Monaco Tightens the Screws on Banking Secrecy: “Know Your Customer” Act Takes Effect

Strengthening Financial Integrity

In a bid to strengthen its reputation as a bastion of financial integrity, Monaco has enacted tough new legislation aimed at preventing money laundering and financing terrorism. The “know your customer” act, which came into force in 2009, requires banks and other financial institutions operating in the Principality to conduct rigorous checks on their clients.

Requirements for Banks

The legislation, known as Act no. 1362, stipulates that from the moment a professional relationship is established with a customer, banks must:

• Identify account holders
• Gather all relevant information about their business dealings
• Obtain official and valid identity documents, including:
  • Photographs
  • Valid national identity cards
  • Passports
  • Monegasque residence permits

Gathering Information

In addition to verifying identity, banks must also gather information about their customers’ financial circumstances, including:

• Reasons behind account openings
• Details about assets, activities, and economic profiles
• Origin, composition, and scope of their wealth
• Amount and source of income

Ongoing Monitoring

Once a business relationship has been established, banks are required to remain vigilant, monitoring transactions for any inconsistencies with their knowledge of the customer. They may request updates on identification data where necessary to ensure ongoing compliance with the act’s provisions.

A Major Step Forward

The “know your customer” legislation is seen as a major step forward in Monaco’s efforts to maintain its reputation as a centre of financial excellence, while also addressing concerns about money laundering and terrorist financing. The move is expected to provide greater transparency and confidence in the Monegasque banking sector, both domestically and internationally.