Compliance obligations under law 14/2017
The Principality of Andorra, which is no longer considered as an “offshore” platform, has transposed several EU Directives in order to harmonize its legal system with the legal framework of its neighboring countries. This initiative stemmed from the signature of the Monetary Agreement between the Principality and the European Union. Therefore, despite the numerous advantages of setting up a company in Andorra, there are certain obligations that must be fulfilled.
In accordance with Law 14/2017, of 22 June, on the prevention and fight against money laundering or terrorist financing, modified by the recent Law 21/2019, of 28 November, amending Law 14/2017, the obligations must be fulfilled by (i) Designated Financial Businesses and Professions and (ii) Designated Non-Financial Businesses and Professions.
This article will focus on Non-Financial Businesses and Professions, seeking to cover more precisely any type of small or large business in the Principality.
Non-Financial Businesses and Professions are divided into the following sectors:
– External accountants;
– Tax advisors;
– Lawyers and members of other independent legal professions;
– Economists, managers and service providers;
– Real estate agents;
– Gambling, face-to-face and online casinos;
– Associations, foundations and other non-profit organizations.
The entities in the list above – not only residents in Andorra but also non-residents who carry out identical activities in the Principality – must comply with all the obligations set out below, with the exception of associations, foundations and other non-profit entities, which are subject to other special features/measures.
1. Designation of the Internal Control and Communication Body (“OCIC”)
The first of the obligations is to appoint a body (the figure is equivalent to the figure of the “Money Laundering Reporting Officer – MLRO” in the United Kingdom), whose functions are to develop an internal policy, training, and evaluation of risks, among others. In order to perform these functions, the designated members must have sufficient capacity and knowledge of the applicable regulations.
One peculiarity is that if the Non-Financial Businesses and Professions is a physical person, he will already have the consideration of OCIC by default. If it is a legal entity, it may have a sole owner or be a collective body, depending on the structure and size of the business. In both cases, certain formalities must be complied with before the Andorran Financial Intelligence Unit (UIFAND).
2. Appointment of a representative to UIFAND
As a continuation of the above, a representative must be appointed before the UIFAND. The functions of this representative will only be to make the statements of suspicious transactions, as well as to receive the requests and requirements of the UIFAND. One of the requirements to be such a representative is to be part of the management of the company.
3. Identification and verification of the identity of the client and the beneficial owner
Client’s identities must be verified before a business relationship can be established. With respect to ongoing business relationships, the law states that the identification and verification of the beneficial owner must be reviewed every five years. The purpose of the business relationship and the source of funds must also be properly identified.
In addition, there is an obligation to ensure that none of the actual clients or beneficiaries appear on the “United Nations List”.
4. Simplified or due diligence measures
Non-Financial Businesses and Professions, after assessing the different risk factors (such as the volume of operations, the purpose and duration of the business relationship, if there are politically exposed persons (PEPs) involved in the business relationship), will have to determine whether to apply due diligence or simplified measures.
5. Monitoring the business relationship
In the event of an ongoing relationship with the client, certain procedures should be set up to monitor the client and verify whether the level of risk previously determined is maintained or changed over time.
6. Obligation to declare a suspicious transaction
Non-Financial Businesses and Professions have the obligation to report to the financial intelligence authority, ex officio, any detected suspicious transaction or an attempt to carry it out. This function cannot be delegated.
7. Internal control, internal regulations and training
Non-Financial Businesses and Professions must have internal control policies, which must be in writing and available to all employees who may be potentially exposed to a situation of money laundering or terrorist financing. In addition, they must receive up-to-date training that is extensive enough to recognize situations that involve “red flags” and can react in a timely manner.
8. Conservation of documentation
Andorran legislation states that the retention period for documentation related to regulatory compliance pursuant to Law 14/2017 is of at least ten (10) years. This includes documentation regarding the identity of the client, the nature and date of the transaction, and the origin of the funds, among others.
9. Individual risk study
This obligation is compulsory since July 18, 2019, and consists in the obligation to have an Individual Risk Study. It is the preparation of a written document in which each Non-Financial Business and Profession self-assesses the risks and vulnerabilities to which it is exposed, and identifies and implements measures to mitigate such risks.
It is clear that there has been an evolution in the adaptation of the Principality to the international legal context. Our team of experts in regulatory compliance will be able to advise you and help you comply with the corresponding legislation, in order to properly develop your business in the Principality of Andorra.
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