Financial Crime World

Andorra Financial System Compliance Review

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A recent review of Andorra’s financial system has yielded mixed results, with some areas showing significant progress and others requiring further improvement.

Independence and Cooperation

The independence of INAF (Institut Nacional d’Auditorià Financera), the country’s financial authority, was limited by the requirement for prior approval from the Finance Minister and the Comissió Superior de Finances (CSF) for most actions. However, a 2003 charter has strengthened INAF’s independence and capacity for cross-border cooperation and information exchange.

Progress Made

  • Implemented many recommendations on banking regulation and supervision
  • Strengthened INAF’s independence through its charter

Areas for Improvement

  • Still needs to implement those related to insurance and securities sectors
  • Legislation to establish the framework for investment funds managers and other asset managers is drafted but not yet approved by Parliament

Financial Institutions and Markets

Andorra is a small financial center dominated by banks, which produce 15 percent of GDP and employ around 1,523 persons. The financial sector is the highest paying in the country, with average salaries above twice the national average.

Overview of Financial System

  • Comprises 7 banking institutions
  • 1 specialized financial credit institution
  • 7 collective investment entities
  • 4 wealth management companies
  • 28 insurance companies, including 15 branches of foreign insurance companies authorized to operate in Andorra

Material Non-Compliance

Two principles were deemed non-compliant:

Non-Compliant Principles

  • Principle 9: The regulatory framework for insurance needs improvement.
  • Principle 10: The authorities have not yet implemented most recommendations on the insurance and securities sectors.

Large Compliance

13 out of 14 principles were found to be compliant, with some areas showing significant progress. These include:

Compliant Principles

  • Principle 11: INAF’s independence has been strengthened through its charter.
  • Principle 12: Andorra’s financial system comprises a range of institutions and markets.

Principle Not Applicable

One principle was deemed not applicable:

Non-Applicable Principle

  • No information available on the review of accounting and auditing standards.

Conclusion

The review highlights areas where Andorra needs to improve, particularly in relation to insurance regulation and international cooperation. However, progress has been made in strengthening INAF’s independence and capacity for cross-border cooperation.