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 by 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. This regulation is constantly reinforced to keep equivalent standards to the EU AML Regulation in accordance with the agreements entered into by Monaco and the European Union. Following the introduction at the European level of new AML measures by the 5th EU AML Directive, the Monegasque AML law was hence amended to transpose and take into account the new measures. This was done through the Law No. 1.503 of 23 December 2020 completed by the Sovereign Ordinance No. 8.634 dated 29 April 2021, which considerably redesigned the Monegasque AML Regulation.

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 anti-money laundering obligations.

 

The obligation to identify clients and due diligence

Companies carrying out banking and financial activities such as wealth management activities must, before concluding any business relations, identify clients as well as their agents and check the identity of each of these persons based on their ID documents. In this respect, said companies must strictly pay attention to the countries of origin of clients with whom a relationship is to be established, as Law No. 1.503 has strengthened customer due diligence with regard to some third countries qualified of high risk. Monaco has its own list of countries with insufficient AML/CFT legislation or whose practices are considered to impede the fight against money laundering, terrorist financing or corruption. This list results from several Monegasque ministerial orders (AM No. 2018-930 of 28/09/2018; AM No. 2018-1109 of 27/11/2018; AM No. 2018-926 of 28/09/2018 and AM No. 2018-927 of 28/09/2018) and includes, for the time being, the following countries: Afghanistan, Bosnia and Herzegovina, Ethiopia, Guyana, Guyana, Laos, Pakistan, Pakistan, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu, Yemen, Democratic People's Republic of Korea, Islamic Republic of Iran.

For the record, copies of documents collected from clients 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).

Following the entry into force of Law No. 1,462 amending the former AML legislation, a beneficiary ownership register had been created obliging Monegasque registered companies to transmit information concerning their beneficial owner to the Minister of State. With the new AML Law No. 1.503 of December 2020, the information compiled in the said register is now accessible to a wider range of persons, as previously only a few institutions had access to it. Thus, in addition to the persons previously authorised (the Monegasque AML regulator, the Monegasque courts and tax administration, credit institutions and asset management companies for LAB purposes), the following persons may now have access to the register of beneficial owners: the President of the Bar Association, the agents of the Monegasque Supervisory Committee for Financial Activities (CCAF) within the framework of their missions, and all other persons to the extent that the legal person concerned has been informed.

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. So are any operations involving high-risk third countries listed above, as well as clients domiciled in those countries. The due diligence obligation also requires the keeping of updated identification documents of the client. The due diligence obligations are greater for clients, beneficial owners or agents qualified as politically exposed persons (PEPs), members of their family, or persons in any way related to them.

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. To simplify procedures and to take into account the development of digitalisation in the Principality, documents can now be kept in a digital format according to the provisions of Law No. 1.503.

Companies shall take appropriate measures to train their employees and designate one or several persons to be responsible for the application of amended AML Law No. 1,362 of 3 August 2009. Given the importance of the role assigned to said persons in practice, the new AML regulation has introduced some education and experience requirements (diploma, training or professional competencies) regarding their designation. Procedures must also be put in place to enable employees to warn internally of any breach of the AML obligations.

The new AML Law No. 1.530 dated 23 December 2020 also strengthened the exchange of information between Monegasque banks and asset management companies and their groups. According to the new AML Law, the modalities and conditions under which information may be shared between entities belonging to the same group will have to be clearly defined and framed in internal procedures established by the parent company at the group level. Moreover, these exchanges will have to take place only for AML purposes, and be subject to compliance with professional secrecy and personal data protection obligations.

 

Declaration of suspicion

Companies carrying out banking and financial activities are required to declare to the Financial Circuits Information and Control Department (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 due 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?

Under the Monegasque AML law, the notion of PEPs includes politically exposed persons themselves together with members of their families and all persons closely related to them.

Thus, politically exposed persons, whether they are clients, beneficial owners or agents, are those who hold or have held, over the past three years, important public positions, namely:

  • heads of state;
  • members of governments;
  • members of parliamentary assemblies;
  • members of supreme courts, constitutional courts or other high courts whose decisions are not subject to appeal, except in exceptional circumstances;
  • officials and leaders of political parties;
  • members of courts of auditors and central bank boards;
  • ambassadors, chargés d'affaires and senior officers of the armed forces;
  • members of the administrative, management or supervisory bodies of public enterprises;
  • senior politicians and officials of international or supranational organisations.

 

Considered as persons deemed to be family members of PEPs are:

  • the spouse or person living in a marital relationship with a politically exposed person;
  • the partner bound by a contract to live together or by a partnership contract registered under a foreign law; and
  • the direct ascendants or descendants of the above.

 

Considered as persons closely related to politically exposed persons are:

  • natural persons identified as beneficial owners of a legal person or of a mutual fund, investment fund, trust or comparable legal arrangement under a foreign law together with a politically exposed person, or for having any other close business relationship with such a person;
  • individuals who are sole beneficial owners of a legal person, mutual fund, investment fund, trust or comparable legal arrangement under foreign law known to have been established for the benefit of a politically exposed person.

 

With respect to PEPs, professionals shall define and implement internal procedures enabling them to determine whether a customer or its beneficial owner is a politically exposed person or becomes one during the course of the business relationship. These internal procedures must also clearly define the policy for accepting PEPs, which requires:

  • obtaining prior approval from a senior member of the management team to establish or maintain the relationship with such persons;
  • taking appropriate steps to establish the source of assets and funds involved in the business relationship or transactions with such persons; and
  • professionals who engage in a business relationship with PEPs are also required to ensure enhanced monitoring of the business relationship on an ongoing basis.
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 upon presentation of the original of a valid official document bearing their photograph, or by taking a copy of such a document and collecting the following information: its name, nationality, date and place of birth, address, as well as the nature, the authority and the date and place of issuance of the identification document.

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, 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 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.

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 relevant 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.

Law stated date

Correct on

Give the date on which the information above is accurate.

27 May 2020.