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Andorran Banking Entities Must Follow Remuneration Principles

In an effort to maintain transparency and stability within the financial sector, Andorra has introduced new regulations governing remuneration policies for banking entities.

According to Law 8/2013, the overall level of variable components does not exceed 200% of the fixed component of total remuneration for each individual. The inspiring principles outlined in the law apply to categories of staff such as:

  • Senior management
  • Employees who take risks
  • Those exercising internal control functions
  • Any employee receiving a lump-sum payment that includes them in the same scale of remuneration as senior management and other risk-taking employees

Failure to comply with these provisions may result in sanctions under the Disciplinary Law.

AML/KYC Requirements

Andorra is committed to complying with international standards on anti-money laundering (AML) and counter-terrorism financing (CFT). To achieve this, the country has implemented:

  • The Fourth Anti-Money Laundering Directive
  • The Financial Action Task Force’s recommendations

Banking entities in Andorra must comply with several obligations, including:

  • Identifying clients and beneficial owners prior to commencing business relationships
  • Reporting suspicious transactions to the UIFAND
  • Maintaining confidentiality regarding issuer information
  • Applying simplified and enhanced due diligence measures based on client risk profiles
  • Developing a client admission policy and maintaining documentation for at least 10 years

Depositor Protection

The FAGADI Law regulates Andorra’s deposit guarantee system, which is aligned with Directive 2014/49/EU. The key features of the system include:

  • Clients’ deposits are repaid up to EUR100,000 in the event of an insolvent banking entity
  • Additional coverages are available for deposits related to real estate transactions and lump-sum payments
  • The FAGADI’s ex ante resources must reach 0.8% of guaranteed deposits by June 2024

Bank Secrecy

Andorra has repealed bank secrecy laws, aligning with international requirements on the exchange of information for tax purposes recommended by the OECD. Three types of exchange are now regulated in Andorra:

  • Exchange on request
  • Automatic exchange
  • Spontaneous exchange

Prudential Regime

Law 35/2018 aligns Andorran banking regulations with EU directives, requiring banking entities to maintain minimum internal capital that is adequate in quantity, quality, and distribution. The law also outlines strategies for assessing and maintaining internal capital.

Overall, these new regulations aim to promote transparency, stability, and compliance within the financial sector in Andorra.