The Financial Action Task Force (“FATF”) held the third and final Plenary meeting under the US Presidency in Florida from June 19-21, 2019, during which delegates discussed several major strategic initiatives of the FATF (e.g., launching a strategic review to analyze progress toward effective implementation of AML/CFT measures), as well as recent mutual evaluation reports (including reports from Hong Kong) and follow-up reviews. Among the major strategic initiatives discussed during the Plenary meeting was FATF’s advancement of its work in the area of virtual assets by issuing a public statement and adopting an Interpretive Note to Recommendation 15 on New Technologies (the "Interpretive Note"). The Interpretive Note further clarifies the FATF's position on virtual assets and it details how countries and obliged entities (e.g., covered financial institutions) must comply with relevant FATF Recommendations to prevent the misuse of virtual assets for money laundering and the financing of terrorism and proliferation.
Additionally, the FATF published an updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, which describes how countries and virtual asset service providers can satisfy their AML/CFT obligations with respect to these assets. The guidance addresses the following questions, among others:
- How activities involving virtual assets and virtual asset service providers fall within the scope of the FATF Recommendations?
- How should countries and competent authorities apply the FATF Recommendations in the context of virtual assets or virtual asset service providers?
- How do the FATF Recommendations apply to virtual asset service providers and other entities (including banks, securities broker-dealers) that engage in or provide covered virtual asset activities?
The updated virtual asset guidance follows revisions to the FATF Recommendations in October 2018 and June 2019 to address the growing use of virtual assets for money laundering and terrorist financing. The next FATF Plenary meeting will take place in Paris from October 13-18, 2019.
A first hearing before the Sanctions Commission of the French Anti-Corruption Agency
A French leading company, distributor of electric equipment, appeared before the Sanctions Commission of the French Anti-Corruption Agency (“Agence Française Anticorruption”, or “AFA”) on June 25, 2019. At this public hearing, the company presented its compliance program regarding the prevention of bribery and corruption as well as illicit influence peddling.
The AFA was created under the Sapin II Law of December 9, 2016 on transparency ("Sapin II Law"), the prevention of corruption and the modernization of economic life. It assists authorities and legal persons and carries out inspections to assess compliance programs built to detect and prevent corruption, influence peddling, extortion by public officials, unlawful taking of interest, misappropriation of public funds and favoritism. Following an inspection, in the event of a failure to comply with the Sapin II Law, the AFA can decide to send a warning to the company's representatives or refer the matter to the Sanctions Commission, which can order the company to strengthen its internal compliance procedures in accordance with the AFA’s recommendations within a determined period, not exceeding three years. The Sanctions Commission can also impose a fine on the company and its management, which can be up to EUR 200,000 for individuals or EUR 1 million for legal persons.
The above-mentioned French company was subject to an AFA inspection which was held between October 2017 and December 2017. Following this inspection, the AFA referred the matter to the Sanctions Commission. This is the first time that any matter is referred to the Sanctions Commission.
The AFA critiqued the French company for the lack of an appropriate compliance program (existence of a code of conduct, whistleblowing system, risk assessment, third parties due diligence process, accounting measures to prevent and detect corruption, employee trainings, disciplinary measures, assessment and monitoring of the compliance program) consistent with article 17 of the Sapin II Law and its recommendations.
The French company’s defense included the fact that the inspections and the AFA conclusions were made under standards that are not legally binding and go beyond what is required by law. The French company also noted the fact that the inspections carried out by the AFA were made with the objective of searching for evidence related to the commission of an offence and not to assist the company in the reinforcement of its compliance program.
The AFA requested that the Sanctions Commission order the company to comply with the law by adapting its compliance program and to be subject to a new inspection or, in the event of a non-compliance, to be sanctioned by paying a fine. The Sanctions Commission decision should be issued within four weeks from the date of the public hearing. It is expected that the Sanctions Commission decision will further clarify the Sapin II Law requirements, including the scope and the binding effect of the AFA’s recommendations and powers.