Financial Crime World

Monaco Faces Intense Scrutiny Over Money Laundering Concerns

A recent report by 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.

A Prime Target for Illicit Cross-Border Financial Flows

The report emphasizes that Monaco is a “prime target” for illicit cross-border financial flows due to its internationally oriented financial activities. Fraudsters often commit crimes abroad, with the proceeds laundered in Monaco, and the country’s risk analyses, international cooperation, and sanctions are not fully equipped to address fraud and corruption risks.

Concerns over Terrorism Financing Risks

While terrorism financing risks have been found to be relatively low, more in-depth analysis is required by Monegasque authorities. The report notes that the country’s Anti-Money Laundering (AML) system has been deemed “uneven”, with not all risks being effectively accounted for.

Key Findings and Recommendations

  • Monaco is a prime target for illicit cross-border financial flows.
  • Risk analyses, international cooperation, and sanctions are not fully equipped to address fraud and corruption risks.
  • The country’s AML system has been deemed “uneven”, with not all risks being effectively accounted for.
  • Significant improvements are required in Monaco’s supervisory activities of financial institutions and non-financial businesses such as real estate agents, property dealers, and private banking.
  • Money laundering-related prosecutions and sanctions need to be improved, with many cases failing to be identified by authorities in the first place.

Next Steps

Monaco is set to enter a one-year observation phase after the report goes to FATF plenary on February 20th. If structural reforms are not implemented during this period, the country risks being named and shamed in a public “grey list”. The Monegasque government has vowed to implement the report’s recommendations quickly.

Implications

  • Failure to implement reforms could result in Monaco being grey-listed as early as mid-2024.
  • The country would join a list of other nations including Albania, Barbados, Gibraltar, Morocco, and Panama.

Conclusion

A one-year observation period does not imply a general failure of Monaco’s AML system, but rather highlights specific issues that need to be addressed. The Monegasque authorities have undertaken legislative reforms since April 2022 to tackle the report’s priority concerns, particularly in the non-financial business space.