Andorra’s Financial Regulation Compliance: A Snapshot of Laws, Practices, and Authorities

Last Updated: December 12, 2023

Andorra’s Financial Regulation: An Overview 🇦🇩

The Principality of Andorra’s financial industry, especially the banking sector, significantly contributes to its economic development, accounting for approximately 15% of its GDP and employing nearly 5% of its workforce. Given its border partnerships with European countries and the 2011 Monetary Agreement signing with the EU, Andorra’s financial regulatory framework closely follows EU legal initiatives, including banking regulation, investor protection, and anti-money laundering measures.

Founded in 1848, Cases & Lacambra is a leading Andorran law firm serving high-demand international institutional and private clients with expertise in banking matters, regulation of financial markets, corporate and debt transactions, special situations, and asset recovery (since 2016 also featuring a tax practice).

Key Laws and Regulations 📄

Several key Andorran laws and regulations govern the banking sector:

• Law 35/2010
• Law 7/2013
• Law 8/2013
• Law 10/2008
• Law 7/2021
• Law 35/2018

These regulations address topics such as licensing requirements, organizational requirements, corporate governance, risk management, prudential regime, and investor protection.

Authorization and Licensing 🔒

To provide banking activities in Andorra, prior authorization from the Andorra Financial Authority (AFA) is required. Legal entities can offer services like deposit-taking, granting loans, financial leasing, investment services, securities issuance, and other related financial activities under the given authorization.

Setting up a Banking Entity in Andorra ���ANK

To establish a banking entity in Andorra, follow these steps:

1. Submit a form.
2. Draft by-laws.
3. Present the basic program of activities.
4. Provide statements regarding economic promotion and sponsorship.
5. Identify shareholders and their qualifications.
6. Pay a €3 million deposit to the AFA.

Control, Supervision, and Governance 📊

Changes in banking entities’ shareholder structures require prior AFA approval and registration. Andorra’s banking entities must have effective risk management, internal controls, and sound remuneration policies. They must also comply with anti-money laundering regulations.

Regulatory Authorities and Bodies 👥

Primary regulatory bodies overseeing Andorra’s financial industry include:

• Andorra Financial Authority (AFA)
• Andorran Financial Intelligence Unit (UIFAND)
• State Agency for the Resolution of Banking Institutions (AREB)
• Andorran Fund for the Resolution of Banking Institutions
• Andorran Data Protection Agency

Anti-Money Laundering/Know Your Customer (AML/KYC) 💰

Andorra follows international anti-money laundering and counter-terrorism financing regulations, implementing Anti-Money Laundering Directives and FATF recommendations. Banking entities must identify clients, conduct due diligence, report suspicious transactions, and maintain records for at least ten years.

Depositor Protection and Bank Secrecy 🔒💳

Andorra has a deposit guarantee scheme implemented under the FAGADI Law, aligning with EU regulations, to protect depositors up to €100,000. The Andorran Criminal Law maintains bank secrecy but has implemented international requirements for tax information exchange to avoid tax evasion.

Prudential Regime and Requirements 📊

Andorra’s financial regulations require banking entities to maintain adequate capital, liquidity, and internal risk controls, in line with European prudential regulations.