Andorra’s Banking Sector Adapts to Stricter Compliance Regulations

Introduction

The financial system in Andorra has undergone significant changes in recent years due to the implementation of stricter regulations aimed at enhancing fiscal transparency and preventing money laundering. The banking sector, which accounts for approximately 20% of the country’s GDP, has been at the forefront of these developments.

Adapting to Stricter Regulations

Andorran banks have had to adapt to a more complex regulatory environment. The “Know Your Client” (KYC) requirements have become increasingly demanding, with financial institutions seeking more extensive personal information from clients and a clearer understanding of the intended use of bank accounts.

• Enhanced KYC Requirements: Banks are now seeking more detailed information from clients, including:
  • Identification documents
  • Proof of address
  • Source of funds
  • Intended use of bank account

International Cooperation and Compliance

As a member of the Organisation for Economic Co-operation and Development (OECD), Andorra is subject to the Common Reporting Standard (CRS). This initiative aims to combat tax evasion, and Andorran banks are strictly adhering to international regulations to prevent money laundering and tax fraud.

• Automatic Exchange of Information: The CRS facilitates the automatic exchange of information on financial accounts between countries.
• International Cooperation: Andorra’s banking sector is committed to cooperating with international authorities to prevent financial crimes.

Accession to SEPA

A notable development in the sector has been the accession of Andorran banking entities to the Single Euro Payments Area (SEPA). This membership enables clients to make and receive payments in euros across the SEPA region with reduced commission fees and without the need for SWIFT transfers.

• Benefits of SEPA Membership: Clients can now enjoy:
  • Reduced commission fees
  • Faster payment processing
  • Simplified international transactions

Conclusion

With these changes, opening a bank account in Andorra has become more complex, but it also presents opportunities for individuals and businesses looking to establish themselves in the country. Our firm’s banking compliance team is well-versed in navigating these regulations and can assist with the process of opening a bank account in Andorra, as well as provide guidance on communication with financial institutions.