France’s AMF releases CDD guidance for investment sector

The French financial market regulator, Autorité des marchés financiers (AMF), has released customer due diligence (CDD) guidance for investment firms to clarify anti-money laundering and counter-terrorist financing (AML/CFT) obligations. The guidelines were released on October 2, 2023.

“[This guidance] sets out the due diligence obligations with regard to clients and their beneficial owners,” explains the AMF, “taking account of the essential contributions of the 4th directive and 5th directive, and notably the reinforcement of the risk-based approach…Specific explanations are provided on the regimes for…outsourcing of AML-CFT obligations.”

Core CDD requirements for investment firms

The October 2 guidelines cover four key areas, beginning with key CDD definitions and obligations and ending with insights on fulfilling them through third parties. They apply to: 

• Investment management firms.
• Self-managed French collective investments.
• Certain European management companies.
• Financial investment advisors.
• Crowdfunding investment advisors.

Firms’ highlighted responsibilities center on identity verification for clients and beneficial owners, the importance of understanding the business relationship, and retention of information. The AMF focuses on:

• The difference between identifying clients and verifying their identity – Identification involves collecting specific identity details, including legal name and date of birth for individuals or business name, registration number, and location for legal entities. Verification involves obtaining proof of identity such as an official ID or trust agreement.
• Key identity verification provisions – For individual clients, the AMF makes key distinctions between the requirements for identity verification with an in-person customer versus a remote one. It provides similar guidance for clients with beneficial owners, whose identity must be established and verified according to law.
• Additional due diligence for special situations – As part of a risk-based approach, the AMF instructs firms to follow levels of due diligence based on risk. Some situations may require higher levels of CDD – especially politically exposed persons (PEPs), transactions favoring anonymity, and customers living in higher-risk countries.
• Third-party CDD implementation – The AMF specifies the difference between an outsourced AML/CFT provider, which implements the firm’s own AML/CFT obligations, and a third-party introducer, which carries out its own procedures. In either case, the firm engaging such a service remains responsible for remaining compliant according to its unique regulatory obligations.

The AMF’s key responsibilities

Under the Financial Security Act (2003), the AMF was created by merging three formerly independent bodies: Commission des Opérations de Bourse (COB), the Conseil des Marchés Financiers (CMF), and the Conseil de Discipline de la Gestion Financière (CDGF). The AMF exercises its authority under Article L. 561-36 of the French Monetary and Financial Code. 

The regulator has three core goals: 

• To protect financial product investments.
• Ensure investors have enough information about financial products.
• Maintain orderly financial markets.

Next steps 

To help ensure their current procedures are compliant and up-to-date, regulated firms are encouraged to study the AMF’s most recent guidance. They may also wish to consult background resources the guidance refers to, especially articles L. 561-4-1 and the Monetary and Financial Code.