Financial Crime World

ANDORRA’S STRUGGLE WITH MONEY LAUNDERING: A COMPLIANCE REPORT

The Principality of Andorra has long been known for its banking secrecy laws and financial institutions, which have attracted many high-net-worth individuals seeking to keep their wealth hidden from prying eyes. However, this reputation has also made it a hotspot for money laundering activities.

Progress Made in Anti-Money Laundering (AML) Regulations

In recent years, Andorra has taken steps to improve its compliance with international AML regulations. According to the Financial Action Task Force (FATF), Andorra’s follow-up report in 2021 revealed that while the country has made progress in implementing AML requirements, it still struggles with certain areas.

FATF Compliance Report Highlights

  • Largely Compliant: Andorra was found to be largely compliant in assessing risk and applying a risk-based approach (R.1).
  • Compliant: The country was found to be compliant in the following areas:
    • National cooperation and coordination (R.2)
    • Confiscation and provisional measures (R.4)
    • Terrorist financing offence (R.5)
    • Targeted financial sanctions related to terrorism and terrorist financing (R.6)
    • Correspondent banking (R.13)
    • Money or value transfer services (R.14)
  • Largely Compliant: Andorra was found to be largely compliant in the following areas:
    • Customer due diligence (R.10)
    • Record keeping (R.11)
    • Reliance on third parties (R.17)
    • Internal controls and foreign branches and subsidiaries (R.18)
    • Higher-risk countries (R.19)
    • Reporting of suspicious transactions (R.20)
    • Tipping-off and confidentiality (R.21)
  • Partly Compliant: The country was found to be partly compliant in the following areas:
    • New technologies (R.15) and wire transfers (R.16)

Non-Compliance Areas

However, Andorra was also found to be non-compliant in certain areas, including:

  • Regulation and supervision of financial institutions (R.26)
  • Powers of supervisors (R.27)
  • Financial intelligence units (R.29)
  • Responsibilities of law enforcement and investigative authorities (R.30)
  • Extradition (R.39)

Recommendations for Improvement

The FATF report highlights the need for Andorra to strengthen its AML regime, particularly in areas related to customer due diligence, record keeping, and supervision of financial institutions. The country must also improve its international cooperation, including mutual legal assistance, extradition, and other forms of cooperation.

Andorra’s Government Commitment

Andorra’s government has acknowledged the challenges posed by money laundering and has committed to addressing these issues through legislative reforms and increased enforcement efforts. However, significant work remains to be done to ensure that the country meets its AML obligations and prevents the misuse of its financial system for illicit activities.