Act No. 1,549, which came into force on 6 July 2023, amends Act No. 1,362 of 3 August 2009, the legislative cornerstone of the fight against money laundering, terrorist financing, and the proliferation of weapons of mass destruction in Monaco (“AML-CFT”).
The new Act is the first of a four-pronged legislative package aimed at reshaping Monaco’s AML-CFT landscape, bringing it into line with the recommendations made by the MONEYVAL Committee. One of the key measures contained in this new legislation is the transformation of the Service d’Information et de Contrôle sur les Circuits Financiers (SICCFIN) into a brand new authority.
1/ Prior to the reform, the role of SICCFIN - which was attached to the Ministry of Finance and Economy - was to receive, analyse, and process suspicious transaction reports made by the entities and individuals listed in Article 1 of Act No. 1,362. It was also empowered to carry out inspections and audits of so-called “obliged entities” to whom the legislation applied.
Under the old system, an Audit Report Review Commission (the “CERC”) was responsible for (i) examining reports drafted in response to SICCFIN inspections, and (ii) issuing a non-binding opinion intended for the Minister of State, who then had the power to impose sanctions on the inspected entities.
This unprecedented arrangement proved controversial with monitored entities and professionals operating in Monaco’s financial sector but also the National Council’s Legislation Committee , who questioned the status and real powers of the CERC.
This Commission, which examined cases and determined whether a regulatory breach warranting sanctions had occurred, had the characteristics of a “tribunal” as understood by European Court of Human Rights (“ECHR”) case law.
Yet the fact that it was tied to the executive contravened, both national and international understanding, of respect for the right of defence, and specifically the right to an independent and impartial tribunal.
In their recommendation 28.4 of December 2022, the MONEYVAL assessors also found that the non-binding nature of the CERC’s opinions, which left discretion to the Minister of State, was not in line with international standards.
This arrangement could raise doubt for the monitored entities, who may have felt that the same bodies were acting as investigator, prosecutor, and judge, leaving them with the impression that they had been “prosecuted and tried by the same people” , as the ECHR had previously observed in similar circumstances.
While parties accused of breaches could be heard by the CERC, they could not obtain a hearing before the Minister of State. This was despite the fact that the CERC submitted inspection reports and proposals for sanctions to the Minister of State, who was the authority with actual legal power to impose sanctions.
2/ Act No. 1,549 addresses these concerns by reorganising and restructuring the sanctions procedure.
Monegasque lawmakers have therefore decided to abolish SICCFIN and the CERC, and to replace them with a body called the Autorité Monégasque de Sécurité Financière or Monegasque Financial Security Authority, an “independent administrative authority” as per Article 50 of the reform bill and Article 46 of Act No. 1,362, amended.
This new authority will comprise three departments, each performing a distinct function, namely financial intelligence, supervision, and sanctions.
While the first two functions encompass the general prerogatives originally held by SICCFIN, the third represents a major change to the previous system.
The new sanctions departement, taking over from the CERC, will henceforth be responsible for examining inspection reports or reports of regulatory breaches, and the enclosures under Article 99 of the Act, amending Article 65-1 of Act No. 1,362.
Under the new provisions, the power to impose administrative sanctions now lies with a “sanctions board”.
Though initially intended to be a specific ad hoc body, it has ultimately been decided that this board will be attached to the independent Monegasque Financial Security Authority itself. It will be composed of three individuals: a judge (who may or may not be a sitting judge, but must have at least five years’ service with the Monegasque judiciary), and two officers from the Authority’s sanctions department.
During the debates before the National Council, concerns had been raised about the board’s composition, and in particular the presence of staff from the sanctions department. Some felt that this once again compromised the body’s independence and impartiality.
In order to settle the controversy, a fourth paragraph was added to the new Article 65-5 added to Act No. 1,362, obligating any member of the sanctions board to inform the head of department of any conflict of interest, but also prohibiting the officers sitting on the sanctions board from “exercising any supervisory powers, or having exercised any supervisory powers, in the matter of the proceedings that they are called upon to adjudicate”.
As anticipated, this change represents another step in the process of modernising the local legislative framework, but also reflects the growing trend of administrative authorities performing the role of supervisory and sanctions authority.
