Monaco Added to Anti-Money Laundering ‘Grey List’
The Financial Action Task Force (FATF) has added Monaco, a small principality on the French Riviera, to its “grey list” of countries with strategic deficiencies in their anti-money laundering and terrorist financing safeguards. This move comes as a result of Monaco’s failure to meet international standards for combating money laundering and terrorism financing.
What Does it Mean?
According to FATF, Monaco has made significant progress on several fronts, including:
- Establishing a new combined financial intelligence unit and anti-money laundering/counter-terrorism financing supervisor
- Strengthening its approach to detecting and investigating terrorism financing
However, the country still needs to improve in the following areas:
- Implement targeted financial sanctions
- Improve risk-based supervision of non-profit organizations
- Enhance sanctions for anti-money laundering/counter-terrorism financing breaches
FATF’s Expectations
To address these strategic deficiencies, FATF has given Monaco six key areas to focus on:
- Strengthening its understanding of risk
- Increasing the rigor of its identification and seizure of criminal assets abroad
- Enhancing sanctions for anti-money laundering/counter-terrorism financing breaches
- Improving the seizure of property suspected to derive from criminal activities
Impact on Financial Sector
Industry insiders predict that the move will have a significant impact on Monaco’s financial sector, particularly on corporate service providers, banks, and trust companies. As a result, these entities will be expected to implement stricter know-your-customer (KYC) procedures to ensure compliance with international anti-money laundering standards.
Reputational Damage
Industry experts believe that the reputational damage could be short-lived, citing Malta’s experience when it was removed from the grey list just six months after being added. However, some experts also think that the move may actually boost Monaco’s profile and attract more clients who are looking for a jurisdiction with a strong anti-money laundering regime.
Quotes
- “We expect to see some of the toughest KYC requirements for clients. A client not willing to share intimate details will be instantly rejected. No one will take the risk.” - Ian Petts, partner at Jaffa Prive in Monaco
- “For those of us in Monaco, working closely with UHNW clients to handle the sale, charter and management of their high-value assets, this latest development is disappointing but not unexpected. We do not anticipate this new situation having a material impact on our internal procedures.” - Patrick Coote, MD Europe at Northrop & Johnson
Global Context
The FATF’s move comes as Turkey and Jamaica were removed from the grey list for making significant progress in their anti-money laundering regimes. Monaco is now the highest-profile European nation to be added to the list, which includes more than 200 nations and jurisdictions that are subject to increased monitoring to prevent money laundering and the financing of terrorism.