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Andorra’s Banking Sector Embraces Transparency Amid Global Pressures
In a significant shift, Andorra’s banking sector has been working to adopt a model of transparency in an effort to maintain its reputation as a financial hub while complying with global regulations.
AEOI and CRS: A New Era of Transparency
In 2014, Andorra signed the Declaration on Automatic Exchange of Information in Tax Matters, joining over 100 jurisdictions in a bid to combat tax evasion and facilitate tax compliance. The Common Reporting Standard (CRS) requires participating countries to collect financial information from their banks and other financial institutions, then exchange this data with other jurisdictions automatically.
- Under the CRS, Andorra’s financial institutions are required to share information on non-resident individuals and entities, including:
- Account numbers
- Taxpayer ID numbers
- Names
- Addresses
- Date of birth
- Income
- Sale proceeds
- Account balances
- For company accounts, banks must also provide information on ultimate beneficiary owners (UBOs).
Resident Accounts Remain Private
While Andorra’s banking privacy remains in place for resident bank accounts, financial institutions are not required to share information about these accounts with local authorities. However, given the reciprocal nature of AEOI, residents should assume that Andorran authorities will be aware of their accounts abroad.
The Impact of Combined Catalysts
The 2015 scandal involving Banca Privada d’Andorra (BPA), accused of money laundering by the US Treasury Department, combined with the introduction of CRS has placed significant pressure on Andorra’s banking system. The need for due diligence and KYC processes has become increasingly challenging for individuals and companies.
A New Era for Andorra’s Banking Sector
Despite its low financial secrecy score and ranking on the Financial Secrecy Index, Andorra is moving towards a model of transparency without sacrificing its reputation as a financial hub. With taxation remaining low and fair, non-resident and resident individuals and entities must ensure compliance both within Andorra’s borders and abroad.
As the banking sector continues to evolve, it remains to be seen how this new era of transparency will impact Andorra’s economy and financial landscape. One thing is certain, however: the principality’s commitment to reform and cooperation with international authorities has set a new standard for financial transparency in the region.