Automatic Exchange of Information in Monaco: Where Do We Stand?

2024 02 16 Natalia BERRIN

Six years after the implementation of Automatic Exchange of Information (AEoI) in Monaco, the processes related to this regulation now appear to be well mastered, both on the side of authorities and Monegasque financial institutions. The latest peer review conducted on Monaco reveals that not only is the legal framework "in place," but the effectiveness of practical implementation is also "on track". The results of this evaluation confirms Monaco's deep commitment to tax transparency and reflect significant efforts made in this field since 2009 with the signing of the first bilateral exchange of information agreements.

Monegasque financial institutions have also played an essential role in this accomplishment. The Global Forum reports that many of the exchange partners who received files from Monaco achieved success rates that were equivalent, or even higher, than their usual rates when matching the received information with their taxpayer databases. This success shows the effectiveness of the efforts undertaken by Monegasque financial institutions to ensure accuracy and compliance in their reporting obligations.

Despite these very positive results, for which the Monegasque financial center as a whole can be proud, the level of effort and vigilance must remain constant to maintain an optimal level of compliance. To enhance the effective implementation of the system, the Government has informed the Global Forum that on-site visits would be organized in the near future, going beyond the document checks that have already been initiated. The implementation of penalties and sanctions is also being considered.

Finally, the OECD published in June an update to the Common Reporting Standard and its commentaries. When these changes are transposed to Monaco, they will directly impact the due diligence and reporting procedures of Monegasque financial institutions. It is essential for companies to anticipate these modifications by assessing their impacts on existing processes and the necessary efforts to ensure compliance. This proactive approach will allow them to quickly adapt to new requirements while maintaining a high level of compliance.

US Tax Regulations: An Overview of FATCA and QI Regimes

Regarding the FATCA regime, Monaco remains one of the few states that has not signed an intergovernmental agreement (IGA) with the United States. This results in a direct interaction between Monegasque financial institutions and the US Internal Revenue Service (IRS), the American tax authority. They must adhere to often complex US tax rules, requiring legal advice for interpretation and implementation. This can lead to additional costs for Monegasque entities that are part of a group with subsidiaries generally located in IGA countries.

In 2014, Australia published a study exploring different options for implementing FATCA. This analysis revealed that if Australia chose not to sign an IGA with the US, the total annual compliance costs for the Australian financial sector would have been approximately 2 times higher compared to the costs resulting from signing an IGA.

One of the key deadlines for the FATCA regime is the obligation to renew the compliance certification every three years. This process needs to be properly anticipated by financial institutions as it requires a periodic review conducted by an internal or external auditor. Entities registered in 2014 must perform their next periodic certification by July 1, 2024.

As for the QI regime, a first agreement came into effect in 2001 and remained unchanged until the arrival of FATCA in 2014. In 2017, an update was introduced, including requirements for internal compliance programs and periodic external audits. This year, a new version of the QI agreement came into effect, obliging Monegasque financial institutions to once again revise their compliance programs and periodic review processes to comply with these new requirements.

International tax regulations continue to evolve, significantly impacting Monegasque financial institutions. While Monaco maintains a strong stance on automatic exchange of information, it's crucial for financial institutions to remain vigilant to stay compliant and anticipate forthcoming changes. Similarly, the US FATCA and QI regimes demand ongoing attention and adaptation efforts to ensure optimal compliance and avoid legal, operational, and reputational risks.

By staying abreast of these developments and taking proactive steps, Monegasque financial institutions can control costs, maintain their compliance level, and position themselves as actors adhering to international tax standards.


(2)Foreign Account Tax Compliance Act
(3)Qualified Intermediary