New Bill No. 1077 (Part I) Fight against money laundering, financing of terrorism and proliferation of weapons of mass destruction

Bill No. 1077 adapting legislative provisions on the fight against money laundering, financing of terrorism and proliferation of weapons of mass destruction (Part I) [133 articles before going to Committee] was submitted to the Parliament (Conseil National) on 12 April 2023.

It 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 draft laws that the Government plans to table in order to implement the evaluators' recommendations. 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.

Summary

— Bill No. 1077 "Part I" mainly amends Law No. 1.362 of 3 August 2009 on the fight against money laundering, terrorist financing and corruption, with the following notable changes:

• Restructuring of SICCFIN into an independent administrative authority called the "Autorité Monégasque de Sécurité Financière" (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 associations and foundations of the obligation to obtain, keep and communicate 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) with recast provisions on reporting (discrepancy or absence of discrepancy), sanctioning of breaches, competence of the President of the Court of First Instance, and competent authorities having access to the Register;
• Obligation for legal persons to designate a person residing in Monaco responsible for obtaining, keeping and making available to the competent authorities information on beneficial owners;
• Establishment of a mechanism for the permanent control of the good repute of the directors, shareholders and associates, beneficial owners of the professionals subject to Law No. 1.362;
• Increasing the quantum of criminal sanctions incurred by natural and legal persons for failure to comply with Law No. 1.362, the wording of which would be revised;
• 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.

*The restructuring of SICCFIN entails the adaptation of additional provisions of the texts governing the exercise of certain economic and professional activities.

— The bill "Part II" would concern the amendment of the laws governing foundations, associations, the Trade and Industry Register (RCI), civil companies, and trusts.

— The bill "Part III" would be dedicated to matters falling more specifically within the competence of the Directorate of Judicial Services (DSJ).

— The bill "Part IV" would be a subsidiary text devoted to legislative amendments that would not have been dealt with in the first three bills, which would appear necessary in the course of the legislative procedure as complementary measures.

* * *

In detail, Bill No. 1077 (Part I) [before amendments]:

→ Addition to the title and body of Law No. 1.362 of the reference to the fight against the financing "of the proliferation of weapons of mass destruction". Recommendation 7 “Targeted financial sanctions related to proliferation”of the FATF Revised Recommendations calling on countries to implement the UN Security Council Resolutions on preventing, suppressing and disrupting the proliferation of weapons of mass destruction and its 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 (2018) Guidance on Counter Financing Proliferation.

CUSTOMER DUE DILIGENCE

→ Clarification that the obligations of L. 1.362 are applicable to the activities of huissiers de justice (State bailiff) in the context of public auctions (Article 2 L. 1.362).

→ Clarification that professionals must apply a risk-based approach based on their understanding of the risks (Article 3, 2nd paragraph L. 1.362). Point 12 of the Interpretative Note to FATF Recommendation 1 "Assessing risks & 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, 5th paragraph L. 1.362). Recommendation 15 "New technologies" of the MONEYVAL Report.

→ Addition of foundations and associations to the list of entities for which professionals must identify the beneficial owner (BE) before establishing a business relationship, the register of beneficial owners being newly named "Registre des bénéficiaires effectifs – sociétés et GIE" (Article 4-1 L. 1.362). Recommendations 10 "Customer due diligence", 24 "Transparency and beneficial ownership of legal persons" and immediate outcome 5 d) "Legal persons and legal arrangements" of the MONEYVAL Report.

→ Indication that the due diligence measures relating to cross-border credit transfers and transfers of funds are applicable to virtual asset providers (VAPs), and that all the professionals referred to are required to keep information on the originator and the beneficiary of the transfers (Article 9 L. 1.362). Recommendation 15 "New technologies" of the MONEYVAL Report.

→ Clarification of the procedures for implementing enhanced due diligence measures (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), the conditions of which will be specified by sovereign ordinance (Article 14-2 L. 1.362). FATF Recommendation 19 "Higher-risk countries".

→ Amendments regarding enhanced due diligence requirements applicable to correspondent relationships (Articles 15, 15-1, 16 L. 1.362). FATF Recommendation 13 "Correspondent banking” criteria a. d. e., MONEYVAL Report Recommendation 13 "Correspondent banking” criteria 13.1.

→ Additions regarding enhanced due diligence requirements applicable to politically exposed persons (extension to persons who perform or have performed a significant function within or on behalf of an international organisation, to persons who present a higher risk, removal of the 12-month time limit after termination of functions for the application of due diligence requirements, life insurance) (Articles 17, 17-1, 17-2, 17-3 L. 1.362). Recommendation 12 "Politically exposed persons" criteria 12.2 and 12.3, and Recommendation 10 "Customer due diligence" criteria 10.13 of the MONEYVAL Report, FATF Recommendation 12 "Politically exposed persons".

→ Recast of the definition of "beneficial owner" which will be completed with the additional amendments to Sovereign Order No. 2.318 (Article 21, paragraph 1 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 result 5 "Legal persons and legal arrangements" of the MONEYVAL Report.

→ Extension to associations and foundations 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 Department of the Interior, with a reference for the registration regime to Law No. 56 of 29 January 1922 on foundations and Law No. 1.355 of 23 December 2008 on associations and federations of associations (Article 21, paragraph 3 and Article 22 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.

→ Clarification that information on beneficial owners and related documents must be kept in Monaco (Article 21, paragraph 4 L. 1.362). Recommendation 24 "Transparency and beneficial owners of legal persons" criterion 24.9 of the MONEYVAL Report.

→ Addition of the obligation of beneficial owners to communicate to legal persons the necessary information and any subsequent changes (Article 21, paragraph 6 L. 1.362). FATF Recommendation 24 "Transparency and beneficial ownership of legal persons", MONEYVAL Report Recommendation 24 "Transparency and beneficial ownership of legal persons" criteria 24.6 and 24.7.

→ Enshrinement of the power of the Monegasque Financial Security Authority department exercising the supervisory function and of the judicial authorities to require legal persons to transmit the information they hold on their beneficial owners, on pain of criminal sanctions (Article 22-1, paragraph 6 (L. 1.362). Recommendation 24 "Transparency and beneficial owners of legal persons" criteria 24.6 and 24.10 of the MONEYVAL Report.

→ New obligation applicable to companies, foundations and associations to designate one (or more) person(s) responsible for obtaining, holding and communicating basic information on beneficial owners, resident in Monaco, and for providing assistance to the competent authorities, with notification as appropriate to the RCI or the Department of the Interior - Right of access to the information entered in the "Registre des bénéficiaires effectifs - société and GIE" (Articles 22-1, II and 22-6 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.

→ Establishment of the power of the Economic Development Department (DEE) to impose financial penalties in the event of failure by commercial companies, economic groupings and civil companies to communicate information on their beneficial owners and to keep it up to date, with the possibility for the RCI department to refer the matter to the President of the Court of First Instance in the event of persistent failure to communicate the information (Articles 22-1-1, 22-2 last paragraph L. 1.362). Immediate result 5 (Legal persons and legal arrangements) h and j, priority action q. first and third indents of the MONEYVAL Report.

→ New obligation for professionals requesting an extract from the entries in the "Registre des bénéficiaires effectifs – société et GIE" to report any discrepancy or absence of discrepancy, with the possibility for the RCI in the event of inaccuracy or discrepancy to order the legal person to regularise its situation and, failing that, to refer the matter to the President of the Court of First Instance (Article 22-2, paragraphs 2 and 3 L. 1.362). Immediate result 5 (Legal persons and legal arrangements) h and i, priority action q. third indent of the MONEYVAL Report.

→ Additions relating to the competence of the President of the Court of First Instance concerning ex officio striking off, his referral and his prerogatives (Article 22-3 L. 1.362). Immediate outcome 5 (Legal persons and legal arrangements) h and priority action q. third indent of the MONEYVAL Report.

→ Extension of access to the "Registre des bénéficiaires effectifs – société et GIE" to judicial police officers authorised by the Director of Public Security, to the department for the management of seized or confiscated assets under the Directorate of Judicial Services, and to the Bar Association (replacing the President of the Bar); all the competent authorities have access to it in the context of all their activities and no longer only the LCB/FT-C (Article 22-5 L. 1.362).

→ Opening up the possibility of requesting an extension of the retention period for personal data and documents to the investigating judge or to officers of the judicial police acting at the request of the Public Prosecutor or the investigating judge; requiring reporting entities to have systems enabling them to respond quickly and securely to requests in the context of an ongoing investigation (Articles 23, paragraph 2, number 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.

RETENTION OF DOCUMENTS - INTERNAL ORGANISATION REQUIREMENT

→ Extension to notaries, State bailiffs and lawyers of the obligation to appoint an agent domiciled in Monaco who is responsible for keeping documents and data for 5 years from the date of cessation of activity, and of the application of the special provisions for groups (Articles 24, 26, 27, 28, 29, 29-1 L. 1.362). Recommendation 28 "Regulation and supervision of designated non-financial businesses and professions" of the MONEYVAL Report.

DISCLOSURE AND INFORMATION OBLIGATION

→ Notaries and State bailiffs, who would be supervised by the "Monegasque Financial Security Authority" (and no longer the Public Prosecutor) would have to 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.

→ Clarification of the confidentiality obligation for reports of transactions and facts concerning natural or legal persons domiciled, registered or established in a State or territory whose legislation is recognised as insufficient or whose practices are considered to impede the AML/CFT or the proliferation of weapons of mass destruction, under penalty of sanctions (Article 41 L. 1.362).

SUPERVISION AND SANCTIONS

→ Restructuring of SICCFIN (a State administrative service) into an independent administrative authority called the "Autorité Monégasque de Sécurité Financière" ("Monegasque Financial Security Authority") aligned with the level of requirement required internationally to fight financial delinquency, whose missions would be 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 governmental function (abolition of the CERC procedure and of the pronouncement of sanctions by the Minister of State) (Articles 46, 46-1 to 46-4, 47 to 53, 53-1 and 53-2, 65, 65-1, 66, 67, 67-1, 69 and abolition of Articles 65-2 to 65-4, 67-2 to 67-4 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" criterion 28.4, Recommendation 35 "Sanctions" criterion 35-1, Priority action b) of the MONEYVAL Report, FATF Recommendation 29 “Financial intelligence units”.

This restructuring would entail changes to the legislative texts relating to the regime of declaration or authorisation of activity of the professionals subject to the law as well as to the authorisations for the creation of limited companies.

Transitional provisions would regulate the question of the application of the new law over time with regard to sanction procedures (sanction procedures resulting from audit reports received by CERC prior to the entry into force of the new law would remain governed by the provisions of the old law).

→ Establishment of a mechanism for control by the supervisory department of the Monegasque Financial Security Authority, on a permanent basis, of the good repute of managers, shareholders and partners, and beneficial beneficialof the professionals subject to Law No. 1.362, based on an obligation to register systematically and following any change, under penalty of sanctions in the event of failure to comply (Article 53-2 L. 1.362). Recommendation 26 "Regulation and supervision of financial institutions" criterion 26.3 of the MONEYVAL Report.

→ With regard to lawyers, the supervisory function would be entrusted to the Ordre des avocats-défenseurs et avocats de la Principauté de Monaco, and the power to impose sanctions on members of the Ordre, managers of practice entities and employees or agents, to the Conseil de l'Ordre. The details of the control and supervision mechanism created would be specified by sovereign ordinance (Articles 56-2 to 56-5, 69-1 to 69-4 of 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.

INTERNATIONAL COOPERATION

→ Recast on international cooperation of supervisory authorities (Article 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 of the Public Security Directorate (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 the control of 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.

REGISTRE DES COMPTES BANCAIRES ET DES COFFRE-FORTS (REGISTER OF BANK ACCOUNTS AND SAFES)

→ Widening access to information in the Register to the seized or confiscated assets department of the Directorate of Judicial Services, to judicial police officers authorised by the Director of Public Security, and to the Directorate of Economic Development; access would also no longer be limited solely to the AML/CFT framework (Article 64-2 L. 1.362).

MISCELLANEOUS PROVISIONS

→ New provision relating to cooperation and the exchange of information under conditions that comply with the applicable regulations on the protection of personal data (Article 82-1 L. 1.362).