Financial Crime World

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Monaco’s Money Laundering and Terrorism Financing Vulnerabilities Under Scrutiny

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

Key Findings

  • Monaco faces significant money laundering risks due to its “internationally oriented financial activities” and is a prime target for illicit cross-border financial flows.
  • The country’s risk analysis, international cooperation, and sanctions are not fully equipped to face fraud and corruption risks.
  • Although terrorism financing risks were found to be relatively low, more in-depth analyses are required by Monégasque authorities.

Recommendations

  • Implement structural reforms within a one-year observation period to address vulnerabilities in money laundering prevention.
  • Enhance risk analysis, international cooperation, and sanctions to combat fraud and corruption.
  • Conduct more in-depth analyzes of terrorism financing risks and implement effective measures to prevent them.

Current Status

  • 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 within this period, the country risks being named and shamed on a public “grey list”.

Criticisms

  • The effectiveness of Monaco’s anti-money laundering (AML) system is “uneven”, with not all risks effectively accounted for.
  • Significant vulnerabilities regarding laundering the proceeds of income tax fraud committed abroad were identified.
  • Supervisory activities of financial institutions and non-financial businesses, such as real estate agents, property dealers, and private banking, are inadequate.
  • Investigations and prosecutions are inadequate, with many cases failing to be identified by authorities in the first place and speed of investigations begging questioning.

Government Response

  • Monaco’s government told EURACTIV that it adheres fully to the policy recommendations of the report and is determined to implement them quickly to align with international standards.
  • The report was approved at the MONEYVAL plenary on December 9th, and it is almost certain that FATF will bring Monaco into a one-year observation period on February 20th.

Consequences

  • If Monaco fails to address structural deficiencies, it runs the risk of being grey-listed as early as mid-2024.
  • A grey list includes countries such as Albania, Barbados, Gibraltar, Morocco, and Panama, among others. Monaco was previously included in an “Uncooperative Tax Havens” OECD list until 2009.

Ongoing Reforms

  • The Monegasque authorities have undertaken legislative reforms since April 2022 to address the report’s priority concerns, particularly in the non-financial business sector.
  • These reforms aim to enhance risk analysis, international cooperation, and sanctions to combat fraud and corruption.