Andorra’s Progress in Enhancing AML/CFT Compliance: MONEYVAL’s Third Follow-up Report

Adoption of Andorra’s Third Enhanced Follow-up Report (November 2021)

Andorra’s third Enhanced Follow-up Report on Anti-Money Laundering and Counter-Terrorist Financing policies was adopted by the Council of Europe’s Committee of Experts on Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) during its fourth intersessional consultation in Strasbourg, in November 2021.

The Role of MONEYVAL in Evaluating Andorra’s Progress

MONEYVAL uses a dynamic process of mutual evaluations, peer review, and regular follow-up to help countries strengthen their capacity to combat money laundering and terrorist financing more effectively. The third Enhanced Follow-up Report provides a comprehensive evaluation of Andorra’s progress in addressing the technical compliance (TC) deficiencies identified in previous assessments and implementing new FATF Recommendations.

Fifth-round Mutual Evaluation Report and Previous Enhanced Follow-up Reports

Following the adoption of Andorra’s fifth-round mutual evaluation report in September 2017 and its first and second Enhanced Follow-up Reports in December 2018 and 2019, respectively, the third Enhanced Follow-up Report assesses the country’s progress in addressing the TC deficiencies and new requirements.

The Expectation: Address Most TC Deficiencies by the End of the Third Year

With several deficiencies identified in the fifth-round mutual evaluation report, Andorra was placed in enhanced follow-up by MONEYVAL, involving a more intensive process of follow-up.

Overview of Progress to Improve Technical Compliance

Since the previous assessments, Andorra has made significant strides in improving its technical compliance by addressing the identified deficiencies and implementing new requirements.

Addressing the Deficiencies: Subset of NPOs Vulnerable to TF Abuse

One area of improvement involves Recommendation 8, which had deficiencies relating to the failure to use relevant sources in identifying the subset of NPOs vulnerable to terrorist financing abuse. In response, Andorra conducted a sectorial risk assessment of the non-profit organization sector in 2020. The assessment identified the subset of NPOs falling within the FATF definition that may be vulnerable to terrorist financing abuse.

Findings of the Terrorist Financing Risk Assessment

The assessment process involved collecting information from the NPO sector through a questionnaire, analysis of relevant registers, data held by the FIU, financial statements, and financial flows to/from higher-risk jurisdictions. Based on the findings, 26 NPOs were identified as likely to be at terrorist financing risk, displaying some combination of operating in high-risk areas, large cash handling, significant available funds or assets, international ties, overly broad or generic names, and mainly providing service activities.

The Conclusion: Continued Improvement and Reporting

Andorra is expected to continue reporting back to MONEYVAL every year on its progress in strengthening its implementation of anti-money laundering and counter-terrorist financing measures, showcasing its commitment to combating these threats effectively and ensuring that its financial system remains secure and robust.