Domestic Threat: Andorra’s Financial Sector
Andorra’s financial sector has been identified as a significant domestic threat due to its vulnerability to money laundering (ML) and terrorist financing (TF). This assessment highlights the need for continued vigilance and effective measures to combat ML and TF in the country’s financial sector.
Vulnerability to Money Laundering
As a regional financial center with an international dimension, Andorra is at risk of illicit funds entering its economic system. The lack of criminal liability for legal persons in the country’s penal code increases its vulnerability to ML. This makes it easier for criminals to launder money through Andorran banks and financial institutions.
Banking Sector Risks
Andorra’s banking sector offers a wide range of services to non-residents, making it a prime target for money laundering. In fact, over 80% of ML cases involve banks, which have also been exposed to proceeds from tax crime.
Regulatory Framework Deficiencies
Despite efforts by authorities to enhance compliance with anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements, Andorra still has significant deficiencies in its regulatory framework. The country was rated “partially compliant” with five core recommendations from the Financial Action Task Force (FATF).
Inadequate AML/CFT Strategy
Andorra’s lack of a clear AML/CFT strategy and inadequate political oversight of implementation plans also pose risks to its financial system.
Steps Taken to Address Deficiencies
The country’s authorities have taken some steps to address these issues, including:
- Establishing a supervisory unit
- Introducing fit-and-proper requirements for insurance activities
However, more work is needed to improve strategic cooperation and coordination among law enforcement agencies and supervisors.
Conclusion
Andorra’s high domestic threat rating highlights the need for continued vigilance and effective measures to combat ML and TF in the country’s financial sector. To address these concerns, it is essential that authorities prioritize strengthening its regulatory framework, implementing an effective AML/CFT strategy, and enhancing political oversight of implementation plans.