THE MONEGASQUE REAL ESTATE PROFESSIONALS’ OBLIGATIONS WITH REGARD TO THE FIGHT AGAINST MONEY LAUNDERING, FINANCING OF TERRORISM AND CORRUPTION

Since 1993, the Principality of Monaco has pursued an active policy in the fight against money laundering and the financing of terrorism ("AML/CFT") and intends to guarantee a level of legal security for monetary and financial transactions in line with the standards of a modern and attractive banking centre.

Concerning domestic law, Monaco has adopted a legal system to better fight these criminal activities, which is regularly amended and strengthened to consider the development of international best practice. This system is currently based on law no.1.362 of August 3rd, 2009 amended by law no. 1.503 of December 23rd, 2020 reinforcing the measures applicable to Monegasque companies in order to guarantee better transparency of financial transactions.

To ensure the implementation of this legislation, the Principality has created SICCFIN (Service d'Information et de Contrôle sur les Circuits Financiers), the counterpart of the French TRACFIN. This is the national central authority responsible for collecting, analyzing and processing suspicious transaction reports made by professionals subject to the law, including real estate professionals, real estate agencies and property dealers, as indicated in Article 1 of the law, in paragraphs 10 and 11, especially since these sectors of activity have been identified as being among the most at risk in terms of threat and vulnerability. SICCFIN is subject to evaluation by Moneyval, a Council of Europe organisation, which aims to ensure that Member States have an effective system in place to counter money laundering and terrorist financing and that they comply with the relevant international standards in this area.

SICCFIN also monitors the proper implementation of the legal obligations of these professionals by making regular visits to companies to ensure that they have implemented adequate procedures and controls and that they are complying with their due diligence obligations. What does this mean in practice?

Within the scope of the purchase or sale of a property, or a rental for which the monthly rent is equal to or higher than €10,000 (this amount has been set by Sovereign Order), the Monegasque real estate professional has a duty of vigilance and must require certain information from his clients and, if necessary, from the beneficial owners* of the transaction, in order to check their identity at the time of entering into a business relationship and to identify the purpose, the nature, the origin of the assets, the funds involved and the purpose of the transaction generating a financial flow that is being undertaken.

*According to the law, the beneficial owner is the natural person(s) who ultimately own(s) the client (have more than 25% of the capital or voting rights) or control(s) the client, directly or indirectly, or is the natural person(s), for whom a transaction is carried out or an activity is carried out.

Control is direct when the natural person himself/herself holds shares in the company concerned. On the contrary, control is indirect when the natural person holds shares in the company through another company.

The vigilance obligation

With this in mind, the real estate agent or property trader is required to ask questions of his clients and to request certain documents that are sufficiently convincing to enable him to get to know them better, to understand their motivation and to remove any doubts about the conditions under which they are carrying out a property transaction. This vigilance obligation is mandatory throughout the relationship.

For natural persons, these documents are, for example, passport, identity card and/or residence permit, proof of address.

For legal entities and trusts, identification should include the company name, the registered office, the share capital ownership, the list and identification of directors, the articles of association, an extract from the Trade Register, the identity document of the legal representative (manager, chairman, director, etc.) and proof of his/her powers to commit the company.

Particular attention must be paid to the legal form of a legal person, its size and the identity and activities of those who hold the capital and manage it. To this end, the real estate professional is authorised to have access to the register of beneficial owners of companies registered in Monaco, which can be consulted at the Direction de l'Expansion Économique.

If it is an offshore company or a company from a tax-advantaged country, the certificate of incumbency, certificate of good standing, certificate of incorporation and register of directors must be requested.

Even if legal entities get between, the beneficial owners to be identified must be natural persons, unless

• the customer is a company listed on a regulated market or,
• a company that can make public offerings and located in a State that respects and applies anti-money laundering rules.

In addition to the full identity of the beneficial owners (surname, first name, nationality, address, date and place of birth), the information to be collected includes the type of control exercised (directly or indirectly) and the date on which the beneficial ownership was acquired.

The study of this various information makes it possible to adapt the vigilance measures of the real estate professional and to proportion them to the situation, i.e. they can be lightened or must be strengthened, particularly in the latter case, if:

• the business relationship is not physically present at the time of identification;
• third parties are used;
• the transaction is considered particularly risky regarding its nature (due to the fact that the amounts are very high in real estate);
• the nature of the transaction is complex and unusual;
• the proposed transaction conditions are risky (cash transactions, fund transfers);
• the absence of economic justification;
• there is a relationship with a "risky" country, the list of which is determined by ministerial order;
• the client or the beneficial owner is a politically exposed person (PEP), who exercises or has exercised during the last 12 months, in a foreign country or in Monaco, important public functions.

Family members of a PEP and any natural person known to have close business ties with the PEP are also considered as PEPs. In this case, the real estate agent must establish the origin of the assets and the origin of the funds involved in the transaction and ensure enhanced monitoring of the business relationship on an ongoing basis.

The estate agent or property trader obligations also vary depending on whether he/she is dealing with an occasional client or a regular client. The latter may be a client who carries out several transactions in the same year or a client who is planning a property purchase requiring negotiations. However, the estate agent should remain vigilant as to the consistency of the transaction with the elements identified at the time of entering the business relationship. He/She may also be alerted during the course of the business relationship by a judicial requisition or a freeze on their client's assets. In such cases, the risk must be reassessed.

Finally, the real estate professional should not establish or maintain a business relationship if:

• there is an inability to identify the natural person;
• there is reason to believe that the person is seeking to avoid physical contact in order to conceal his/her true identity;
• there are suspicions that the client intends to carry out money laundering operations;
• he/she has not been able to fulfil the due diligence obligations.

In the event of suspicion and where the due diligence measures alert the client, the real estate agent is authorised not to apply the said measures, provided that he/she files a suspicion report with the SICCFIN without delay.

The obligation to keep the information collected

Real estate agents, like all professionals subject to the legislation, are required to keep documents and information, regardless of the medium, relating to their business relationships or occasional clients, as well as to the due diligence measures implemented, for five years from the closing of the transactions.

The duty of vigilance breaches

Failure to comply with all these obligations exposes real estate professionals to administrative (reprimand, financial penalty, ban on carrying out certain transactions, temporary suspension or withdrawal of their licence to practice) or criminal (imprisonment and/or fines) sanctions depending on the nature of the breach.

Indeed, Monegasque law imposes a criminal penalty to "anyone who, in disregard of his/her professional obligations, assists in any transfer, investment, concealment or conversion of goods and capital of illicit origin".

Monaco wants to be a role model in the fight against money laundering and terrorist financing and has over the years acquired significant resources to ensure that good practice is respected by local economic players. These measures are taken in the interest of the Principality's economic attractiveness and aim to maintain its excellent reputation.

Our agency, Valeri Agency, is constantly informed of the evolution of these obligations and makes all its employees aware of these good practices. Thus, a very precise guide of internal procedures was drafted and is updated regularly, tools were rolled out and trainings are provided.

We can thus assist you throughout our relationship, ensuring that your transaction is carried out with complete peace of mind.

For more information, please visit the Siccfin website: https://www.siccfin.mc/en