Monaco Compliance Reporting: Strong Progress Made in Tax Transparency Efforts

Six years since the implementation of Automatic Exchange of Information (AEoI), Monaco’s financial institutions and authorities have demonstrated a high level of mastery in complying with this regulation.

Effective Implementation of AEoI

A recent peer review conducted by the Global Forum revealed that not only is the legal framework in place, but the practical implementation is also on track. The positive evaluation reflects Monaco’s commitment to tax transparency and significant efforts made since 2009.

Financial Institutions’ Role

Monegasque financial institutions have played a crucial role in achieving this success. Many of their exchange partners who received files from Monaco achieved high success rates when matching the information with taxpayer databases, demonstrating the effectiveness of efforts undertaken to ensure accuracy and compliance.

Ongoing Efforts Required

Despite these positive results, vigilance must remain constant to maintain an optimal level of compliance. To enhance the implementation of the system, the Government plans on-site visits in the near future, building on existing document checks. The introduction of penalties and sanctions is also being considered.

Update to Common Reporting Standard (CRS)

The OECD recently updated the CRS and its commentaries, which will impact Monegasque financial institutions’ due diligence and reporting procedures. Companies must anticipate these modifications by assessing their impacts on processes and ensuring compliance.

Monaco’s FATCA and QI Regimes: Ongoing Challenges

FATCA Regime

Monaco remains one of the few states that has not signed an intergovernmental agreement with the United States regarding the Foreign Account Tax Compliance Act (FATCA) regime. As a result, Monegasque financial institutions must adhere to complex US tax rules, requiring legal advice and potentially leading to additional costs.

FATCA Certification

The FATCA regime requires periodic compliance certification every three years, which must be properly anticipated by financial institutions. The next deadline is July 1, 2024, for entities registered in 2014.

QI Regime

Monegasque financial institutions are also subject to the Qualified Intermediary (QI) regime, with recent updates introducing requirements for internal compliance programs and periodic external audits. Entities must revise their compliance programs and review processes to comply with these new requirements.

Staying Vigilant

To maintain optimal compliance and avoid legal, operational, and reputational risks, Monegasque financial institutions must remain vigilant and proactive in adapting to international tax regulations.