Andorra -- Sanctions Compliance Regulatory Overview

Andorra, while not a member of the European Union, is deeply integrated into the European financial system and highly committed to international standards for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF), including the implementation of sanctions. This commitment extends to the rapidly evolving virtual asset sector.

Here's a breakdown of cryptocurrency sanctions and restrictions in Andorra:

1. Andorra's Legal Framework for Sanctions Compliance

Andorra implements international sanctions through its domestic legislation, primarily:

• Law 14/2017, of June 22, on the prevention and fight against money laundering and terrorist financing (Llei 14/2017, del 22 de juny, de prevenció i lluita contra el blanqueig de diners i el finançament del terrorisme): This is the overarching AML/CTF law that establishes the general obligations for all financial entities and designated non-financial businesses and professions (DNFBPs), which now explicitly include Virtual Asset Service Providers (VASPs). It mandates compliance with international sanctions.

  • URL (Official Gazette): https://www.bopa.ad/bopa/029017/Pagines/EDICTE_2017_06_22_14_42_37.aspx

• Law 23/2022, of December 1, on the Digital Economy, Digital Assets, and Security Tokens (Llei 23/2022, de l'economia digital, els actius digitals i la seguretat jurídica de les transaccions basades en la tecnologia de registres distribuïts): This specific law regulates the digital asset sector in Andorra. It explicitly brings VASPs under the scope of AML/CTF obligations set out in Law 14/2017, including sanctions compliance.

  • URL (Official Gazette): https://www.bopa.ad/bopa/034057/Pagines/EDICTE_2022_12_01_13_45_22.aspx

• Decrees and Regulations: The Andorran government issues specific decrees to implement UN Security Council Resolutions and to adopt restrictive measures aligned with the EU's Common Foreign and Security Policy (CFSP).

The Autoritat Financera Andorrana (AFA), the financial regulator, supervises financial institutions, and the Unitat d'Intel·ligència Financera d'Andorra (UIFAND), the Financial Intelligence Unit, is responsible for receiving and analyzing suspicious activity reports (SARs) and ensuring compliance with AML/CTF obligations, including sanctions.

• AFA Website: https://www.afa.ad/
• UIFAND Website: https://www.uifand.ad/

2. UN Sanctions Compliance Requirements for VASPs

Andorra, as a member state of the United Nations, is legally bound to implement all UN Security Council Resolutions, including those imposing targeted financial sanctions.

• Obligations for VASPs:
  • Asset Freezing: Immediately freeze the virtual assets and funds of individuals and entities designated by the UN Security Council.
  • Prohibition of Services: Prohibit making any funds or economic resources available, directly or indirectly, to or for the benefit of sanctioned persons or entities.
  • Reporting: Report any frozen assets or attempted transactions involving sanctioned parties to UIFAND without delay.
• Key UN List: UN Security Council Consolidated List.
  • URL: https://www.un.org/securitycouncil/content/un-sc-consolidated-list

3. EU Sanctions Compliance Requirements for VASPs

Andorra is not an EU member, but it consistently aligns itself with and adopts the restrictive measures imposed by the European Union under its Common Foreign and Security Policy (CFSP). This is crucial for its financial stability and integration with Europe.

• Obligations for VASPs:
  • Asset Freezing: Freeze virtual assets and economic resources of individuals and entities designated under EU sanctions regimes.
  • Prohibition of Transactions: Prohibit financial transactions and services that would directly or indirectly benefit sanctioned persons or entities. This includes restrictions on certain types of transactions, sectors (e.g., energy, finance), or specific goods and technologies (e.g., dual-use items).
  • Circumvention Prevention: Take measures to prevent the circumvention of EU sanctions.
  • Reporting: Report any relevant findings to UIFAND.
• Key EU List: EU Consolidated Financial Sanctions List (often accessed via the EU Sanctions Map).
  • URL: https://www.sanctionsmap.eu/

4. OFAC Sanctions Compliance Requirements for VASPs

While Andorra does not directly mandate compliance with U.S. sanctions (Office of Foreign Assets Control - OFAC) through its national laws, any VASP operating in Andorra that has:

• Dealings with U.S. persons (citizens, residents, entities).
• Transactions involving U.S. currency (USD).
• Use of U.S. infrastructure or services (e.g., cloud providers, payment processors).
• Any other nexus to the U.S. jurisdiction.

...must comply with OFAC sanctions to avoid severe penalties from the U.S. government.

• Obligations for VASPs:
  • Asset Blocking: Block the virtual assets and property of individuals and entities on OFAC's Specially Designated Nationals and Blocked Persons (SDN) List and other OFAC sanctions lists.
  • Prohibition of Transactions: Prohibit any transactions or dealings with sanctioned persons, entities, or jurisdictions.
  • Reporting: Report blocked assets and rejected transactions to OFAC.
• Key OFAC List: Specially Designated Nationals (SDN) List.
  • URL: https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-list

5. Sanctioned Entity Screening Obligations for VASPs

Under Law 14/2017 and Law 23/2022, VASPs in Andorra have robust screening obligations:

• Customer Due Diligence (CDD): Conduct thorough CDD measures on all clients, including identifying and verifying their identity and beneficial ownership. This involves screening against sanctions lists at onboarding and on an ongoing basis.
• Transaction Monitoring: Continuously monitor transactions for any patterns or indicators that might suggest involvement with sanctioned entities or territories.
• Screening Lists: VASPs must screen their clients, beneficial owners, and, where feasible, transaction counterparties against:
  • The UN Security Council Consolidated List.
  • The EU Consolidated Financial Sanctions List (CFSP).
  • (Practically) OFAC's SDN list, if there is any U.S. nexus.
• "Hit" Procedures: Implement clear procedures for handling "hits" (matches) against sanctions lists, which typically involve freezing assets and reporting to UIFAND.
• Risk-Based Approach: Adopt a risk-based approach to sanctions compliance, dedicating more resources to higher-risk clients, transactions, and geographies.

6. Geographic Restrictions

Geographic restrictions are an integral part of UN, EU, and OFAC sanctions regimes, which Andorra implements. VASPs must be particularly vigilant when dealing with:

• Countries/Regions under comprehensive sanctions: E.g., North Korea, Iran, Cuba, Syria, parts of Ukraine (Crimea, certain non-government controlled areas), and increasingly Russia and Belarus due to specific sectoral and individual sanctions.
• Transactions to, from, or involving individuals/entities in these regions are highly restricted or prohibited.
• VASPs must implement robust geo-blocking and IP address screening where appropriate, in addition to sanctions list screening.

7. Penalties for Violations

Violations of sanctions obligations in Andorra are subject to significant penalties under Law 14/2017 and Law 23/2022:

• Administrative Fines:
  • Law 14/2017 (Art. 72 onwards): Specifies fines that can range from minor to very serious, with amounts reaching up to €10 million or even higher for legal entities (up to 10% of annual turnover) for serious or very serious infractions. Violations of asset freezing and reporting obligations are considered very serious.
  • Law 23/2022 (Art. 131 onwards): Cross-references the penalties of Law 14/2017 and applies them to VASPs for non-compliance with AML/CTF and sanctions obligations.
• Criminal Penalties: Individuals involved in breaches of sanctions that constitute money laundering or terrorist financing can face imprisonment.
• Reputational Damage: Significant harm to the VASP's reputation and trust.
• License Revocation: The Autoritat Financera Andorrana (AFA) can suspend or revoke the VASP's operating license.

8. Country-Specific Sanctions Lists in Andorra

Andorra does not maintain its own independent primary sanctions list. Instead, it adopts and implements the sanctions lists promulgated by the UN Security Council and aligns with those of the European Union through its national legal framework and specific government decrees.

Therefore, VASPs in Andorra primarily need to monitor:

• The UN Security Council Consolidated List.
• The EU Consolidated Financial Sanctions List (CFSP).
• (If applicable due to U.S. nexus) OFAC's SDN List and other relevant OFAC lists.

In summary, VASPs operating in Andorra face stringent requirements to comply with international sanctions, particularly those stemming from the UN and EU. Robust compliance programs, including comprehensive screening, transaction monitoring, and clear reporting procedures to UIFAND, are essential to avoid severe penalties.