Tracfin report highlights money laundering
In its annual money laundering report, France’s Traitement du Renseignement et Action Contre les Circuits Financiers Clandestins (“Tracfin“) expressed concern over money laundering risks associated with the sale of France’s most renowned wineries to investors from China, Hong Kong and Russia. The concern stems from the increase in suspicious transaction reports filed with Tracfin by professionals in connection with the transactions for the acquisitions of wineries. According to Tracfin, the investment transactions are structured through complex layers of corporations, several of which are incorporated in foreign jurisdictions that are known as tax havens.
Flow of funds tied to immigration from Asia
The bulk of the transactions are for immigration purposes whereby foreign nationals from Asia obtain immigration status in France by investing in businesses, namely buying vineyards and wineries in France. Tracfin recommends that lawyers, estate agents and others undertake heightened due diligence to ascertain client identity, including beneficial ownership of the corporate vehicles used to acquire French wineries and that they confirm the source and legitimacy of the funds from Asia before completing the transactions.
Use of beneficial ownership and tax havens
Complex corporate structuring in business transactions with layers of foreign corporate entities is a red flag for money laundering and tax evasion, particularly where there are beneficial ownership concerns or tax havens involved. With respect to Asia, confirmation of source of funds for investment or immigration purposes continues to be an ongoing problem.
China immigrant investors controlling wineries in France
The Tracfin report noted, in particular, concern from China. Chinese investors now own 50 of the most prestigious vineyards in Bordeaux, and will soon be the largest nationality group controlling winemaking, particularly in Bordeaux. The French properties owned by Chinese investors include Chateau Bellfont-Belcier and Chateau de Gevrey-Chambertin.
People’s Bank of China addresses money laundering issues
The Tracfin report comes as China has expressed parallel concerns over the massive outflow of funds to foreign countries. In May of this year, the Deputy Governor of The People’s Bank of China, Li Dongrong, said the specter of money laundering and outflows of funds from China was being raised to the national strategic level in China for resolution. Mr. Li was the keynote speaker at the first international anti-money laundering conference held in China last month and expressed the bank’s commitment to tackle money laundering issues in China and across the Asia-Pacific region.