French AML legislative changes: Updates to the Law on Transparency and its impact on PEP definitions

On March 17, 2023, the French Ministry of Economy introduced changes to the definition of politically exposed persons (PEPs) and, consequently, has expanded the scope of AML regulations. Although these modifications appear substantial, the adjustments made by the French government are relatively minor and only affect a limited number of PEP categories.

The Law on Transparency

The legislation regarding anti-money laundering (AML) in France, as in much of Europe, is meticulously structured to encompass various forms of illicit activities. This includes the law no. 2013-907 of October 11, 2013, commonly known as the “Law on Transparency,” which aims to promote transparency and combat corruption in public life in France. 

The law covers a wide range of elements from asset and interest declarations to whistleblower protection and transparency in the lobbying industry. By upholding ethical standards and ensuring the integrity of public officials, the Law on Transparency reflects France’s commitment to fostering an open and accountable public administration.

The impact on PEP definitions

In March 2023, the law was updated through the Order of March 17, 2023, which established the list of national functions. While the changes were minor, they directly impacted the definition of PEPs. To fully comprehend these alterations and their importance for financial institutions (FIs) complying with AML regulations, it is essential to examine the previous legislation and its functioning. 

The previous version of the Law of Transparency provided a limited list of public functions subject to its regulation. This list included:

• High-level state executives.
• Political party leaders.
• Members of parliament.

The law’s scope was extended in its third section to include individuals responsible for State-Owned Enterprises (SOEs). 

Nonetheless, acknowledging the varying AML risks associated with different institutions, the French lawmakers imposed certain limitations. For example, only local SOEs directly or indirectly owned by the French government with annual revenue of at least €10 million fell under the purview of the Law of Transparency. This recognition illustrated that not all SOEs posed a risk to the state and, thus, required less stringent controls and regulations. This remained the case until March 2023.

The changes introduced by the Order of March 17, 2023, further relaxed these regulations by increasing the annual revenue cap to €50 million. This demonstrates a lower risk appetite of French regulators and a greater willingness to extend trust to local businesses with state involvement. 

Additionally, the decree expanded the Law on Transparency to include other political parties operating in France but without a strong presence in the French parliament. This move was aimed at preventing illicit funding for political parties with representative bodies in regions like French Guiana or Martinque, where transparency and oversight may be lacking. 

Next steps

While the decree primarily affects the definition of PEPs in relation to local SOEs and foreign political parties, other aspects of the legislation remain unchanged. To allow companies sufficient time to adapt to the new regulations concerning local SOEs, the French government will enact these amendments starting November 1, 2023. 

Businesses that engage in screening processes need not worry if they have a reliable partner that can thoroughly examine the fine print and ensure compliance with the updated AML regulations. To learn more about ComplyAdvantage’s PEP data collection process and how quality data is secured, read some of the related content below:

• The Lifecycle of a PEP: From Identification to Removal
• How ComplyAdvantage Defines and Classifies a PEP
• PEP Data Quality: The 12-Eye Review Process