On October 2, 2019, the French Prudential Supervision and Resolution Authority (Autorité de Contrôle Prudentiel et de Résolution or “ACPR”) published its report (the “Report”) on banking and insurance groups’ consolidated controls for managing anti-money laundering and combatting terrorism financing (“AML-CFT” controls). The Report comes as European regulators plan to step up their enforcement of AML-CFT rules in light of recent money laundering scandals at EU financial institutions.

In the Report, the ACPR acknowledged efforts made by such groups under its supervision but noted shortcomings in the following areas:

  • Information provided to and the involvement and oversight of the governing bodies (board of directors, supervisory board);
  • Standards regarding AML-CFT, which were incomplete, outdated or insufficiently prescriptive at the groups’ consolidated level;
  • Training of personnel who are not part of the compliance and AML-CFT departments but who are exposed to money laundering and terrorist financing risk in their roles;
  • Control and effectiveness of vigilance measures in establishments and subsidiaries located or incorporated abroad (particularly in countries with weaker legislations);
  • Organization of intra-group information exchange; and
  • Regularity and scope of the internal auditing of AML-CFT devices.

As a result of the Report, the ACPR has given formal notice to groups to comply to AML-CFT provisions by remediating these deficiencies or face potential disciplinary action.

The Report comes as AML-CFT and prudential supervisors work to strengthen their cooperation at the EU level through the 5th Anti-Money Laundering Directive (“AML V”) (2018/843) and the Capital Requirements Directive V (“CRD V”) (2019/878). Among other measures, AML V calls for a multilateral agreement to exchange information between AML-CFT supervisors and the European Central Bank (ECB) on ACPR sanctions and identified weaknesses in institutions’ AML-CFT programs. (The agreement was signed by the ACPR in January 2019.) CRD V additionally provides that the ACPR alert the European Banking Authority (EBA) if the ACPR has reasonable grounds to suspect that money laundering or terrorist financing is being or has been committed.

Furthermore, a recent political agreement granted the EBA additional AML-CFT powers, responsibilities and tools, such as:

  • A European database of the institutions’ main weaknesses regarding AML-CFT;
  • The power to request that national supervisors investigate potential material breaches and consider targeted actions or sanctions;
  • Conducting risk assessments regarding the institutions’ ability to mitigate new AML-CFT risks within the EU territory, in addition to conducting peer reviews that could lead to recommendations; and
  • Cooperation with non-EU countries when facing cross-border money-laundering and terrorist financing risk cases.

In light of this Report, French banks as well as foreign banks with activities in France must remain vigilant in implementing and enforcing their AML-CFT compliance programs and internal risk management processes.