Complying with regulatory regimes in multiple jurisdictions – a view from Monaco

Operating a foreign bank branch can be complex due to regulatory obligations in both the home and host countries. This requires an institution to adapt to a different and new regulatory framework, while dealing simultaneously with a range of other national and international regulatory reforms.

Recent cases have shown that failure to adapt to changing regulatory requirements in multiple jurisdictions could have serious impacts on a bank’s reputation. One crucial point is that foreign branches with dual regulations need to have a clear vision concerning the role of compliance and the consequences of non-compliance for the group. Compliance usually acts to discharge the bank’s regulatory obligations, and has an advisory and oversight role in monitoring business activities.

The dual role of compliance

The way a financial institution structures its financial crime compliance functions within the branch and its overall risk management framework will have a range of impacts in its relationship with both local and home-country-based regulators. The compliance department within a foreign branch has to build a real collaboration with the local authorities and apply measures consistent with the home country requirements.

In foreign branches of global banks established in Monaco, such as HSBC, Credit Suisse, and UBS, the head of compliance has to collaborate with the “Service d’Information et de Contrôle sur les Circuits Financiers.” Called SICCFIN, this is Monaco’s central financial intelligence unit, or the authority responsible for collecting, analyzing and disseminating information related to money laundering, terrrorist financing and corruption. SICCFIN may carry out inspections of documents and on-site inspections. An institution’s professional secrecy cannot be used as a shield against such inspections.
The compliance team should document and provide written guidance listing scenarios and cases where it is mandatory to get authorization from the local regulator, and the dispensations authorized under local law (in Monaco the primary financial services regulator is the Commission of the Control of Financial Activities, under the Monaco law 1.338).
In its dual functions, the head of Compliance in a foreign branch also has to remain aware of legislative and regulatory changes in its parent company’s jurisdiction that may impact its operations. Of particular concern are laws with an “extra-territorial” effect, or those that apply to acts committed outside of the jurisdiction in which the law is enacted.
One recent example is the UK Bribery Act, which became law in 2010. The Bribery Act has extra-territorial reach both for UK companies operating abroad and for overseas companies with a presence in the UK. A foreign subsidiary of a UK company can cause the parent company to become liable under section 7 of the Bribery Act, when the subsidiary commits an act of bribery in the context of performing services for the UK parent.
If the foreign subsidiary were acting entirely on its own account, it would not cause the UK parent to be liable for failure to prevent bribery. However, the UK parent might still be liable for the actions of its subsidiary in other ways such as false accounting offenses or under the Proceeds of Crime Act 2002.

Penalties for non-compliance

Failure to comply with dual obligations is a serious matter, and the local authorities may take action in terms of the Group’s disciplinary procedures. In recent years, regulatory agencies in the European Union, US and elsewhere have become increasingly active in pursuing branches of foreign institutions for violations of local law, increasing liability risks for compliance programs.

The following are some recent examples:

  •  The French Banking regulator Commission des Sanctions de L’Autorité de Contrôle Prudentiel (ACPR) fined the French unit of Swiss bank UBS 10 million euros ($13.1 million) on March 26 2013 for failure of internal oversight of products currently being investigated on suspicion of tax fraud.
  •  HSBC Private Bank was forced to pay a $1.9 billion settlement with the United States that resulted in part from information obtained from a whistleblower, Herve Falciani, on tax evasion in the Swiss branch.
  •  EFG, the UK banking subsidiary of EFGI group, a global private banking group based in Switzerland, was fined £4.2 million by the UK FSA (Financial Services Authority, now the Financial Conduct Authority) because it had not fully enforced its AML policies between 2007 and 2011.

Dual compliance and international cooperation

Compliance with dual regulatory structures may require foreign branches to take a two-layered approach. The requirements set forth in the legislation and regulation of the parent company’s jurisdiction set the minimum standards to be adopted by all group businesses. Layered over this will be any additional requirements of local legislation or regulation for the foreign branch.

As cross border financial activity increases, regulatory and enforcement authorities are increasingly seeking closer ties and data-sharing agreements with agencies in other nations. For example, in Monaco the Commission de Contrôle des Activités Financières (CCAF) is the country’s financial markets regulator. Founded in 2007, it has actively sought international cooperation with other regulatory agencies through bilateral co-operation agreements (MoU) with foreign counterparts.

Such agreements enable information exchange, which facilitates more efficient and timely regulation of financial activities and markets. At the end of 2011, six agreements were in place with regulators in 6 countries.


Gaetana Ricotta is a Compliance and AML Specialist at Barclays Wealth and Investment Management in Monaco. She has expertise in regulatory  matters and oversees administrative matters related to compliance with anti-money laundering and terrorist financing activities. Her work entails communication with law enforcement agencies and regulatory agencies in order to prevent and mitigate financial crime risk.