The Lawyer global offshore report – Monaco

It is tempting, but incorrect, to group Monaco with the number of ‘offshore’ jurisdictions that offer products and services to individuals or groups situated elsewhere. Monaco is not offshore in the sense that there are no offshore International Business Corporations (IBCs) or similar vehicles available in Monaco.

To incorporate a Monaco company, a number of requirements have to be satisfied: a licence, which will take between three and six months to obtain from the government, as the latter’s discretion is needed; Monaco premises and staff must be taken on; two Monaco auditors are required; and a minimum capital of €150,000 (£104,000) must be paid.

There are no offshore trusts or foundations in Monaco along the lines understood elsewhere, although foreign law trusts can be administered locally. A specific law allows foundations to be set up with government approval, but these will have a strictly local and philanthropic flavour. Trusts can be set up but only in very strict conditions whereby an individual will import his national trust law to regulate a trust, invariably set up for a Monaco estate planning purpose. Such trusts, known as Monaco Law 214 trusts, are not available to individuals resident outside the principality.

Offshore banks are unknown and indeed illegal. French banking law applies directly in the principality – a French banking licence and full French regulatory control applies over any banking activity in the principality. Bank secrecy does not exist, although confidentiality is enshrined in law.

There are no insurance companies in Monaco so no local offshore insurance-related products are on offer.

Monaco has a rigorous financial services law that regulates very strictly both the marketing and giving of advice in respect of financial products. In practice, virtually no domestic financial products are marketed, there being extremely restricted local product availability.

Banks, financial institutions and certain activities, including company management and trust management businesses, are subject to extremely strict anti-money laundering regulation obligations. Monaco has its own regulator, Siccfin, which is active in seeking out money laundering. Tax evasion is not regarded as a matter for making a report, for in the absence of a high tax regime it is not a crime in the principality, but virtually every other form of crime qualifies for making a suspicion report.

One may ask what Monaco’s view is of offshore activity. Locally, Monaco will consider nothing it offers as being specifically designed to create a product generally available in the offshore world. Indeed, it is the very opposite, either having no product to offer or severely restricting what can be done.

What Monaco offers instead is a low or no-tax place of residency, essentially for wealthy individuals who are seeking security and the services that them and their families require. A number of highly regulated private banks and asset management companies do offer services locally in Monaco, but draw heavily on products and skills sourced from elsewhere in their groups.

The Monaco paradox is that it is often mistakenly grouped as being within the offshore world. In reality it has little in the way of legislation, products or services usually found in offshore jurisdictions. By contrast with the offshore world, wealthy people want to base themselves, as opposed to their structures or investments, there. It is a proposition that has served the jurisdiction well to date and, as a result, change is not something that is coveted by its people.

William Easun is a tax and private capital partner at Lawrence Graham, Monaco