Financial Crime World

Andorra Strengthens Financial Compliance Regulations: A New Era for the Principality’s Banking Industry

Last Updated: December 12, 2023

Andorra, a European micro-state situated between France and Spain, is renowned for its scenic landscapes and tax havens. However, in this picturesque setting, the Principality has been making significant strides in enhancing its financial compliance regulations to align with international standards and improve transparency.

Key Regulations Governing Andorra’s Financial Sector

  1. Law 35/2010 - Law on the Legal Regime for Authorising the Creation of New Operating Entities within the Andorran Financial System
  2. Law 7/2013 - Law on the Legal Regime of the Entities Operating within the Andorran Financial System and Other Provisions Regulating the Exercise of Financial Activities in the Principality of Andorra
  3. Law 8/2013 - Law on Organisational Requirements and Operational Conditions of Entities Operating within the Financial System, Investor Protection, Market Abuse, and Contractual Netting Arrangements

Leading Business Law Firm in Andorra

Cases & Lacambra, the prominent business law firm in Andorra, has a solid reputation in both national and cross-border banking matters and the regulation of financial markets, corporate and debt transactions, special situations, and asset recovery. The firm houses a team of highly qualified professionals with a client-oriented approach, dedicated to providing comprehensive business law advice to local and international players.

Andorra’s Financial Industry and Regulatory Framework

Role of the Financial Sector in Andorra’s Economy

Andorra’s financial industry has long played a crucial role in the country’s economy. With a thriving banking sector that generates approximately 15% of the country’s GDP and employs over 5% of its workforce, the Principality has focused on ensuring its regulatory framework remains in line with international standards.

Key Andorran Laws and Regulations Concerning Banking Activities

  • Law 10/2008 - Law Regulating Andorran Collective Investment Undertakings
  • Law 10/2013 of the Andorran Financial Authority (AFA)
  • Law 7/2021 - Law Regulating the Restructuring and Resolution of Banking Entities and Investment Entities
  • Law Regulating the Disciplinary Regime of the Financial System, etc.

Regulatory and Supervisory Authorities

Institutions overseeing Andorra’s banking sector include:

  • The AFA
  • The Andorran Financial Intelligence Unit (UIFAND)
  • The Andorran Data Protection Agency
  • The Association of Andorran Banks (ABA)

These entities enforce requirements related to authorisation, corporate governance, supervision, and anti-money laundering and counterterrorism financing regulations.

Providing Banking Services in Andorra

Laws and Regulations

To offer banking activities in Andorra, entities must obtain prior authorisation from the AFA. Andorran banking entities can provide various financial services, including deposit-taking, loan granting, financial leasing, and payment transactions, among others.

Application Process and Fees

To establish a banking entity in Andorra, applicants must submit various documentation and go through an application process, which can take up to six months, along with a submission fee of EUR32,018 and an annual supervision fee.

Shareholding and Corporate Governance

Changes in Shareholding

Changes in shareholding of Andorran banking entities demand prior authorisation and registration with the AFA. No specific restrictions on foreign ownership exist.

Corporate Governance Requirements

Banking entities must maintain robust corporate governance arrangements, including a clear organisational structure, effective risk management processes, adequate internal control mechanisms, and sound remuneration policies.

Supervision and Anti-Money Laundering Measures

The Role of the AFA

Andorra’s financial regulator, the AFA, is responsible for developing and implementing regulations and standards for banking, financial, and insurance activities in the Principality.

Anti-Money Laundering and Counterterrorism Financing

Andorra follows international anti-money laundering and counterterrorism financing standards through the implementation of the Fourth Anti-Money Laundering Directive and the FATF’s recommendations. Banking entities must adhere to these regulations to maintain a robust business environment while fostering transparency and international cooperation.

Depositor Protection

Andorra’s deposit guarantee system, aligned with Directive 2014/49/EU on deposit guarantee schemes, ensures that clients’ deposits in an Andorran banking entity are repaid up to EUR100,000 in the event of insolvency, with additional coverages up to EUR300,000 in certain cases.

Bank Secrecy

Andorra’s bank secrecy laws have been repealed due to the country’s commitment to implementing OECD recommendations on the exchange of information for tax purposes. The Principality operates under the three types of exchange of information for tax purposes: on request, automatic exchange, and spontaneous exchange.