France Short Form Report - May 2017

Transcription

1 Sanctions FAFT AML Deficient Medium Risk Areas None No US Dept of State Money Laundering Assessment ANTI-MONEY LAUNDERING FATF Status France is not on the FATF List of Countries that have been identified as having strategic AML deficiencies. Compliance with FATF Recommendations France has been removed from the regular follow-up process and agreed that it should now report on any further improvements to its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) system on a biennial basis. US Department of State Money Laundering assessment (INCSR) France was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: - Perceived Risks: Due to its sizeable economy, political stability, sophisticated financial system and commercial relations, especially with Francophone countries, France is a venue for money laundering. Public corruption, narcotics and human trafficking, smuggling, and other crimes associated with organized crime are sources of illicit proceeds. France can designate portions of its customs territory as free trade zones and free warehouses in return for employment commitments. The French Customs Service administers these zones. France has an informal economic sector, and underground remittance and value transfer systems such as hawala are used by immigrant populations accustomed to such systems in their home countries. There is little information on the scale of such activity. Casinos are regulated. The use of virtual money is growing in France through online gaming and social networks. Sport teams have become another significant source of money laundering. SANCTIONS There are no international sanctions currently in force against this country. BRIBERY & CORRUPTION Index Rating (100-Good / 0-Bad) Transparency International Corruption Index 69 World Governance Indicator Control of Corruption 88 Information relating to implementation of the OECD Anti-Bribery Convention in France Follow up on Phase 3 report (December 2014) 1

2 Summary of findings In October 2014, France presented the Working Group on Bribery with its Written Follow-up Report, responding to the recommendations formulated by the Working Group during its Phase 3 evaluation of France in October Since Phase 3, France has opened 24 new procedures involving the bribery of foreign public officials, but no legal person has yet been convicted of this offence. Since Phase 3, only three more individuals have been convicted in two cases, resulting in fines ranging from EUR to EUR In addition, the number of acquittals, dismissals and case closures has risen significantly since Phase 3, from a total of 12 in October 2012 to 31 in October 2014 (including 11 new decisions in favour of legal persons). The Working Group welcomes the responses provided by France in connection with the written follow-up exercise, and the efforts of the Ministry of Justice to provide the most up-to-date information about the 58 procedures initiated since the Convention entered into force in France. Of its 33 recommendations, the Group deemed that 4 had been implemented in full; 17 partially; and 12 recommendations remained nonimplemented. Two of the Working Group s unimplemented recommendations have been challenged by France, which considers that the existing legal framework is appropriate. In respect of seven other recommendations, France is presumably not planning any implementation measures. Despite the increased volume of ongoing procedures, the enforcement of the foreign bribery offence still falls far short of the expectations expressed by the Working Group during Phase 3, given both the size of the French economy and the exposure of French companies to the risk of foreign bribery. No legislative action has been taken, in respect of the bribery of foreign public officials committed by French nationals on foreign territory, to repeal the dual criminality requirement imposed by Article of the Penal Code.It should also be noted that no action has been taken to ensure that neither the case-law principle of corruption pact (including the need to demonstrate its prior existence) nor the interpretation of the principle of non-retroactivity of criminal law would, in practice, constitute obstacles to prosecution. Nor has the definition of foreign public official been clarified. Lastly, the reform contemplated to expand the offence of trading in influence to encompass foreign bribery has not materialised. While it has been clarified that legal persons may be held liable for acts of bribery committed by an intermediary, including a foreign-based subsidiary, the authorities have taken no action to clarify requirements for the criminal liability of legal persons that would be in line with the 2009 Recommendation (Annex I). Furthermore, training efforts to raise awareness of the French judicial authorities on enforcing the criminal liability of legal persons in foreign bribery cases should be intensified. With regard to enforcement, the Working Group calls attention to the authorities lack of initiative in cases involving French enterprises and proven or presumed instances of foreign bribery. The Law of 6 December 2013 on action against tax fraud and serious economic and financial crime stiffened significantly penalties for the offence of bribing a foreign public official, raising the fine for natural persons to EUR 1 million, which can be increased to double the proceeds of the offence, and for legal persons to EUR 5 million, which can be increased to ten times the proceeds of the offence. Notwithstanding, there exists no sufficiently convincing practice that would demonstrate that these recommendations are being fully implemented. As for the use of confiscation measures, there has yet to be any seizure or confiscation in a case of bribing a foreign public official, in contrast to other economic and financial offences. Apart from a practical guide for judges on seizure and confiscation which would include e.g. a reference to guidelines on how to quantify the proceeds of an offence (forthcoming, year-end 2014), no other action has been planned to encourage full use of the confiscation measures available. 2

3 The Working Group has studied the progress France has made with regard to investigations and prosecutions in foreign bribery cases. When the Phase 3 evaluation report was adopted, France had pledged to put an end to prior practices whereby the Minister of Justice would send individual instructions to public prosecutors. Article 30 of the Code of Criminal Procedure, as amended by the Law of 25 July 2013, abolished such instructions. The Working Group notes that one consequence of this will be to facilitate the granting of mutual legal assistance requests in foreign bribery cases. However, the reform of the status of the Public Prosecutor s Office, recently contemplated by the French authorities, and which would have allowed prosecutors to conduct their missions without being in any way influenced by those holding political power did not materialise, and the issue of these prosecutors independence is still questioned by the Group. Prosecution in the wake of complaints by victims of foreign bribery offences is now possible in respect of such acts that are committed entirely or partially in France (owing to the repeal of Article of the Criminal Code). Anti-corruption organisations were also given the right to file civil party claims. However, the Public Prosecutor s Office may only instigate proceedings for an offence committed abroad if a victim has filed a prior complaint or there has been an official accusation made by the authority of the country in which the offence was committed (Article of the Criminal Code). No legislative reform has been undertaken to abolish this requirement, despite the authorities announcement in October France has not changed the public disclosure rules relating to appearance on prior admission of guilt (CRPC) procedures and is planning no reform in this area. Nor do the French authorities have any plans to make other expected amendments to ensure that the law governing defence secrecy requirements or the blocking statute do not raise obstacles to investigations or prosecution in foreign bribery cases (Recommendations 4(g) and 4(h)). Moreover, since the circular of 9 February 2012 restating guidelines of criminal policy, the French authorities have taken no action to clarify their country s criminal justice policy with regard to active bribery of foreign public officials with a view to encouraging systematic investigation of the liability of persons suspected of committing the offence. The Working Group has noted with satisfaction the establishment of a National Financial Prosecutor tasked inter alia with pursuing foreign bribery cases. A circular introducing the new National Financial Prosecutor was sent out on 31 January 2014 by the Ministry of Justice, stipulating the Prosecutor s area of competence and the criteria to be applied to the submission and circulation of information in cases likely to come under its jurisdiction. The Central Office for the Fight against Corruption and Financial and Tax Offences (OCLCIFF) is now in charge of investigating foreign bribery cases. For the Group, however, the question is whether sufficient resources are specifically allocated to investigations and prosecutions, and in particular to processing mutual judicial assistance requests. Lastly, the Working Group has noted the conclusions of the Committee for the Modernisation of Public Action in a report released in November 2013, which did not recommend altering the status of the criminal police by making it responsible to the judicial authority. The Working Group had recommended that France review the status of the criminal (judicial) police in order to ensure its capacity to conduct investigations that are not influenced by the considerations mentioned in Article 5 of the Convention. In Phase 3, the Working Group had felt that the three-year statute of limitations applicable to bribery, running from the date on which the offence was either committed or, in cases of concealed offences, discovered, did not ensure enough time for investigation and prosecution and had recommended that France extend this statute of limitations to an appropriate period. With regard to applicable case-law, France considers that its statute of limitations does not hinder prosecution, and has therefore taken no action to implement Recommendation 5. With regard to mutual legal assistance, no measure has been taken to ensure that the granting of such assistance in foreign bribery cases not be influenced by considerations of national economic interest under the guise of protecting the fundamental interests of the nation. 3

4 Concerning the fight against money laundering, the guide to detecting potentially corrupt financial operations, co-authored by TRACFIN and the Central Corruption Prevention Department (SCPC), has been updated. However, France must pursue and intensify its actions to raise the awareness of professions that are required to detect acts that may specifically involve foreign bribery. With regard to accounting rules, external auditing and corporate compliance programmes, the Working Group welcomes the adoption, on 18 April 2014, of a circular clarifying the scope of external auditors obligation to report criminal acts committed by foreign subsidiaries of companies they audit. France must, however, pursue its efforts to raise the awareness of French companies. Concerning tax measures, no initiative has been taken to encourage French Polynesia and Saint Pierre and Miquelon to apply the principle of the non-deductibility of bribes as soon as possible. In addition, the authorities should pursue their efforts to raise the awareness of tax officials in their role of detecting illicit transactions related to foreign bribery. Few awareness-raising actions have been taken by the Ministries of Economic or Foreign Affairs, in particular to heighten companies awareness of the risks of foreign bribery. It should be noted, however, that a workshop for chief economic officers has been scheduled for 2015 and a module on bribery incorporated into the initial and ongoing training programme for diplomats (Recommendation 10). Efforts in the realm of reporting acts of foreign bribery have been geared towards protecting whistleblowers in the private sector). No warning and reporting mechanism has been put in place in government agencies to enable comprehensive enforcement of the provisions of Article 40, paragraph 2 of the Code of Criminal Procedure. The interpretation of the modalities to report allegations of bribery, which had already been raised during Phase 3, is still an outstanding issue. In respect of public advantages, no change has been made to allow all authorities mandated to approve public procurement contracts identified in Phase 3 to access the criminal records of legal persons. COFACE and AFD have held training courses on corruption for their employees, and the induction process for Ministry of Defence officials authorised to issue arms export licences requires training in this area. Lastly, although the legal arrangements governing arms export licences have been overhauled extensively since 2012, it is not certain that this has helped ensure that internal controls, ethics and compliance programmes or measures undergo thorough in depth scrutiny. INVESTMENT CLIMATE Economy The French economy is diversified across all sectors. The government has partially or fully privatized many large companies, including Air France, France Telecom, Renault, and Thales. However, the government maintains a strong presence in some sectors, particularly power, public transport, and defence industries. With more than 84 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that mitigate economic inequality. France's real GDP increased by 1.1% in The unemployment rate (including overseas territories) increased from 7.8% in 2008 to 9.9% in the fourth quarter of Youth unemployment in metropolitan France decreased from a high of 25.4% in the fourth quarter of 2012 to 24.3% in the fourth quarter of Lower-than-expected growth and high spending have strained France's public finances. The budget deficit rose sharply from 3.3% of GDP in 2008 to 7.5% of GDP in 2009 before improving to 4% of GDP in 2014 and 2015, while France's public debt rose from 68% of GDP to more than 98% in 2015, and may hit 100% in

5 Elected on a conventionally leftist platform, President Francois HOLLANDE surprised and angered many supporters with a January 2014 speech announcing a sharp change in his economic policy, recasting himself as a liberalizing reformer. The government's budget for 2014 shifted the balance of fiscal consolidation from taxes to a total of $24 billion in spending cuts. In December 2014, HOLLANDE announced additional reforms, including a plan to extend commercial business hours, liberalize professional services, and sell off $ billion in state owned assets. France s tax burden remains well above the EU average and income tax cuts over the past decade are being partly reversed, particularly for higher earners. The top rate of income tax is 41%. The government is allowing a 75% payroll tax on salaries over $1.24 million to lapse. Agriculture - products: wheat, cereals, sugar beets, potatoes, wine grapes; beef, dairy products; fish Industries: machinery, chemicals, automobiles, metallurgy, aircraft, electronics; textiles, food processing; tourism Exports - commodities: machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceutical products, iron and steel, beverages Exports - partners: Germany 15.9%, Spain 7.3%, US 7.2%, Italy 7.1%, UK 7.1%, Belgium 6.8% (2015) Imports - commodities: machinery and equipment, vehicles, crude oil, aircraft, plastics, chemicals Imports - partners: Germany 19.5%, Belgium 10.7%, Italy 7.7%, Netherlands 7.5%, Spain 6.8%, US 5.5%, China 5.4%, UK 4.3% (2015) Investment Climate France welcomes foreign investment and has a reliable business climate that attracts investment from around the world. The French government devotes significant resources to attracting foreign investment, through policy incentives, marketing, its overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks and public transportation, and efficient intermodal connections. High speed (3G/4G) telephony is nearly ubiquitous and over 85% of French citizens have internet access. The investment climate in France, though complex, is generally quite conducive to U.S. investment, as illustrated by the fact that the United States is France s largest source of foreign direct investment (FDI stock). Around 1,200 U.S. companies in France (affiliates with assets, sales, or net income greater than $25 million) are responsible for over 450,000 jobs. (Note: Business France (a French government agency) counts smaller firms and arrives at 4,800 American firms employing 460,000 people in France. End note.) In total, there are more than 20,000 foreign-owned companies doing business in France. It is home to more than 30 of the world s 500 largest companies. This year, France moved up one place to number 22 in the World Economic Forum s ranking of global competitiveness. 5

6 The 2014 and 2015 American Chamber of Commerce France-Bain Barometer surveys on the outlook of U.S. companies in France have expressed a degree of pessimism on France s business climate, specifically citing challenges such as lack of clarity in the government s agenda, red tape and burdensome regulations, unpredictability in legislation, and the complexity of labor law. In recent years, the government has selectively intervened in corporate mergers and acquisitions and it maintains a significant stake in a few industries. Research suffers from insufficient collaboration between the public and the private sectors. Factors that can impede inward foreign investment include France s weak economic growth (0.2% GDP growth in 2014; 1.1% in 2015), unemployment stubbornly above 10%, unpredictable economic and budget policies, the complexity of tax regimes, and the fact that France has been subject to strict European Union macroeconomic surveillance due to a prolonged period of budget deficits exceeding the EU limit of 3% of GDP. Key sectors that have historically attracted significant foreign direct investment in France include manufacturing industries (notably the pharmaceutical, chemical, and automobile industries); financial sector; trade and repairs; information and communication; and construction and real estate. France continues to support innovation in small and medium enterprises (SMEs) via its ten-year, EUR 35 billion Investments for the Future (Investissements d Avenir) program targeting green technologies, the digital economy and industrial sectors such as aeronautics, space, transportation, and shipbuilding. It developed tax incentives to spur research and innovation, such as the Research Tax Credit (CIR - Crédit Impôt Recherche) and for innovative new companies (Jeune Entreprise Innovante). Key sectors with high potential include aerospace, food products, pharmaceuticals, microelectronics, logistics, and healthcare equipment. Call centers, biotechnology, and environment are other sectors with potential. The government has announced partial privatization of state-owned firms and plans to use proceeds to reduce indebtedness and increase investment in some sectors; it has not yet provided a detailed plan but may further reduce its stakes in electricity, gas, rail transport, and postal services. Key issues to watch include the government s ability to plan and implement structural reforms to boost competitiveness and employment. The government has already initiated an increase in the number of Sundays businesses can open and the deregulation of some sectors. In 2015, the government continued to introduce new measures to encourage growth and investment. In particular, it implemented the Responsibility and Solidarity Pact designed to lower firms labor costs by EUR 30 billion by 2016, reduce corporate taxes and simplify administrative formalities. In tandem with the CICE corporate tax credit program (Crédit d Impôt Compétitivité Emploi), the government expects the Responsibility Pact to spur the creation of approximately 500,000 jobs over the coming years. It has also recently implemented new labor laws, which strengthen vocational training and add elements of flexibility to the French labor market. In early 2016, the government unveiled but has not yet passed into law a package of labor market flexibility measures that would streamline legal and regulatory requirements through a revision of the labor code. One element of the 2016 labor bill (still under revision as of this writing) proposed to give companies more flexibility to set aspects of workers workweeks or working hours at the company level, subject to employer-employee accord. Foreign investment represents a significant percentage of production, exports and employment in many sectors. Foreign firms employ two million individuals, account for one-third of French exports, and undertake more than 20% of corporate R&D expenditures. Rapid growth in new technologies has given way to renewed growth in traditional sectors: automobiles, metalworking, aerospace, capital goods, consultancy and services. France rejoined the top 20 largest recipients of foreign direct investment (FDI) inflows in 2014, at number 19 in annual FDI rankings published by UNCTAD (United Nations Conference on Trade and Development). FDI inflows accounted for 0.5% of GDP in According to the government agency Business France, investment projects in France were 5% lower in 2015 than the year before, but remained higher than the ten-year average. The United States accounted for 4.9% of FDI inflows in 2014, down from 18.5% the previous year. The 6

7 U.S. FDI stock represents 10.4% of FDI in France or USD 76.8 billion. Based on 2013 estimates, U.S holdings of French securities totaled USD 196 billion, down from the 2011 level of USD 217 billion. Those figures likely understate U.S. investment in France, as the U.S. investments tend to be considerably older than those of other countries, and U.S. firms often finance expansions and acquisitions on domestic French capital markets or through subsidiaries in third countries. As a result, much U.S. investment in France is not recorded in balance of payments statistics, even though it may ultimately be controlled by U.S. citizens. 7