Financial Crime World

Executive Summary

Andorra has made significant progress in addressing money laundering (ML) and terrorist financing (TF) risks, but there are still areas for improvement. This report highlights both positive developments and ongoing challenges.

Overview of ML/TF Risks

Financial System Risk

  • Andorra’s financial system is relatively small, with a low risk tolerance due to past banking failures.
  • The use of cash in the financial sector remains extensive, and action against tax evasion has only recently been taken.
  • Large financial institutions (FIs) assess and understand their ML/TF risks, but smaller FIs and designated non-financial business and professions (DNFBPs) may be less clear about these risks.

Preventive Measures

AML/CFT Obligations

  • FIs and DNFBPs have a commitment to applying anti-money laundering/countering the financing of terrorism (AML/CFT) obligations, but some parts of the DNFBP sector may not be aware of their AML/CFT responsibilities.
  • The extent to which customer due diligence (CDD) held for existing customers has been remediated is variable.
  • There is evidence of under-reporting of suspicious activity, and in cases where accounts were terminated under tax regularisation programmes, few suspicious activity reports (SARs) were submitted.

Supervision

UIFAND Progress

  • The UIFAND has made progress in supervision despite limited resources and key-man risk.
  • Technical deficiencies exist in licensing and registration controls to prevent criminals and their associates from holding positions of control or management in FIs and DNFBPs.
  • Risk-based supervision is not fully applied to FIs and DNFBPs, and AML/CFT supervision is largely focused on checking policies and procedures rather than assessing effectiveness.

Transparency

Supervisory Engagement

  • The report highlights the need for better strategic engagement and coordination of activities between supervisory authorities.
  • There is limited supervisory engagement with the DNFBP sector, including ongoing collection of data for off-site analysis.

Conclusion

Overall, while Andorra has made progress in addressing ML/TF risks, there are still areas for improvement, particularly in supervision and transparency. The report recommends that the UIFAND and other supervisory authorities take steps to address these challenges and enhance their efforts to prevent ML/TF in Andorra.