Financial Crime World

Monaco’s Financial Crime Risk Assessment: MONEYVAL Reports Moderate Effectiveness, Identifies Key Areas for Improvement

On January 23, 2023, the Council of Europe’s MONEYVAL agency released its fifth-round evaluation report on Monaco’s progress in combatting money laundering (ML) and terrorism financing (TF). The on-site visit to Monaco took place in March 2022, and the report considers the country’s capacity to prevent and address ML/TF risks in a more detailed and comprehensive manner.

MONEYVAL’s Assessment of Monaco’s Effectiveness

Monaco’s efforts to identify ML/TF risks have shown some improvements, but significant weaknesses remain, as outlined in the report. MONEYVAL identified a moderate level of effectiveness for Monaco in several areas, such as:

  • Understanding ML/TF risks
  • International cooperation
  • Applying AML/CFT preventive measures in the private sector
  • Utilizing financial intelligence
  • Implementing targeted financial sanctions on TF and proliferation financing

However, substantial improvements are necessary in various areas. Below are the key areas that need attention.

Areas for Improvement

Monaco needs to improve transparency in legal persons and enhance supervision to address ML/TF risks effectively.

  • Transparency in legal persons: Monaco must establish beneficial ownership registers and ensure their accessibility to competent authorities.
  • Enhanced supervision: Monaco should improve the current deficiencies in the supervisory system, particularly with regards to beneficial ownership, to ensure tailored supervision for a large number of obliged entities.

Increasing ML Investigations and Prosecutions and Seizing Proceeds of Crime

Monaco must focus on seizing, confiscating, and recovering proceeds of crime to improve the identification and prioritization of ML cases.

  • ML investigations and prosecutions: Monaco needs a more significant number of ML investigations and prosecutions, particularly targeting complex cases and third-party ML.
  • Convictions and sanctions: Current ML convictions involve foreign proceeds and standalone ML but do not cover ML committed by third parties. Sanctions are proportionate but not effective or dissuasive, and confiscation measures are still relatively few.

Addressing High-Risk Sectors and Underutilizing the Financial Intelligence Unit

Monaco must prioritize addressing high-risk sectors and fully utilize the Financial Intelligence Unit.

  • High-risk sectors: Sectors such as casinos, company service providers, trusts, virtual assets, organized crime, and external ML threats have not yet been adequately addressed.
  • Financial Intelligence Unit (SICCFIN): Monaco’s Financial Intelligence Unit (SICCFIN) is under-resourced but still manages to produce high-quality analyses. However, these analyses are not fully utilized by investigative authorities, and the majority of Suspicious Transaction Reports (STRs) come from banks.

Monaco needs to make progress in areas like the legal framework and international cooperation.

  • Legal framework for targeted financial sanctions (TFS): Monaco’s legal framework is appropriate for implementing TFS, but delays in implementation and inconsistent risk analysis have impacted their effectiveness.
  • International cooperation: Monaco’s cooperation with counterparts is generally strong, but systemic legislative obstacles hinder providing mutual legal assistance and result in a high rejection rate of requests. Extradition issues also arise due to an overly restrictive interpretation of the dual criminality principle.