MONACO SANCTIONED: Principality Added to Anti-Money Laundering “Grey List”
The Financial Action Task Force (FATF) has added the Principality of Monaco to its anti-money laundering “grey list”, citing strategic deficiencies in its money laundering and terrorist financing safeguards. This move has sent shockwaves through the financial community, as jurisdictions on the grey list are expected to implement an action plan to resolve identified strategic deficiencies within agreed timeframes.
Reasons for Inclusion
According to FATF officials, Monaco’s inclusion on the grey list is due to a lack of progress in implementing measures to prevent money laundering and terrorism financing. The principality has been deemed to have “strategic deficiencies” in its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.
Progress Made
Despite being added to the grey list, FATF officials noted that Monaco has made significant progress in strengthening its AML/CFT regime since the adoption of its mutual evaluation report (MER) in December 2022. The principality has:
- Established a new combined financial intelligence unit (FIU) and AML/CFT supervisor
- Strengthened its approach to detecting and investigating terrorism financing
- Implemented targeted financial sanctions
- Risk-based supervision of non-profit organizations
Challenges Remaining
However, Monaco still faces several challenges, including:
- Strengthening its understanding of risk in relation to money laundering and tax fraud
- Increasing the rigor of its identification and seizure of criminal assets abroad
- Enhancing sanctions for AML/CFT breaches
- Increasing the seizure of property suspected to derive from criminal activities
Industry Impact
Industry experts are bracing for impact, with some predicting that corporate service providers, banks, financial entities, MFOs, Trust companies will be implementing stricter know-your-client (KYC) procedures. As Ian Petts, partner at Jaffa Prive noted, “A client not willing to share intimate details will be instantly rejected.”
The reputational damage from being added to the grey list could be significant, but some experts believe it may have a short-term impact. As Petts also noted, “Malta was off the grey list within six months and people have very short memories.”
Reactions
Other industry insiders remain cautious, with Patrick Coote, MD Europe at Northrop & Johnson stating that while the development is disappointing, it is not unexpected. “We do not anticipate this new situation having a material impact on our internal procedures,” he said.
The FATF’s grey list includes more than 20 jurisdictions, including Monaco and Venezuela. The organization also maintains a black list for jurisdictions deemed to be high-risk.
Conclusion
The addition of Monaco to the anti-money laundering “grey list” is a significant development in the financial community. While the principality has made progress in strengthening its AML/CFT regime, it still faces several challenges. Industry experts are bracing for impact, and it remains to be seen how this development will affect corporate service providers, banks, financial entities, MFOs, Trust companies and other stakeholders.