Financial Inclusion and Crime in Monaco: Country on Brink of Gray List Designation

Monaco is facing growing concerns over its efforts to combat financial crimes. The Financial Action Task Force (FATF) will announce a decision regarding adding the principality to an intergovernmental “gray list” next month, which would subject Monaco to increased regulatory scrutiny and potentially harm its economy.

Background

According to a report by Bloomberg, the FATF is expected to make its announcement on June 28. The move follows previous criticism from European inspectors who highlighted deficiencies in Monaco’s prosecution of money laundering. In January, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) noted that while Monaco had taken steps to identify money-laundering and terrorist financing threats, its authorities were limited by a lack of information and investigation into financial crimes.

Vulnerability to Financial Threats

As one of the wealthiest countries in the world, Monaco is considered particularly vulnerable to financial threats. With the highest concentration of millionaires and billionaires, and renowned for its luxury housing and opulent casinos, the principality’s international profile makes it a prime target for suspect financial flows.

• “In most cases where it is identified, the predicate offense is committed abroad and the proceeds of the crime are laundered in Monaco,” Moneyval analysts wrote. “For the most part, these proceeds originate from neighboring jurisdictions, especially France and Italy.”

Consequences of Gray List Designation

If Monaco is added to the gray list, it could have far-reaching consequences for its economy. The principality would be subject to increased regulatory scrutiny, and some investors may be deterred from doing business in a country with this designation.

• The fate of Monaco echoes that of the United Arab Emirates, which was added to the gray list in 2022 after failing to address financial offenses. However, following reforms aimed at addressing these issues, including allowing for easier extradition of individuals accused of white-collar crime, the UAE was removed from the list in February this year.

Action Required

Monaco’s authorities face a pressing need to step up their efforts to investigate and prosecute money laundering, confiscate and recover proceeds of crime, and strengthen its supervisory system. If it fails to do so, the principality risks facing significant economic consequences as a result of its gray list designation.