Andorra Strengthens Financial Regulations: An Overview of Compliance Rules in the Principality

Andorra, a microstate sandwiched between France and Spain, is making significant strides in enhancing its financial regulations to guarantee transparency, stability, and security in its financial sector. This article offers an outline of the current financial compliance regulations in Andorra that aim to meet international standards.

The Role of Andorra’s Financial Regulator

The Autoritat Financera Andorrana (AFA) is Andorra’s financial regulator and has been instrumental in enforcing and updating various regulations to promote financial stability and international compliance. In recent developments, the European Union (EU) recognized Andorra as a cooperative jurisdiction in its tax transparency initiatives, underscoring the country’s dedication to maintaining robust financial regulations.

Adoption of European Union Money Laundering Directives

One of the most significant steps taken by Andorra was the implementation of the European Union Money Laundering Directives. Andorra adopted the 4th and 5th Anti-Money Laundering Directives in 2017 and 2020, respectively. These Directives establish stringent guidelines for:

• Customer due diligence
• Risk assessment
• Record-keeping

Andorra’s financial institutions have fully adopted these measures.

Prevention of Terrorist Financing Regulations

To enhance accountability and transparency, Andorra has established regulations related to the identification and prevention of terrorist financing. Financial institutions must carry out Customer Due Diligence (CDD) measures aimed at identifying and verifying the identity of clients and beneficiary owners. Furthermore, Suspicious Transaction Reports (STRs) must be submitted if there is a suspicion of money laundering or terrorist financing.

Information Exchange and Membership in International Organizations

Andorra has a well-established system for exchanging information with other jurisdictions. As a member of the Organisation for Economic Co-operation and Development (OECD), Andorra abides by the OECD’s Convention on Mutual Administrative Assistance in Tax Matters, enabling it to provide and obtain information for tax purposes in a cooperative and timely manner.

Regulation of Virtual Assets

Recognizing the need to address virtual assets as they gain popularity, Andorra has started implementing regulations to ensure compliance in this domain. In January 2022, AFA published a draft law on Virtual Assets Service Providers (VASPs), which aims to regulate the activities of VASPs, including the provision of services related to virtual assets, exchange between virtual and fiat currencies, and custodial services.

Conclusion

The Andorran government is committed to maintaining a stable financial environment that conforms to international standards while preserving the country’s competitive advantage as a leading financial hub. By implementing thorough financial regulations and continuously updating them, Andorra reaffirms its dedication to transparency, security, and fairness for all stakeholders in its financial sector.