By Vincent de Bonnafos / Remi Delforge
DL Corporate & Regulatory, Monaco
GENERAL PRESENTATION
The Principality of Monaco is an attractive microstate adjoining the French Riviera and being neither a member of the European Union (“EU”) nor of the European Economic Area (“EEA”). Monaco is headed by the Grimaldi family, a 700-year-old dynasty, currently represented by His Serene Highness Prince Albert II.
The Principality has attracted a cosmopolitan population with more than 36,000 inhabitants of 120 different nationalities including around 8.670 Monegasque, 8.500 French, 5,360 Italian and 2,270 British. Almost 50 000 people come to work in Monaco every day. More than 85% of these workers have their domicile outside the Principality, mostly in French neighbouring cities.
Monaco had a 2012 GDP of €4.48 billion with a growth of 0.9 %; the 2012 GDP per worker was of €90,350. With an average square meter generally worth €32.000, Monaco is one of the most expensive places in the world for real estate.
The financial sector includes 36 banking institutions and 49 asset management companies employing a workforce of 3,465 employees with turnover of € 1.47 billion (10% of the private sector global turnover).
Although the Principality is not a member of the EU,
– it shares a customs union with France and consequently is part of the EU customs territory;
– it belongs to the Eurozone;
– it determines and collects VAT on the same basis and at the same rates than in France (general rate of 20%).
LEGAL AND REGULATORY BACKGROUND
As a sovereign state, the Principality has its own legal system including laws, regulations, court system and regulators.
Business activities are subject to prior authorisation from Monaco authorities
As a general rule, any business activity carried out in Monaco by non-Monegasque persons is subject to prior authorisation from the Monaco authorities. Certain regulated activities such as banking, insurance and financial services are subject to specific requirements, regarding notably the type of legal entity, minimum capital, management qualifications, etc.
Banking and financial activities
Monaco not being a member of the EEA, passporting principles do not apply for most banking and financial activities.
Pursuant to a Treaty dated 14 April 1945 between Monaco and France (as modified subsequently), provisions in French legislation concerning the regulation and organisation of banks are directly applicable to Monaco. Authorisations and banking licences are delivered and regulated by the French Autorité de Contrôle Prudentiel et de Résolution (“ACPR“) and in Monaco by the Ministry of State and the Direction du Budget et du Trésor which is a Department of the Monaco Ministry of State.
Portfolio/asset management services can only be undertaken in Monaco, “habitually or professionally”, by entities duly authorised and regulated by the Monaco Commission de Contrôle des Activités Financières (“CCAF”).
Asset management services include (i) the reception and placement on financial markets of orders in relation with securities, (ii) fund management (offshore and Monaco funds/instruments), (iii) portfolio management activities for the account of third parties, (iv) execution of orders for the account of third parties, (v) negotiation for own account and (vi) advising and assistance in items (i) to (iii) above.
Monaco has not entered into an Inter-Governmental Agreement (“IGA”) with the USA for the purposes of implementation of the Foreign Account Tax Compliance Act (“FATCA”). As a result banks are required to register with the American tax authorities, collect information to determine whether their clients may be a US Person under US tax regulations and disclose such information to American tax authorities.
Professional secrecy and protection of personal data
Professional secrecy is an obligation sanctioned by the Monaco Criminal Code. Article L.511-33 of the French Monetary and Financial Code on banking secrecy is applicable in Monaco. Asset management companies authorised by CCAF are subject to professional secrecy as applicable under Monaco law.
In December 2008, Monaco has made decisive progress towards compliance with European standards of personal data protection. The Principality has ratified the Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data and its additional protocol. Processing of personal data in Monaco, including data transfer abroad, is either subject to notification or to prior authorisation by the Monaco Commission de Contrôle des Informations Nominatives (‘CCIN’). The Principality is in discussions to obtain a status of “adequate level of protection” for data protection purposes.
Anti-money laundering (“AML”) and anti-corruption laws
Monaco has one of the strictest AML regimes in the world. Monaco implemented its own anti-money laundering and terrorism financing law in August 2009 which requires one or more compliance officer(s) to be designated in certain entities, among which banks, asset management companies and insurance companies.
The purpose and responsibility of such compliance officer(s) is to (i) ensure the application of Monaco AML laws and (ii) establish procedures in the areas of internal control, communication, centralisation of information to prevent transactions connected with anti-money laundering, terrorism financing and corruption.
Monaco has also enacted anti-bribery legislation in October 2012 dealing with gifts, presents and other types of commissions received for acts or omissions of recipients, such as civil servants, international or foreign public officials, employees in private sector and magistrates or jurors, in the course of their duty or employment.
E-commerce
Monaco is connected to the Europe-India-Gateway (‘EIG’) for internet and is covered by the French 4G mobile network providing a high quality Internet experience both from computers and mobile phones. In August 2011, the Principality has enacted a law on e-commerce which recognises the validity of electronic signatures and implements certain consumer protections measures.
Other Monaco Specificities
Monaco law has a number of specificities in many areas of the law, including employment. For instance, a specific order of priorities must be followed in the hiring and firing of staff employed in Monaco. Other specificities include objects clauses of companies which are construed strictly regardless of the type of activity.
14 April 2014