Andorra Money Laundering Risks: EU Regulators Sound Alarm on Tiny State’s Financial Ties

European regulators have sounded the alarm over significant money laundering risks posed by closer financial ties with Andorra, Monaco, and San Marino. Despite not being EU members, these tiny states are negotiating greater economic ties, which could lead to a lack of rigorous financial regulations and create opportunities for illicit activities.

A Deeper Relationship Poses Risks

In a letter to the European Commission, the chair of the European Banking Authority (EBA) warned that companies may set up in these microstates to benefit from lighter financial standards, creating significant risks to consumers. The EBA chair, José Manuel Campa, was joined by the chairs of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), forming the European Supervisory Authorities.

• A deeper relationship with these states could open the backdoor to illegal money.
• It would make it easier for predatory financial firms to target people in the EU, causing significant financial harm to Europe’s consumers.

The Tiny Principality of Monaco

Andorra, Monaco, and San Marino have a combined population of 150,000 and border France, Italy, and Spain. They are negotiating on greater economic ties, which would allow access to the single market. The tiny principality of Monaco received a scathing assessment of its anti-financial crime defenses from the Council of Europe earlier this year.

• Monaco must “step up its efforts to investigate and prosecute money laundering, to confiscate and recover proceeds of crime as well as to strengthen its supervisory system.”
• Monaco is home to many casinos, banks, and some of the world’s wealthiest individuals, having the world’s highest concentration of millionaire and billionaire residents.

Proper Scrutiny and Safeguards are Essential

“Proper scrutiny and safeguards are essential to ensure we don’t let any Trojan horse through our gates,” said Paul Tang, a Dutch MEP for the Socialists & Democrats. “When the European watchdogs issue a joint warning, we’d better listen.”

San Marino’s Response

The San Marino government has responded to the warnings, saying they were read “with astonishment” and that problems in the past had “nothing to do with the virtuous process undertaken by the three states that have been transposing European regulations for years.” However, EU regulators remain concerned about the potential risks and are urging closer scrutiny of these tiny states’ financial ties.