Best practice in the Real Estate sector (AML)

In order to respond to the recommendations of the Moneyval Mutual Evaluation Report (5th cycle) published in December 2022, a legislative arsenal relating to the fight against money laundering, financing of terrorism, the proliferation of weapons of mass destructions and corruption (AML/CFT) was adopted in Monaco during 2023. These measures continue with the adoption by the National Council of Law 1.559 of 29 February 2024 (known as "Part IV").

The persons subject to Law 1.362 as amended, and indirectly many other players in Monaco's economic life with them, have therefore had to adapt in record time to the latest legislative developments in the area of compliance.

Among them are professionals in the real estate sector, which is one of the predominant sectors of the Monegasque economy and one of the highest risk sectors according to the second National Risk Assessment of Money Laundering and Terrorist Financing.

This Assessment also highlighted the high level of threat to real estate agents in particular and stated that these professions present a significant risk of being used as tools in AML/CFT strategies (1).

However, all players in the Principality's real estate sector, whether or not they are subject to the terms of Law 1.362, and in particular property dealers (2), Monegasque non-trading companies (3), trusts (4), notaries and lawyers and advisers carrying out transactions, will have to be sensitive and particularly vigilant in applying the applicable AML/CFT due diligence obligations.

1. Real estate agents, target of the AMSF's first practical sector guide

Real estate agents are subject to AML/CFT obligations under the terms of Law no. 1.362 insofar as they engage in transactions involving third-parties’ properties as regular occupation, in particular the purchase/sale of real estate, shares in companies holding real estate assets and businesses, and rental transactions involving properties for which the monthly rent is equal to or greater than 10,000 euros. On the other hand, persons carrying out property management transactions for their own account are not liable, even if they have a large real estate portfolio.

The second National Risk Assessment considered that, despite their good involvement, the notion of a risk-based approach was not always properly understood or formalised by real estate agents, who can now rely on the new guidelines issued by the Autorité Monégasque de Sécurité Financière (AMSF).

In the new practical sector guide for real estate agents published in December 2023, the AMSF highlights the risk factors specific to this activity and the obligations to which they are subject, while reminding them that the involvement of other parties (such as another real estate agent, notaries or lawyers) is not likely to exempt them from their due diligence obligations.

Real estate agents are therefore urged to check the relevance of their internal compliance procedures in the light of this guide.

As part of this process, real estate agents should expect the AMSF to carry out further and more frequent inspections and to impose sanctions in the event of failure to comply with their obligations.

2. Property dealers, also targeted by the second National Risk Assessment

Since 2020, property dealers have also been subject to the Law 1.362 as amended, and according to the conclusions of the second National Risk Assessment, this profession presents a high level of final risk.

The Assessment highglights a number of shortcomings in compliance with due diligence obligations and considers that many property dealers do not have a system for monitoring operations and transactions. However, here again, the fact that other liable persons are most often involved in transactions in which property dealers participate (real estate agents, notaries, lawyers) does not exempt these professionals from their due diligence obligations.

Nevertheless, it is to be expected that with the reform and structuring of the profession of property traders, which is an expected reform in the Principality, the vulnerabilities presented by this profession will diminish, particularly in view of the new conditions of access to the profession, the reduction in tax benefits and the imposition of a minimum percentage of work to be carried out in proportion to the value of the property acquired.

AMSF inspections of these professionals should also be considered.

3. Greater transparency for non-trading companies holding property assets in the Principality...

As such, non-trading companies are not liable for due diligence obligations within the meaning of Law 1.362, as amended.

However, part 2 of the AML/CFT reform strengthened the reporting obligations of non-trading companies in response to the FATF recommendations and the need for transparency. As a result, non-trading companies are now required to appoint a person responsible for basic information, which must now appear in the special register of non-trading companies, as well as a person responsible for information on beneficial owners. 

The Government has sent reminder letters to non-trading companies that have not met their reporting obligations by 15 December 2023.

Law no. 1.559 of 29 February 2024 also specified the list of information and documents required for the registration of a non-trading company and added an obligation for all non-trading companies to keep a register of their members or shareholders, indicating their identity.

The basic information listed for non-trading companies will have to be updated on a regular basis, bearing in mind that new events in the life of a non-trading company will now have to be reported. This information will then be made available to the Direction du Développement Economique (« DDE ») and will be kept by the person responsible for it for a period of 10 years after the dissolution or winding-up of the company.

It should be noted that the system of penalties applicable to Monegasque public limited companies for civil purpose, non-trading companiesquinzaine and their directors or liquidators has been strengthened in the event of failure by authorised agents to rectify any shortcomings.

Lastly, the Direction du Développement Economique (« DDE ») has published a list of « dormant » non-trading companies, i.e. non-trading companies for which it has been established that there is no registered office, or that the statutory term has expired, or where their authorisation or declaration to carry on business has been revoked due to a lack of registered office or activity. This list should be updated every fortnight.

4. ... And for trusts

With a view mainly to responding to the recommendation of the Moneyval report on transparency concerning the beneficial owners of legal arrangements, Law no. 1.559 of 29 February 2024 ("Part IV" of the AML/CFT-P-C reform) devotes a chapter to the obligations on trustees or local representatives of Monegasque trusts or foreign trusts, which are also subject to an obligation to register in the Monegasque register of trusts, to collect and keep information and supporting documents.

Law no. 1.559 of 29 February 20024 stipulates in particular that the trustee, and the local representative appointed in the Principality if the trustee is established or domiciled abroad, must collect, keep and permanently update adequate, accurate and up-to-date information and the corresponding supporting documents on the beneficial owners of the trust, including the settlor(s) of the trust, the trustee(s), the protector(s), its beneficiaries and any natural person ultimately exercising effective control.

Information must also be kept concerning the list of persons and bodies referred to in articles 1 and 2 of law no. 1.362 of 3 August 2009, as amended, and persons and bodies governed by foreign law who, if they were established or domiciled in the Principality, would be considered as falling within the scope of these provisions, who provide services or who enter into a business relationship or occasionally carry out a transaction with the trust in order to provide services or advice.

All of this information must be kept for auditing purposes at a location in Monaco notified to the Direction du Développement Economique for a period of 10 years after ceasing to be involved as a trustee or local representative of the trust.