Foundations (Moneyval): changes up to date with Law no. 1.559 of 29 February 2024 (PART IV)

UP TO DATE WITH THE LATEST CHANGES 2024 made by Law no. 1.559 (Part IV) and Sovereign Order 10.455 of 15 March 2024

Entry into force on 30 September 2023 of the new provisions governing foundations, following the recommendations of the MONEYVAL Report which focused on strengthening measures to ensure greater transparency, extended access by the competent Monegasque authorities to basic information and information on beneficial owners (accurate and up to date), assurance that funds are not used to support the financing of terrorism or the proliferation of weapons of mass destruction:

• Law 56 of 28 January 1922 on foundations as amended by Chapter IV of Law 1.550 of 10 August 2023 adapting certain legislative provisions to combat money laundering, terrorist financing and the proliferation of weapons of mass destruction (Part II) and Law no. 1.559 of 29 February 2024 (PART IV);
• Sovereign Order 10.114 of 14 September 2023 implementing Law 56 of 29 January 1922 on foundations, as amended.

Changes for associations and federations here

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SUMMARY

The main changes for foundations from 30 September 2023:

• Specification of the information that must be included in applications for authorisation of foundations submitted to the Ministre d'Etat ;
• Special register kept by the Département de l'Intérieur ;
• Obtaining and declaring new basic information and information on beneficial owners, keep it in Monaco for 10 years, kept up to date and made available;
• Appointment of a person responsible for basic information and information on beneficial owners;
• Keeping a Register of donations and grants received and a Register of donations and grants paid;
• Guarantee of good repute for foundation directors ("administrateurs"), in order to increase the transparency of foundations and reduce the risk of foundations being used as a vehicle for terrorist financing;
• Requirement for all foundations to keep accounts showing a sufficiently detailed breakdown of income and expenditure, and extension of the period for which accounts must be kept to 10 years;
• Extension of the obligation to appoint a statutory auditor ("commissaire aux comptes") to all foundations, without any restriction linked to the amount of assets, to make it possible to determine and guarantee that all funds are duly accounted for and fully used in accordance with the object and purpose of the foundation's declared activities;
• Foundations considered to present a particular risk of exploitation for terrorist financing purposes, on the basis of the national risk assessment, are required, at the request of the Département de l'Intérieur, to apply additional measures.
• Supervision by the Département de l'Intérieur, with regulations governing documentary and on-site inspections.
• The new obligations give rise to new administrative, financial and criminal penalties in the event of non-compliance.

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IN DETAIL

¤ Foundation authorisation

— Specification of the basic information and information on the beneficial owners that must be included in applications for authorisation of foundations submitted to the Minister of State: (art. 6, 6-2, art. 12-4 L. 56; art. 1, 1-1 OS 10.114)

1. the name and purpose of the foundation;
2. the address of its registered office located in Monaco;
3. the identity of each founder or co-founder;
4. the identity of those who, in any capacity whatsoever, are responsible for its administration or management and, where applicable, the executor of the will.
5. executor, if any;
6. the identity of the person appointed as the person responsible for the basic information and the information on the
7. beneficiaries referred to in paragraph II of Article 22-1 of Law no. 1.362 of 3 August 2009, as amended;
8. the identity of the beneficial owner(s) of the foundation.

The identification details of the above persons:

1. for the founder or each co-founder of the foundation, referred to in point 3) of the second paragraph of article 6 of law no. 56 of 29 January 1922, as amended: their surname, customary name, nickname or pseudonym, first names, date and place of birth, profession, nationality and address of their personal residence;
2. for the persons entrusted with the administration or management of the foundation or for the executor of the will, referred to in 4°) of the second paragraph of article 6 of law no. 56 of 29 January 1922, as amended: their surname, usual name, nickname or pseudonym, forenames, date and place of birth, profession, nationality, address of their personal domicile, their duties in the foundation and the date on which they took up or renewed their duties;
3. for the person designated as responsible for basic information and information on beneficial owners, as referred to in point 5°) of the second paragraph of article 6 of law no. 56 of 29 January 1922, as amended:
   1. in the case of a legal person: its name or corporate name, its corporate purpose, its legal form, the date of its incorporation, its principal activity and, where applicable, its secondary activities, the address of its registered office, the number and place of registration in a public register and the identification details of the natural person authorised to represent the said legal person as listed in letter b);
   2. in the case of a natural person: his surname, given name, nickname or pseudonym, forenames, date and place of birth, profession, nationality and home address.

The application for authorisation must be accompanied by the following documents:

1. the deed of incorporation of the foundation;
2. the foundation's articles of association, in duplicate;
3. a document proving the address of the registered office of the foundation accompanied by a certificate of ownership or lease, mentioning, where applicable, the agreement of the owner;
4. for the natural persons referred to in numbers 3°) to 6°) of the second paragraph of article 6 of the aforementioned law no. 56 of 29 January 1922, as amended, a valid official document proving their identity and bearing their photograph;
5. where the address given on the document referred to in point 4°) is not correct, a copy of proof of address less than three months old, for the natural persons referred to in points 4°) and 5°) of the second paragraph of article 6 of law no. 56 of 29 January 1922, as amended, referred to above;
6. where the persons referred to in 5°) of the second paragraph of Article 6 of Law no. 56 of 29 January 1922, as amended, are legal entities, a certified copy of any deed, document or extract from an official register not more than three months old attesting to the matters listed in a) of 3°) of Article 1.

The basic information relating to foundations and their beneficial owners and the updating of this information is kept in a register kept by the Home Office. This register also indicates the place where the foundation or, where applicable, the liquidators keep this information and, if different, the place where the person responsible for the basic information and the information on the beneficial owners keeps this information.

The basic information mentioned in the first paragraph of Article 6 and in figures 1°) to 5°) of the second paragraph of Article 6, as well as the copy of the sovereign authorisation order for the foundation, are accessible to the public by means of an extract from the register kept by the Department of the Interior. The procedures for issuing the extract are determined by Sovereign Order 10.114.

Basic information on the foundation and on its beneficial owners may be communicated to foreign authorities under the conditions set out in Article 51-1 and Chapter VIII of Act 1.362 or through international legal assistance.

— Definition of the beneficial owner of a foundation: the founders, the donors, the members of the board of directors, as well as any person who, by any other means, directly or indirectly can exercise effective control over the foundation. (art. 5 L. 56; art. 2 OS 10.114)

¤ Obligations of the foundation, those responsible for basic information and information on beneficial owners, and liquidators

— The Minister of State must be notified of any change to the basic information and information on beneficial owners within 1 month of the date of the change, so that it can be entered in the special register. Foundations must ensure that this information is adequate, accurate and up-to-date at all times (art. 12-1 L. 56).

— Obtaining, keeping in Monaco, updating and making available basic information and information on beneficial owners (and the corresponding supporting documents) as well as a copy of the sovereign authorisation order for entry in the special register kept by the Department of the Interior. (art. 12-2, 12-4 L. 56; art. 4, 4-1 and 5 OS 10.114)

• Foundations are required to keep this information and these documents for 10 years after the date on which they cease to be clients of the bodies and persons referred to in articles 1 and 2 of law no. 1.362 of 3 August 2009, as amended. This information and these documents are kept and made available either at the registered office of the foundation or at another location in Monaco, in particular, with one of the persons or bodies referred to in numbers 6°), 13°), 19°) or 20°) of article 1 or in numbers 1°) or 3°) of article 2 of law n° 1.362 of 3 August 2009, as amended. The identity and address of the person who keeps the said information and documents are communicated to the Department of the Interior.
• The liquidators of foundations are required to keep basic information on the foundation and its beneficial owners, as well as a copy of the sovereign authorisation order, and the corresponding supporting documents for 10 years after the date on which the authorisation is revoked or the foundation is liquidated. This information and these documents must be kept and made available in Monaco at a location notified to the Department of the Interior. It may also be entrusted for the same purposes to one of the persons or bodies referred to in points 6°), 13°), 19°) or 20°) of Article 1 or in points 1°) or 3°) of Article 2 of Law no. 1.362 of 3 August 2009, as amended, whose identity and address are communicated to the Department of the Interior.

Competent authorities with access to the information and supporting documents on which it is based:

• Authorised agents of the Department of the Interior
• Authorised officers of the Monegasque Financial Security Authority (and through it: Authorised officers of the Commission de Contrôle des Activités Financières Financial activities supervisor; Conseil de l'Ordre des Avocats Bar association) ;
• Authorised personnel of the judicial authorities ;
• Officers of the Criminal Investigation Department of the Public Security Directorate acting at the request of the Public Prosecutor or by delegation of an Examining Magistrate;
• Authorised agents of the management department for seized or confiscated assets within the Judicial Services Department.
• Authorised agents of the General Expenditure Control Department;
• Police officers with at least the rank of captain, individually and specially authorised by the Director of Public Safety;
• Authorised agents of the Tax Department;
• Authorised agents of the Budget and Treasury Department.

— The foundation must notify the Department of the Interior of the identity of the person or persons designated as responsible for the foundation's basic information and, if different, of the person or persons responsible for the information on beneficial owners (referred to in paragraph II of article 22-1 of law no. 1.362 of 3 August 2009, as amended). The foundation must notify the Secrétariat Général du Gouvernement of any change to the designated person(s) within one month of the change. (art. 12-3 L. 56)

These persons are appointed from among the president and directors of the foundation residing in Monaco. They may also be appointed from one of the persons or bodies referred to in points 6°), 13°), 19°) or 20°) of article 1 or in points 1°) or 3°) of article 2 of law n° 1.362 of 3 August 2009, as amended, whose identity and address are communicated to the Department of the Interior.

They are responsible for:

1. obtaining and keeping adequate, accurate and up-to-date information and a copy of the Sovereign Authorisation Order in a place in Monaco communicated to the Department of the Interior;
2. communicating this information to the Minister of State and updating it so that it can be entered in the register kept by the Department of the Interior;
3. communicating this information to the competent authorities, upon request and within the specified time limit, and providing any other form of assistance to these authorities;
4. keeping the said information and documents for 10 years after the date on which the authorisation is revoked or the foundation is wound up, in a location in Monaco notified to the Department of the Interior for entry in the special register.

¤ Statutory auditor ("Commissaire aux comptes")

— Extension of the obligation to appoint a statutory auditor to all foundations, without any restriction linked to the amount of the assets (previously when the assets exceeded the amount of 500,000 euros), to make it possible to determine and guarantee that all funds are duly accounted for and fully used in accordance with the object and purpose of the foundation's declared activities. (art. 13-2 L. 56)

¤ Administrator of the foundation ("Administrateur")

The foundations are administered in accordance with the provisions of the deeds establishing them and their approved articles of association, under the supervision of a committee ("Commission") consisting of: the Government Councillor-Minister of the Interior, chairman, with a casting vote in the event of a tie; a serving or honorary magistrate appointed by the Secretary of State for Justice, Director of Judicial Services; the Director of Legal Affairs or his representative; a member of the municipal council, appointed by the council; and a representative of the Department of Finance and the Economy. (art. 13 L. 56)

— New requirement for foundation directors to provide a character guarantee, in order to increase the transparency of foundations and reduce the risk of foundations being used as a vehicle for terrorist financing. (art. 15 L. 56)

In the event of serious misconduct by a director in the performance of his management or administrative duties or if the director no longer enjoys his civil rights or no longer presents the guarantees of good character provided for in Article 15, the other directors have the right to order his exclusion and to appoint a new director, subject to the approval of the Minister of State, after receiving the opinion of the supervisory committee. (art. 16 L. 56)

¤ Accounting

— Addition of the obligation for any foundation to keep accounts which must show a breakdown of its income and expenditure in sufficient detail to enable it to be determined whether all funds are fully accounted for and whether they have been spent in accordance with the foundation's object and stated purpose. Registers and accounts, as well as records of individual domestic or international transactions, must be kept for 10 years at the foundation's registered office in Monaco by the person responsible for basic information and beneficial ownership, who must be domiciled in Monaco (art. 17 L. 56).

— The accounts approved by the directors ("administrateurs") must include the following: (art. 13-1 L. 56; art. 6 OS 10.114)

• a balance sheet, showing in particular the endowment funds; and
• a profit and loss account; and
• the auditor's report; and
• account statements; and
• the valuation of the portfolio of securities held.

These documents must be kept at the foundation's registered office for at least 5 years, together with the corresponding supporting documents, including in particular an extract from the minutes approving the foundation's accounts.

— Register of donations and grants received kept available for the competent authorities (art. 17-1 L. 56; art. 7 OS 10.114, APPENDIX I - Model register of donations and grants received)

The foundation must take the necessary measures to establish and verify the identity of its donors and the origin of donations made to it and keep a register listing all donations and grants received with a value of more than 200 euros, in accordance with the model annexed to Sovereign Order 10.114.. The foundation must keep all receipts and supporting documents relating to all donations and grants received.

Any act by the foundation intended to conceal the identity of the true donor of the donation or grant is prohibited.

— Register of donations and grants paid made available to the competent authorities (art. 17-2 L. 56; art. 7 OS 10.114, ANNEX II - Model register of donations and grants made)

The foundation must keep a register of donations and grants paid to natural persons or entities and of the final beneficiaries with all the civil status information concerning them in accordance with the model annexed to Sovereign Order 10.115.

The foundation must therefore take the necessary steps to establish, verify and document the identity of individuals or representatives of legal entities to whom it grants donations or subsidies of a value in excess of 200 euros.

Where the beneficiaries of these donations and grants are not the final beneficiaries, the Foundation shall put in place appropriate mechanisms to enable it to monitor the proper destination of the funds allocated and to check the identity, references and good reputation of the partner organisation and of the final beneficiaries, in order to ensure that they are not involved in or using the Foundation's funds to support the financing of terrorism or the proliferation of weapons of mass destruction.

— Foundations considered to present a particular risk of exploitation for terrorist financing purposes, on the basis of the national risk assessment, are required, at the request of the Department of the Interior, to apply additional measures. (art. 29-1 L. 56, art. OS 10.114)

1. Donations can only be received by cheque or bank transfer;
2. Donations can only be made by cheque or bank transfer;
3. Foundations shall identify all donors and keep a register of donations received, regardless of the amount;
4. Foundations make the payment of their donations conditional on the production of proof of the intended use of the donations by the beneficiaries and record this information in the register of donations paid, which lists all donations paid, regardless of the amount.

¤ Supervision of foundations by the Department of the Interior

— Documentary and on-site inspections (art. 29, 30 to 32 L. 56; art. 9, 10 OS 10.115)

Professional secrecy may not be invoked in respect of information and documents relating to the foundation being inspected.

The authorised agents of the Department of the Interior, specially commissioned and sworn for this purpose, may carry out controls, depending on the risks, on documents and in particular:

1. carry out all necessary checks;
2. obtain all documents necessary for the performance of the duties provided for in this article, regardless of the medium, and of which they may take copies by any means;
3. obtain from directors ("administrateurs"), members and any other person any information, documents or evidence necessary for the performance of their duties;
4. hear any person likely to be able to provide them with information, if necessary by videoconference or audioconference.

In the event that the documentary inspection proves to be impossible or unsuccessful, the said agents may access all the premises located in Monaco which are used for the Foundation's activities, after prior notification of the Foundation or its representative, with the exception of those parts of the premises which are used for the private residence, in order to carry out the operations provided for in points 1°) to 4°). Access to premises or parts of premises that are not accessible to the public must have the prior consent of the Foundation or its representative.

At the end of an inspection, the authorised agents of the Department of the Interior who have taken part in it draw up a report, in accordance with the conditions laid down by Sovereign Order.

As part of the inspections, the Foundation's premises may only be visited between 9 a.m. and 6 p.m., or outside these hours when access to the public is authorised or when a Foundation activity is in progress.

¤ New sanctions

The new provisions implement the recommendations of the Moneyval Report, which found that the penalties applicable to not-for-profit organisations and their directors or persons involved in their administration were insufficient and not dissuasive in the event of failure to comply with their anti-money laundering and anti-terrorist financing obligations.

— Administrative and financial penalties (art. 33 to 36 L. 56)

— Criminal penalties (art. 37 to 43 L. 56)

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