When banking secrecy disappears: due diligence obligations and the fight against money laundering

Le banking secrecyThe confidentiality agreement, often perceived as a pillar of the relationship between a bank and its customer, is not in fact an impenetrable fortress. Although it protects the confidentiality of financial information, French law provides for numerous situations where this secrecy must give way to the demands of the authorities. Understanding these exceptions to secrecy is essential, particularly in the context of the fight against money laundering and the financing of terrorism, where the the banker's duty of care are under particular scrutiny.

TRACFIN and banks' reporting obligations

Banking institutions play a central role in detecting and preventing illicit financial flows. They are subject to strict due diligence obligations, in particular with regard to TRACFIN (Traitement du Renseignement et Action contre les Circuits Financiers clandestins).

A demanding legislative framework to combat money laundering

French legislation, largely influenced by successive European directives (including the 5th anti-money laundering directive transposed by Order no. 2020-115 of 12 February 2020), imposes a constant duty of surveillance on banks. Article L.561-15 of the Monetary and Financial Code requires them to report to TRACFIN any transaction or sum that appears suspicious. This obligation takes precedence over banking secrecy.

Article L.561-22 of the same code also protects bona fide registrants: they cannot be prosecuted for breach of professional secrecy. This guarantee is essential to ensure the effectiveness of the system. TRACFIN's [obligations](cite: 2919) are therefore at the heart of the prevention system.

The different types of declaration to TRACFIN

Alerts to TRACFIN can take two main forms:

1. Ad hoc declarations (or suspicious transaction reports) The "STRs" are triggered when a transaction or the funds used appear to have been derived from an offence punishable by a prison sentence of more than one year. This explicitly includes tax fraud, for which article D.561-32-1 of the Monetary and Financial Code sets out 16 criteria that may justify an alert.
2. Systematic declarations Introduced by article L.561-15-1 of the French Monetary and Financial Code, they concern transactions deemed to be high-risk on the basis of objective factors: the country of origin or destination of the funds (in particular those listed as non-cooperative or high-risk), the specific nature of the transaction, or the use of complex legal structures (trusts, shell companies, etc.). The precise criteria will be defined by decree.

The volume of these declarations is considerable, testifying to the active involvement of banks in this scheme.

Confidentiality of information transmitted

While the bank must report suspicions, it must also maintain the [confidentiality](cite: 2946) of its actions vis-à-vis customers and third parties. Article L.561-18 of the Monetary and Financial Code formally prohibits informing the customer or other persons of the existence and content of a suspicious transaction report, on pain of a fine of €22,500 (article L.574-1).

However, TRACFIN is not a black box. The department analyses the information received and may share it with other competent authorities if justified by the investigation (Articles L.561-29 and L.561-30-1). Possible recipients include the public prosecutor, the criminal investigation department, the tax authorities and other government departments such as customs. These [exceptions](cite: 2951) to confidentiality are strictly regulated and are necessary for the effective fight against financial crime. If you are faced with a situation where your due diligence obligations are being questioned, the assistance of a duty of care lawyer can prove invaluable.

The prerogatives of the Customs Administration

The Customs Administration is another public authority with significant powers that enable it to circumvent banking secrecy in the performance of its duties.

A wide-ranging right to communicate

Based on article 65 of the Customs Code, the [right of communication](cite: 2960) allows customs officers (with at least the rank of inspector or officer) to demand the communication of all documents, whatever the medium, relating to operations of interest to their department. Case law (notably Cass. crim., 11 June 1979) interprets this prerogative broadly: it is sufficient for the documents requested to have a link, even indirect, with an operation falling within customs jurisdiction.

Banks may therefore be asked to provide account statements, copies of cheques, contracts or any other document deemed useful by the officers. It is not necessary for the request to be linked to an offence that has already been established; a simple check or routine inspection may justify the exercise of this right.

Judicial Customs: specific investigative powers

A distinction must be made between the general right of communication and the action of the [Judicial Customs](cite: 3001). Since the law of 23 June 1999, certain customs officers (judicial customs officers - ODJ) have been authorised to conduct judicial investigations under the authority of the public prosecutor or an examining magistrate (article 28-1 of the Code of Criminal Procedure).

Their powers are limited to certain specific offences (customs offences, money laundering, counterfeiting, various forms of trafficking, etc.). When acting within this judicial framework, the ODJs have the classic powers of the judicial police (searches, seizures, police custody) and banking secrecy is obviously unenforceable against them in the same way as it is against other investigators. Banks must therefore cooperate fully with their investigations.

Deterrent penalties for refusals

Refusal to cooperate with the Customs Administration in exercising its right of communication is heavily penalised:

• Article 413 bis of the Customs Code provides for a fine of €3,700.
• The court may also order the recalcitrant establishment to pay a penalty of at least 150 euros per day of delay in producing the documents (article 431 of the Customs Code).
• Constant case law (since Cass. crim., 23 November 1987) specifies that no suspension is possible for customs fines, underlining their mixed penal and fiscal nature.

Faced with these extensive prerogatives and the penalties incurred, banking establishments have introduced internal procedures to deal with customs requests promptly. For customers, this means that the confidentiality of their banking information is far from guaranteed when dealing with this authority. The balance between the protection of privacy and the need to combat fraud and trafficking is clearly in favour of the public authorities.

If you are faced with a customs investigation or a request for information from TRACFIN via your bank, do not hesitate to contact our firm for an analysis of your situation and appropriate advice.

Sources

• Monetary and Financial Code, articles L.511-33, L.561-15, L.561-15-1, L.561-18, L.561-22, L.561-29, L.561-30-1, L.574-1, D.561-32-1
• Customs Code, articles 65, 413 bis, 431
• Code of Criminal Procedure, article 28-1
• Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018
• Order no. 2020-115 of 12 February 2020
• Order no. 2016-1635 of 1 December 2016
• JurisClasseur Banking and Financial Law, Fasc. 141-5 (Banking secrecy - Public bodies)