Anti-money laundering and financial crime prevention

Requirements

What are the main anti-money laundering and financial crime prevention requirements for private banking and wealth management in your jurisdiction?

The Principality of Monaco has developed its own anti-money laundering legislation through Act No. 1.362 of 3 August 2009 on the fight against money laundering, terrorist financing and corruption and Sovereign Ordinance No. 2.318 of 3 August 2009. In July 2018, the Monegasque anti-money laundering (AML) Regulation was amended by Act No. 1.462, which provides for equivalent measures to those of EU Directive No. 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (known as the 4th AML Directive). This Act has also been completed by Sovereign Ordinance No. 7.065 dated 3 August 2018 .

Among other entities, companies providing banking services and companies performing financial activities regulated by Monegasque Act No 1.338 of 7 September 2007 are subject to the following main anti-money laundering duties: identification of all clients (know your customer) and constant due diligence, strong and effective internal AML organisation and reporting obligations in the case of possible operations or clients linked to money laundering, terrorism financing and corruption.

Politically exposed persons

What is the definition of a politically exposed person (PEP) in local law? Are there increased due diligence requirements for establishing a private banking relationship for a PEP?

Sovereign Ordinance No 2.318 of 3 August 2009 (which is expected to be amended shortly) provides a definition of a PEP as follows:

  • persons (either client, beneficial owner or mandatory) who hold, or during the past three years have held, prominent public functions in a foreign country, shall be considered as politically exposed, whether they are clients, beneficial owners or proxies;
  • the spouses and direct ascendants or descendants of these persons must be treated as if they themselves were PEPs; and
  • persons known to be close associates of any of the persons referred to above must also be considered as PEPs and in particular:
    • any natural person who is known to have joint beneficial ownership of a legal person or legal entity or any other close business relations with them; and
    •  any natural person who has sole beneficial ownership of a legal person or legal entity known to have been set up de facto for the benefit of one of the persons mentioned above.

 

Due diligence obligations pertaining to PEP are strengthened. If PEPs wish to enter into business relations with professionals or contact them to perform occasional operations, the acceptance of these clients shall be subject to a particular examination and must be decided at an appropriate level of hierarchy. The said acceptance requires the taking of all appropriate measures to establish the origin of their assets as well as that of funds that are or will be employed in the business relations or in the occasional operation contemplated.

Professionals who maintain business relations with PEPs are required to monitor them closely on an ongoing basis. Due diligence measures shall also apply when it later transpires that an existing client is or has become a PEP.

Documentation requirements

What is the minimum identification documentation required for account opening? Describe the customary level of due diligence and information required to establish a private banking relationship in your jurisdiction.

To date, when identifying clients who are natural persons, the verification of their identity must be carried out in their presence using a valid official document bearing their photograph.

If the client’s address is not mentioned on the substantiating documents presented, or in the event of doubt as to the correctness of the address mentioned, the professional is required to check this information using another document that can prove their actual address (eg, water, gas, electricity bills) and of which a copy shall be retained.

For legal entities and trusts, identification and verification concern the corporate name, the registered office, the list of directors and the knowledge of the provisions governing the power to incur the liability of the legal person or trust. Identification also concerns the purpose and nature of the contemplated business relations and the effective beneficiary of the legal entities. In the latter case, the identification measures shall aim at understanding the ownership structure and control of the legal entity.

Tax offence

Are tax offences predicate offences for money laundering? What is the definition and scope of the main predicate offences?

Tax offences would be included in the categories of offences covered by money laundering provisions in Monaco only if punishable by more than one year of imprisonment.

In Monaco, money laundering offences are covered by article 218 of Monaco’s Criminal Code, which provides that any person who knowingly, in any manner whatsoever, for him or herself or for another person, acquires movable or real assets by directly or indirectly using assets or funds of unlawful origin or knowingly possesses or uses such assets, and any person who knowingly assists any transaction to transfer, invest, conceal or convert assets or funds of unlawful origin shall be liable to five to 10 years’ imprisonment.

Assets and funds of unlawful origin are deemed to be the proceeds of offences punishable in Monegasque law by more than one year of imprisonment as well as the proceeds of some other offences punishable by inferior penalties. Monaco’s definition of money laundering covers all categories of predicate offences designated by the Financial Action Task Force in its glossary of 40 Recommendations.

The offences referred to in article 218 of the Criminal Code shall be constituted even though the offence from which the laundered funds derive has been committed in another country if it is punishable in Monaco and in the state where it has been perpetrated.

Finally, in Monaco, the law provides penalties for any person who, in disregard of his or her professional obligations, provides assistance with any transfer, investment, concealment or conversion of assets or funds of unlawful origin.

Compliance verification

What is the minimum compliance verification required from financial intermediaries in connection to tax compliance of their clients?

As part of Common Reporting Standard’s obligation, enforceable in Monaco since early 2018, banks and asset management companies are required to identify the tax residence of their clients. For that purpose, each natural person must certify his or her tax residence to open an account in Monaco.

Liability

What is the liability for failing to comply with money laundering or financial crime rules?

Violation of money laundering or financial crime rules can be punished either by administrative sanctions or criminal penalties.

In a case of serious infringement of the obligations provided by Act No. 1.362, the Minister of State is empowered to take the following administrative sanctions:

  • a reprimand;
  • a pecuniary penalty that cannot exceed €1 million and €5 million or 10 per cent of the annual turnover for certain obliged entities (banks, asset management companies and insurance companies);
  • a prohibition to carry out certain operations;
  • temporary suspension of their authorisation to exercise their profession; or
  • the withdrawal of their authorisation to carry out an activity in Monaco.

 

Administrative sanctions can also be taken against directors or employees of the obliged entities in case of direct and personal liabilities.

In some cases provided by the amended Act No. 1.462, the violation of the AML rules can constitute crimes punishable by imprisonment or fines.

Law stated date

Correct on

Give the date on which the information above is accurate.

27 May 2020.