Financial Crime World

MONACO TIGHTENS FINTECH ANTI-MONEY LAUNDERING REGULATIONS WITH NEW LAW

On December 23, 2020, the National Council of Monaco adopted Law No. 1.503 on Money Laundering, the fight against corruption and the financing of terrorism. This new law aims to enhance the Principality’s efforts in combating money laundering, terrorism financing, and corruption, building on the foundation laid by previous legislation.

Commitment to Transpose EU Anti-Money Laundering Directive

The adoption of Law No. 1.503 is part of Monaco’s commitment to transpose the European Union’s 5th Anti-Money Laundering Directive into domestic law by December 31, 2020. The new regulations aim to bring Monaco in line with international standards and best practices in the fight against financial crime.

Key Novelties and Enhancements

The law introduces several key novelties aimed at improving the prevention of money laundering and terrorist financing in Monaco’s financial sector:

  • Enhanced Due Diligence Requirements: Strengthened customer due diligence procedures to ensure a more thorough understanding of customers’ backgrounds and transactions.
  • Increased Transparency in Transactions: Financial institutions must provide greater transparency in transactions, including information on beneficial ownership and source of funds.
  • Strengthened Reporting Obligations for Financial Institutions: Enhanced reporting requirements for suspicious activities and transactions to help detect and prevent financial crime.

Impact on Fintech Companies

Financial technology companies (fintechs) operating in Monaco are particularly impacted by the new regulations, which introduce:

  • Stricter Rules for Customer Onboarding: Fintechs must implement enhanced customer due diligence procedures, including verification of identity and background checks.
  • Transaction Monitoring: Fintechs must monitor transactions closely to detect suspicious activity and report any unusual behavior.
  • Suspicious Activity Reporting: Fintechs must report all suspicious activities to the relevant authorities.

Increased Penalties for Non-Compliance

The law also increases the penalties for non-compliance with anti-money laundering (AML) requirements, emphasizing the importance of effective AML measures. Failure to comply may result in severe penalties and reputational damage.

Recommendations for Financial Institutions and Fintechs

In light of these developments, financial institutions and fintechs operating in Monaco are advised to:

  • Review Current AML Procedures: Update existing procedures to ensure compliance with the new regulations.
  • Adapt to New Regulatory Landscape: Implement necessary changes to ensure ongoing compliance with the law.

By familiarizing themselves with the updated legal framework and implementing necessary changes, financial institutions and fintechs can avoid severe penalties and reputational damage.