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Monaco Banking Industry Compliance Standards Under Scrutiny

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The banking industry in Monaco has come under scrutiny in recent years, with regulators and lawmakers seeking to strengthen compliance standards across the sector.

Managing Conflicts of Interest

In a bid to address potential conflicts of interest, banks operating in Monaco are required to implement robust policies and procedures to manage these situations. According to regulatory framework Law No. 1.338 of 07 September 2007 on Financial Activities, authorised companies must comply with prudential and good conduct rules defined by the Sovereign Order.

Key Provisions

• Article 7 of Sovereign Order No. 1.284 of 10 September 2007 requires authorised companies to adhere to rules of good conduct intended to guarantee the protection of investors and the regularity of transactions.
• Rules include acting with loyalty and fairness in the best interests of clients, exercising activities with competence, care, and diligence required in the best interests of clients and the integrity of the market, having necessary resources and procedures to carry out activities, and endeavouring to avoid conflicts of interest.

Identifying Potential Conflicts of Interest

Potential conflicts of interest may arise in situations where a bank or its personnel have an interest in the outcome of a service provided to a client or transaction carried out on behalf of a client, which is different from the client’s interest in this outcome. Other scenarios that may generate conflicts include:

• Prioritising the interests of another client over those of the concerned client
• Having the same professional activity as the client
• Receiving benefits unrelated to commission or fees for services provided
• Influencing the pricing of insurance-based investment products

Mitigating Risks at CFM Indosuez Wealth

To mitigate these risks, banks operating in Monaco are required to identify potential conflicts of interest and implement effective management policies. CFM Indosuez Wealth, a leading bank in the principality, has established an organisational structure and internal procedures to detect and manage potential conflicts.

Key Measures

• The Compliance Department participates in various committees governing its operations and is responsible for detecting any conflicts of interest.
• Members of the Board of Directors and Authorised Management are required to report all mandates held and specify why they do not believe they are affected by conflicts of interest in their business with the bank.
• Similar attention is paid to relationships with related parties, including employees, shareholders, directors, and members of boards of directors within the Crédit Agricole Group.

Managing Conflicts of Interest at CFM Indosuez Wealth

The management of conflicts of interest at CFM Indosuez Wealth is based on the principle of primacy of the client’s interests over those of the bank or its personnel. Where a conflict arises between two clients, the bank refers to the principle of proportionality and, where applicable, to the principle of primacy of the interests of the client to whom it has made the longest-standing commitments.

Process

1. Reporting conflicts to line managers and the Head of Compliance
2. Proposing a solution based on the principles outlined above
3. Recording conflicts in a specific register
4. Proposing corrective actions to avoid similar situations arising in the future

By implementing robust policies and procedures to manage conflicts of interest, banks operating in Monaco can ensure compliance with regulatory requirements and maintain the trust of their clients. As the banking industry continues to evolve, it is essential that these standards are upheld to protect investors and preserve the integrity of the market.