France has suspended the country's honorary consul in the Turkish port of Bodrum after a television report showed dinghies being sold to migrants from a shop that she owned.
Footage secretly filmed by France 2 TV shows Francoise Olcay selling dinghies and life jackets to migrants hoping to reach the Greek islands.
The body of three-year-old Alan Kurdi was washed up at Bodrum last week.
Olcay said the items would be bought elsewhere if she did not sell them.
Admitting that she was taking part in the trade, she alleged that local Turkish authorities were also involved.
She said others would have taken her place if she stopped selling supplies to the migrants.
The BBC's Hugh Schofield in Paris says that while honorary consuls are not members of the diplomatic corps, the news will be a big embarrassment to the French foreign ministry.
His inquiries brought him to a large store, with a French flag flying outside and a sign at the entrance saying "French honorary consul".
Olcay confirmed she was the consul, and that she sold boats to the migrants despite knowing it could lead to disaster.
She told the reporter that it was wrong but everyone was doing it.
Thousands of refugees have used Bodrum as a gateway to fulfil their dream of reaching Europe.
However, correspondents say the number of nightly departures appears to have slightly decreased after Turkish police stepped up patrols in the wake of the Alan Kurdi tragedy.