Title: EBA Chair Warns of Money Laundering Risks in Deepening EU Financial Ties with Monaco, San Marino, and Andorra

By Jeanette Lloyd for European Today

The European Banking Authority’s Concerns

The Chair of the European Banking Authority (EBA), José Manuel Campa, issued a warning over potential money laundering risks concerning the European Union (EU)’s closer financial relationships with Monaco, San Marino, and Andorra. This cautionary statement was shared in a letter to the European Commission.

Financial Regulators’ Concerns

Accompanying Campa were the Chairs of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA). Their collective concern stemmed from the “historically less rigorous financial regulations” and the alleged susceptibility of these microstates to money laundering and other illicit activities.

Highlighting Risks for EU Consumers: The financial regulators voiced their worry that companies might exploit lighter regulations in the microstates, leading to risks for EU consumers if these products were marketed across the bloc.

Monaco’s Weak Anti-Financial Crime Defenses

Monaco, in particular, faced criticism for its “weak” anti-financial crime (AFC) defenses in the wake of a damning evaluation from the Council of Europe’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) supervisor, Moneyval.

Moneyval’s Evaluation: In January 2023, Moneyval revealed numerous shortcomings within Monaco’s AML and CFT framework, including issues concerning Beneficial Ownership, Suspicious Transaction Reports, staffing, and the criminal justice system. Moneyval urged Monaco to intensify efforts against money laundering and the recovery of crime proceeds and to strengthen its supervisory system.

Monaco: A Financially Significant Hub

Monaco, known for its high concentration of millionaires and billionaires, features numerous casinos, banks, and luxury residences, raising EU concerns that the principality might serve as a hub for money laundering and other financial crimes.

EU Parliament’s Role

Paul Tang, a Dutch Member of the European Parliament (MEP) from the Socialists & Democrats group, voiced the importance of rigorously evaluating any new economic agreements with Monaco and the other microstates to ensure the EU does not inadvertently facilitate financial crimes.

Proposed Association Agreements with the EU

These proposed association agreements between the EU and the microstates go beyond just financial services by aiming to remove trade barriers and grant free movement of people, goods, services, and capital.

Easing Financial Regulations: However, critics argue that lessening financial regulations for the microstates risks undermining the EU’s regulatory efforts to improve supervision of financial institutions.

Implications of European Elections

A failure to address these concerns before the European elections in June 2024 could potentially halt the plans’ progression.

San Marino’s Response

San Marino’s government responded to the warnings with “astonishment,” insisting that the microstates have been striving to comply with European regulations for several years. San Marino’s spokesperson claimed that the reported concerns had “nothing to do with the virtuous process undertaken by the three states.”

Commission’s Response

A Commission spokesperson confirmed that all letters received, including Campa’s, would be responded to “in due course.”