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14

Jul
2023

Legal news

International and European law

Compliance

14/ Jul
2023

Legal news

International and European law — Compliance

Law no. 1.549 of 6 July 2023 (PART I) ● Fight against money laundering, financing of terrorism and proliferation of weapons of mass destruction

Law no. 1.549 of 6 July 2023 adapting legislative provisions on the fight against money laundering, the financing of terrorism and proliferation of weapons of mass destruction (Part I), published in JDM No. 8651 of 14 July 2023, stems from Bill No. 1077 submitted to the Parliament (Conseil National) on 12 April 2023 and passed on 29 June 2023.

The provisions of Law no. 1.549 come into force on the date set by the regulations made for their application (no later than 30 September 2023).

Presentation

Law no. 1.549 (Part I) follows on from the 5th Mutual Evaluation Report of the MONEYVAL Committee on the measures implemented in this area by the Principality of Monaco between 2015-2021, published on 23 January 2023. Read more here

This is the first of four laws that the Government plans to table in order to implement the evaluators' recommendations:

Law (Part II), submitted to the Parliament on 30 May 2023, focuses on the transparency of legal entities and amends the laws governing foundations, associations, the Trade and Industry Register (RCI) and civil partnerships.
Law "Part III" is dedicated to "Justice, criminal law and criminal procedure", subjects that fall more specifically within the remit of the Judicial Services Department (DSJ).
— Law "Part IV" would be a subsidiary text devoted to legislative amendments that were not dealt with in the first three Bills, which would appear necessary in the course of the legislative procedure as additional measures.
For the record, during the 5th evaluation cycle, Monaco has already adopted 9 laws related to the fight against money laundering and terrorist financing.

The Principality is under "enhanced monitoring" procedure. Its situation will be examined again by the FATF in June 2024 and then by the Council of Europe in December 2024. This implies implementing the MONEYVAL recommendations within one year, in law and in practice..

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SUMMARY

Law no. 1.549 (Part I) mainly amends Law No. 1.362 of 3 August 2009 newly entitled "on the fight against money laundering, financing of terrorism and proliferation of weapons of mass destruction and corruption" with the following notable changes:

Restructuring of SICCFIN into an independent administrative authority called the "Autorité Monégasque de Sécurité Financière" AMSF (Monegasque Financial Security Authority), with the power to impose sanctions on the professionals subject to its jurisdiction (including, from now on, notaries and State bailiffs) [end of the functions of the CERC and of the pronouncement of sanctions by the Minister of State], with, in parallel, a new control and supervision mechanism applicable to lawyers;

New definition of beneficial owners.

• Extension to foundations, associations and federations of associations of the obligation to obtain, retain and disclose information on their beneficial owners.

• The Register of beneficial owners would be renamed "Registre des bénéficiaires effectifs - société et GIE" (Register of beneficial owners – company and economic interest grouping), the power of the Director of Economic Development to impose administrative financial penalties in the event of non-compliance has been enshrined, the provisions relating to the jurisdiction of the President of the Court of First Instance hearing the case have been strengthened, the possibility of ordering the director of the compnay to pay a civil fine has been included, and the scope of the competent authorities with access to the Register has been extended.

•- Requirement for legal persons to appoint a "Responsable des informations élémentaires et des informations sur les bénéficiaires effectifs" (Person Responsible for Basic Information and Information on Beneficial Owners) for obtaining, storing and making available to the competent authorities such information.

• The retention period for information following termination of customer relationships, dissolution or liquidation is doubled to 10 years.

• Introduction of a mechanism for ongoing checks on the good repute of directors, shareholders and beneficial owners of reporting entities.

• Sanctions to be imposed by the AMSF: creation of a simplified sanction procedure for isolated and minor breaches for the entities listed in Article 1 of Law no. 1.362 (except for chartered accountants and certified accountants), sanction proposal procedure and standard procedure before the sanction panel. The amount of the fines depends on whether they are imposed on financial institutions or not.

• Revision of the wording and increase in the quantum of the criminal penalties incurred by natural and legal persons in the event of failure to comply with Law no. 1.362.

Reinforcing the effectiveness of investigations and prosecutions in the area of money laundering by opening up the possibility of requesting an extension of the retention period for personal data and documents from the investigating judge or judicial police officers acting at the request of the Public Prosecutor or the investigating judge, and the obligation for professionals to have systems that allow them to respond quickly and securely to requests in the context of an ongoing investigation.

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IN DETAIL

→ Addition to the title and body of Law no. 1.362 of the reference to te fight against the financing of "the proliferation of weapons of mass destruction". FATF Recommendation 7 "Targeted financial sanctions related to proliferation" calling on countries to implement the United Nations Security Council Resolutions on preventing, suppressing and disrupting the proliferation of weapons of mass destruction and their financing. The FATF defines proliferation of weapons of mass destruction (WMD) as the transfer and export of nuclear, chemical or biological weapons, their delivery systems and related materials. See FATF Recommendations (updated June 2021) and FATF (2018) Guidance on Counter Proliferation Financing.

→ Definition of National Risk Assessment (Evaluation Nationale des Risques - ENR) in Preliminary Article (4th and 5th paragraphs) of Law no. 1.362.

CUSTOMER DUE DILIGENCE

> State Bailiffs

→ Clarification that the obligations of Law no. 1.362 are applicable to the activities of bailiffs in the context of public auctions (Article 2 L. 1.362).

> Risk-based approach

→ Clarification that reporting entities must apply a risk-based approach based on their understanding of risks, and also include in their own risk assessment, the risks identified by the Government and the competent authorities in particular in the context of the ENR in addition to the specific risks that the latter might target (Article 3, 2nd paragraph and 5th paragraph new L. 1.362). Point 12 of the Interpretative Note to FATF Recommendation 1 "Assessing risks and applying a risk-based approach*.

→ Clarification that reporting entities must take appropriate measures to manage and mitigate risks, including those related to new technologies (Article 3, 6th paragraph new L. 1.362). Recommendation 15 "New technologies" of the MONEYVAL Report.

> Identification of the beneficial owner of foundations and associations

→ Addition of foundations and associations to the list of entities for which reporting entities must identify the beneficial owner (BO) before establishing a business relationship (Article 4-1 L. 1.362). Recommendations 10 "Customer due diligence", 24 "Transparency and beneficial ownership of legal persons" and immediate result 5 d) "Legal persons and legal arrangements" of the MONEYVAL Report.

> Cross-border credit transfers and fund transfers

→ Indication that the due diligence measures relating to cross-border credit transfers and transfers of funds are applicable to virtual asset service providers (VASPs), and that all the professionals referred to are required to keep the required information on the originator and the required and accurate information on the beneficiary of the transfers, which shall be made available to the competent authorities upon request (Article 9 L. 1.362). Recommendation 15 "New technologies" of the MONEYVAL Report.

> Enhanced vigilance measures

Implementation procedures

→ Clarification of the procedures for implementing enhanced due diligence measures: reporting entities must implement these measures when the risk presented by a business relationship, product or transaction appears to them to be high, on the basis of their own risk analysis, or when the Government and the competent authorities have identified higher risks, particularly in the context of the ENR To this end, they shall take enhanced measures to manage and mitigate the risks and incorporate those identified by the Government and the competent authorities in their risk assessments (Article 12-2 L. 1.362). Immediate outcome 1 g) "Risk, policy and coordination" of the MONEYVAL Report.

→ Addition of the application of "countermeasures" by reporting entities (when the FATF calls on States to do so) determined by sovereign ordinance (Article 14-2 L. 1.362). FATF Recommendation19 "Higher-risk countries".

The Interpretative Note to Recommendation 19 provides the following examples of countermeasures that can be taken by countries: (a) Requiring financial institutions to apply specific elements of enhanced due diligence.(b) Introducing enhanced relevant reporting mechanisms or systematic reporting of financial transactions.(c) Refusing the establishment of subsidiaries or branches or representative offices of financial institutions from the country concerned, or otherwise taking into account the fact that the relevant financial institution is from a country that does not have adequate AML/CFT systems.(d) Prohibiting financial institutions from establishing branches or representative offices in the country concerned, or otherwise taking into account the fact that the relevant branch or representative office would be in a country that does not have adequate AML/CFT systems.(e) Limiting business relationships or financial transactions with the identified country or persons in that country.(f) Prohibiting financial institutions from relying on third parties located in the country concerned to conduct elements of the CDD process.(g) Requiring financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in the country concerned.(h) Requiring increased supervisory examination and/or external audit requirements for branches and subsidiaries of financial institutions based in the country concerned.(i) Requiring increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in the country concerned.

Correspondent relationships

→ Changes to the enhanced due diligence obligations applicable to correspondent relationships, now grouped in two articles instead of three.. It is added that these obligations, which apply to the entities referred to in items 1°) to 4°), also apply to the entities referred to in items 24°) to 28°) {VASPs) of L. 1.362*. Adopting the terminology of the FATF, the expression "through publicly available information" is replaced by "on the basis of publicly available information" (articles 15 amended, 15-1 repealed, 16 amended L. 1.362). FATF Recommendation 13 "Correspondent banking" criteria a. d. e., Recommendation 13 "Correspondent banking " criterion 13.1 of the MONEYVAL Report.

** 1°) credit institutions, including branches established in the Principality of credit institutions whose registered office is located abroad, and finance companies; 2°) payment institutions and electronic money institutions, including branches established in the Principality of payment institutions or electronic money institutions whose registered office is located abroad; 3°) persons carrying out the activities referred to in Article 1 of Law no. 1. 338 of 7 September 2007 on financial activities, as amended; 4°) insurance undertakings referred to in Article 3 of Sovereign Order no. 4. 178 of 12 December 1968 instituting State control over insurance companies of all kinds and capitalisation companies and organising the insurance industry, insurance intermediaries, agents and brokers established in the Principality only in the case of life insurance or other forms of insurance linked to investments; 24°) any person who, by virtue of a usual profession, either acts as counterparty or acts as an intermediary, with a view to the acquisition or sale of digital assets in exchange for legal tender; 25°) any person who, by virtue of a usual profession, either acts as counterparty or acts as an intermediary, with a view to the exchange of digital assets for other digital assets; 26°) any person who, as a usual profession, carries out the activity of custody and/or administration of digital assets or crypto-assets on behalf of third parties, or access to digital assets or crypto-assets, where applicable in the form of private keys, with a view to holding, storing and transferring digital assets or crypto-assets; 27°) any person who, as a usual profession, participates in the supply or provides financial services related to the offer of an issuer and/or the sale of digital assets or crypto-assets; 28°) any person who, as a usual profession transfers the ownership or control of digital assets or crypto-assets by carrying out a transaction on behalf of a third party, by moving digital assets or crypto-assets from one address or account to another.

> Beneficial owner

Definition

→ Recast of the definition of "beneficial owner" which will be completed with the additional amendments of Sovereign Order 2.318 (Article 21, paragraphs 1 and 2 L. 1.362). Recommendation 10 "Customer due diligence" criterion 10.10 and Recommendation 24 "Transparency and beneficial ownership of legal persons" criterion 24.6, Immediate Outcome 5 "Legal persons and legal arrangements" of the MONEYVAL Report.

Communication and conservation

→ Extension to foundations, associations and federations of associations of the obligation to obtain and keep adequate, accurate and up-to-date information on their beneficial owners, and of the obligation to communicate this information to the Minister of State with a reference for the registration regime to Laws No 56 of 29 January 1922 on foundations and No 1.355 of 23 December 2008 concerning associations and federations of associations. The Special Register is kept by the Department of the Interior (article 21, paragraph 3 and article 22, paragraph 2 L. 1.362). Recommendation 10 "Customer due diligence" criteria 10.5, 10.10 and Recommendation 24 "Transparency and beneficial ownership of legal persons" criteria 24.6, 24.7, 24.8, Immediate result 5 "Legal persons and legal arrangements" of the MONEYVAL Report.

→ Update of the title of the Register of beneficial owners for commercial companies, economic interest groupings (GIE) and (non-trading) civil companies: "Registre des bénéficiaires effectifs - sociétés et GIE". The said companies and GIEs must communicate the information on their beneficial owners to the Direction du Développement Economique (DDE) (Economic Development Department)* for entry in the said Register (appended to the RCI) when they are registered and then regularly in order to keep them up to date (article 22, 1st paragraph L. 1.362).

The transitional provisions stipulate that the 10-year retention period (referred to in paragraphs 4 and 5 of article 21 L. 1.362) only applies to terminations of customer relationships and dissolutions or liquidations occurring after the entry into force of this law (no later than 30 September 2023).

* Sovereign Order 9.827 of 15 March 2023 created the Department of Economic Development, which succeeded the Department of Economic Expansion (DEE).

→ Increase in the retention period and availability of information on beneficial owners and related documents, and clarification of the place of retention: 10 years (instead of "at least 5 years") after the date on which they cease to be customers of taxable persons, at the registered office of the legal person or, failing that, at another location in Monaco notified to the RCI department or the Department of the Interior; 10 years (instead of "at least 5 years") after the date of their dissolution or liquidation at a location in Monaco notified to the RCI department or the Department of the Interior (article 21, paragraph 4 L. 1.362). Recommendation 24 ""Transparency and beneficial ownership of legal persons"" criterion 24.9 of the MONEYVAL Report.

→ Addition of the obligation for beneficial owners to communicate to legal persons the necessary information and all subsequent changes within a period determined by sovereign ordinance (Article 21, paragraphs 6 and 7 L. 1.362). FATF Recommendation 24 "Transparency and beneficial ownership of legal persons", Recommendation 24 "Transparency and beneficial ownership of legal persons" criteria 24.6 and 24.7 of the MONEYVAL Report.

→ New obligation applicable to commercial companies, non-trading companies, EIGs, foundations, associations and federations of associations to designate one (or more) person(s) "Responsable des informations élémentaires et des informations sur les bénéficiaires effectifs" (responsible for basic information and information on beneficial owners), resident in Monaco (from a specified list of persons) responsible for keeping this information, communicating it for entry in the relevant Register and updating it (as the case may be to the Minister of State or the DDE), communicating it on request within the specified period and providing any other form of assistance to the competent authorities who have unrestricted access to the Register*. Obligation to notify the designated person (and any changes) as appropriate to the DDE or the Home Office, thereby formalising their prior consent. The procedures for identifying designated persons are defined by Sovereign Order (articles 22-1, II, 22-4-1, 22-5 L. 1.362). Recommendation 24 "Transparency and beneficial ownership of legal persons" criterion 24. 8 and Immediate Outcome 5 (Legal persons and legal arrangements) h, priority action q. third indent of the MONEYVAL Report.

* Competent authorities For companies and economic interest groupings : Authorised agents of the Monegasque Financial Security Authority (AMSF), the seized or confiscated assets management department of the Directorate of Judicial Services, the Budget and Treasury Directorate, the Tax Services Directorate, the Financial Activities Control Commission, authorised staff of the judicial authorities, judicial police officers from the Public Safety Department acting at the request of the Public Prosecutor or on delegation from an examining magistrate, police officers with at least the rank of captain, individually and specially authorised by the Director of Public Safety, and the Bar Council and lawyers (through the AMSF). For foundations, associations and federations of associations, the competent authorities mentioned in Laws no. 1.355 of 23 December 2008, as amended, and no. 56 of 29 January 1922, as amended.

Sanctions

→ New penalty procedure in the event of failure to comply with obligations to declare beneficial owners, discrepancies or inaccuracies: the Director of Economic Development has the power to order the legal entity to regularise its situation (under the conditions of article 22-2-1 L. 1.362). If the situation is not regularised, the Director may first impose an administrative fine of up to €5,000, then an administrative financial penalty of up to €20,000/€50,000/€100,000 depending on the annual turnover excluding VAT, and finally, if the breach persists, be specially authorised by the Minister of State for the management of the RCI to refer the matter to the President of the Court of First Instance (articles 22-2 paragraphs 2 and 3, 22-2-1 L. 1.362). Immediate outcome 5 (Legal persons and legal arrangements) h, i, j. priority action q. third indent of the MONEYVAL Report.

→ Rewrite the provisions relating to proceedings on application before the President of the Court of First Instance: summons, referral, appointment of "any useful agent" responsible for carrying out the formalities determined by the order made on application at the expense of the legal entity concerned, summons for retraction, in the event of failure to comply with the injunction, the director may be ordered to pay a civil fine of up to, depending on annual turnover excluding VAT, €20,000 / €50,000 / €100,000 (article 22-3 L. 1.362). Immediate result 5 (Legal persons and legal arrangements) h and priority action q. third indent of the MONEYVAL Report.

Access

Expanded access to the "Registre des bénéficiaires effectifs - sociétés et GIE". More competent authorities have access not limited to AML/CFT, including the addition of the service for the management of seized or confiscated assets under the Directorate of Judicial Services. The same applies to authorities with limited access to AML/CFT, which includes the implementation of procedures for freezing funds and economic resources. The conditions of access to the Register and the mechanisms for ensuring the traceability of consultations carried out are defined by Sovereign Order (article 22-5 L. 1.362). The persons designated as responsible for basic information and information on beneficial owners only have access to information declared by the persons who designated them (article 22-6 L. 1.362). Foundations, associations and federations of associations have access to the Register under the conditions laid down by Laws no. 1.355 of 23 December 2008 and no. 56 of 29 January 1922. Consultation of the Register in accordance with the law enables procedures to be initiated or decisions to be taken concerning infringements or breaches of legal provisions other than those provided for in Law no. 1.382 (new wording of article 22-9 of Law no. 1.362).

→ Opening up the possibility of requesting an extension of the retention period for personal data and documents, for a maximum additional period of 5 years, from the investigating judge or judicial police officers acting at the request of the Public Prosecutor or the Investigating Judge, and requiring those subject to the Act to have systems enabling them to respond quickly and securely to requests in the context of an ongoing investigation. The conditions of application are defined by sovereign ordinance (articles 23, paragraph 2 figure 3°), 24 L. 1.362). Amendments at the initiative of the Director of Judicial Services, Immediate Result 7 "Investigation and prosecution of money laundering" of the MONEYVAL Report.

OBLIGATION TO REPORT AND PROVIDE INFORMATION

→ Notaries and bailiffs, who will be supervised by the Autorité monégasque de sécurité financière - AMSF (Monegasque Financial Security Authority) (and no longer the Public Prosecutor) must send their suspicious transaction report to it (Articles 36 and 40, 53-1 L. 1.362). Recommendation 23 "Designated non-financial businesses and professions - Other measures" criterion 23.1 of the MONEYVAL Report.

→ The procedures for transmitting suspicious transaction reports are determined by sovereign ordinance. The aim is to take account of developments in communication methods: transmission by electronic means and using a specific form (Article 36, 3rd paragraph of L. 1.362).

→ Clarification of the obligation to keep confidential reports of transactions and facts concerning natural or legal persons domiciled, registered or established in a State or territory whose legislation is recognised as inadequate or whose practices are considered to be an obstacle to AML/CFT, subject to penalties (article 41 L. 1.362).

→ Clarification and specification of reporting obligations relating to measures to freeze funds and economic resources (Article 42 L. 1.362).

SUPERVISION AND SANCTIONS

→ Restructuring of SICCFIN (a State administrative department) into an independent administrative authority called the Autorité monégasque de sécurité financière - AMSF (Monegasque Financial Security Authority) aligned with the level of requirements required internationally to combat financial crime, whose missions are organised under three main functions: 1/ financial intelligence unit; 2/ supervision; 3/ direct sanctioning of those subject to its jurisdiction in compliance with the principle of independence from the government function (abolition of the CERC procedure and of the imposition of sanctions by the Minister of State) (articles 46, 46-1 to 46-5, 47 to 53, 53-1 and 53-8, 54 to 56-2-1, 64-7, 64-8, 65, 65-1 to 65-8, 66, 67, 67-1, 67-2, 69 L. 1.362). Immediate result 3 "Supervision" Recommendation 27 "Powers of supervisory authorities" criterion 27.4, Recommendation 28 "Regulation and supervision of designated non-financial businesses and professions (DNFBPs)" criterion 28.4, Recommendation 35 "Sanctions" criteria 35-1, Priority action b) of the MONEYVAL Report, FATF Recommendation 29.

Transitional provisions settle the question of the application in time of the new law with regard to sanction procedures: the CERC remains competent for all controls begun before the entry into force of the present law (applicability of previous provisions for the time necessary to process these procedures).

These include:

  • Introduction of a mechanism for ongoing checks on the good repute of managers, shareholders and partners and the beneficial owners of regulated entities by regulated entities and the department responsible for supervising AMSF, with the transmission of information by the authority responsible for examining declarations of activity, administrative authorisations or approvals, the Director of Labour and the Economic Development Department, subject to penalties in the event of failure to comply. The purpose of good repute checks is to assess the compatibility of the relevant information relating to the natural and legal persons concerned, in particular any criminal or administrative penalties to which they may have been subject, with the nature of the activity carried out, taking into account the risks presented by the person and the activity concerned (article 53-2 to 53-8 L. 1.362). Recommendation 26 "Regulation and supervision of financial institutions" criterion 26.3 of the MONEYVAL Report.
  • In order to establish the risk profile of the entities under its jurisdiction, the risks of B/FT-PADM/C and non-compliance with the obligations arising from Law no. 1.362, the department exercising AMSF's supervisory function will draw up any questionnaire to which the entities are required to respond within the time limits and in the form laid down by Sovereign Order.
  • Creation of a simplified penalty procedure for isolated and minor breaches for the entities listed in Article 1 of Law no. 1.362 (except for chartered accountants and certified accountants) (articles 64-7, 64-8 L. 1.362), a penalty proposal procedure (articles 65-1 and 65-2 L. 1.362) and a standard procedure before the AMSF's penalty panel. The amount of financial penalties depends on whether or not they are imposed on financial institutions (articles 65-3 to 65-8, 67, 67-1, 67-2, 69 L. 1.362).

→ With regard to lawyers, the supervisory and sanctioning function is entrusted to the Conseil de l'Ordre des avocats-défenseurs et avocats de la Principauté de Monaco (previously Bâtonnier) (Articles 56-3, 56-4, 56-5, 57, 58, 58-1, 58-2,, 58-3, 69-1 to 69-4 L. 1362). Recommendation 28 "Regulation and supervision of designated non-financial businesses and professions (DNFBPs)" criteria 28-4, 28-5, Recommendation 35 "Sanctions" criterion 35-2 of the MONEYVAL Report.

→ Increase in the quantum of criminal penalties incurred by natural persons and legal entities in the event of failure to comply with Law no. 1.362, the wording of which has been revised (Articles 70, 71, 71-1, 71-2, 72 to 77-2, 80-1 L. 1.362). Recommendation 24 "Transparency and beneficial ownership of legal persons" criteria 24.6, 24.8, 24.13, Recommendation 35 "Sanctions" criterion 35.1 of the MONEYVAL Report.

INTERNATIONAL COOPERATION

→ Recasting of international cooperation between supervisory authorities (Articles 59-1 and 59-2 L. 1.362). Recommendation 40 "Other forms of international cooperation" criteria 40.7, 40.12, 40.13 and 40.16 of the MONEYVAL Report.

→ New provision on international cooperation by the Direction de la sûreté publique (Public Security Directorate) in relation to AML/CFT (art. 59-3 L. 1.362). Recommendation 40 "Other forms of international cooperation" criteria 40-4 and 40-6 of the MONEYVAL Report.

BORDER CASH TRANSPORT

Reinforcement of checks on compliance with the obligation to declare accompanied cash, by the Public Security Directorate (Article 62 L. 1.362). Interpretative Note C. 5 "Additional elements" of FATF Recommendation 32 "Cash couriers", Recommendation 32 "Cash couriers" criterion 32-4 of the MONEYVAL Report.

REGISTER OF BANK ACCOUNTS AND SAFES

Extension of access to information in the Registre des comptes bancaires et des coffres-forts to the service des avoirs saisis ou confisqués (seized or confiscated assets department) of the Direction des Servces Judiciaires (Judicial Services Directorate), to judicial police officers with at least the rank of captain individually and specially authorised by the Director of Public Safety, and to the Direction du Développement Economique (Economic Development Directorate)(Article 64-2 L. 1.362).

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