Financial Crime World

Monaco at Risk of Grey-Listing Over Bribery and Corruption in Finance

A recent report by the Council of Europe has highlighted significant vulnerabilities in Monaco’s measures against money laundering, warning that the country risks being placed under intense scrutiny by the international Financial Action Task Force (FATF) watchdog.

Money Laundering Risks

The report claims that Monaco faces significant money laundering risks due to its internationally-oriented financial activities and is a prime target for illicit cross-border financial flows. In most cases, frauds are committed abroad with the proceeds laundered in Monaco.

  • The report highlights the country’s vulnerabilities in combating fraud and corruption risks.
  • International cooperation and sanctions are not sufficient to combat these risks.

Structural Reforms Needed

The report has sparked renewed scrutiny of Monaco’s financial industry, which has faced accusations of protecting the fortunes of Russian oligarchs despite international sanctions against Russia.

  • Monaco is due to enter a one-year observation period after the report goes to FATF plenary on February 20.
  • If structural reforms are not implemented during this time, Monaco risks being named and shamed in a public grey list.

Anti-Money Laundering (AML) System

The country’s AML system is described as “uneven”, with many risks not effectively accounted for. The report calls for the implementation of a risk-based supervision approach and guidelines for wealth management and private banking firms to ensure greater compliance with Monaco’s supervisory framework.

Investigations and Prosecutions

Investigations and prosecutions have also been criticized as inadequate, with many cases failing to be identified by authorities in the first place. The speed of investigations has also been questioned, with some cases taking up to 10 years to complete.

  • International cooperation is hindered by obstacles in domestic legislation.
  • Monaco’s demands for international support work generally well, but are not always aligned with associated risks.

Government Response

The Monegasque government has pledged to implement the report’s recommendations quickly to align with international standards. However, if structural reforms are not implemented during the one-year observation period, Monaco faces the risk of being grey-listed as early as mid-2024.