Fintech 2025

FRANCE Law and Practice Contributed by: Hubert de Vauplane and Hugo Bordet, Morgan Lewis & Bockius LLP

companies provide services which fall outside the scope of regulation, however, they are not subject to these compliance processes. 2.13 Conjunction of Unregulated and Regulated Products and Services Generally speaking, under French law, most reg - ulated entities may provide certain unregulated services. The extent of a regulated entity’s abil - ity to provide unregulated services depends on its status. For example, credit institutions may provide a wide range of banking-related services ( opérations connexes ) which do not benefit from the banking monopoly, and they may acquire stakes in private companies. Credit institutions may also carry out various non-banking activities as long as such activities remain limited (ie, less than 10% of the net banking income) and do not limit competition in the relevant markets. Some regulated actors, such as crowdfunding intermediaries, are also forbidden to provide activities other than those for which they are regulated. 2.14 Impact of AML and Sanctions Rules Unregulated fintech companies are not subject to AML legislation but are still forbidden from knowingly facilitating illicit activities. These actors need to be careful not to become the vehicles of money-laundering or terrorism- financing schemes. By contrast, regulated fintech companies (ie, fintechs providing regulated services) are sub - ject to AML rules, to the same extent that credit institutions, payment service providers or digital asset service providers are. The ACPR and the AMF both issue and update generic AML guide - lines, and guidelines specifically applicable to certain regulated entities (such as DASPs, insur - ance undertakings and investment funds).

Even before the AML 6 package came into force, the French AML rules were being strengthened. For example, since an order on 9 December 2020, the ACPR has been carrying out a prior verification of compliance with AML rules by DASPs providing the service of custody of digi - tal assets on behalf of third parties and the ser - vice of purchase or sale of digital assets in legal tender. In addition, the decree of 2 April 2021 removes the EUR1,000 threshold in order to require DASPs to carry out “know your custom- er” (KYC) checks on their occasional customers as soon as the latter use their service. The complexity and density of these AML rules may be an obstacle to the development of fin - tech start-ups if they are not properly advised. 2.15 Financial Action Task Force Standards France has been a member of the Financial Action Task Force (FATF) since 1990. The effec - tiveness of France’s measures against money laundering and terrorist financing, as well as its compliance with the FATF Recommendations, was assessed in May 2022. The evaluation report concluded that France has a robust and sophisticated framework for combating money laundering and terrorist financing, which is effec - tive in many respects. Regarding the application of this framework in the context of the growing use of fintechs in France, the FATF report indicated that French financial institutions have a good understand - ing of the obligations they are subject to. It also highlighted the thorough understanding by French DASPs of the specific money launder - ing and terrorist financing risks associated with their sector.

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