Monaco Faces Intensified Scrutiny over Money Laundering Vulnerabilities: Key Findings from the Council of Europe Report

Monaco’s reputation as a financially prosperous European microstate is under threat as the Council of Europe report identifies significant money laundering vulnerabilities.

Key Concerns and Recommendations

Ineffective AML System and Risk Assessments

• Monaco faces considerable money laundering risks, particularly due to its internationally oriented financial activities.
• The report criticizes the uneven effectiveness of Monaco’s Anti-Money Laundering (AML) system.
• A risk-based supervision approach, increased on-site inspections, and guidelines for wealth management and private banking firms are recommended.

AML Supervision of Financial and Non-Financial Institutions

• Monaco’s financial institutions and non-financial businesses face little to no regulation.
• The report advises implementing formal regulation and ensuring that all sectors represent low-risk profiles for financial fraud.

Lack of Adequate Investigations and Prosecutions

• The report highlights inadequate investigations and prosecutions for money laundering cases.
• Monaco has recently made legislative developments but investigations can still take up to a decade.
• The recommendations include improving response times and domestic legislation to impose appeal time limits.

Challenges with International Cooperation Requests

• The domestic legislation imposes hindrances to international investigations.
• Monaco is advised to significantly improve response times and adapt the legislation accordingly.

Potential Consequences

• With the report scheduled to be discussed at the Financial Action Task Force (FATF) plenary, Monaco may enter a one-year observation period and possibly face “grey-listing.”

Monaco’s Determination and the Road Ahead

• The Monegasque government has expressed its commitment to implementing the report’s recommendations and addressing its anti-money laundering measures.
• The challenges in effectively addressing these issues will test Monaco’s resolve and financial reputation.