In 2015, the Banca Privada d’Andorra (BPA) scandal became the center of an international financial controversy. The U.S. Treasury, through the Financial Crimes Enforcement Network (FinCEN), labeled BPA as a “financial institution of primary money laundering concern,” effectively cutting it off from the U.S. financial system. The move triggered a chain reaction that led to the bank’s closure and highlighted vulnerabilities in Andorra’s banking sector.

Alex Mostaslavski spoke with Mr. Burke Files, head of international investigative firm Financial Examinations & Evaluations, Inc. (L7 Ventures), about BPA, its implications, and the future of Andorran finance.

What Went Wrong at Banca Privada d’Andorra

Unlike recent Swiss banking scandals, BPA was directly linked to organized crime groups in Russia and China. The bank used correspondent accounts at four U.S. banks to access the American financial system. According to Mr. Files, BPA’s management failed in governance — they either ignored or actively assisted criminal activity. “There was no reason to warn the bank,” Files explains. “The U.S. authorities simply shut it down.”

This failure was not unique to BPA. Other banks, such as FBME Bank (Tanzania), Banco Delta Asia (Macao), and even HSBC (Cayman Islands), faced similar sanctions. However, BPA’s closure had a particularly strong impact on Andorra due to the small size of its banking sector: losing one of just five major banks meant a reduction of roughly 20% of the country’s banking capacity.

Lessons for Andorra’s Financial System

Mr. Files emphasizes that Andorra needs more professional capacity, not fewer banks. The country’s financial professionals are smart and capable, but there is room to expand expertise in commercial banking, regulation, and financial education.

Andorra must invest in:

• Education and training for bankers, regulators, and auditors.
• Professional networks to share knowledge and improve governance.
• Regulatory oversight that is effective and adapted to a growing banking sector.

Interestingly, BPA had undergone regular anti-money-laundering audits by KPMG and Deloitte since 2003. Files notes that relying solely on Big 4 firms is insufficient: “AML audits often lack depth because trainees conduct them without understanding record manipulation. Jurisdictions need real professional capacity, not just branding.”

Comparing Andorra and Switzerland

Switzerland has 275 banks with €2,804 billion on its balance sheets; Andorra has 4 major banks with €3.3 billion. Files cautions that Andorra cannot copy Switzerland. Instead, it should leverage its small size to be nimble and innovative.

“Clients will not come to Andorra because we copy Switzerland. We must create unique, compelling financial products and services,” he says. With rapid technological change and the rise of shadow banking, Andorra has an opportunity to innovate and lead in areas overlooked by larger jurisdictions.

Attracting Investment and Expanding Services

Currently, Andorra operates with just five local banks and sees limited foreign bank entry. Files argues this is not a disadvantage: “It’s about Andorran banks growing, innovating, and entering other markets.”

Opportunities include:

• Funds, insurance companies, and risk pools
• Merchant support services
• Intellectual property-based financial products
• Secure and private banking services

Privacy remains critical, even if traditional bank secrecy is declining. Andorra should enforce strong data security policies alongside professional financial services.

Stabilizing Andorra as an Offshore Financial Center (OFC)

Files suggests a comprehensive strategy to build “Financial Andorra” as a brand:

• Develop state-sponsored education and mandatory continuing professional training.
• Assemble a neutral expert navigation team to guide policy and innovation.
• Encourage professionals to write about Andorra in global publications (finance, tech, tourism).
• Monitor trends in payment systems, intellectual property, technology, and investment vehicles.
• Host industry-specific events and workshops to foster knowledge exchange.

He emphasizes that Andorra must combine creativity, responsibility, and a tolerance for calculated risk while maintaining strict governance standards.

Broader European Context

Recent scandals in Europe, particularly in Swiss banks, demonstrate systemic risks. Fines, mismanagement, and regulatory shortcomings have reduced investor confidence in traditional banks. Files points to opportunities in Poland, the Czech Republic, the Baltics, and Romania, where cleaner systems and less restrictive regulation provide a more fertile environment for growth.

Diversifying Andorra’s Economy

Tourism contributes 80% of Andorra’s GDP, highlighting the need for economic diversification. Financial services remain a key area for growth but must be uniquely Andorran, not copied from elsewhere.

Files concludes, “Andorra has the opportunity to create a forward-looking financial service center, grounded in education, innovation, and responsibility — one that is inclusive of professionals, clients, and the future of finance.”

Conclusion

The BPA bank scandal 2015 was a wake-up call for Andorra. While it exposed weaknesses in governance and regulation, it also provides an opportunity to build a stronger, more innovative financial system. With the right investment in professional capacity, education, and regulatory frameworks, Andorra can expand its role as a competitive and unique offshore financial center.