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Monaco’s Banking Sector Faces Regulatory Challenges

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Monaco, a small principality in Western Europe, has a thriving banking sector that provides a range of financial services to its residents and international clients. However, the sector is facing several regulatory challenges, including the implementation of anti-money laundering (AML) legislation and consumer protection rules.

Government Deposit Insurance

Unlike many other countries, the Monegasque government does not provide deposit insurance for bank deposits. Instead, local credit institutions have been affiliated with the French Deposit Guarantee and Resolution Fund (FGDR) since 1999. The FGDR provides compensation to depositors up to a maximum limit of €100,000 per depositor in the event that a bank becomes insolvent.

Transactions between Affiliates

There are no specific limitations on transactions between Monegasque banks and their affiliates, except for general corporate law rules applicable to local corporations. However, French banking regulations do impose some restrictions on ancillary activities carried out by banks, including real estate management and commissioning services.

Regulatory Challenges

The principal regulatory challenge facing the banking industry in Monaco is the implementation of AML legislation, which has been amended several times over the past decade to align with European Union standards. The latest reforms have strengthened due diligence requirements for correspondent banking relationships and introduced professional certification requirements for anti-money laundering managers.

Consumer Protection

There are no specific consumer protection rules applicable to banks under Monegasque law, although case law requires credit institutions to provide stronger duties of information and advice to non-professional clients. However, a draft law is currently being examined that would exempt the application of foreign consumer public policy rules for certain banking services offered to foreign consumers.

Future Changes

The signing of an association agreement between Monaco and the European Union could have significant consequences for the country’s banking sector, including the potential opening up of the market to new competitors. The agreement is still under negotiation, but its conclusion is expected to lead to changes in the domestic legal framework.

Date: The information above was accurate as of February 15, 2021.