Financial Crime World

MONACO’S BANKING INDUSTRY UNDER SCRUTINY: COUNCIL OF EUROPE REPORT RAISES CONCERNS OVER MONEY LAUNDERING RISKS AND FINANCIAL SECRECY

A Scathing Report from the Council of Europe

A recent report from the Council of Europe has cast a shadow over Monaco’s banking industry, warning that the principality’s measures against money laundering are woefully inadequate and leaving it vulnerable to being placed on a grey list by the international Financial Action Task Force (FATF).

Inadequate Measures Against Money Laundering

The report found that Monaco’s financial system is riddled with vulnerabilities, particularly in regards to its “internationally oriented financial activities” and lack of effective supervision over financial institutions. The country’s Anti-Money Laundering (AML) system is unevenly applied, leaving many high-risk sectors such as real estate agents and private banking unregulated.

Critical Findings

The report highlights several critical findings, including:

  • Lack of Effective Supervision: Monaco’s lack of effective supervision over financial institutions has created a haven for money laundering.
  • Uneven AML Application: The country’s AML system is unevenly applied, leaving many high-risk sectors unregulated.
  • Insufficient Investigations and Prosecutions: Only six convictions were handed down between 2017 and 2021, highlighting the need for significant improvements in investigations and prosecutions of money laundering cases.

Recommendations

The report recommends that Monaco:

  • Introduce a Risk-Based Approach to On-Site Inspections: The country should introduce a risk-based approach to on-site inspections to ensure that financial institutions are adequately supervised.
  • Develop Guidelines for Wealth Management and Private Banking Firms: Monaco should develop guidelines for wealth management and private banking firms to ensure that they comply with AML regulations.

Response from the Monegasque Authorities

The Monegasque authorities have acknowledged the report’s findings and pledged to implement its recommendations quickly in an effort to align with international standards. However, the country faces a one-year observation period by FATF, during which it must address its structural deficiencies or risk being placed on the grey list.

Concerns Over Reputation

The report has sparked renewed concerns over Monaco’s reputation as a financial hub, particularly given recent allegations of protecting Russian oligarchs’ fortunes despite international sanctions. The country’s failure to meet AML standards could have far-reaching consequences for its banking industry and reputation.

Expert Opinion

As one expert noted, “Monaco’s failure to address these issues could lead to a loss of confidence in the country’s financial system, which would be disastrous for its economy.”