French and Italian Money Laundering Regulations

French and Italian Money Laundering Regulations

French and Italian money laundering regulations have become an important compliance issue affecting the process of buying French and Italian property and obtaining a French or Italian mortgage. This article explains the basic French and Italian legislative position.

You might assume that money laundering is a rare occurrence, but in fact money laundering has grown to be a major industry and very profitable for those involved, touching some of the worlds largest financial institutions such as the UK’s HSBC Read more.

Though money laundering has probably existed for as long as there has been government, it is only recently that it has reached epidemic proportions fuelled by global crime, terrorism and tax evasion.

The increasingly interconnected and wired financial clearing systems have just added to the problem making it ever easier for money to be laundered.

So, who are the big players in money laundering?

1. The Italian mafia:
   1. In Sicily and the USA, called Cosa Nostra. Read more
   2. In Calabria, called ‘Ndrangheta. Read more
   3. In Puglia, called Sacra Corona Unita. Read more
   4. In Naples, Called Camorra. Read more
2. Other Mafiosi: Generally from Eastern Europe, South East Asia and South America
3. Terrorist Organisations
4. Tax Evaders, both quasi-corporate entities and wealthy individuals

Banks were the first institutions to be required to put systematic controls in place to anticipate and prevent money laundering, but often these controls were implemented in a very lax way because permitting money laundering can be extremely profitable for the banks.

In June 1980 European Governments voted to make a recommendation to deal with the increasing scale of money laundering. This effort is still developing and the appropriate country by country picture is neatly encapsulated on the Anti-Money Laundering Forum website.

With the huge inflation in property prices since 1980, the increasing volume of property transactions and the global relaxation on property ownership controls, particularly during the last decade, property transactions have become ripe for exploitation for money laundering.

The purpose of this article is not to set out the detail of French and Italian money laundering regulations, but to explain how the regulations attempt to combat money laundering, with the inevitable impact on your entirely proper and legal property transaction.

What Is Money Laundering?

Money laundering is the process through which criminals, terrorists and tax evaders attempt to conceal the true origin or ownership of assets so as to retain control over them, avoid tax and ultimately make it appear as though the funds originate from a legitimate source.

How Is Money Laundering Policed?

Solicitors and Notaires are required be alert to the possibility of their clients using property transactions to launder money. If a solicitor or Notaire fails to report a suspicious source of money, an offence may be committed which can result in the solicitor or Notaire being prosecuted for assisting money laundering.

In the UK, solicitors are regulated by the Money Laundering Regulations 2007 which came into force on 15 December 2007.

French Money Laundering Regulations

In France,  money laundering is governed by the Order of 30 January 2009, which transposed the 3rd European Anti-Money Laundering Directive into national law. This act also extended the scope of TRACFIN (Traitement du Renseignement et Action Contre les Circuits Financiers Clandestins) investigations by requiring that a suspicious transaction report be submitted whenever the reporting party knows, suspects or has good reason to suspect that a transaction is based on an offence that is punishable by more than one year’s imprisonment or is connected to terrorist financing. Full details can be found on the Banque de France website.

Italian Money Laundering Regulations

In Italy, the system for the prevention of money laundering is based on the following obligations enshrined in Legislative Decrees 231/2007 and 109/2007:

1. Customer due diligence according to a risk-based approach
2. Record-keeping of the information acquired in the performance of customer due diligence
3. Reporting of suspicious transaction
4. Adoption of adequate organizational and procedural arrangements and internal control measures

An additional anti money-laundering and tax evasion tool, characteristic of Italy’s legal system, consists of the provisions that limit the use of cash and bearer instruments in transactions in general.

The scope of anti-money-laundering legislation has been progressively extended beyond banks and financial intermediaries to other persons engaged in activities considered to be particularly exposed to the risk of money laundering (professionals such as lawyers, notaries and accountants and some categories of non-financial business such as antique dealers, casinos and real-estate agents).

Despite the wide-ranging scope of the Italian money laundering regulations they have not , like many areas of Italian law, always been implemented in a consistent and universal way. Surprisingly, even the Vatican has found itself in breach of the regulations and in January 2013 had its permission to process credit card payments suspended by the Italian central bank. >>> Read more

How Do The Money Laundering Regulations Affect You?

Solicitors, Notaires, French mortgage providers and Italian mortgage providers have to implement the requirements of the relevant money laundering regulations and perform due diligence in respect of their customer’s identity.

Proof of identity will have to be provided from documentation, often called the A and B list, which corroborates a person’s claimed identity.

The main concern for solicitors and Notaires will be the dealing with funds that pass through their client accounts. Because money launderers will find it difficult to pass money through banks without providing a valid reason, passing money through a solicitor’s client account with repayment on a clean client account cheque or electronic transfer remains a useful laundering transaction.

When a solicitor or Notaire believes that there is suspicion or possibility of money laundering it is their duty to report their suspicion. In England, solicitors will inform the Serious Organised Crime Agency (SOCA), in France the Traitement du Renseignement et Action Contre Les Circuits Financiers Clandestins (TRACFIN) and in Italy the Polizia Fiscale.

It is an offence for a solicitor or Notaire who knows or has grounds to suspect that a transaction may involve money laundering not to disclose that information to the authorities.