Fight against money laundering, terrorist financing and corruption in Monaco: a new legal framework in the making

Directive (EU) 2018/843 of the European Parliament and of the Council dated 30 May 2018, known as the "5th Anti-Money Laundering Directive", was included, by Sovereign Ordinance No 7.440 of 26 April 2019, in Annex B of the Monetary Agreement concluded on 29 November 2011 between the European Union and the Principality of Monaco.

Monaco is required to adopt measures having equivalent effect to those of the 5th Directive by 31 December 2020. To this end, bill No 1008 (referred to as the "Bill to strengthen the system for combating money laundering, terrorist financing and corruption") was submitted to the National Council (the Monaco Parliament) on 12 February 2020. This bill also aims to adjust and supplement the regulations in force with regard to the 4th Directive and the FATF (Financial Action Task Force) recommendations.

This bill updates and strengthens the Monegasque system by amending several legal instruments, in particular:

1. Act No 1.362 on the fight against money laundering, terrorist financing and corruption;
2. Act No 214 on trusts;
3. Act No 797 on civil companies; and
4. the Criminal Code.

There are 90 articles in this bill, including several new measures on which we povide a brief overview below .

Set up of a new register

First of all, a register is to be set up to give SICCFIN and other competent authorities timely access to information on the identity of holders of bank accounts and safe-deposit boxes.

With this register, it will be possible to identify any natural or legal person who holds or controls a payment account, a bank account identified by an IBAN number or a safe deposit box.

In practical terms, banking institutions will have to declare to SICCFIN the opening, modifications and closures of accounts and safes they manage, within one month after any of these events have occurred (Articles 64 and 65 of the bill).

The provisions relating to this register will enter into force on 31 August 2021.

It is to be noted that this register is intended to improve the detection of transfers of funds linked to terrorism, and is not, in the current state of the project, intended to be used by bailiffs ("huissiers de justice") for civil enforcement measures (contrary to the FICOBA register that exists in France, which is a domestic database for bank accounts and similar accounts).

Limiting business relations and transactions with high-risk states

Limiting business relations and transactions with high-risk states*, identified as having significant deficiencies in their AML/CFT regime and the application of enhanced customer due diligence measures by entities when establishing such relationships or conducting such transactions.

By way of illustration, it is planned to insert, in Article 16 of Act No 1.362, a last paragraph authorising SICCFIN to request, in writing, to a credit institution the termination of its correspondent relationships with institutions located in these states.

* In this regard, this list of countries "with strategic deficiencies in their AML/CFT frameworks" was updated on 13 February 2019 and includes 23 countries and territories (Afghanistan, American Samoa, Bahamas, Botswana, Democratic People's Republic of Korea, Ethiopia, Ghana, Guam, Iran, Iraq, Libya, Nigeria, Pakistan, Panama, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, US Virgin Islands, Yemen). For more information, please refer to our previous publication on this topic.

Information sharing when a bank subject to Monegasque law is a member of a group

Articles 31 to 35 of the bill deal with the communication of information (necessary for the organisation of the fight against money laundering, terrorist financing and corruption) when the banking institution subject to Monegasque regulations is a member of a group.

Extension of AML regulations to new people

Anti-money laundering regulations will be extended, in particular, to:

1. professionals who carry out transactions for the acquisition or sale of "virtual financial assets"; as well as to
2. persons offering the activity of custody for third parties of "digital assets".

New details on existing mechanisms

This extensive bill also clarifies :

1. the enhanced due diligence obligations applicable to politically exposed persons (scope of persons covered and details regarding life insurance contracts - Articles 20 and 21 of the bill);
2. the conditions of access to the Register of Beneficial Owners (Articles 25 et seq. of the bill);
3. the cooperation between SICCFIN and foreign financial intelligence units (Articles 50 and 51);
4. cross-border transportation of cash (Articles 56 to 63 of the bill); and
5. information on beneficial owners of trusts (Articles 74 to 79 of the bill).

Updated criminal sanctions

Furthermore, this bill amends and supplements the Criminal Code accordingly. In particular, it should be noted that it simplifies the definition of the offence of money laundering. By way of reminder, the offence of money laundering is a consequential offence, which therefore requires the prior existence of an offence punishable by a term of imprisonment of more than one year.

The bill envisages to:

• supplement the current Article 218-3 of the Criminal Code with the reference to the "direct and indirect" proceeds of offences punishable by one year of imprisonment. This reference will broaden the scope of the offence and will refer to any economic benefit derived directly or indirectly from the offence; and to
• add a second paragraph to Article 218-4 of the Criminal Code to specify that account should be taken of "the fact that the value of the property is disproportionate to the lawful income of the prosecuted person and that the criminal activity and the acquisition or possession of the property coincide in time".

This provides an addition to the current text, which establishes a simple presumption as to the origin of funds, where the terms of the transaction reveal an intention to conceal the illicit origin or the beneficial owner of the funds.