Legal analysis of Act 43-05 on the fight against money laundering

Legal analysis of Act 43-05 on the fight against money laundering

Law no. 43-05 as amended and supplemented by Law no. 13.10 and Law no. 145-12 stipulates in its chapter on the prevention of money laundering that those subject to the said provisions include auditors, external accountants and tax consultants, as well as service providers involved in setting up, organizing and domiciling companies.

As part of the prevention of money laundering, the law lays down a number of obligations with which those subject to the law must comply: obligations of vigilance, obligations to report suspicions, and obligations of internal monitoring.

As part of the Obligations de vigilanceIn accordance with the provisions of the French Banking Act, reporting entities are required to collect all information needed to determine and verify the identity of their regular or occasional customers and beneficial owners. A beneficial owner is defined as any natural person on whose behalf the customer acts, or any natural person who ultimately controls or owns the customer when the latter is a legal entity. The information to be collected includes :

  • its name,
  • legal form,
  • its business,
  • head office address,
  • its capital,
  • the identity of its managers,
  • the powers of persons authorized to represent the legal entity vis-à-vis third parties or to act on its behalf by virtue of a mandate
  • beneficial owners.


The question then arises as to what the taxable person must do if it has not been possible to verify the identity of the persons concerned, or if this identity is incomplete or manifestly fictitious. The answer is clearly set out in article 4 of the aforementioned law, where the legislator stipulates that taxable persons must simply not carry out any transactions. This is a firm prohibition.

The legislator also requires reporting persons to verify the following elements relating to the business relationship they are handling for their customers, failing which the legislator strongly requests that they neither establish nor continue said business relationship:

  • Check the purpose and nature of the proposed business relationship;
  • Check the identity of principals when executing transactions where the beneficiary is a third party;
  • Determine and verify the identity of persons acting on behalf of their clients under a mandate;
  • Find out where the funds come from;
  • Pay particular attention to business relationships and transactions carried out by or for the benefit of people from countries presenting a high risk of money laundering or terrorist financing;
  • Ensure that the obligations defined by the present law are applied by their branches or subsidiaries headquartered abroad, unless local legislation prevents this, in which case they shall inform the Unit provided for in Article 14 below;
  • Set up a risk management system;
  • Apply enhanced due diligence measures to high-risk customers, business relationships and transactions, particularly those carried out by or on behalf of non-resident persons;
  • Set up a system to prevent the risks inherent in the use of new technologies for money-laundering purposes;
  • Ensure their customers' files are regularly updated;
  • Ensure that the transactions carried out by their customers are perfectly in line with their knowledge of these customers, their activities and their risk profiles;
  • Ensure special monitoring and implement appropriate vigilance measures for high-risk customer transactions.


Still in the context of due diligence obligations, the legislator has reiterated that persons subject to the law must keep documents relating to transactions carried out by their customers for ten years (10) from the date of execution.

Before moving on to the obligation to report suspicions, the legislator spoke in article 8 of the law about the case where the customer "presents himself in unusual or complex conditions and does not appear to have any economic justification or apparent lawful purpose, must be the subject of special scrutiny by the reporting person." In such cases, taxable persons must obtain information from the customer on the origin and destination of these sums, as well as on the identity of the beneficiaries, and must record details of the transaction on a document which must also be kept for 10 years.

Secondly, within the framework of the Obligations de Déclaration de soupçon, are required to file a suspicious transaction report with the Unité de traitement du renseignement financier:

  • 1) All sums, transactions or attempts to carry out transactions suspected of being linked to one or more of the offences set out in articles 574-1 and 574-2 above. The same applies when it becomes apparent, after the transaction has been carried out, that the sums in question are the proceeds of money laundering.
  • 2) Any transaction where the identity of the principal or beneficiary is in doubt;

The offences set out in Articles 574-1 and 574-2 of the Criminal Code relate to money laundering, and set out the acts constituting this offence. Money laundering is punishable by law:

  • for individuals, from two to five years' imprisonment and a fine of between 20,000 and 100,000 dirhams;
  • for legal entities, a fine of between 500,000 and 3,000,000 dirhams, without prejudice to the penalties that may be imposed on their directors and officers involved in the offences.

Thirdly, as part of the Internal Monitoring ObligationAs stipulated in article 12 of the law, regulated entities must set up an internal system for vigilance, detection, monitoring and management of risks linked to money laundering.

To meet their internal monitoring obligations, reporting entities are required to centralize information on unusual or complex transactions carried out by their customers, and to keep their managers regularly informed, in writing, of transactions carried out by customers with a high risk profile.

The results of this monitoring by regulated persons must be communicated at all times to the financial intelligence processing unit or to any supervisory and control authorities in response to their requests, without being able to object on the grounds of professional secrecy.

Considering that the law confers a whistle-blowing role on persons subject to the law, the legislator comes in the fourth section of the law to speak on the protection it confers on the persons subject to it, their officers and agents, and the Unit and its agents.

Firstly, protection for the professional secrecyThis implies that no action based on professional secrecy may be brought against the person subject to the Act, or against its officers and agents who have made such a declaration in good faith.

In addition, no civil liability action may be brought, nor any sanction pronounced, in particular for slanderous denunciationA report of suspicion may be filed in good faith against a reporting entity, its directors or agents.

Finally, the legislator confirms that no criminal or civil liability claims may be brought against persons subject to the law or their agents, for the performance, in good faith, of the obligations missions vested in them under this Act.

The fourth section of the law presents the sanctions They may be subject to a fine of between MAD 100,000 and MAD 500,000. In particular, they may be sentenced to a fine of between 100,000 and 500,000 dirhams, to be imposed by the body under whose supervision they are placed, in accordance with the procedure applicable to them, for failure to comply with their duties or with professional rules and ethics, as stipulated in article 28 of the law.

When a a serious lack of vigilance, or a shortcoming in the internal control systemIf a person subject to the Act has not fulfilled the obligations arising from this chapter, the Unit shall refer the matter to the authority vested with the power of control and sanction over the said person, with a view to imposing sanctions against that person, on the basis of the legislation applicable to it, as provided for in article 30 of the Act.

The final chapter of the Act sets out special provisions for terrorist offencesThe law provides that this law, together with the obligations of vigilance, suspicious transaction reporting and internal monitoring that it imposes on those subject to it, also applies to cases where the origin of the goods or products is linked to a terrorist offence, or where the said acts or transactions are intended to finance terrorism.

For further information on country-by-country reporting, please contact our legal and tax team.

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist

Legal reserve: SARL and SA in Morocco

Legal reserves for SARLs and SAs in Morocco.

The legal reserve is the amount of profits reinvested in the company within the framework of the minimum capital required by law. Each year, at the Annual General Meeting, the shareholders decide how to allocate the previous year's profits, dividing them between retained earnings, reserves and the legal reserve. The legal reserve is intended to strengthen shareholders' equity. This reserve forms part of shareholders' equity, which is recorded in class 1.

The legal reserve is a requirement for all companies in which the liability of shareholders is limited to their capital contributions. It therefore applies to all joint-stock companies (SA, SAS, SASU and SCA) and limited liability companies (EURL and SARL).

How does the legal reserve work?

 

In the case of a SARLThe legal reserve is 5% of accounting profit, up to a limit of 20% of capital. Article 1038 of the DOC stipulates that: "One-twentieth (5%) of the net profits earned at the end of each financial year must be deducted, before any distribution, and is used to set up a reserve fund, up to a limit of one-fifth (20%) of the capital."

Yet in a SAThe legal reserve is 5% of accounting profit, up to a limit of 10% of capital. Article 329 of Law no. 17-95 relating to sociétés anonymes stipulates that: "Under penalty of nullity of any deliberation to the contrary, a deduction of (5 %) is made from the net profit for the year, less any previous losses, and this deduction is allocated to the formation of a reserve fund known as the legal reserve. This deduction ceases to be mandatory when the legal reserve exceeds one tenth (10%) of the share capital."

In the case of profits only, you must calculate 5 % of the profit and allocate it to the corresponding account when you enter the appropriation of earnings (on the date of the AGM minutes).

There is a limit to the reserve. The reserve is capped at 10 % of share capital for a SA and 20% for a SARL. As long as the limit has not been reached, the allocation of profits must include the 5 % of the legal reserve. In the year in which the limit is reached, you allocate the maximum amount to the legal reserve.

During the life of a company. The share capital may increase or decrease, and the legal reserve must be adapted to reflect these changes. In the event of an increase in share capital, the legal reserve must be topped up to the new threshold of 10% of share capital for a SA and 20% for a SARL. In the event of a reduction in share capital, the portion in excess of the threshold of 10 % of share capital for the SA and 20% for the SARL must be allocated to another reserve or to retained earnings.

Our legal and tax team will be happy to provide you with any further information you may require.

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist

Share capital increase for a sarlau

Share capital increase for a SARLAU

In principle, a capital increase entails an amendment to the articles of association7. According to the first paragraph of article 77 of law no. 5-96, in the event of a capital increase, new shares may be paid up either: by contribution in cash or in kind; by set-off against liquid and due claims on the company; or by capitalization of reserves, profits or share premiums.

1. Capital increase through cash contribution :

A cash capital increase is an equity transaction whose purpose is to increase a company's share capital in exchange for a cash contribution from one or more individuals or legal entities (partners or third parties).

Cash capital increases in SARLs are governed primarily by articles 51 and 77 of Law 5-96. Under Moroccan law, the operation takes place in the following stages9:

➔ Check that the SARL's share capital has been paid up in full;

➔ Check that at least a quarter (or any proportion strengthened by the bylaws) of the amount of the capital increase is available from subscribers ;

➔ Analysis of the contractual documentation binding the company and associates (typically financing agreements and associates' pacts) to determine whether the capital increase operation does not require prior consents, which is not required in our case as it is a SARLAU.

➔ Valuation of the company in order to determine the terms of the capital increase (subscription price of newly-created shares, need for a share premium or not, etc.) ;

➔ Opening by the company of a blocked bank account ;

➔ Convocation of the Extraordinary General Meeting within the timeframe prescribed by the bylaws; ➔ Holding of the Extraordinary General Meeting to decide on and record the completion of the capital increase;

➔ Deposit of funds relating to the payment of new shares in the company's blocked bank account and obtain a certificate of blocking of funds ;

➔ Legalization of the minutes relating to the general meeting ;

➔ Complete tax registration formalities within 30 days ;

➔ Make the amending declaration to the trade register within 30 days; ➔ Publish the transaction in a legal gazette and the Bulletin officiel within 30 days.


2. Capital increase by offsetting liquid and due claims on the company:

From an economic point of view, the contribution of a receivable into a company's capital consists of "converting" a current account receivable into share capital. In accounting terms, the company's debt is thus transformed into equity (share capital), enabling it to post healthier accounts by raising its level of equity. For this to be possible, the current account receivable must be certain, liquid and due.

Law no. 5-96 requires only a statement of account for an increase by offsetting against debts, without any further clarification. For example, art. 77, para. 2 stipulates: "If the new shares are paid up by offsetting against the company's debts, these debts shall be the subject of a statement of account drawn up by the manager and certified as accurate by a chartered accountant or by the company's statutory auditor, as the case may be".

It should be noted, however, that under French law, the operation of increasing the share capital by offsetting it against receivables takes place in the following stages:

➔ the company's general meeting will decide on a cash capital increase, this decision will have to clearly state that the subscription can be made by offsetting against any existing debt ;

➔ The company director must draw up a statement of account for the receivable. This statement must be certified as accurate by the statutory auditor if there is one; (by a chartered accountant under Moroccan law).

➔ the partner concerned will sign a subscription form indicating that he is subscribing to the shares issued and that he is paying up the amount of his subscription by offsetting it against his receivable ;

➔ the paying-up of shares will be evidenced by a certificate drawn up, either by the company's statutory auditor, or by a notary (particularly if there is no statutory auditor) ;

➔ it may then be noted that the capital increase has been completed.

SHARE CAPITAL INCREASE FOR A SARLAU

3.combine the two increases on the EGM minutes No legal provision expressly regulates the cumulative use of the two means of capital increase, either in Moroccan law or in comparative law. It is assumed that opting for both means of capital increase will simply entail the obligation to deposit the funds in a blocked bank account and obtain a blocking certificate, and to have the receivables approved by a chartered accountant, so the procedure will be as follows:

➔ First: Provide proof of paid-up capital

◆ If in cash: Deposit the funds in a blocked bank account and obtain a blocking certificate ;

◆ If by offsetting receivables: Arrest the receivables by the management and have it certified by a chartered accountant (or the CAC if there is one) ;

➔ Secondly: Hold an Extraordinary General Meeting with a capital increase on the agenda;

➔ Then: sign, legalize and register the minutes of the EGM;

➔ After that: The minutes of the EGM are filed with the Clerk of the Commercial Court;

➔ In addition, Complete the amending declaration of the commercial register ;

➔ Next, Make the publication in a newspaper of legal announcements ;

➔ Finally, Make publication in the B.O ;

 

Our legal and tax team will be happy to provide you with any further information you may require on increasing the share capital of a SARLAU.

Faithfully yours,

Ilham Taha-Bouamri
Chartered accountant and tax specialist