The French Notarial profession :

A Key Player In The Fight Against Money Laundering And Terrorist Financing

Combating money laundering and the financing of terrorism (AML/CFT) has been a priority
for France for many years.

This fight is essential to avoid the threats posed by terrorism, organised crime networks and
economic crime.

The application of these regulations is necessary to preserve the integrity of our country's
financial system.

The regulations are constantly evolving to adapt to new risks and emerging threats.

Combating money laundering and the financing of terrorism (AML/CFT) is a collective and
partnership priority.

It is shared between the public authorities and notaries, who have been subject to the
Monetary and Financial Code since 2009 under article L 561-2 of the Monetary and Financial Code.

The French government recognises that notaries and their involvement are an essential and
indispensable part of the policy to prevent and detect criminal activities and their developments.

The French notarial profession took part in the FATF's evaluation of France.

Notaries were members of the national team that concluded that France has a robust,
sophisticated and effective LCB FT framework.

The notarial profession works hard every day to ensure that national policy is more effective.

As a regulated profession handling funds in the transactions we observe, the notariat is

doubly involved in the fight against money laundering and terrorist financing.

For all transactions carried out in a notary's office, the funds pass through the notary's
accounts.

This practice exists even though the regulations only require it for payments made or
received by a notary on behalf of the parties to a deed that has been formally registered and is
subject to land registration.

This practice provides additional security for tracing financial flows and controls.

When a property is purchased, three financial institutions are involved: the seller's bank, the
buyer's bank and the Caisse des Dépôts et Consignations, which handles all transactions received by
notaries.

The risk analysis carried out by the French government shows that notaries need to be
particularly vigilant in the face of risks relating to property transfers.

Real estate accounts for 11% of France's GDP.

In 2021, notaries filed 1,837 suspicious transaction reports.

Notaries' obligations can be divided into three categories:

 - The duty of vigilance

- The obligation to report suspicious transactions

- the obligation to keep documents

1/ The obligation to be vigilant

Each notary's office must set up a risk assessment and management system (Article L561-4-1
CMF).

A/ The notary draws up his own risk map.

This classification will take into account e craft funds, sale with right of redemption, juridic
advice, etc:

- the nature of the transactions: luxury goods, sales of businesses, sales of craft businesses,
sale with right of repurchase, legal advice, property advice, etc.

- the terms of the transactions: forward payment, payment outside the accounts, unusual or
anonymous transactions, complex arrangements, use of third parties, etc.)

- customer characteristics: politically exposed persons, foreign customers, tax non-residents,

people in sensitive professions using cash (catering, construction, public works, etc.)

- countries or territories of origin or destination of funds: countries with more favourable tax
regimes than France, countries with deficient AML/CFT regulations, countries that have been the
subject of sanctions, countries with a reputation for corruption, etc.

The notary will adopt the internal procedure appropriate to his particular risks.

They will set up an organisation and internal procedures in writing to justify them in the event
of an audit.

The notary is responsible and legally bound to apply the AML/CFT measures.

Consequently, he must be aware of the AML/CFT risks and ensure that the necessary
measures are implemented to reduce these risks in his office.

The notary is responsible for the AML/CFT policies and the measures taken to reduce the
AML/CFT risk.

This means that he must ensure that all his employees are informed of these risks and put
into practice all the measures to reduce them.

The Conseil Supérieur du Notariat (CSN) has created an e-learning programme accessible to
all notaries and their employees. (http//vigilance.e-learning.notaires.fr)

At the end of this process, the notary will decide whether or not to file a suspicious
transaction report.

To improve the existing system, meetings are organised between the Conseil Supérieur du
Notariat, Tracfin, the Direction Générale des Finances Publiques and the Commission Nationale de
Sanctions du COLB.

Following these meetings, training and communication programmes are set up for notaries.
 B/ Identify and verify
The notary has a duty of constant vigilance during the business relationship

Notaries must consider the following

- Identification of the client

- The final beneficiary of the transaction,

- The consistency of the transaction,

- The traceability of funds,

1) Identity :
a. copy of national identity card or passport issued by a government authority and bearing a
photograph of the holder,

b. a copy of the holder's national identity card or passport issued by a government authority
and bearing a photograph,

c. A recent Kbis certificate or extract from an official register or their equivalent under foreign
law - Up-to-date articles of association - Regular mandates

d. It will be necessary to consult the online list of asset freezes.

2) The beneficial owner of the transaction

a. For a company, this is the natural person or persons who either hold, directly or
indirectly, more than 25% of the company's capital or voting rights, or exercise controlling power over
the company.

b. If no natural person can be identified and there is no suspicion of money laundering

or terrorist financing, the beneficial owner is the natural person who legally represents the company:

i. The manager

ii. The managing director of public limited companies with a board of directors

iii. Chairman

If the representative is a legal entity it will be necessary to trace back to the natural
person.

→ Where the customer is not a company, the beneficial owner is the natural person who is
either:

I. The holder, directly or indirectly, of more than 25% of the capital

II. Or is intended, by virtue of a legal instrument, to become the holder, directly or

indirectly, of more than 25% of the capital of the legal entity;

III. Or has the power to appoint or dismiss the majority of the members of the
administrative, management, executive or supervisory bodies of the legal person;
 IV. Or exercises by other means a power of control over the administrative,
management, executive or supervisory bodies of the legal person.

V. Where no natural person can be identified in accordance with the criteria set out in
1° to 4° and there is no suspicion of money laundering or terrorist financing, the beneficial owner is
the natural person or persons who legally represent the legal entity.

VI. For associations, foundations, endowment funds or economic interest groups, the
beneficial owner is :

a. The legal representative(s) of the association

b. The chairman, the managing director and, where applicable, the member(s) of the
management board.

c. The natural person(s) and, where applicable, the permanent representative of legal
entities, appointed as administrators of the economic interest group.

3) The transaction
Consistency between the amount, the purpose of the transaction and the notary's knowledge
of the client's professional, financial and personal situation.

4) Source and destination of funds

- by the notary himself to comply with his obligation of vigilance

- by the notary at the request of the CDC (a Cooperation Charter was signed between the
CDC and the Notariat on 8 February 2021).

C/ VIGILANCE TOOLS
On a day-to-day basis, two AML/CFT due diligence questionnaires are available on the Real
portal, for both employees and notaries.

The first questionnaire concerns "light" vigilance: for standard files with no special features.

The second concerns reinforced vigilance.

It consists of three parts: identification of the parties; the purpose and consistency of the
transaction; the origin of the funds and the terms of payment.

Each response is colour-coded to indicate the level of vigilance required: from green to red if
the circumstances of the case require that the document not be received.

This second questionnaire is used when an element of the first questionnaire leads to
reinforced vigilance, or in cases involving :
 1) a politically exposed person or similar customer

A politically exposed person is particularly subject to verification: there is a risk of corruption

or influence peddling due to the political, jurisdictional or administrative functions they perform or
have performed for less than one year on behalf of a State or an international institution.

This vigilance also applies to their close relations (spouse, partner, children and their spouses
and partners, 1st degree ascendants).

The database, managed by Dow Jones, includes thousands of items of public information,
updated daily.

Notaries can access it from the online application, using their Id.not identifier.

This is a search engine that can be used to find out whether a client is on a list of politically
exposed persons or whether they are subject to a national or international asset freeze or sanctions.

Searches can be carried out on both individuals and companies.

98% of the individual records include a photograph.

They also specify any family ties or close links with a PEP.

The list of PEPs does not constitute a blacklist, but such a qualification requires additional
vigilance measures (article L. 561-10 CMF).

The search results can be downloaded and stored.

2) A specific transaction :

- a product or transaction that favours anonymity

- Abnormally low or high price ;

- Payments from third parties ;

- Payments from abroad;

- Doubt as to the origin or destination of the funds, in particular their geographical

destination;

- Acquisition of property using funds of untraceable origin (bitcoins, etc.);

- Financing through a non-bank loan;

- Complex arrangements with no economic justification

- Atypical financial arrangements ;

- Link between seller and buyer;

- Transaction cancelled and request for reimbursement of escrowed sums;

- Links with persons or entities domiciled in a country with insufficient AML/CFT legislation.

The list of these countries is updated regularly and can be consulted on the Internet.
 2/ REPORTING SUSPICIONS

TRACFIN: INTELLIGENCE PROCESSING AND ACTION AGAINST CLANDESTINE FINANCIAL

CIRCUITS :

This service receives reports of suspicious transactions, analyses them and, where necessary,
sends information notes to the judicial authorities and partner administrations.

Tracfin website: http://www.economie.gouv.fr/tracfin

The notary must provide all the information in his possession so that the report can be as
complete as possible and processed efficiently.

The notary is obliged to complete his initial declaration if new information comes to light. This
is a consequence of the application of the principle of constant vigilance throughout the
business relationship.

Notaries who report suspicions in good faith are exempt from civil and criminal liability and
professional sanctions.

As long as the transaction has not yet been executed, Tracfin may exercise a right of
objection.

The period during which the transaction is suspended (the deed cannot be signed) is 10
working days.

The 10-day period runs from the day on which notification of the objection is issued.

It may be extended by the President of the Paris Tribunal Judiciaire after obtaining the
opinion of the Public Prosecutor of the Paris Tribunal Judiciaire.

The postponed operation may be carried out if, at the end of the period opened by the
notification of opposition, the period has not been extended.

TRACFIN may exercise its right to object.

To enab le it to be exercised, the notary will wait a few days between the acknowledgement
of receipt of his suspicious transaction report and the time when he carries out the
transaction.

Tracfin may request that documents, information or data kept and substantiating the
implementation of the obligation of vigilance be communicated directly to it.

In the case of notaries, this right is exercised on the basis of documents.

Notaries must keep records for a period of five years from the end of their relations with their
regular or occasional clients.

This obligation to retain relates in particular to the following documents:

- documents relating to the identification and verification of clients and the

characteristics of transactions ;
 - the results of the enhanced examination, which must be recorded in writing and
retained

- the results of consultations of registers (measures to freeze assets, beneficial

owners, etc.) and databases;

- the due diligence forms if they constitute the process implemented in the office;

- acknowledgement of receipt of the declaration. It is strongly recommended not to

keep the copy of the declaration and the acknowledgement of receipt in the file to
avoid them being seized during a search and placed in an investigation file.

Thanks to collaboration with TRACFIN, the online form will be modernised.

It will contain a core section common to all the professions concerned, and a section specific
to the notarial profession. The new form was tested by several notaries in June and will be
rolled out in stages between the end of July and mid-September.

3/ SANCTIONS

Application of the AML/CFT regulations entails rules on professional secrecy and penalties.

A/ Professional secrecy
Professional secrecy differs from one party to another:

- The parties to the transaction are not informed of the suspicious transaction report.

- Each year, inspectors check compliance with due diligence obligations.

The chambers monitor compliance with notary’s duties (Article L.561-36 CMF).

- If a judicial police officer a sks to check whether a suspicious transaction report has been
filed.

The notary must not give it to the police officer or tell him/her about it.

The notary must inform Tracfin of the request.

- The departments of the Ministry of the Economy and Finance: exchanges exist concerning
the frozen assets.

- In the event of a request for information from an examining magistrate, the notary informs
Tracfin.

The declaration is only accessible to the judicial authorities upon request from Tracfin and
only in cases where :

o the declaration is necessary for the notary to be held liable

o and when the judicial investigation reveals that the notary may be involved in the
money laundering or terrorist financing scheme that he has disclosed.
B/ Penalties incurred by the notary
- Neglect of obligations of vigilance and declaration :

o if the notary is acting in good faith, he may be subject to disciplinary action by the
national disciplinary chamber;

o if the notary has wilfully failed to make the declaration, he risks a five-year prison
sentence and a €375,000 fine.

The profession will also impose disciplinary sanctions.

- Complicity in money laundering :

o Five years' imprisonment and a fine of €375,000;

o Failure to file a suspicious transaction report may be considered as complicity in

money laundering, subject to this penalty.

- Disclosure of the suspicious transaction report :

o Disclosure of the report is punishable by a fine of €22,500.