CMF Urges Financial Market Intermediaries to Heighten Vigilance Against Sanctions Evasion

The Financial Market Council (CMF) has issued a formal communication urging stock market intermediaries and portfolio management companies to strengthen their vigilance against the risks of circumventing targeted financial sanctions. The regulator places particular emphasis on the control of cross-border transactions, the identification of beneficial owners, and the detection of suspicious operations.

Key Risks: Shell Companies and Complex Structures

In its reminder to financial market professionals, the CMF highlights the significant risks associated with the use of shell companies and complex legal structures. These entities are often employed to conceal the origin of funds or to bypass sanctions. Furthermore, such arrangements can be used to mask the individuals who actually control a company or who benefit from financial operations.

Mandatory Due Diligence Measures

The regulator requires stock market intermediaries and portfolio management companies acting on behalf of third parties to rigorously verify:

• Client Identity: Confirming the identity of all clients.
• Ownership Structure: Analyzing the ownership structure of entities with which they conduct business.
• Source of Funds: Verifying the origin of the funds involved in transactions.

These controls must also take into account the risk profile of each client and ensure that transactions are consistent with the client’s stated business activities.

Enhanced Monitoring and Reporting

The CMF also insists on the regular filtering of applicable financial sanctions lists and the continuous monitoring of operations. Particular attention must be paid to:

• Cross-border transactions.
• Movements passing through multiple intermediary companies.
• Unusual or atypical operations.

In cases of high risk, institutions are called upon to enhance their verification procedures and maintain detailed records of the controls performed.

Any suspicious operation must be reported to the competent authorities in accordance with current legal obligations and while strictly respecting confidentiality requirements.

Objectives: Prevention and Risk Mitigation

Through this reminder, the CMF aims to strengthen the prevention of money laundering, terrorist financing, and the financing of weapons proliferation. Compliance with these obligations is also designed to limit the legal and reputational risks to which financial market professionals may be exposed.