Financial Crime World

Monaco Fraud Alert: EU Watchdogs Warn of Money Laundering Risks Amid Proposed Deeper Financial Ties with Tiny Principality

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The Chair of the European Banking Authority (EBA) has issued a strongly worded warning to the European Commission regarding the potential money laundering risks posed by closer financial relationships with Monaco, San Marino, and Andorra. These microstates are poised to sign economic agreements with the EU, which could grant them access to the single market.

Historical Financial Regulation Concerns

  • According to EBA Chair José Manuel Campa, these tiny states “historically maintained less rigorous financial regulations” and may be prone to money laundering and other illicit activities.
  • The letter, co-signed by the chairs of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), warns that a deeper relationship with these countries could create significant risks to consumers.

Monaco’s Weak Anti-Financial Crime Defenses

  • Monaco has been criticized for its weak anti-financial crime defenses, particularly by the Council of Europe’s AML/CFT supervisor, Moneyval.
  • Moneyval delivered a scathing assessment of Monaco’s ability to fight financial crime earlier this year, citing failures in nearly every aspect of its regime.

EU Agreements and Concerns

  • The EBA warning comes as the EU is pushing to conclude trade agreements with Andorra, Monaco, and San Marino by the end of the year.
  • These agreements would allow the microstates to benefit from free movement of people, goods, services, and capital, but only if they adhere to some EU regulations.
  • Critics argue that these agreements could open a backdoor for illegal money to flow into the EU, making it easier for predatory financial firms to target consumers.

Resistance and Reassurances

  • San Marino’s government has expressed astonishment at the warnings, insisting that it had transposed European regulations for years and complied with main mechanisms for fostering tax and financial cooperation.
  • Commission Vice President Maroš Šefčovič remains optimistic about the prospects of concluding an agreement before the European election next June.
  • However, a failure to reach an accord could see the plans fall by the wayside.