Automatic exchange of information on financial accounts (CRS): new system of administrative penalties applicable to reporting financial institutions

Sovereign Order no. 10.641 of 27 June 2024 (JDM no. 8702 of 7 July 2024) amends the provisions of Chapter VI - Administrative penalties (art. 13, 14 and new articles 14-1 to 14-4) of Sovereign Order no. 6.208 of 20 December 2016 implementing :

• the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Agreement between Competent Authorities on Automatic Exchange of Financial Account Information, and
• the Protocol with the European Union amending the Agreement between the European Community and the Principality of Monaco providing for measures equivalent to those contained in Directive 2003/48/EC.

The new provisions reshaping the system of administrative (pecuniary) penalties applicable to reporting financial institutions in the context of the automatic exchange of information (AEI) on financial accounts do not apply to procedures already underway on the date of publication of the Sovereign Order.

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SUMMARY

As a reminder, Monaco reporting Financial Institutions are subject to the reporting obligations ("déclaration", which must be submitted each year to the Tax Services ("Direction des Services Fiscaux" DSF) by 30 June following the end of the calendar year to which the information relates) and due diligence obligations set out in the Common Reporting Standard (CRS) which appear in Annexes I and II of Sovereign Order no. 6.208 together with the implementing measures specific to the Principality. The list of jurisdictions subject to declaration in Monaco is set by Ministerial Order.

In its new wording, Sovereign Order no. 6.208 distinguishes between the following breaches, which are subject to administrative (pecuniary) penalties:

• Failure to send the annual "déclaration" (reporting);
• Incomplete or inaccurate "déclaration" (reporting);
• Breaches of reporting and due diligence procedures;
• Opening a new account without valid self-certification, or failing to take strong measures such as freezing, blocking or closing the account when a valid self-certification has not been obtained;
• Failure to keep a record of actions taken and evidence used to ensure proper execution of reporting and due diligence obligations.

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IN DETAIL

¤ Failure to send the annual declaration to the DSF by the prescribed deadline (at the latest by 30 June following the end of the calendar year to which the information relates) (amendment of art. 13 OS 6.208)

• The procedure has been clarified, with the addition of a formal notice ("mise en demeure") to provide the declaration within 30 days.
• The amount of the penalties incurred remains unchanged: €750, then €1,500 for failure to produce the declaration following formal notice.

New wording of Article 13:

"When the declaration referred to in Article 3 is not sent within the time limit stipulated in point 1°) of Article 4, the Financial Institution concerned shall be liable to an administrative penalty of 750 euros.

Without prejudice to the application of the penalty provided for in the previous paragraph, the Direction des Services Fiscaux shall give formal notice to the Financial Institution concerned, by registered letter with acknowledgement of receipt, to provide the aforementioned declaration within thirty days of receipt of the formal notice.

If the declaration is not produced within the period stipulated in the previous paragraph, the Financial Institution concerned is liable to an administrative penalty of 1,500 euros.

If the failure persists at the end of the sixty-day period following receipt of the formal notice provided for in the second paragraph, the Financial Institution concerned shall be liable to criminal prosecution."

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¤ Incomplete or inaccurate declaration (amendment of art. 14 OS 6.208)

• The procedure has also been clarified, with the addition of a formal notice ("mise en demeure") to provide the declaration within 30 days.
  
• The wording of the penalties incurred has been revised: €150 per omission or inaccuracy, up to a limit of €1,500 per Declarable Account containing one or more omissions or inaccuracies (instead of €150 per Declarable Account containing one or more omissions or inaccuracies); then €250 per omission or inaccuracy up to a limit of €2,500 per Declarable Account, failing regularisation following formal notice.

New wording of Article 14:

"When the Direction des Services Fiscaux finds that the declaration referred to in Article 3 is incomplete or inaccurate with regard to the information referred to in Annexes I and II of this Order, the Financial Institution concerned shall be liable to an administrative penalty of 150 euros per omission or inaccuracy, up to a limit of 1,500 euros per declarable account containing one or more omissions or inaccuracies.

Without prejudice to the application of the penalty provided for in the previous paragraph, the Direction des Services Fiscaux shall give formal notice to the Financial Institution concerned, by registered letter with acknowledgement of receipt, to rectify the declaration within thirty days of receipt of the said formal notice, which will set out the omissions or inaccuracies noted and the total amount of the penalties incurred.

If the declaration is not rectified within the period stipulated in the previous paragraph, the amounts stipulated in the first paragraph are increased to 250 euros per omission or inaccuracy, up to a maximum of 2,500 euros per declarable account.

If the breach persists at the end of the sixty-day period following receipt of the formal notice referred to in the second paragraph, the Financial Institution concerned shall be liable to criminal prosecution."

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¤ Breaches of reporting and due diligence procedures (new art. 14-1 OS 6.208)

• Penalties: €150 per breach, then €250 if the breach is not remedied following formal notice.

New Article 14-1:

"When the Direction des Services Fiscaux finds failures in the declaration and due diligence procedures referred to in Annexes I and II of this Order, the Financial Institution concerned shall be liable to an administrative penalty of €150 per failure.

Without prejudice to the application of the penalty provided for in the previous paragraph, the Direction des Services Fiscaux shall give formal notice to the Financial Institution concerned, by registered letter with acknowledgement of receipt, to regularise its situation within a period of ninety days following receipt of the said formal notice, which shall set out the breaches observed and the total amount of the penalties incurred.

If the breach is not remedied within the period specified in the second paragraph, the amounts specified in the first paragraph are increased to 250 euros per breach.

If the breach persists at the end of the period of one hundred and eighty days following receipt of the formal notice referred to in the second paragraph, the Financial Institution shall be liable to criminal prosecution."

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¤ Opening a new account without valid self-certification, or failing to take strong measures such as freezing, blocking or closing the account when a valid self-certification has not been obtained (new art. 14-1 OS 6.208)

• Penalties: €150 per breach, then €250 if the breach is not remedied following formal notice.

New Article 14-2:

"Where the Direction des Services Fiscaux finds that a new account has been opened without valid self-certification, the Financial Institution concerned shall be liable to an administrative penalty of 150 euros per breach, except in the restricted cases:

1) the transfer of an insurance contract; or

2) the acquisition of units in investment trusts on the secondary market.

Without prejudice to the application of the penalty provided for in the previous paragraph, the Direction des Services Fiscaux shall give formal notice to the Financial Institution concerned, by registered letter with acknowledgement of receipt, to rectify its situation within ninety days of receipt of the said formal notice, which shall state the breaches observed and the total amount of the penalties incurred.

In the cases referred to in points 1) and 2) of the first paragraph, the provisions of this article apply to the Financial Institution which has not taken strong measures, such as freezing, blocking or closing the account when a valid self-certification has not been obtained within ninety days of it being opened.

If the situation is not remedied within the period stipulated in the second paragraph, the amounts stipulated in the first paragraph are increased to €250 per breach.

If the breach persists at the end of the period of one hundred and eighty days following receipt of the formal notice referred to in the second paragraph, the Financial Institution concerned shall be liable to criminal prosecution".

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¤ Failure to keep a record of actions taken and evidence used to ensure proper execution of reporting and due diligence obligations (new art. 14-3 OS 6.208)

• Penalties: €150 per breach, then €250 if the breach is not remedied following formal notice.

New Article 14-3:

"When the Direction des Services Fiscaux notes failings relating to the keeping of the register of actions taken and evidence used to ensure the proper performance of reporting and due diligence obligations, the Financial Institution concerned shall be liable to an administrative penalty of 150 euros per failure.

Without prejudice to the application of the penalty provided for in the previous paragraph, the Direction des Services Fiscaux shall give formal notice to the Financial Institution concerned, by registered letter with acknowledgement of receipt, to regularise its situation within ninety days of receipt of the said formal notice, which shall set out the breaches observed and the total amount of the penalties incurred.

If the breach is not remedied within the period specified in the second paragraph, the amounts specified in the first paragraph are increased to 250 euros per breach.

If the breach persists at the end of the period of one hundred and eighty days following receipt of the formal notice referred to in the second paragraph, the Financial Institution concerned shall be liable to criminal prosecution."

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¤ Payment of administrative monetary penalties (new article 14-4 OS 6.208)

New Article 14-4:

"Administrative pecuniary penalties are to be paid to the order of the Receveur des droits de Régie at the Direction des Services Fiscaux within thirty days of the date of their notification, i.e. the first presentation of the registered letter with acknowledgement of receipt, and bear interest calculated at the legal interest rate applicable per month of delay at the expiry of this period."

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