Financial Crime World

Andorra’s Banking Sector: Exceeding Expectations

Stronger Remuneration Policies

The Andorran banking sector has taken a significant step towards implementing international standards by exceeding the fixed component of total remuneration for each individual, as per Law 8/2013. This law requires banking entities to follow inspiring principles when implementing remuneration policies, including salaries and discretionary retirement benefits.

AML/KYC: Andorra’s Strongest Defense Against Money Laundering

Andorra is committed to combating money laundering and terrorism financing. The country has implemented the Fourth Anti-Money Laundering Directive and FATF recommendations, serving as the backbone of the Andorran system for prevention. To ensure compliance, banking entities must:

  • Solicit information about clients and transactions
  • Report suspicious transactions to UIFAND
  • Keep client admission policies and documentation for at least 10 years
  • Conduct independent external audits

Depositor Protection: Guaranteeing Peace of Mind

Andorra’s deposit guarantee system, regulated by the FAGADI Law, ensures that clients’ deposits are repaid up to EUR100,000 in case of insolvency. Additional coverages are foreseen for exceptional cases. The key regulatory features include:

  • Repayment of deposits up to EUR300,000
  • Ex ante resources reaching 0.8% of guaranteed deposits by June 2024
  • Extraordinary contributions from member entities

Bank Secrecy: A Thing of the Past

Andorra has abandoned bank secrecy in favor of international requirements on tax information exchange recommended by the OECD. Three types of exchange are regulated:

  • Exchange of information on request
  • Automatic exchange of information
  • Spontaneous exchange of information

Prudential Regime: Stronger, Safer Banking Sector

Law 35/2018 aligns Andorra’s prudential regime with EU regulations. Banking entities must maintain minimum internal capital, adequate in quantity, quality, and distribution. The total amount of capital is subdivided into:

  • Common Equity Tier 1 capital
  • Additional Tier 1 capital
  • Tier 2 capital

The minimum capital requirements are designed to ensure business continuity and cover losses in the event of liquidation.

Conclusion

Andorra’s commitment to compliance with international standards has resulted in a stronger, safer banking sector. The country continues to prioritize transparency, integrity, and stability, ensuring the protection of depositors and the prevention of financial crimes.