Monaco Rushes to Strengthen Anti-Money Laundering Regime Amid Threat of Grey Listing
In an effort to avoid being labelled as non-compliant with international standards for combating money laundering, Monaco has embarked on a series of fast-track reforms. The tiny principality, prized by criminals for its lax financial regulations, is under threat of being downgraded from its current status as a respected international financial center.
Background
According to Moneyval, a Council of Europe body responsible for evaluating anti-money laundering and counter-terrorist financing measures, Monaco fell short on numerous evaluation criteria in its latest assessment report. The report highlighted several “deficiencies,” “weaknesses,” and “shortcomings” in the principality’s anti-money laundering regime.
Threat to International Profile
The warning shot comes as Moneyval warned that Monaco’s international profile, particularly through its banking and financial services, makes it a prime target for suspect financial flows. Criminals have long prized Monaco for its ability to launder proceeds from crimes such as tax fraud, embezzlement, and corruption.
Timeline
To avoid being placed on the grey list of jurisdictions subject to enhanced surveillance, Monaco must demonstrate its efforts to comply with international rules over the next 12 months. The decision will be taken in 2024 by the Financial Action Task Force (FATF), the intergovernmental body responsible for combating money laundering and terrorism financing.
Response
The principality’s authorities have responded swiftly to the warning, launching a transparency exercise aimed at listing the true owners of companies behind possible frontmen. While some business leaders have expressed frustration with the new requirements, others recognize the need for increased transparency in order to avoid being tainted by the country’s questionable reputation.
Outlook
As Monaco navigates this critical period, it remains to be seen whether its efforts will be sufficient to stave off a downgrade and maintain its status as an attractive destination for foreign investors.
Key Points:
- Monaco is under threat of being downgraded from its current status as a respected international financial center due to lax financial regulations.
- Moneyval highlighted several “deficiencies,” “weaknesses,” and “shortcomings” in the principality’s anti-money laundering regime.
- Monaco must demonstrate its efforts to comply with international rules over the next 12 months to avoid being placed on the grey list of jurisdictions subject to enhanced surveillance.
- The principality’s authorities have launched a transparency exercise aimed at listing the true owners of companies behind possible frontmen.