Monaco: Double Tax Treaties
Other International Treaties
Mutual Assistance Treaties: Until 2001 the principality had no mutual legal assistance treaties other than with France, but it has now signed cooperation agreements with Spain, Belgium, Portugal, and Luxembourg.
In October 2001 France and Monaco reached an agreement on initiatives to counter money laundering in the principality. Monaco significantly strengthened its stance against money laundering activities by doubling the number of staff who trace the money launderers as well as pledging to report more suspicious transactions.
In January 2002 Switzerland's money laundering control authority announced that the country had signed an agreement with Monaco to promote the exchange of information in international cases of money laundering.
In September, 2002, Liechtenstein's Head of Government, Otmar Hasler said that the Principality had concluded an agreement with Monaco over the prevention of money laundering and terrorist financing.
Monaco has legislated effectively against money-laundering and associated criminal activities. By law no 1162 of 1993 Monaco passed all crimes money laundering legislation corresponding to the standards adopted by other jurisdictions and which requires financial institutions to carry out internal checks on their clients and to report any suspicious transactions to the Service de Information et de Controle Sur Les Circuits Financiers (SICCFIN) the regulatory body responsible for monitoring money laundering.
Additionally, when Government agents become aware of facts that relate to drug trafficking or criminal conduct they will prepare a report that they submit to the Ministry of State which may in turn send on the information to the competent foreign authorities, except where those foreign authorities do not have secrecy rules equivalent to those in Monaco.
Under Article 308 of the Monegasque Commercial Code and under Article 57 of the French Banking Law criminal sanctions are imposed on anyone who makes an unauthorized disclosure relating to matters governed by banking secrecy laws unless a specified exception applies by law. Disclosure can be made pursuant to criminal proceedings, requests for information from various government bodies such as customs and excise, pursuant to a court order in certain civil proceedings and where the provisions of a specific treaty apply as in the cases of the Hague Convention on Taking of Evidence Abroad on Civil or Commercial Matters 1927, the Vienna Convention against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 and the Treaty on Assistance in Judicial Matters between France and Monaco 1949.
Banking secrecy does not apply in regard to a request for information from an account holder's heirs and legatees, the account holder's authorized representative, against a spouse who has the appropriate court order, where one of the joint account holders wishes to release the bank from its secrecy obligation and the other account holders are not unduly prejudiced thereby, in the face of a request by a minor's representatives and in the face of a request by the legal representatives of a corporate body.
In December, 2005, Monaco's Prince Albert II and French President Jacques Chirac signed new agreements regulating the Franco-Monegasque relationship. The agreements include:
- A Convention which is designed to adapt and to strengthen administrative co-operation between the Principality of Monaco and the French Republic. It replaces the previous 1930 convention and has already undergone a preliminary application phase by means of Government expansion, with the nomination of a Government Counsellor for Social Affairs and Health and an External Relations Delegate.
- The Convention of judicial assistance between the Monegasque and French Governments with regard to criminal matters;
- Exchange of letters relating to investor securities, with the aim of completing the pre-existing exchange of letters concerning banking affairs in Monaco, as well as enabling banking establishments within the Principality to accede to the French investor security system.
The revision normalises Monaco's relationship with its larger neighbour, putting the two States on equal footing, updating the 1930 convention, and giving the Principality the autonomy promised in the build up to its entry into the Council of Europe. The agreement removes the restriction whereby French civil servants are appointed to many important positions in Monaco.
Given so many exemptions, it can be seen that the strict banking confidentiality which one associates with offshore financial havens does not apply in Monaco.
French nationals are in a particularly compromised position. The bank of France has considerable control over the Monaco banking system. Bankers in the Principality must respond to inquiries from the Bank of France and information communicated may be passed on to the French tax authorities and used either in the context of French criminal proceedings or in accordance with French law on international judicial assistance in criminal matters and in this way information may even be passed on to the appropriate authorities in a third country.
Monaco has also undertaken to increase its cooperation with the Financial Oversight Commission to revise the rules governing investment management companies and improve upon regulation and transparency in general.
The statement also stressed that the OECD and the FATF have 'noted progress by Monaco in the fight against money laundering.'
In 2004, Monaco was forced to join the EU's Savings Tax Directive regime, and agreed to impose a withholding tax on the interest income of EU residents at the same rate as Austria, Belgium and Luxembourg (initially 15%, rising to 20% from July 1, 2008, and to 35% from 1 July 2011) and to hand over 75 per cent of such revenues to the Member State of the EU resident concerned. Monaco also agreed to exchange information on request in criminal or civil cases of tax fraud or similar misbehaviour. The new regime came into operation from July 1, 2005.
United Nations Convention Against Transnational Organised Crime: In December 2000, Monaco signed the United Nations Convention Against Transnational Organised Crime in Palermo, Sicily, to demonstrate the country's commitment to stamping out money laundering. The treaty went into effect in 2003, and has been signed by 147 countries.
The new treaty follows the OECD Fiscal Committee's recommendation that its members ban anonymous accounts and require identification of customers. Under the treaty, countries must also require banks to keep accurate records of accounts and report suspicious transactions. In addition, accounts must be open to inspection by domestic law enforcement officials. Money laundering is criminalised, with sanctions against the people who do the laundering, counsel it, or acquire the ill-gotten gains.
However, the treaty does not go as far as the OECD's recommendation that countries re-examine existing practices - presumably with a view towards changing them - that prevent tax authorities having access to bank information for purposes of exchanging it in criminal tax prosecutions. In addition, the treaty doesn't deal with correspondent accounts.
An International Monetary Fund assessment of Monaco's financial supervisory and regulatory regimes in September, 2003, confirmed the Principality's reputation as a well regulated jurisdiction. The IMF observed that: 'The Principality of Monaco has in place a comprehensive legal framework, supervisory structure, and practices that support a well regulated financial environment.'
After the 2008 assessment, the IMF report stated: 'Since the 2002 OFC assessment, the Principality of Monaco has taken important steps to further strengthen an already comprehensive legal framework, supervisory structure, and practices supporting a well-regulated environment.' It went on to add that: 'In its recent mutual evaluation of compliance with FATF 40+9 Recommendations, MONEYVAL acknowledged that Monaco has a satisfactory Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) legal framework.'
'Nonetheless, given Monaco’s ambition to develop into a more fully-fledged financial center, there is a case for intensifying efforts to comply with international best practices so as to minimize potential reputational risk, which is the main risk that Monaco’s financial sector faces.'