officers.

They take an active part in forging institutional relations between Tracfin and local and national police, gendarmerie and judicial customs departments.

Liaison officers also intervene as speakers during training sessions or through presentations at meetings held by investigation departments. They help build awareness of the operational support Tracfin can provide to all investigators, whether they are specialised in financial matters or related areas of organised crime, or general investigators.

DISCLOSURES TO PARTNER violent act on the French territory or linked to a network AUTHORITIES of facilitators, on legal entities used to transfer suspi- cious funds or on the freezing of assets.

To intelligence services Tracfin also continues to contribute to other areas in the intelligence field. In 2017, the Unit sent infor- The upswing in exchanges of financial information with mation on money-laundering schemes implicating the intelligence community continued in 2017. The politically exposed persons (PEPs) who were foreign number of information notes sent by Tracfin reached nationals of sensitive countries. Other notes dealt 614, up from 488 in 2016 (+26%). with challenges to France’s fundamental interests, As in 2016, nearly 75% of these notes (460 out of 614) threats to France’s scientific or industrial potential, involved persons suspected of terrorist activities. and more generally, with threats to the economic Tracfin’s inclusion in the fight against terrorism is security of the nation. Tracfin also made a strong contri- reflected not only in the growing number of information bution to the fight against arms trafficking. Lastly, the notes sent to the intelligence community but also in the Unit helped identify goods and funds originating from diversity of their contents. These notes may contain proliferation activities. information on individuals suspected of planning a TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT since 2010. The total revenue includes more than €675m THE DIVISION SPECIALIZED in reassessed taxes and more than €282m in penalties.35 IN ECONOMIC AND FINANCIAL For the past five years, the additional amounts origina- PREDATION ting from the DGFiP’s audits conducted on the basis of In July 2015, an office specialising in economic and Tracfin information notes are as follows: financial predation was set up within Tracfin. Its 2013 2014 2015 2016 2017 investigators are tasked with analysing and using Number of information relating to facts, actions or attempts to 138 157 231 232 234 interfere with capital, know-how, human resources completed audits Amount of tax and the research and development efforts of French 28.1 26.4 45.6 39.9 55.2 firms. Using financial analysis and background checks, reassessed (€m) investigations concern customer poaching, fraudulent Total amount 25.1 15.9 26.6 23.6 32.3 operations or offences committed when taking over of penalties (€m) struggling companies, infringements of a business’s intellectual property, and anything that harms France’s economic interests. A DGFIP LIAISON OFFICER JOINS TRACFIN Special relationships have been forged with the On 1 July 2016, Tracfin and the DGFiP executed an specialized services to identify examples of predation, agreement for the secondment of a DGFiP senior as part of preventive action. The Unit can analyse executive to Tracfin as from 1 September 2016. investments in the capital of companies based in France which are reported as part of AML/CFT Possessing a tax audit background, the liaison officer arrangements. was tasked with further bolstering relations between Tracfin and the DGFiP by implementing an additional Since 1 January 2017, pursuant to Article L.561-31(8) system for speeding up disclosures between the two 59 of the Monetary and Financial Code, Tracfin can structures. Thanks to this expedited processing, tax exchange information with the Strategic Information intelligence can be disclosed almost immediately when and Economic Security Service (SISSE). The Unit takes the confirmation of a suspicion does not require any part in the inter-ministerial meetings organised by other investigation besides searching tax databases. SISSE that pertain to economic security. In 2017, 248 additional cases were sent to the DGFiP through these «flash» disclosures.

The liaison officer also contributes to the disclosure of information notes originating from DGFiP’s internal VAT Task Force, of which he is a member.

To the tax authorities Main types of tax evasion detected In 2017, Tracfin sent 625 information notes to the tax The widespread presence of tax evasion in reports authorities (a 79% increase). This upsurge was driven received by Tracfin reflects the two sections of Article by an 8% rise in enhanced information disclosures, L.561-15 of the French Monetary and Financial Code. from 350 in 2016 to 377 in 2017, and by the May 2017 The first is due to the fact that tax evasion is very often implementation of a new procedure for accelerated associated with other forms of reported fraud: misuse of («flash») disclosures which resulted in 248 incremental company assets, scams, undeclared work, etc. disclosures. Concurrently, the average stakes per case The second is connected with point II of this Article amounted to €966.3m in 2017. which covers «tax evasion when there is at least one DGFiP’s use of notes submitted by Tracfin criterion that has been defined by decree». 1,850 tax audit proposals have been initiated on the basis of transmissions of information sent by Tracfin

35 It is worth noting that 2010 and 2011 were exceptional years due to a limited number of carbon tax-related cases (€455m in taxes and €137m in carbon tax). TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT A small number of STRs concern complex tax avoidance the borrower’s financial resources, etc.). The purpose schemes that have been clearly identified by the repor- of these transactions is often to conceal donations ting entities. • Asset-based issues that are sometimes connected to The most frequently reported typologies are: handling large amounts of cash (reducing wealth tax liability, hidden donation, inheritance, etc.) • Financial structures involving funds or entities located in non-cooperative countries or territories To social welfare agencies • Transfer, repatriation or possession by French resi- Tracfin receives numerous STRs that directly address dents of financial assets derived from border countries social security fraud issues or that have repercussions or tax havens in this area to a greater or lesser degree. This informa- • Suspicions connected to flows originating from trusts, tion can be split into two major categories: most often to individuals of foreign origin residing in • Social security contribution fraud: Principally use France of undeclared labour, with salaries paid outside any • Suspicions of carousel fraud or participation in net- legal framework. As a result, social security contri- works designed to illicitly obtain VAT refunds butions are not paid on all or part of these wages • Attempts to organise insolvency in connection with a (sometimes only part of the salary is declared). The tax procedure same may be true for self-employed workers, adhe- • Possession of financial assets or transfers of funds ring to the RSI social security scheme or the MSA through non-trading companies (such as non-trading social agricultural mutual fund, who only officially real estate investment companies) that are inconsis- declare part of their business activity. tent with the purpose of these structures • Social security benefit fraud:This involves people 60 • Suspicions of concealed activity or the partial conceal- unduly or improperly receiving social security bene- ment of an activity or of turnover, sometimes using fits (unemployment benefit, RSA (social inclusion third-party accounts. For instance, a recurrent busi- benefit), AAH (disabled adults allowance), APL (per- ness activity for buying/selling vehicles acquired in sonalised housing benefit), etc.) to which they are countries bordering France not, or are no longer, entitled to (income received • Failure to file corporation tax and/or VAT returns. This from carrying on an undeclared business or failure is often related to a suspicion of employing labour to comply with a special condition governing entit- that has not been declared to URSSAF (the entity lement to a social security benefit, for example, the responsible for collecting some social contributions) condition of French residency). Sometimes indivi- duals present false ID papers to illegally obtain social • Suspicions of exercise of an undeclared professional security benefits. activity in addition to a salaried activity, or combined with the reception of minimum social benefits. These Tracfin also receives STRs concerning fraud involving cases involve widely varying sums, and may be the health professionals whose financial activities or condi- subject of parallel disclosures to the relevant social tions for practising their profession may have alerted protection body the reporting entities. • Financial transactions carried out with an eye to undu- Financial implications vary from one case to the next. ly benefitting from tax exemption arrangements such Cases featuring the most complex characteristics, as non-eligible capital gains deposited in a share large financial amounts, or that reveal organised crime savings plan (PEA) or invalid application of capital networks are handled as a priority with disclosures of gains tax exemption arrangements when retiring information sent to the judicial authorities. In 2017, • Improper or fraudulent application of the tax relief 223 information notes were sent, a 35% increase over regime in France’s overseas départements, regions the previous year. In 2016, the increase had been 51%. and communities (DOM-COM) under the Girardin Act Since 2015, the number of notes sent by Tracfin has doubled. • Financial transfers between individuals or legal enti- tles in the form of loans which are often unjustified In the social security field, the ACOSS (Central Agency and granted under highly favourable terms (interest- for Social Security Bodies) remains the primary free, repayment date non-commensurate with the recipient with 79% of notes sent by Tracfin (versus 82% lender’s age, amount lent disproportionate as regards in 2016). TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT In correlation with this surge in volume, the amounts at stake soared by 45% in 2017, reaching €202m FRAUD AGAINST THE NATIONAL FAMILY (versus €139m in 2016). The average amount per case ALLOWANCE FUND (CNAF) was €0.9m (up 7%). In 2017, the number of information notes sent to CNAF tripled. This surge was driven by:

The main types of social security fraud –– Special processing targeting fraud networks In 2017, the main types of social security fraud giving responsible for massive foreign transfers of allowances received in France on behalf of multiple grounds for disclosures of information were as follows: beneficiaries: Social security benefit recipients • Social security contribution fraud: (primarily RSA or housing benefits) have their –– Suspicion of undeclared work and failure to declare allowances deposited onto the bank accounts of individuals who all reside at the same address and workers act as «consolidators». After the funds are remitted, –– Understatement of the basis for calculation of they are withdrawn in cash in France or abroad, social security contributions by concealing a major or are wired to third-party bank accounts in foreign or minor proportion of professional activity countries (primarily Romania). • Social security benefit fraud: –– A growing number of cases involving false declaration of residence by recipients of various –– Carrying out regular undeclared work while at the social security allowances: Pursuant to Articles same time collecting unemployment benefit, the R.262-4-2 and R.265 of the Code for Social Action RSA (social inclusion benefit) or other meanstes- and Families, stable, actual residence in France is ted benefits required to receive CNAF allowances. For example, –– False declaration of residence when it comes to the RSA, residence outside of 61 France must not exceed three months per calendar –– Suspicion of the diversion of pension benefits year. Nevertheless, analysis of transactions from through «collection accounts» (See text box on bank accounts used by recipients to remit CNAF the right) benefits brought to light a pattern of repeated –– For health professionals, defrauding supplemen- purchases or withdrawals abroad over a long period tary mutual insurance companies of time. This indicates that people unduly received these allowances.

Sector-based breakdown

As for previous years, the construction sector is by far Geographical distribution the largest employer of undeclared labour. After an The Greater Paris region remains the most affected region, increase in 2016, the security sector remained stable but its share in the number of cases dropped to 67% in 2017. The transport sector experienced the largest versus 77% in 2016. Within the region, Seine-Saint-Denis increase in cases due to the strong growth in the private jumped well ahead of Central Paris with 38% of cases. The car hire (VTC) business. French capital, usually in the lead, now accounts for only 26% of cases, down from 41% in 2016. Among the other Greater Paris départements, Val-de-Marne rose to No. 3 after a 100% increase in cases (it now accounts for 12% of disclosures). Outside of Greater Paris, the Occitanie, Hauts-de-France and Auvergne-Rhône-Alpes regions, respectively, round up the most cases. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Social security fraud: detailed report A detailed report of Tracfin information notes sent to THE URSSAF LIAISON OFFICER social welfare agencies is drawn up twice a year under Since 1 January 2016, an URSSAF inspector has been the aegis of the DNLF (National Anti-Fraud Office). working as a social security liaison officer with Tracfin. He is tasked with ensuring permanent contact between The amounts reassessed after audits carried out by the the ACOSS and Tracfin to foster exchanges both ACOSS (the primary target of social security fraud) on centrally and nationally, but also at URSSAF regional the basis of information notes from Tracfin came to: directorate level. He thus provides the Unit’s investigators with technical support and specific Total amounts notified Years Cases closed expertise. This involves managing investigative (€m) measures by providing responses to Tracfin’s using 2012 27 6.3 its power to request. These requests may cover, 2013 40 3.1 for instance, a company’s situation as regards its 2014 35 13.1 declarations to the URSSAF office to which it reports 2015 82 42.4 or the existence of an audit procedure against it. 2016 69 37.0 2017 33 26.4 The social security liaison officer approves the Total 286 128.3 information notes sent to the ACOSS. As part of this process, discussions are held to improve, for heightened effectiveness, the relevance of these notes and any The total reassessed amounts after audits now reach over supplementary information which may be of use €128m. While this report was being drafted, many cases to the URSSAF inspectors. He checks the consistency were in the process of being audited. of the information sent to optimize its use.

The amounts reassessed after audits carried out by the An experiment is underway to help fight undeclared 62 National Family Allowance Fund (CNAF) on the basis of work. To be more responsive vis-à-vis the shell information notes came to: companies that employ undeclared workers, Tracfin and the ACOSS are working in close collaboration Total amounts notified to conduct investigations directly on building sites. Years Cases closed (€) A circuit has been set up to illustrate the interest 2012 5 21,075 in taking fast and effective action to fight undeclared 2013 5 85,912 work. 2014 12 120,606 The social security liaison officer also provides training 2015 5 58,540 to the Unit’s officers on social security fraud. He uses 2016 6 79,449 his expertise to draw up study projects of mutual interest 2017 26 167,784 that require knowledge of both social security legislation Total 59 533,366 and management, audit and contributions collection practices. While this report was being drafted, 11 cases were in the process of being audited. The amounts reassessed after audits carried out by Pôle Emploi on the basis of information notes came to:

Total amounts notified Years Cases closed (€) 2012 7 117,588 € 2013 2 0 € 2014 2 29,062 € 2015 3 82,033 € 2016 4 74,689 € 2017 6 Pending Total 24 303,372 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT To the Directorate General of Customs offences and the fight against terrorism. To that end, a and Excise (DGDDI) DGDDI liaison officer was seconded to Tracfin in 2013. This secondment greatly facilitates the collaboration Strong cooperation between Tracfin and the DGDDI conti- between the two structures. nued in 2017. Tracfin sent nearly 850 administrative search requests To the supervisory authorities to the DGDDI. Most of these requests involved analysing In 2017, Tracfin sent eight information notes to the physical flows of goods through import or export tran- supervisory authorities and professional associa- sactions with third countries (outside the European tions. This information is provided pursuant to Article Union) or as part of intra-Community exchanges, using L.561-28 of the Monetary and Financial Code, which the National Directorate for Foreign Trade Statistics stipulates: (DNSCE) database. The objective is to remove any doubt as to whether commercial transactions actually took • A mutual exchange of information that may be rele- place, based on the countries involved and the nature vant for carrying out their respective assignments. and value of the declared goods. As part of this process, Tracfin may not only provide details of the level and standard of the reporting but The quality of the cases sent by Tracfin to the DGDDI also of the responsiveness of the entity obliged to has remained high. Thanks to the analyses sent by respond to requests for information. the Unit, investigators from the customs department • Information to Tracfin about any facts uncovered were able to conduct targeted investigations, enhance during their oversight mission which may be rela- ongoing investigations and even uncover offences. ted to money laundering or terrorist financing. The Regarding the latter, Tracfin’s contribution was instru- reports are based on suspicions. mental in cases involving the export of sensitive mate- rials considered as dual-use goods (civil and/or military) In 2017, 75% of the notes were sent to French financial 63 as well as in bolstering high-stake tax investigations regulatory authorities AMF and ACPR (versus 64% in related to intra-Community excise fraud (on beer and 2016). For the first time, Tracfin sent a case for disci- alcohol). plinary purposes to the High Council of Auditors (H3C) as part of H3C’s new disciplinary powers. Regarding regulations affecting affecting capital flows, and especially the obligation to declare any transac- tion over €10,000 (Article L.152-1 of the Monetary and Financial Code), several analyses proved conclusive, THE EUROPEAN AUDIT REFORM particularly as part of the investigations led by the REINFORCES H3C’S SUPERVISORY POWERS Antilles-French Guiana branch of the Customs Inves- tigations Directorate (DED). This subject matter repre- H3C was granted investigative and disciplinary powers when the European Audit Reform came into force sents a key area of cooperation between Tracfin and on 17 June 2016 (through Order 2016-315 of 17 March the DGDDI, as undeclared cross-border capital flows are 2016 enacting Directive 2014/56/EU of 16 April strong indicators of money laundering. 2014). H3C now has its own investigation department In addition to the synergy achieved in administrative headed by a general rapporteur tasked with running investigations, the DGDDI and Tracfin also share interests the investigations and presenting them to a select in the judicial area. The number of cases investigated committee from H3C’s Board, which can, if necessary, initiate disciplinary proceedings. by the National Customs Judicial Department (SNDJ), established by Order of 5 December 2002, has soared These cases are heard at first instance either by the from 67 in its first year to over 1,000 in 2017. In 2017, the select committee of the Board or by regional disciplinary SNDJ, renowned for its keen expertise in financial inves- boards (the choice is up to H3C’s Board). Any fact likely tigations, was asked to investigate 20 judicial referrals to justify the opening of disciplinary proceedings sent by Tracfin. These were transmitted to the SNDJ by by duly empowered persons is referred to the general rapporteur. He may also take on any case directly public prosecutor’s offices after they had received the referred to him. Unit’s notes. Strengthening and bolstering cooperation between Tracfin and the DGDDI is a key objective for 2018, as both organisations share a deep concern about financial TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 2. FINANCIAL INTELLIGENCE AND ITS ROLE IN COMBATING THE FINANCING OF TERRORISM

As a member of the French intelligence community since The Terrorism Financing Division enriches and maintains 2008, Tracfin continues its efforts to foster exchanges close relationships with the other specialised divisions and forge ties with all the community’s stakeholders. of European and international FIUs that are joined in The Unit has also focused its efforts on judicialising the fight against terrorism. A concrete example of the financial intelligence, and has been working with the growing international cooperation was the creation of anti-terrorist section of the Paris public prosecutor’s the first joint training sessions. The expertise shared by office. all staff tasked with fighting the financing of terrorism in the most affected European countries has helped bolster In 2017, Tracfin sent 685 “combating terrorist finan- exchanges and disseminate best practices. cing” notes, 459 of which were sent to specialist depart- ments, up 73% versus 2016 (396 disclosures), and up Aside from intelligence work, and when its investigations 115% versus 2015. unequivocally reveal a presumption of terrorist finan- cing, Tracfin also refers cases to the courts, resulting in These 459 notes break down as follows: the opening of investigations into terrorist financing. In • 29 to the DGSI (Directorate General for Domestic 2017, 226 notes were sent to courts or to the criminal Security) investigation departments tasked with fighting terro- • 387 to the inter-agency unit at the DGSI (including rism, vs. 44 in 2016. Thanks to these efforts, the public «flash» disclosures) prosecutor’s office was able to open new investigations 64 • 37 to the DGSE (Directorate General for External based on information sent by Tracfin and dismantle Security) networks that had so far operated unsuspected. With the • 2 to the DRM (Military Intelligence Directorate) help of the reporting entities, Tracfin is examining the structure of networks that support and provide financial • 1 to the DRSD (Defence Intelligence and Security aid to jihadists in the Iraqi-Syrian war zone and is also Directorate) anticipating the funding of potential returns. • 3 to the CNRLT (National Intelligence and Counter- Terrorism Coordinator) The profiles established can be shared with the com- pliance departments of France’s major financial stake- Tracfin has by now cemented its position within the holders to further bolster their detection capabilities. intelligence community and even more so in joint inter- These compliance departments are now invited to spe- departmental structures. Moreover, the growing number cial meetings in which Tracfin provides the feedback of information received from the French FIU (Financial necessary to help them fine-tune their detection tools. Intelligence Unit) illustrates the importance of financial These flagging tools have become increasingly effective intelligence in the fight against terrorism. These results over the years, particularly in detecting radicalisation reflect the commitment of the Unit’s Terrorism Financing scenarios and people wishing to leave for the jihad. In Division, which operates jointly and collaboratively 2017, 1,379 STRs were analysed by Tracfin’s Combating with other partners in a wide range of activities, from of Terrorist Financing Division. complex analysis to operational response (such as «flash» disclosures). Lastly, like the other domestic anti-terrorism stake- holders, Tracfin is involved in the various government An officer from this division has been seconded on a full- action coordination bodies such as the CNRLT, the time basis to an inter-departmental unit. This officer SGDSN (Secretariat General for Defence and National can coordinate the information sent by Tracfin in real Security), and the UCLAT (Antiterrorist Action Coordi- time and draw on his experience to advise partner nation Unit). departments. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT ANTI-TERRORIST FINANCING EFFORTS – KEY FIGURES FOR 2017 RECEPTION AND ANALYSIS OF INFORMATION > 1,379 reports received and analysed in 2017 (a 17% increase over 2016)

INVESTIGATIONS On 31 December 2017, 105 cases were being processed

DISCLOSURES In 2017, Tracfin disclosed 685 “combating terrorist financing” notes (+73%): > 459 notes were sent to intelligence services > 226 notes were sent to the courts or to the criminal investigation departments tasked with fighting terrorism

65 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 66 66 TRACFIN - ANNUAL REPORT 2017 CASES NOTEWORTHY

67 TRACFIN - ANNUAL REPORT 2017 68 TRACFIN - ANNUAL REPORT 2017 over €500,000 in two years. over €500,000intwo years. totalling bankaccounts from TPacific’s large cashwithdrawals company, the positions with made MrX’s children andhiswife company, heldnoofficial they Company SAntilles.Although atathird headquartered itwas itsbankthat actually informed orcommercial businessactivity. had TPacific any industrial accountswere notlinked these to through transited that The had funds 5 bank accounts in based T Pacific France. Tracfinforeign- anddiscoveredthat useditspowerto request Tracfin’s investigations itschairman. andMr Xwas export was company.import- Pacific’s declaredfirst purpose T the aholdingcompany basedabroadby T Pacific, and held In 1996,in mainland France. a second company, he formed Company S,aholdingcompanyformed located hoses, first sale of head of an SME specialised in the Mr X, a former The facts evasion. tax potential suggesting businesspurpose, their with and inconsistent by a held Frenchbank accounts of commercial firms resident Tracfinthe onsuspiciousactivities received information purposes for inheritance Tax evasion –usingaforeign entity 4: Case study Spouse Withdrawal €293,740 Withdrawal Chairman Daughter €36,000 Account 1 Account 2 Company SFrance Account 3 Withdrawal €105,070 Daughter Account 4 Administrator Withdrawal €135,740

99.99% • • • • Warning signs income. Tax asinvestment General couldbetaxed Code.Thusthey be reclassified ashiddenpayments asperArticle 111the Cof could MrXandhisfamily by sumsobtained The considerable • • • evidence: following its decision-makingcentre basedonthe inFrance hadno real businessactivitybuthad TPacific It appeared that and Financial Code) and Financial D.561-32-1 14 of Article Monetary of the company (criterion aforeign ofaccountsheldby business activityinFrance, outa Regular individualsresiding use,by andcarrying Code) andFinancial Monetary D.561-32 1ofArticle ofthe Use ofashellcompany (criterion French company the accountsofaforeign oruseofbankcards linked to Numerous cashwithdrawals are French residents beneficiaries company aforeign Bank accountheldby whoseeconomic nameofTPacific Family hadbankcards in the members Company S premisesThe company of hadanaddress inthe inFrance The company hadbankaccountsinFrance Bank accounts in France Company T Pacific Ltd Company S domiciled at documents, On bank Antilles salaried Companyvered Ghaddeclared that employing 5 salaried Tracfinthe ACOSS with anddisco- to useditspowerrequest vehicles. Furthermore, Company Gused13led that different vehicle revea maintenance for - reports ofexpense An analysis Tracfin’s investigations Gulfcountry. inaPersian tion located - a consultingcompany specialisedincommercial representa Additionally, Company were C,towards there financialflows Company V, company, acarrental €250,000. amountingto individualsandto to wereside, there 395banktransfers debit €950,000.Onthe hire vehicle company totalling private from the Company Greceived numerous transfers The facts service. ting ataxi Company G, - a solely owned liability company limited opera transactions made by the financial to Tracfinwas alerted platform vehicle (VTC) hire through the useofaprivate Tax fraud evasion andsocialsecurity 5: Case study Company V €250,000 €950,000 395 banktransfers Company G • • Warning signs–bank rities. - autho ACOSS tax the to the andto referred was This evidence invoices. abroad issuingfake profits Company Cmay transfer have upinorder to beenset Company same(individual)partner. CandCompany Ghadthe ofdrivers. teams the for salesmanagement aspayment services for country, Company Gulf inaPersian paidto C,located €70,000 was Company 2017. Gdidnotdeclare for anyturnover Lastly, bankloans, several havingIn addition,despite contracted usingundeclared labour.G was Company that Thissuggested hiring. to prior tive declarations - administra onthe names featured northe workers salaried namesofthe the neither matched were namesthat madeto individuals to transfers money many of the It appeared that URSSAF). (filedwith hiring to prior declarations in itsadministrative nameshadbeenmentioned whereas 140workers different ACOSS: 5employees DPAE: 140employees €7,870 insalaries manager Partner Bank transfer to a tax haven atax to Bank transfer multipleindividuals andcheques to Bank transfers Invoice €70,000 Partner Company C 69 TRACFIN - ANNUAL REPORT 2017 70 TRACFIN - ANNUAL REPORT 2017 sonal account, and withdrew €30,000incash. sonal account,andwithdrew Subsequently, shewired €140,000 per- heremployer’s onto €30,000. to amounted Ms X’s annualsalary €300,000. to amounted sum remitted total bankaccount.The herpersonal into firm, from MrZ,heremployer architecture andsoleowner ofthe manager,An administrative MsXhasbeendepositingcheques The facts audited. employee been ofacompany the by whoseaccountshadjust out Tracfincarried onfinancial flows received information from notice issuingagarnishee to prevent the authorities tax Organisation ofinsolvency 6: Case study Employee ofCompanyY Annual salary:€30,000 withdrawals €30,000 Cash M s

X €140,000 intotal Bank transfers: Mrs X'spersonal bank account Mr Z'spersonal bank account Mr • • Warning signs disclosure. a«flash» activitiesthrough ofthese informed was The DGFiP recover claim. to their authorities tax the used by measures aimedatcircumventing forceful This scheme the notices(ATDs)garnishee DGFiP. from the bankhadbeen receiving firm’s the repayment plan.Infact, a hadgranted (DGFiP) General Directorate Public Finances the of the localbranch collectionofficerof tax the that and tax arrears €400,000in owed nearly firm architectural the that found itwas databases, tax cross-checking After Tracfin’s investigations amounting to€300,000 from thefirm'saccount Multiple depositsofcheques Z notices Business infinancialdifficulty, bank receiving garnishee ormanager operator firm’s accountofthe personal the account to latter’s from the employee’s account, then to an bank account from a firm’s transfers Large money Company Y's account owned byMrZ,anarchitect a solelyownedcompany Company Y, Garnishee notices in taxarrears €400,000 in cash used to purchase these codes, the difficultyin tracking codes, the purchase these in cashusedto amounts considerable useofprepaid codes,the case, given the this investigate The Unit to intelligence techniques leveraged cash. a European city. boughtusing Theseprepaid codeswere mostly camefrom asingle in pointofsalelocated bulkofthem but the France, pointsofsalethroughout purchased inmultiplephysical Prepaid codeswere fromdisconnected anygaming transaction. out offundswere carried prepaid codes,andtransfers through accounts players’ large amountswere the remittedVery to ofthe fundscredited to theseconceal the accounts: origin accounts revealed how this group to ofindividualsarranged Analysis onthe oftransactions players’ onlinegaming onlinegaming players’ accounts. the depositsonto the However, bankaccountdebitswere from disconnected the amountof€500,000intotal. inthe Authority) Regulatory OnlineGamingonline gaming approved sites ARJEL(the by offundscomingfrom consisted bank accountsmostly income.Depositsontheir noreported with of students The group were underinvestigation ofplayers composed onlinegaming websites. through laundering atmoney onlinegaming hinted players’ accountswhich the activityofbankaccountsand to Tracfinwas alerted The facts gaming websites usingonline Money laundering 7:Case study With individualsknown to thepolicefortheft, possession anduse of narcotics,etc. outside theEU With countries CO M Connections were observed inareas the pointsofsale UN located farfrom OF CONNECTIONDATA ICA T IO ANALYSIS N S

GEOLOCATION

FINANCIAL ANALYSIS • • • Warning signs suspiciousflows were undeclared. the given that evasion, tax inconnectionwith laundering money to prejudicethrough online gaming without cifically websites, spe- laundering money for courts the to referred This case was prepaid codesinperson. the hadnotpurchased the players that confirmed which others), among (planeandroad trips, also uncovered travel information EU. outsideofthe located It and received from two countries calls hadbeenmade ofcommunicationsrevealed that Analysis prepaid codes. purchase the to pointsof sale in person various the had visited onlinegaming players’ accounts ofthe owners the whether confirm to prepaid codeswerehow the acquired, particularly involved. provide to insightinto network Theobjective was scopeofthe international cash,andthe of the origin the ...in pointsofsalelocated For electronic money institutions: institutions: electronicFor money For gaming operators: gamingFor operators: For banks: banks: For throughout France – – – – – – – – – – online gamingaccounts points of sale, particularly outsideFrance points ofsale,particularly Massive inafew purchases ofelectronic money Massive useofelectronic money game actionsFew Debit flows inconsistent with high gains with inconsistent Debit flows the players economic profile of socio- the inrelation with online gaming operators originating from Unusual large financialflows Players opened 1 actions recorded were purchased Prepaid codes 3 Few game 2 accounts werecredited Players' onlinegaming Funds werewired to bankaccounts ...in apointofsalelocated 4 in aEUcountry €500 000 BANKS

71 TRACFIN - ANNUAL REPORT 2017 72 TRACFIN - ANNUAL REPORT 2017 instance, Company C did not appear to work with a select group aselectgroup with Company work Cdidnotappearto instance, recipients. For locationsofthe geographical the any logicasto aswell. be diverse There didnotseemto bevery red seemedto funds receivedtransfer legal the entities that mented andthe appeared highly- frag operations (in Europe andAsia).Payment companies abroad located various fundsto collected the convey French accountsto bankaccountswere only usedastransit Unit Company C’s the noticedthat itsinvestigation, During Tracfin’s investigations investments. the payments asdiamond of the purpose specified bank transfers over Company C’s bankaccountsreceived period, asixmonths Within diamondsector. inthe experience professional haveto anyprior Mr K, Company C’s manager and sole shareholder, did not appear abroad, underitsresponsibility.warehouses incustoms insafes Rather, them store businessproposed to the homes. nor delivered their to be shipped, nor imported, neither itsclients.However, saleto diamonds for would gemstones the sector. in the Thecompany apparently offered experience claimed ithad15 upbutits website recently of set was years Company C tion ofdiamondresources inproducing countries. deple- the dueto returns promising exponential assets as safe itpresented which Internet, indiamonds»onthe «investments andbroker, beadiamondtrader to Company Coffered Purporting The facts power)(postponement of power to atransaction postpone anduse Diamond fraud 8: Case study Individual clients €1.5m indepositsfrom French individuals.Someofthe in 6months €1.5m 1 and othergemstones Trader indiamonds Manager: MrK Company C €700,000 retrieved frombankaccountsinFrance €700,000 retrieved Tracfin’s powertopostponetransactions Seized lateraspartoflegalproceedings Pending banktransfersorders for atotalvalueof€170,000 to various"suppliers"abroad used tosuspendtransfers in completedbanktransfers -

• • • • • • Warning signs recovered. (about€700,000)was money investors’ the of part Tracfin’s to Thanks intervention, defraud. to conspiracy officeas publicprosecutor’s the to referred This casewas transactions. these stop ofoppositionto its right transfers were aboutto Unit beprocessed, sothe exercised that €170,000 entities by reporting inbank Tracfinwas alerted providers. such dealing with entitieswere becareful when advisedto Reporting traders. diamond asinvestment such Internet, onthe opportunities atypicalinvestment offering intermediaries public against the Control) andFraud hadwarned DGCCRF (ConsumerAffairs the AMF, office, publicprosecutor’s the the ACPR and The Paris diamondtrading. to trading earth from rare purpose company’schange corporate inthe by adubious issued gemmological lab,anda recent certificates useofforged the returns, andsocialsecurity in Company C’s tax Unit the uncovered by investigations irregularities Furthermore, basedinFrance. acompany truly with beconsistent low to seemedtoo expenses operating his businesstravel expenses, and payment ofMrK’s salary the company’s headquarters, on the lease companies, foreign the to fundtransfers from the Apart purchase itsdiamonds. to wholesalers gemstone of trusted €630,000 payment orders duediligence executing heightened before Call for abroad recipients to payment operations Highly fragmented Transit bankaccountsinFrance from collected individuals amountsofmoney Substantial from departments government alert Public service Internet the through offered activityinatypical assets investment High-risk 3 2 4 Companies located (Europe, Asia,etc.) in variousregions

• • that: onFrench accountsshowed ofbanktransactions An analysis companies’ the accountsinFrance. through transiting French directlyfrom orafter the accounts,either funds accountsreceived Theseforeign someofthe countries. resources butdidhave inFrance bankaccountsintwo European Company AandCompany Bdidnothave anydeclared operating revealed that counterparts ourforeign with and aconsultation databases andsocialsecurity legal, customs A search oftax, Tracfin’s investigations ceased. onCompany A’s allbanking transactions accountshad after business. Itreceived large (€1m inflows over amonth) used-vehicle alsoengaged inthe managed MrP2,was by Company B,across-border company upand recently set inused-vehicle trading. operating EUCompanyopened by A, managed MrP1andreportedly by of €15m onaFrench over deposited months bankaccount ten Tracfin theamount in onfinancial flows received information The facts in vehicle trading and money laundering Tax fraud evasion, socialsecurity 9: Case study nated from:nated The fundsreceived Company by AandCompany B origi- A andCompany B. group asCompany samefamily-owned controlled the by aholdingcompany business,for vehicle trading the in really companies operated ny B were that mostly Company fundssentby AandCompa-The recipients ofthe Pallet tradingcompany Security servicescompanies Construction companies Companies managedbyMrP2 Companies managedbyMrP1 A F ra n c e 1

€15m 2 €11m wholesalers

Vehicle €400,000

3 • • • • • Warning signs–bank possibly abroad.market, The vehicles acquired may have beenresold on another andpensionfraud. fraud, and socialsecurity evasion under suspicion of tax jurisdiction territorial with office publicprosecutor’s the sentto was This information apparent economicconnection. any individualsorcompaniesside, cheques madeto without the debit credit sideonly pensionbenefits,andon on the individualswhosebankaccountsshowedinvolving several fraud social linkedsecurity suspected This to case was 4 vehicle trading in are which commonpractice drafts, ofbanker’s Lack onbehalfofindividualorbusinessaccounts debited quickly pensionfundsthen Individual accountscredited by deceased be outto andwhomighteven turn notascertained was from individualswhose Inflows residence in retired France not ascertained whose residence was inFrance andfrom individuals retired trading), pallet services, security massive vehiclewith purchases (construction, from Inflows companies involved in activities inconsistent resources anyapparentcompanies operating without accountsofforeign onthe Large banktransactions over onemonth – – €1m – – there was actually no proof that they were still alive. were still they actually noproof that was there whom andfor (someactually residing there) Africa sameremote region ofNorth tiesinthe with retired, Many individuals,someofwhom were identifiedas occurred. flows the inwhich period the during anyvehicles hadnotregistered andthat services), and security construction trading, cles (pallet massive purchase ofvehi- the with ties inconsistent activi- obligations, declaring tax their comply with to Companies failed recently created and/orthat B F ra n French individuals c e Outside France Fr ance

73 TRACFIN - ANNUAL REPORT 2017 74 TRACFIN - ANNUAL REPORT 2017 had been granted new loans to cover loansto itscashflow new needs.had beengranted frequently companybank accountwas overdrawn andthe thattime.Itscompany hadbeeninfinancialdifficulties at French the revealed investigation that the Furthermore, hadbeen rendered. that services justification aninvoice related to of anyinvoice or information no prior supplieraccountwith the payments hadbeenremitted to advanced these entityrevealed that ofthe circumstances financialandaccounting contextual, ofthe An examination Tracfin’s investigations country. aforeign by signingofasupply contract the related to mayred. have They oncommissions represented advances had been actually rende- that services orproof justification any without overto €1mover arolling period one-year amounted labelled as «prepayments» orders, new for fers, - Thesebanktrans Europeancompany Company with Statute. refuelling benefitinga specialised incivilandmilitary by a sent French entity to banktransfers Tracfinwas alerted The facts Economic andfinancialpredation 10:Case study entity usingfalsecredentials The Frenchcompany paid theintermediary solicited theFrench An intermediary 2 1 French andforeign government clients new foreigncontracts services tohelpsign Claimed toprovide

• • • • Warning signs situation. vulnerable placedina French defacto independence, the company was andstrength itsfinancial asto uncertainty much Faced with was and it greatlyfinancial difficulties weakened. worsened, company’starget the was beingdiverted, as itscashflow These actions were typical of an economic predation scheme: fraud. of individualhadbeensuspected also uncovered the that credentials. Asearch ofpublic-accessdatabases used false individual hadreceived French fundsfrom the entityandhad this lightthat brought investigations to TheUnit’s diary. - aninterme by contacted itwas fundsafter had paidthese French discovered the companyIn addition,itwas that reached overequity 100%. ratio year, fiscal endofthe At the the French company’s debt-to- Company infinancialdifficulties inpublic-accessdatabases be verified whosecredentials couldnot Presence ofanintermediary entries identifiable counterpart of andalack involving flows foreign suppliers Financial sector inasensitive Company strategic operating French company Foreign company Refuelling operations on behalfof F ra n c e French andforeign civil clients that serviceswererendered documents proving without supporting for commissions Advanced payments 3

• • beneficiaries: three tigated these business. inves- service Tracfin sameofficeofamoney the andwere allreceived other ofeach at days afew ned within happe- amountof€1,800. Thesetransfers atotal for Levant Subsequently, individualsinthe three hesentfundsto 2017,In April of €500 from Canada. Mr X received a transfer jihad. the region for Levant the gone to whohad Islamists Frenchof sendingfundsto radicalised suspected He was religious fundamentalism. for databases known inpublic-access ofMrX.Thisindividualwas tances Tracfinthe financialcircums- on investigations conducted financingviaafundcollector Terrorist 11:Case study in France. living Levant anindividualfrom the was transfers of these remitters Gulf.Amongthe Persian Caucasusandthe the Europe, Europe, Eastern inWestern individuals located Mr Bhadreceived 2014, about$9,000sincelate from 13 remitters. the among was militant Islamist Gulf.AFrenchPersian radical Caucasusandthe Europe, the basedinWestern senders Mr Ahadreceived 2016, about$5,000sincelate from ten 13 individuals 3 2 1 13 individuals Mr A

Mr Jihadists Mr Mr X • • • • Warning signs ongoingproceedings. to bolster office public prosecutor’s Paris andthe departments partner shared with The casewas financingscheme. terrorist was implicated ina that MrX alsoconfirmed They tors. fundcollec- identificationofnew the ledto Investigations that end. to conflictzone the bordering countries hemay have that inoneofthe usedrelays suggested fers - financialtrans ofthese pattern region, the Levant in the militants MrXandFrench between Islamist transactions didnotuncover investigations Unit’s any directWhile the • B Y operations involved andremitters insimilar Multiple countries Levant the to Bank transfers financialtransfers Staggered movementIslamist radical individualandthe targeted the between Links Balkans. Europe andthe inWestern located remitters Mr Chadreceived about$5,500sincemid-2016 from nine €1,800 €500 Mr C 9 individuals 9 in d iv id u s

75 TRACFIN - ANNUAL REPORT 2017 76 TRACFIN - ANNUAL REPORT 2017 ABROAD TRACFIN

77 TRACFIN - ANNUAL REPORT 2017 1. TRACFIN WITHIN THE INTERNATIONAL COMMUNITY

1.1 TRACFIN’S CONTRIBUTION The Egmont Group pursues a quadruple four-fold TO THE FATF AND MONEYVAL objective, as per its Charter: • To develop operational exchanges between financial The Financial Action Task Force (FATF) was founded intelligence units to combat money laundering and the in 1989 out of the necessity to develop and promote financing of terrorism international standards to fight money laundering, • To foster the development of programs for coopera- terrorist financing and other threats to the integrity tion, technical assistance and training, designed to of the international financial system. boost the effectiveness of financial intelligence units This intergovernmental body now has 37 member juris- • To bolster the powers of FIUs by championing their dictions and organisations. In 1990, it published a operational autonomy, within the framework of inter- report containing 40 recommendations, which featu- national standards such as those set by the FATF red a detailed action plan to be implemented by each • To support the creation of financial intelligence units member. These recommendations contained measures to centralise the reception and analysis of STRs and of to combat money laundering and nine special recom- any information relevant in the fight against money mendations related to the financing of terrorism. They laundering, predicate offences and terrorist financing. were revised in 2012 to deal more effectively with issues Also, to promote the dissemination of the results of 78 related to corruption and transparency. their analyses to competent authorities, in compliance with international standards The FATF regularly assesses the progress made by its members, to ensure the AML/CFT systems implemented Tracfin sits on the Egmont Committee as regional contact in each country meet its standards. In 2020, this peer for the organisation, representing the European Union assessment process will evaluate France’s laws and and countries of the European Economic Area. The regulations. Unit takes an active part in discussions and is tasked with ensuring contact between the Egmont Group and Together with the public entities involved in AML/CFT, Europe’s FIUs. Tracfin participates in the French delegation to the FATF, and to Moneyval, its regional group for Europe. More Tracfin is also involved in coordinating the meetings specifically, it focuses on identifying trends and new of the Circle of French-speaking FIUs, which comprises types of schemes. Annual reports can be accessed on all French-speaking members of the Egmont Group. The the FATF’s website. Some of the organisation’s reports goal of these gatherings is to promote best practices are also sent out to reporting entities. and allow members to share their experiences. Tracfin was especially involved when the Unit presented the French experience in the fight against terrorism and 1.2 OPERATIONAL its financing, during a training session held alongside COOPERATION BOOSTED the July 2017 plenary meeting in Macau. Moreover, BY THE EGMONT GROUP under the aegis of the Swiss FIU, the Unit has also organised a day of discussions with other FIUs on the The Egmont Group was created in 1995, and gathers fight against money laundering. 155 financial intelligence units worldwide. Its goal is to achieve more effective cooperation between FIUs. To combat money laundering and terrorist finan- cing, the Egmont Group has built a secure network for communication and information exchanges known as «Egmont Secure Web». The system complements «FIU.net», the network used by the EU’s financial intel- ligence units. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 1.3 TRACFIN’S CONTRIBUTION exchanges. Similarly, Tracfin’s officers also regularly visit foreign financial intelligence units. They also take TO EFFORTS WITHIN THE EU part in training and technical assistance missions. The Unit’s officers, in cooperation with Canada’s FIU, contri- The terrorist attacks that have afflicted Europe since buted to the organisation of a regional training session 2015 have underlined the necessity to pursue efforts on fighting terrorist financing, which was held from 21 to thwart terrorist financing and money laundering. In to 26 May 2017 in Dakar. Also in 2017, they contribu- December 2015, the Council of the EU and the European ted to a series of training sessions organised by the Council called for a revision of the EU legislative United Nations Office on Drugs and Crime (UNODC), framework on that matter. Consequently, in February which brought together financial intelligence units and 2016, the European Commission presented an action investigation departments of countries of the Western plan to bolster the fight against terrorist financing and Balkans. boost the effectiveness of the efforts deployed within the European Union. Its objectives included consolidating Furthermore, Tracfin is sometimes called on to to raise the powers of financial intelligence units, more specifi- awareness among foreign authorities involved in the cally, by allowing them to gain access to a wider range of fight against money laundering, terrorist financing information. and corruption about the role of financial intelligence units. In 2017, negotiations were held in Brussels, on the imple- mentation of a Fifth AML/CFT Directive. Tracfin took an active part in the consultation process that led to the fifth round of anti-money laundering measures and ensured its speedy implementation across France. BILATERAL MEETINGS WITH FOREIGN Here are a few of the noteworthy measures championed DELEGATIONS 79 by the Unit: Bilateral exchanges between Tracfin and its European counterparts are frequent with numerous opportunities • Implementing special due diligence measures for for in-person meetings through gatherings of the financial flows originating from high-risk third party Egmont Group, the FATF or the bodies placed under countries the aegis of the European Commission. Moreover, • Bolstering the skill sets of the EU’s financial intel- an officer exchange programme was set up and ligence units and fostering more effective coopera- experimented the Belgian financial intelligence unit tion among them CTIF-CFI, as part of an effort to bolster operational capabilities and a better understanding of the units’ • Implementing centralised national registers for bank respective investigation methods. Owing to the accounts and payment accounts success of this initiative, similar programmes may be • Instituting measures to address the role of virtual implemented with other foreign counterparts. currencies in the financing of terrorism In 2017, Tracfin also hosted representatives of financial intelligence units from Germany, Benin, Egypt, Jersey and Laos. The discussions and presentations, which 1.4 BILATERAL COOPERATION sometimes stretched over several days, helped provide AND TECHNICAL ASSISTANCE the necessary impetus to boost operational exchanges. The year was also marked by sustained exchanges with Since the scope of money laundering is by nature inter- American and Canadian counterparts, which focused national, it requires wide-reaching regional coopera- on information technology matters. tion among financial intelligence units. Tracfin has a division solely dedicated to receiving and processing requests from its counterparts. While biannual meetings of the Egmont Group offer the opportunity for bilate- ral meetings and discussions, Tracfin’s work requires more frequent interactions. The Unit frequently hosts foreign delegations to foster mutual knowledge and understanding of other FIUs’ respective responsibili- ties. Ultimately, the objective is to boost operational TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 2. PROCEDURES FOR INTERNATIONAL INFORMATION SHARING

Breakdown of incoming information (requests and reports) 2.1 REQUESTS FROM FOREIGN by geographical area FIUS South America / Central America / North America Caribbean Europe (including Mexico) 2% Information requests from foreign FIUs are handled 16% 17% Australia, Oceania by the Unit in the same way as STRs. Based on these 2% requests, Tracfin can exercise the same powers as when Asia, Middle East 4% investigating STRs submitted by a reporting entity. It Africa may in particular exercise a power to request vis-à-vis the 4% relevant professionals, or request additional information from the national public authorities.

The quality of the Unit’s reply depends on the clarity Europe (EU) of the reasons for the request relating, in particular, 55% to the context of the case and the identification of the The Unit exchanges more with certain countries on the targets. basis of specific criteria: As exchanges are subject to the principle of recipro- • Luxembourg, Belgium and Switzerland: Owing to the city, requesters may only ask for information that they geographic and linguistic proximity, there are large 80 themselves would be able to obtain in their own financial flows which may involve money laundering, countries. tax evasion or terrorist financing Foreign FIUs may also send spontaneous information to • The US: A large number of spontaneous reports poten- Tracfin that does not require a response. tially related to terrorist financing were received In 2017, the number of reports received from foreign • The UK: As a tax-friendly jurisdiction, the country FIUs was fairly stable compared to 2016. Tracfin received is a specialist in complex arrangements. There also 1,303 reports (down 4.5%) relating to over 7,000 indi- has been a sharp rise in operational cooperation on viduals and legal entities. criminal issues This information was comprised of: • Jersey/Guernsey: A large number of spontaneous • 719 requests (-11%) disclosures was received, involving either French citizens whose assets may not have been reported to • 550 spontaneous reports (+6%) the French tax authorities, or British citizens who are There were 712 exchanges with EU partners (+4%), of resident of French residents for tax purposes for tax which 228 were spontaneous reports (+42%) and 484 purposes were requests for information (-8%). The rise in the • Singapore and Hong Kong: These free trade zones number of spontaneous reports is a direct consequence may be used for the laundering of the proceeds of of the gradual implementation of Article 53 of the Fourth tax evasion AML/CFT Directive across the EU. The Directive man- • Russia: Exchanges primarily involved the financing dates that any European Union FIU that receives an STR of terrorism and searches relating to the property involving another Member State must forward it to that and financial assets of certain individuals State without delay. • Poland, Hungary, Czech Republic, Slovakia and Roma- nia: The efficient collaboration with these countries’ FIUs was mainly focused on false transfer orders and fraudulent payments TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Countries that sent Tracfin at least 10 reports Independently of the information sharing with foreign in 2017 FIUs, Tracfin provides information to its counterparts in two ways: Number Of which of reports • Spontaneous disclosures that result from analyses Country spontaneous received reports made based on domestic STRs received by the Unit. in 2017 In 2017, Tracfin sent 202 information notes (+66%) United States 217 180 to its partners, so that the intelligence gathered in Luxembourg 214 135 the STRs received in France could be used abroad. Belgium 213 29 The overall value of suspicious transactions totalled United Kingdom 63 20 around €409m.36 The vast majority of these notes Jersey 45 43 were sent to European FIUs (115 notes to 23 FIUs) Switzerland 43 10 • Requests for information, particularly financial, on Netherlands 32 2 individuals and legal entities, through which Trac- Germany 31 11 fin draws the attention of FIUs to the targets of its investigations. In 2017, the Unit sent 1,762 requests Italy 28 0 (+21%) concerning 855 cases being investigated to Australia 27 25 93 different FIUs, with European FIUs receiving the Isle of Man 27 27 most requests Spain (incl. Balearic 26 12 Islands) Top countries to which Tracfin sent at least Guernsey 22 20 5 spontaneous information notes Russian Federation 22 5 Poland 17 0 Number of spontaneous 81 Country disclosures sent to FIUs Hungary 13 4 in 2017 Mauritius 13 5 Belgium 13 Israel 10 3 United Kingdom 13 Malta and Gozo 10 3 Hungary 12 Monaco 10 6 Switzerland 12 * Greyed out countries made the list in 2016. Italy 11 Romania 9 Overall, Tracfin received reports from 92 different FIUs Germany 8 in 2017. Brazil 8 Netherlands 8 2.2 DISCLOSURES United States 7 TO FOREIGN FIUS Poland 6 Slovakia 6 In 2017, Tracfin sent 910 replies (-1.5%) to 763 different Spain (incl. Balearic Islands) 5 foreign requests (logged in 2016 and 2017). To substan- Luxembourg 5 tiate its replies, the Unit used its power to request Monaco 5 860 times vis-à-vis reporting entities, mostly financial and payment institutions, but also notaries and entities in the gaming and insurance sectors.

36 €1.3bn in 2016, due to one exceptional €500m case. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 2.3 TOOLS FOR INTERNATIONAL and responses between Tracfin and other European FIUs is paperless. 549 requests were sent to the Unit via this OPERATIONAL COOPERATION network in 2017.

FIU.net Council Decision no. 200/642/JHA of 17 October 2000 EGMONT SECURE WEB (ESW) introduced the concept of appropriate and protected This system, which was introduced in 1995, is also channels of communication among European FIUs. The secure. It can be used by all 155 FIUs members of the FIU.net computer network was set up in 2002 by five Egmont Group. ESW provides access to a broad network countries, including France, with all European FIUs of FIUs that share common operating standards. It is a gradually being connected from 2004 on. vehicle for operational exchanges and is also used for FIU.net is a secure and closed computer network that institutional communication within the Group. allows the EU’s 28 FIUs to exchange different types of Unlike FIU.net, the structure of ESW’s data does not information pursuant to their operations. Exchanges provide Tracfin with an automated import process. may be either bilateral or multilateral. The network In 2017, the Unit received 746 requests using this enables the recovery or automated sending of struc- system. tured data and provides an effective interface between the FIUs’ databases. The processing of all requests

82 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 83 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 84 84 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT ABOUT

TRACFIN 85 TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 1. ORGANISATION

DIRECTOR ADMINISTRATIVE Bruno DALLES AND FINANCIAL AFFAIRS DEPARTMENT DEPUTY DIRECTOR Albert ALLO Security Unit

DGFiP Liaison Officer

International policy and FAFT advisor

Strategic Analysis Unit

Communication officer

LEGAL ADVISER Alexandra BOUDET 86 LEGAL AND ANALYSIS, JUDICIAL DIVISION INTELLIGENCE Combating INVESTIGATIONS INFORMATION AND INFORMATION Terrorism Financing DEPARTMENT SYSTEMS TASK FORCE DEPARTMENT Division

Police, Upstream Report Development Gendarmerie and Investigations Division 1 Intelligence Office and Fraud Detection French Customs Division Liaison Officers Infrastructure Office Investigations Division 2 Information Routing and Enhancement Projects Office Division 1 Financial sector Investigations Division 3

Information Routing and Enhancement Division 2 Investigations Division 4 Non-financial sector

International Division

ACPR and ACOSS Liaison Officers TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Pursuant to an Order dated 7 January 2011,37 an The division provides advice for all legal aspects, helps Analysis, Intelligence and Information Department, draw up national and international AML/CFT legislation, an Investigations Department, an Administrative and manages litigation in relation with the Unit’s work and Financial Affairs Department, and a Combating the monitors data protection issues. It also offers a daily Financing of Terrorism Unit have been set up within interface with the courts and police, gendarmerie Tracfin. and judicial customs departments to ensure the best possible coordination between Tracfin’s work and that Since then, Tracfin has also set up an Information of the judicial authorities. Lastly, and except for urgent Systems Task Force and has transformed its Combating cases, the division’s legal advisor must provide an the Financing of Terrorism Unit into a Division. It has opinion on all reports to judicial authorities involving also formed a Legal and Judicial Division and a Strategic suspicions of criminal offences. Analysis Unit (CAS). Around 50 officers work for theAnalysis, Intelli-gence The Administrative and Financial Affairs and Information Department (DARI). It is tasked Department (DAAF with collecting suspicious transaction reports and information, with redirecting them, with examining The DAAF is comprised of a manager and four officers financial intelligence and relations with reporting responsible for local HR management, forward-planning entities, and with international relations. Two liaison for staff and fiscal monitoring. officers (seconded from the Prudential Supervision and The Strategic Analysis Unit (CAS) seeks to identify Resolution Authority and the Central Agency for Social AML/CFT trends and patterns, either through the cross- Security Bodies) also work in the Department. cutting use of information received by Tracfin, or by The DE (Investigation Department) is comprised of actively monitoring new issues which are only rarely four divisions. When a case so requires, the Department mentioned in the STRs received. Three officers work in 87 conducts in-depth investigations on all types of money this unit. laundering. Each division has its own specialised unit An expert adviser, reporting to the director, is in responsible for the gaming sector, non-banking finan- constant contact with the Unit’s foreign counterparts, cial circuits, economic predation, and complex legal in particular as part of the FATF. structures, respectively. Since 1 September 2016, a liaison officer from the The Combating Terrorism Financing Division (DLFT). Public Finances Directorate General (DGFiP) has Owing to the increase in staff laid down in the govern- been working for Tracfin. He is responsible for bolste- ment programme presented by the Minister for the ring relations between the two structures and impro- Economy and Finance in March 2015, a division to ving mutual understanding of their positioning and skill combat terrorist financing was set up in October of sets. that year. It is tasked with processing the weak signals provided by private-sector reporting entities and with The Information Systems Task Force is responsible for expanding the Unit’s relations with the other specialised current and future operation of Tracfin’s information departments of France’s intelligence community, and system. It has three offices: an Infrastructure Office the administrative and judicial departments involved tasked with maintaining workstations, systems, the in fighting terrorism. network, and providing user support; a Projects Office that designs and rolls out the information system The Legal and Judicial Division and maintains current applications in operational The Division is managed by a judicial magistrate who condition; and an Upstream Intelligence Office in provides legal advice to Tracfin within the framework charge of the standard of data standards and data of the French Monetary and Financial Code. It is also integration into the system. The Task Force also includes comprised of a second magistrate, assistant to the an Information System Security (ISS) Manager and two head of the division, three paralegals, acting as expert data scientists. advisers, two police liaison officers, a gendarmerie liaison officer and a customs liaison officer seconded to the division.

37 See Order of 7 January 2011 on the organisational structure of Tracfin, a unit with national scope. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT 2. TRACFIN: EXPANDING TO MEET NEW CHALLENGES

Tracfin’s staffing increases between 2008 and 2017

160 151

140 132 119 120 104 100 92 84 87 80 73 72 67 60

40

20

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

88

The number of Tracfin employees has been rising stea- civil service explain why the Unit increasingly turns to dily since 2008. In 2017, staffing levels grew by 14.4% contract staff for its staffing needs. Quite often, the year-on-year. Compared to late 2015 levels, this was a contract staff hired by Tracfin already work directly or 26.8% increase in staff, and compared to late 2012, a indirectly for the central government and not for the 73.5% increase. This sharp rise in headcount is in part private sector. due to the recognition of the contribution of financial After struggling to recruit in 2016, the Information intelligence to the fight against terrorist financing. Systems Task Force increased its staff by 35% in 2017 Tracfin’s changing staff structure and now employs 23 officers, up from 17 year-on-year. The hiring was spurred by the imminent roll-out of a Two trends emerge from the Unit’s staffing changes in new ambitious information system across the Unit, as 2017: many functions previously outsourced to service provi- • The number of positions held by contract staff rose to ders were internalised. 15% of total employees, up from 12% in 2016 Concurrently, officers seconded from the DGDDI made • The Information Systems Task Force accounted for up a smaller share of Tracfin’s staff in 2017 (31%), down 15% of staff, up from 13% in 2016 from 34% in 2016. Officers from the DGFiP accounted for These two trends are interrelated. Most of Tracfin’s 26% of staff versus 27% in 2016. Central government contract staff are employed in the Information Systems staff grew slightly, from 19% to 20% of total employees. Task Force, which had a lot of new hires in 2017. The It is worth noting that the Unit continued to diversify its highly specialised and unique nature of these func- staff’s background in 2017 and hired its first seconded tions, and the lack of adequate skill sets within the Territorial Attaché. TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT Breakdown of headcount by original department Tailored training programmes In 2017, Tracfin continued its strategy of broadening and diversifying training programmes. To that end, the 20% Unit turned to the Institute of Public Management and

26% Economic Development (IGPDE), the organisation tasked with training the staff of the French Economy and Finance Ministries. It also sought help from its insti- tutional partners, and used in-house resources to offer training sessions on specific themes. In 2017, 89.4% 15% of the Unit’s officers attended at least one training session, down from 92.4% in 2016. Overall, a little over 837 days of training were provi- 5% ded (up from 665 in 2016) for an average of 5.55 days 31% 3% of training per officer (up from 5.04 in 2016). Over 30% of the training sessions were held within Tracfin.

Central government The training sessions provided by the IGPDE made up Contract staff 25% of all sessions and were organised specifically for Seconded officers the Unit’s officers. Lastly, nearly 23% of the training DGCCRF sessions were conducted by the Intelligence Academy, DGDDI an organisation reporting to the Prime Ministerial DGFiP departments, which provides training to intelligence service staff. Over 75% of the training programmes 89 provided to Tracfin’s officers focused on themes closely Grade A or A+ staff accounted for over 80% of the Unit’s related to their duties and professional environment employees; this percentage has remained fairly stable (as opposed to general training such as languages or year-on-year. information technology). Tracfin continued to attract a large number of unsoli- Tracfin has now developed a comprehensive training cited applications but much fewer were received in programme which helps coach new hires on a few cri- 2017 than in 2016, in the aftermath of the 2015 ter- tical topics. All new officers go through a one-day ror attacks. Unsolicited applications generally align onboarding session, which introduces them to the closely with the Unit’s specific missions, and focused various activities of the Unit and allows for a meet-and- on professions related to financial, rather than general, greet with their new colleagues. New hires also have the intelligence. opportunity to quickly sign up for training programmes on topics such as white collar crime, the banking system Répartition des effectifs de Tracfin par sexe and an overview of the judicial system. (situation au 31/12/2017 : 32 agents) Experienced officers are offered valuable extended training sessions such as those offered by the Intelligence Academy, the Centre for Financial and Women 42% Technical Studies in Aix-en-Provence, the National Magistrates Academy, the Institute for Higher National Defence Studies, and the European College of Financial Investigations and Analysis of Financial Crimes in Strasbourg. In 2018, Tracfin aims to bolster its relations with the National Magistrates Academy. While Tracfin turns to its partners to provide first-rate training for its staff, the Unit also contributes to its par- tners’ training efforts through in-house presentations Men 58% at, inter alia, the Intelligence Academy, the National Magistrates Academy, and the National Institute for Advanced Security and Justice Studies (INHESJ). TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT APPENDICES

AML/CFT-RELATED LEGISLATIVE AND REGULATORY DEVELOPMENTS IN 2017

Several regulations have expanded the scope of institutions authorised by French regulators. The legis- AML/CFT obligations to new entities and new sectors. lation also bolsters the cooperation between national regulators in matters of approval and control. These Order 2017-484 of 6 April 2017, which supplemented measures help secure the framework under which Article L.561-2 of the Monetary and Financial Code, payment providers operate, and indirectly contribute added the following entities to the list of reporting to strengthening the overall AML/CFT system. or liable entities that must now comply with AML/CFT obligations: In 2017, new regulations were issued to implement legislative provisions passed in 2016. • The supplementary occupational retirement funds mentioned in Article L.381-1 of the Insurance Code Act 2016-731 of 3 June 2016, extending Tracfin’s • The supplementary occupational retirement mutual access to the file for processing criminal records (TAJ) societies or unions mentioned in Article L.214-1 of the for all the Unit’s assignments, was made applicable by Mutuality Code the Decree of 3 August 2017, which set out the condi- tions for its implementation. As a result, Tracfin’s 90 • The supplementary occupational retirement insti- officers can now consult data concerning ongoing or tutions mentioned in Article L.942-1 of the Social concluded court proceedings, excluding that relating Security Code to persons registered as victims. Directive 2015/2366/EU of 25 November 2015 on In addition, the measures relating to the register of payment services was enacted into French law through beneficial owners entered into force on 1 August 2017 Order 2017-1252 of 9 August 2017 and Decrees 2017- through Decree 2017-1094 of 12 June 2017. This regis- 1313 and 2017-1314 of 31 August 2017, which entered ter was introduced by Order 2016-1635 of 1 December into force on 13 January 2018. Pursuant to Article 2016, which enacted the Fourth AML/CFT Directive L.314-1(7) of the Monetary and Financial Code, a new (Articles L.561-46 to L.561-50 of the French Monetary sector must now comply with AML/CFT: payment ini- and Financial Code). These measures detail the tiation services. The legislation allows these service procedures for completing and filing the document providers to fulfil their AML/CFT obligations through related to beneficial owners established by the simplified due diligence measures (see Articles L.561-9 Order, and transmitting it to the competent authori- and R.561-16 of the Monetary and Financial Code). ties and to the reporting entities subject to AML/CFT Furthermore, in case of an emergency (such as a obligations. serious threat to the collective interests of users), The Fourth AML/CFT Directive is currently being enacted, the legislation allows the Prudential Supervision and and all regulatory measures related to the application Resolution Authority (ACPR) to take conservancy mea- of the Order of 1 December 2016 should be published sures towards payment or digital currency institutions in 2018. operating in France but authorised in other European countries. This was previously possible only for TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT THE REVISION OF THE FOURTH DIRECTIVE ON THE PREVENTION OF THE USE OF THE FINANCIAL SYSTEM FOR THE PURPOSES OF MONEY LAUNDERING AND TERRORIST FINANCING

The adoption of Directive 2015/849/EU of 20 May 2015 created in 1971), and by providing a wider access to (known as the «Fourth AML/CFT Directive») was a major the registers of beneficial owners of companies and step in improving the effectiveness of the measures trusts. Beneficial ownership information should be engaged in the fight against the laundering of money made available through the system of interconnec- derived from criminal activity and against terrorist tion of registers within 32 months after the Directive financing. has entered into force, so as to facilitate information sharing between Member States. However, the terror attacks in Europe, and especially the November 2015 attacks in Paris, revealed that 3. Reinforces the investigative powers of financial much was still to be done to bolster the resources of the intelligence units: Data recorded in national bank AML/CFT system. Faced with this reality and a rapidly accounts registers will need to be directly accessible changing financial system, the European Union, mainly by any national FIU and can be communicated upon under France’s leadership, began work to revise the request to other FIUs. Furthermore, new provisions Fourth Directive, with the objective of providing a more also allowed for enhanced cooperation between ambitious response. A political agreement was reached financial intelligence units. Every national FIU must at the end of 2017, after 18 months of negotiations in be entitled to request, obtain and use information which Tracfin took an active part. from any obliged entity, even when no suspicious transaction has been reported by said entity. This Deeply engaged in the fight against money laundering 91 ensures national FIUs are able to respond to any and terrorist financing, France has kept ahead of these request originating from other FIUs. developments and has already been actively bolstering its domestic legislation. In fact, many of the provisions These provisions already exist under French law. featured in the new Directive already exist in French law. Their objective is to bolster the powers of all finan- cial intelligence units across the European Union and Some of the advances introduced by the revised facilitate cooperation. Directive: 4. Regulation of digital currency: Lowers existing 1. Expansion of the scope of the Directive to new threshold for identifying prepaid card holders will be sectors: lowered from €250 to €150 and KYC obligations will • Virtual currency exchanges and virtual currency be reinforced. wallet providers 5. Improves controls concerning high-risk third • Persons trading or acting as intermediaries in the countries, by implementing supplementary due dili- trade of works of art for any transaction of €10,000 gence measures for financial flows originating from or more third countries that fall short in the prevention of • Estate agents acting as intermediaries in the letting money laundering, and that are on the list drawn up of immovable property when the monthly rent rea- by the European Commission. This list derives from ches €10,000 or more the global list established by the Financial Action These professionals, except for virtual currency provi- Task Force (FATF). ders, already must comply with AML/CFT obligations as Member States must enact this Directive within 18 per French law. months of its entry into force. While some of the new 2. Continued efforts to boost transparency by imple- European provisions already exist in French law, others menting a register of payments and bank accounts will need to be integrated in the Monetary and Financial in each Member State (this register, known in France Code. as FICOBA – national bank accounts register – was TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT ACRONYMS

AFA French Anti-Corruption Agency ACOSS Central Agency for Social Security Bodies ACPR Prudential Supervision and Resolution Authority AMF Autorité des Marchés Financiers AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism ARJEL Online Gaming Regulatory Authority CARPA Lawyers’ Financial Settlement Fund CIF Financial Investment Advisers CIP Crowdfunding Investment Advisers CMF Monetary and Financial Code CNAJMJ National Association of Court-Appointed Receivers and Trustees CNRLT National Intelligence and Counter-Terrorism Coordinator COSI Systematic Information Disclosure CSN National Association of Notaries DGCCRF Directorate General for Competition Policy, Consumer Affairs and Fraud Control DGDDI Directorate General of Customs and Excise DGFIP Public Finances Directorate General 92 DGGN Directorate General of the National Gendarmerie DGSI Directorate General for Domestic Security DGSE Directorate General for External Security DGSN Directorate General of National Security DGT Directorate General of the Treasury DNSCE National Directorate for Foreign Trade Statistics DNLF National Anti-Fraud Office DNRED National Directorate for Customs Investigations and Intelligence DSP2 Revised European Directive on Payment Services DSS Social Security Directorate EME Digital Currency Entity FATF Financial Action Task Force FDJ Public lottery and betting company FIU Financial Intelligence Unit HATVP High Authority for Transparency in Public Life IFP Crowdfunding Intermediaries OCRGDF Central Office for the Prevention of Serious Financial Crime PEP Politically Exposed Person SCCJ Central Racing and Gaming Unit SGP Investment Management Company SGDSN Secretariat General for Defence and National Security SNDJ National Customs Judicial Department STR Suspicious Transaction Report TGI Court of First Instance UCLAT Antiterrorist Action Coordination Unit URSSAF Unions for the Collection of Social Security Contributions and Family Allowances TRACFIN - ANNUAL REPORT 2017 TRACFIN - ANNUAL REPORT TEAR-OFF REPORTING SLIP: HOW TO SUBMIT AN STR

Two ways for reporting a suspicious transaction that may involve money laundering or terrorist financing:  Online Fast and secure: ERMES (https ://Tracfin.finances.gouv.fr)  Letter You must use the reporting form available online TRACFIN 10, rue Auguste Blanqui 93186 Montreuil-sous-Bois cedex

Tracfin provides you with instructions drawn up together with professionals. These instructions contain a step- by-step guide to reporting. IMPORTANT, the form below must be typed and not handwritten, and must designate at least one person to be valid.

Designate a correspondent or reporting party Who is the reporting party/correspondent? Pursuant to Article L.561-2 of the Monetary and Financial Code, professionals subject to AML/CFT obligations must designate vis-à-vis Tracfin and their supervisory authority, the managers or employees tasked with the responsibilities of “reporting party” and “correspondent” respectively. If necessary, the same person may assume both these positions. –– The reporting party is in charge of sending reports to the Unit –– The correspondent provides the interface with Tracfin. He or she receives the acknowledgments of receipt for reports sent and handles requests for communication of evidence or documents Designating a reporting party/correspondent. Tracfin provides professionals with a special registration form at www.economie.gouv.fr/Tracfin/declarer TRACFIN – France’s Financial Intelligence Unit (FIU)

Publication Director: Bruno Dalles 10 rue Auguste Blanqui 93186 MONTREUIL - tél. : (33)1 57 53 27 00

www.economie.gouv.fr/tracfin graphique SIRCOM : Studio

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