Financial Crime World

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Monaco’s Object Structures Lack Bank Accounts, Raising Concerns

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Monaco’s object structures, including Trust Companies and Business Centres, reportedly do not have a Monegasque bank account. This has raised concerns about the effectiveness of anti-money laundering (AML) and combating the financing of terrorism (CFT) measures in the region.

According to a recent report by Financial Transparency Advisors, the lack of a “double layer” of CDD carried out in Monaco by both the TCSP and a bank means that high expectations exist for the TCSP’s controls. The report highlights several risks associated with object structures, including:

  • Medium-high customer risks
  • Medium-low risks relating to products and transactions
  • Low risks relating to delivery channels

The report also notes that business centers are more inclined to accept cash and have limited understanding of high-risk customers. Additionally, they may lack customer-related data collected by business centers, which can make it difficult to identify beneficial owners (BO) or unknown jurisdictions of incorporation.

In contrast, trustees for trusts covered by Title I of Law No. 214 were found to have a “substantial” overall controls score, with strict rules applying regarding the acquisition of Monaco residency and extensive checks before a trustee is approved.

The report concludes that object structures pose medium-high inherent risks, while their controls are moderate, weak, or substantial. The residual risk is also classified as medium-high, low, or low, depending on the sub-sector.

Recommendations

In light of these findings, the Autonomous Monetary Institute of Monaco (AMSF) has announced plans to implement follow-up actions, including:

  • Thematic inspections
  • Guidance and outreach
  • Data collection and analysis
  • Review of individual risk profiles
  • Periodic updating of its Supervisory Risk Assessment (SRA)

The report also provides recommendations for financial institutions (FIs) on how to assess and mitigate risks posed by forming business relationships with TCSPs, monitoring cash operations, distinguishing between different types of customers, and reconsidering documentation requirements.

Key Takeaways

  • Object structures in Monaco lack a Monegasque bank account, raising concerns about AML/CFT measures.
  • High expectations exist for the TCSP’s controls due to the lack of a “double layer” of CDD.
  • Business centers are more inclined to accept cash and have limited understanding of high-risk customers.
  • Trustees for trusts covered by Title I of Law No. 214 have a substantial overall controls score.

Next Session

Join us on March 19, 2024, as we delve deeper into the AMSF’s Supervisory Findings 2023 and explore the implications for financial institutions in Monaco and beyond.