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 AML legislation by Law 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 AML regulation was amended by Law No. 1,462, which provides for equivalent measures to Directive (EU) 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 (4th Money Laundering Directive). This Bill has also been completed by a Sovereign Ordinance No. 7,065 of 3 August 2018.

Among other entities, companies providing banking services and companies performing financial activities regulated by Monegasque Law No. 1,338 of 7 September 2007 are subject to the following AML obligations.

The obligation to identify clients and due diligence

Companies carrying out banking and financial activities such as wealth management activities must, before forming business relations, identify clients as well as their agents and check the identity of each of these persons based on their ID documents. A copy of these documents shall be kept. If the client is a legal person, a legal entity or a trust, the measures also (in addition to the collection of corporate documents) include the identification of the individual or individuals who, ultimately, own or control the client entity (the beneficial owner). Since the entry into force of Law No. 1,462 amending the former AML legislation, Monegasque registered companies have to transmit information concerning their beneficial owner to the Minister of State. This information will be compiled in a beneficiary ownership register accessible to the Monegasque AML regulator, the Monegasque courts and the Monegasque tax administration. The register can also be consulted by credit institutions, asset management companies and any person with a legitimate interest in a few cases that are to be determined in the upcoming Sovereign Ordinance.

As part of the obligation of identification, credit institutions and asset managers shall also identify the client’s economic background. On this basis, banking and asset management companies are to exercise constant due diligence on the transactions undertaken throughout the course of the relationship with the client. Any unusual or complex operations are to be subject to a deeper and documented analysis. The due diligence obligation also requires the keeping of updated identification documents of the client. The due diligence obligations are greater for politically exposed persons (PEPs) (see question 14).

The obligation of identification also covers the transfers of funds for companies that execute wire transfers (ie, credit institutions). In this regard, the fund transferor and the beneficiary of the transfer shall be identified by the bank.

Obligations concerning internal organisation

Banks and asset management companies shall implement organisational procedures and control measures to effectively comply with the Monegasque AML legislation. Companies are required to keep a copy of all substantiating documents used for their identification for at least five years after ending relations with regular or occasional clients.

Companies shall take appropriate measures to train their employees and designate one or several persons to be responsible for the application of Law No. 1,362 of 3 August 2009, amended, on the fight against money laundering, terrorist financing and corruption. Procedures must also be in place to enable employees to warn internally of any breach of the AML obligations.

Also, the new AML Law No. 1,462 of 28 June 2018 contains new provisions enabling (subject to several conditions) Monegasque banks and asset management companies to exchange information with their group for organising the fight against terrorism, money laundering and corruption only.

Declaration of suspicion

Companies carrying out banking and financial activities are required to declare to the SICCFIN all sums held in their accounts and all operations that might be related to money laundering, terrorist financing or corruption. This declaration, made on the basis of reasonable grounds to suspect, must be submitted in writing, where possible, before the operation is carried out, and must give details of the facts that constitute evidence upon which the said companies have based the declaration.

A declaration made in good faith may not be subject to prosecution owing to a violation of professional secrecy. No civil liability action may be initiated and no professional sanction pronounced against the company, its directors or authorised employees who make such a declaration in good faith.

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 last 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, such as, in particular:

  • heads of state;
  • members of governments;
  • members of parliament;
  • members of supreme courts, constitutional courts or other high-level judicial bodies whose decisions are not subject to further appeal except in exceptional circumstances;
  • the leaders and senior officials of political parties;
  • the members of courts of auditors and the boards of central banks;
  • ambassadors, advisers and high-ranking officers in the armed forces;
  • members of the administrative, management or supervisory bodies of state-owned enterprises; and
  • senior politicians and high-ranking civil servants of international or supranational organisations.

The spouses and direct ascendants or descendants of these persons must be treated as if they themselves were PEPs.

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.

The due diligence obligations pertaining to PEP are greater. 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 in order 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.

These measures of due diligence shall apply whether PEPs are clients, beneficial owners or proxies.

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.

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 exactitude of the address mentioned, the professional is required to check this information using another document that is likely to prove their real address (eg, water, gas and 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.

For more details regarding the identification documentation required to establish a private banking relationship with a structure, see question 34.

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 three years’ imprisonment in Monaco.

In Monaco, the money laundering offence is 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 three years’ 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?

To date, none from a legal AML perspective. In practice, banks and asset management companies mention in general terms and conditions their clients undertaking to provide justifications of their tax status. Furthermore, in accordance with the Common Reporting Standard, enforceable in Monaco since early 2018, private banks are required to identify the tax residence of their clients. For that purpose, each natural person must certify his or her tax residence in order 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.

Regarding administrative sanctions, a warning may be delivered to the obliged entities by a decision of the Monegasque Minister of State.

In a case of serious infringement of the obligations provided by Law No. 1,362, the Minister of State is empowered to take the following administrative sanctions, which can be published in the Monegasque Official Journal:

  • 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 against carrying out certain operations;
  • temporary suspension of their authorisation to exercise their profession; or
  • the withdrawal of their authorisation.

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 Law No. 1,462, the violation of the rules aimed at fighting against money laundering, terrorist financing and corruption can constitute crimes punishable by imprisonment or fines.