Financial Crime World

Monaco at Risk of Being “Grey-Listed” Over Financial Crimes Concerns

A recent report from the Council of Europe has highlighted significant vulnerabilities in Monaco’s measures against money laundering, putting the country at risk of being placed under intense scrutiny by the international Financial Action Task Force (FATF) watchdog.

Money Laundering Risks and Vulnerabilities

The report claims that Monaco faces substantial money laundering risks due to its “internationally oriented financial activities” and is a “prime target” for illicit cross-border financial flows. In most cases, frauds are committed abroad, with the proceeds of crime laundered in Monaco.

Concerns Over Supervision and Regulation

The report highlights several key concerns, including:

  • Uneven supervision of financial institutions and non-financial businesses such as real estate agents and private banking firms, which face little to no formal regulation.
  • Lack of adequate risk-based supervision approach and inadequate system for identifying money laundering-related prosecutions and sanctions.

Inadequate Investigations and Prosecutions

The report notes that investigations and prosecutions are often slow and inadequate, with many cases failing to be identified by authorities in the first place. The report also highlights problems within the Monaco judiciary system, including:

  • Limited investigatory powers of the Prosecutor General.
  • Insufficient staff numbers.
  • Lack of time limits for filing appeals.

Consequences of Not Addressing Deficiencies

If Monaco fails to address its structural deficiencies, it risks being “grey-listed” as early as mid-2024, joining countries such as Albania, Barbados, Gibraltar, Morocco, and Panama on a list of nations deemed to be non-compliant with anti-money laundering regulations.

Government Response

The Monegasque government has promised to implement the report’s recommendations quickly and adhere to international standards. However, the report’s findings have sparked renewed scrutiny of Monaco’s financial industry, which has recently been accused of protecting the fortunes of Russian oligarchs before aligning with international sanctions against Russia.

Timeline

  • February 20: FATF plenary review of Monaco’s anti-money laundering measures.
  • One-year observation phase for Monaco to implement structural reforms.
  • Mid-2024: Potential “grey-listing” of Monaco if reforms are not implemented.