The French financial market regulator, Autorité des marchés financiers (AMF), has recently released new customer due diligence (CDD) guidance for investment firms. This guidance aims to clarify anti-money laundering and counter-terrorist financing obligations, providing clear instructions on how investment firms should carry out their due diligence processes. The guidelines were published on October 2, 2023.
According to the AMF, the new guidance sets out the due diligence obligations in relation to clients and their beneficial owners. It takes into account the contributions of the 4th and 5th directives, particularly the reinforcement of the risk-based approach. The guidelines also provide specific explanations on the outsourcing of AML-CFT obligations.
The core CDD requirements outlined in the guidelines cover four key areas. These include key CDD definitions and obligations, understanding the business relationship, retention of information, and fulfilling CDD obligations through third parties. The guidelines apply to various types of investment firms, including investment management firms, self-managed French collective investments, certain European management companies, financial investment advisors, and crowdfunding investment advisors.
The highlighted responsibilities for investment firms mainly revolve around identity verification for clients and beneficial owners, understanding the business relationship, and retaining necessary information. The AMF emphasizes the difference between identifying clients and verifying their identities. Identification involves collecting specific identity details, while verification requires obtaining proof of identity, such as official identification documents or trust agreements. The guidelines also provide separate guidance for in-person and remote identity verification.
Special situations that may require additional due diligence, such as politically exposed persons, transactions favoring anonymity, and customers residing in higher-risk countries, are also addressed in the guidance. The AMF advises investment firms to follow different levels of due diligence based on the level of risk presented by each situation.
In terms of third-party implementation of CDD, the AMF distinguishes between outsourced AML/CFT providers and third-party introducers. While outsourced providers implement the firm’s own AML/CFT obligations, third-party introducers carry out their own procedures. However, investment firms remain responsible for ensuring compliance with their unique regulatory obligations, regardless of the type of third-party engagement.
The AMF, created under the Financial Security Act in 2003, exercises its authority under Article L. 561-36 of the French Monetary and Financial Code. The regulator’s core goals are to protect financial product investments, ensure investors have sufficient information about financial products, and maintain orderly financial markets.
To ensure compliance with the latest guidelines, investment firms are encouraged to study the AMF’s guidance thoroughly and consult additional background resources referred to in the guidelines.
In conclusion, the release of new CDD guidance by the French financial market regulator provides investment firms with clear instructions on how to fulfill their anti-money laundering and counter-terrorist financing obligations. By following these guidelines, investment firms can improve their due diligence processes, protect themselves against financial crimes, and contribute to maintaining the integrity of the financial markets.