Financial Crime World

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Monaco’s Compliance Regulations on Track: Latest Peer Review Reveals Strong Commitment to Tax Transparency

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Six years after the implementation of Automatic Exchange of Information (AEoI) in Monaco, the Principality has demonstrated a strong commitment to tax transparency and compliance. The latest peer review conducted by the Global Forum on Transparency and Exchange of Information for Tax Purposes reveals that not only is the legal framework in place, but the effectiveness of practical implementation is also “on track”. This achievement underscores the significant efforts made by Monegasque financial institutions since 2009 to ensure accuracy and compliance in their reporting obligations.

Strong Results from Peer Review

  • Many exchange partners who received files from Monaco achieved success rates equivalent or higher than their usual rates when matching the received information with their taxpayer databases.
  • This success is a testament to the effectiveness of the efforts undertaken by Monegasque financial institutions to ensure accurate reporting.

Ongoing Efforts Required

Despite these positive results, the level of effort and vigilance must remain constant to maintain an optimal level of compliance. To enhance the effective implementation of the system, the Government has informed the Global Forum that on-site visits will be organized in the near future, going beyond document checks already initiated.

Update to CRS and Its Impact

In related news, the OECD published an update to the Common Reporting Standard (CRS) and its commentaries in June. When these changes are transposed to Monaco, they will directly impact the due diligence and reporting procedures of Monegasque financial institutions. It is essential for companies to anticipate these modifications by assessing their impacts on existing processes and taking necessary steps to ensure compliance.

FATCA and QI Regimes: Challenges for Monegasque Financial Institutions

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FATCA Regime

  • Monaco remains one of the few states that has not signed an intergovernmental agreement with the United States.
  • This results in a direct interaction between Monegasque financial institutions and the US Internal Revenue Service (IRS), requiring legal advice for interpretation and implementation.

Key Deadlines for FATCA

  • The obligation to renew the compliance certification every three years. Financial institutions must properly anticipate this process, which requires a periodic review conducted by an internal or external auditor.
  • Entities registered in 2014 must perform their next periodic certification by July 1, 2024.

Qualified Intermediary (QI) Regime

  • The QI regime also poses challenges for Monegasque financial institutions. A first agreement came into effect in 2001 and remained unchanged until the arrival of FATCA in 2014.
  • In 2017, an update was introduced, including requirements for internal compliance programs and periodic external audits.
  • This year, a new version of the QI agreement came into effect, obliging Monegasque financial institutions to revise their compliance programs and review processes once again.

Conclusion

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International tax regulations continue to evolve, significantly impacting Monegasque financial institutions. While Monaco maintains a strong stance on automatic exchange of information, it is crucial for financial institutions to remain vigilant and anticipate forthcoming changes to maintain optimal compliance and avoid legal, operational, and reputational risks.

By staying abreast of these developments and taking proactive steps, Monegasque financial institutions can control costs, maintain their compliance level, and position themselves as actors adhering to international tax standards.