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The main anti-money laundering and anti-terrorism financing procedures are known as Know Your Customer (KYC) and Client Due Diligence (CDD). The two processes, very similar, are different because they do not take place at the same stage. While KYC involves obtaining customer data before starting a business relationship, the CDD is about verifying the information provided by a customer throughout the relationship. As a result, the KYC and CDD processes allow banks to better understand and track their customers, thereby preventing the risk of criminal activity.
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The recent definition of the term "money laundering" and the complexity of the global financial system over the past 30 years raise the challenge of detecting the "effective beneficiaries" of financial transactions that take place, in other words answering the question "who really benefits from the transaction?"
This issue pushes financial actors and regulators to organize audit processes for stakeholders and clients with whom they are dealing. These "due diligence" procedures also aim to highlight the various risks, which may be internal to the agencies (operational, legal, reputational or concentration risk) or related to their clients.
Finally, the role of these LCB-FT actors is also to provide recommendations on how to effectively address the identified risks.
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The French regulatory system for fighting against money laundering and the Financing of Terrorism (LCB-FT) derives its source from the legislative part of the French Monetary and Financial Code. However, these instructions can be assessed according to the guidelines jointly issued by the Prudential Control and Resolution Authority (ACPR) and the French financial intelligence unit TRACFIN. Penalties for violations vary depending on the legal personality of the person committing the offence and its nature.
In order to harmonize and strengthen the LCB-FT, the Financial Action Task Force (FATF) has issued guidelines to promote the fight against money laundering, to which member states must submit. They are grouped together in the form of 40 recommendations. Following the September 11 attacks, nine new recommendations were issued at the initiative of the FATF and other international standard-setters such as the International Monetary Fund (IMF), the World Bank, the ECB and the Basel Committee. The latter are helping to strengthen prevention against the financing of terrorism, reflecting the challenge of combating money laundering and terrorism financing.