Andorra’s Financial Regulatory Framework: Key Points

Bank Secrecy and Anti-Money Laundering Regulations

In Andorra, bank secrecy is no longer applicable due to international requirements on the exchange of information for tax purposes. Banking entities must comply with anti-money laundering (AML) and combating financing of terrorism (CFT) regulations.

Client Identification: Banking entities must identify clients and transactions.
Suspicious Transaction Reporting: They must report suspicious transactions.
Confidentiality: Confidential information about suspicious reporting is kept.
Due Diligence Measures: Simplified and enhanced due diligence measures are applied.
Unusual Transactions Detection: Procedures to detect unusual or suspicious transactions are adopted.

Depositor Protection

The FAGADI Law regulates the guarantee system for deposits, aligning with Directive 2014/49/EU of the European Parliament and of the Council. Deposits are guaranteed up to EUR100,000 in case of an Andorran banking entity’s insolvency. Additional coverages include:

Deposits from Real Estate Transactions: Deposits from real estate transactions.
One-Off Payments Linked to Life Events: Payments received on a one-off basis linked to life events.
Insurance Benefits or Compensation for Damages: Insurance benefits or compensation for damages.

Prudential Regime

Law 35/2018 aligns with Directive 2013/36/EU and Regulation (EU) No 575/2013, requiring banking entities to have:

Minimum Internal Capital: Minimum internal capital adequate in quantity, quality, and distribution.
Capital Assessment Strategies: Strategies and processes for assessing and maintaining adequacy of internal capital.

Capital Requirements

Banking entities must maintain a total amount of capital equal to at least 8% of their risk-weighted assets.

Liquidity Requirements

Banking entities must cover 100% of liquidity outflows net of liquidity inflows with high liquidity assets within 30 days in a stress scenario.