Monaco’s Financial Sector Under Scrutiny: Clients and TCSPs Reportedly Lack Monegasque Bank Accounts
In a shocking revelation, Financial Transparency Advisors (FTA) has discovered that clients and Trust Companies Services Providers (TCSPs) in Monaco do not have Monegasque bank accounts. This lack of banking infrastructure raises significant concerns about the effectiveness of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures in the principality.
Lack of Banking Infrastructure and Due Diligence
The report highlights that TCSPs, which include business centers and trustees, are not conducting due diligence on their clients’ bank accounts, leaving them vulnerable to money laundering and terrorist financing. The absence of a “double layer” of Customer Due Diligence (CDD) carried out by both the TCSP and a bank in Monaco creates a significant risk.
Key Findings:
- TCSPs are not conducting due diligence on clients’ bank accounts
- Lack of a “double layer” of CDD creates a significant risk
- Many TCSPs do not collect sufficient customer-related data, including unknown beneficial owners and jurisdictions of incorporation
Risks Associated with Business Centers and Trustees
FTA’s analysis reveals that the TCSP sub-sector is more inclined to accept cash transactions and has limited use of third-party agents for CDD, making them more susceptible to high-risk customers. Moreover, the report notes that many TCSPs do not collect sufficient customer-related data, including unknown beneficial owners and jurisdictions of incorporation.
Business Centers:
- Have recently been brought under the AML/ CFT regime
- Level of compliance with new obligations is still non-existent to basic
Trustees:
- Appear to have stronger controls in place
- Strict rules regarding the acquisition of Monaco residency and extensive checks on trust administrators
- Elevated risks when foreign trustees are involved
Overall Controls Score
The overall controls score for the TCSP sub-sector is deemed “Weak,” while that of the trustees sub-sector is considered “Substantial.”
Recommendations:
- Financial Institutions (FIs) should reassess their risk profiles and controls in light of these findings
- FIs should assess and mitigate risks posed by forming business relationships with TCSPs
- Monitor cash operations by TCSP customers
Response from the Autorité de Contrôle Prudentiel et de Résolution (AMSF)
The AMSF has announced plans for thematic inspections, guidance, and outreach to improve compliance with AML/ CFT regulations.
Conclusion:
This development raises significant concerns about Monaco’s ability to effectively combat money laundering and terrorist financing, and its reputation as a financial hub is under scrutiny.