Monaco’s Money Laundering Vulnerabilities Under Scrutiny: Report Highlights Key Weaknesses
A recent report published by the Council of Europe has shed light on significant vulnerabilities in Monaco’s measures against money laundering, putting the country’s financial industry under intense scrutiny.
Major Concerns
- Internationally Oriented Financial Activities: Monaco faces substantial money laundering risks due to its “internationally oriented financial activities” and its status as a prime target for illicit cross-border financial flows.
- Uneven Supervision: The effectiveness of the Anti-Money Laundering (AML) system is “uneven”, with not all risks effectively accounted for. Income tax fraud committed abroad is not criminalized in Monaco, and no serious risk analysis has been undertaken to address this issue.
Key Weaknesses
- Lack of Regulation: Financial institutions and non-financial businesses such as real estate agents, property dealers, and private banking firms face little to no formal regulation but are high-risk profiles for financial fraud. The report recommends implementing a risk-based supervision approach.
- Inadequate Investigations and Prosecutions: Many cases fail to be identified by authorities in the first place, and when they are, investigations can take up to 10 years. The number of money laundering-related convictions between 2016 and 2021 was six.
International Cooperation
- Obstacles to Cooperation: Domestic legislation creates unusual and fundamental obstacles that slow down the process of returning responses to requesting countries.
Government Response
The Monegasque government has acknowledged the report’s findings and committed to implementing its recommendations quickly. However, if Monaco fails to address these issues, it risks being placed on the “grey list” by FATF as early as mid-2024.
Implications
- Grey List: Joining other countries such as Albania, Barbados, Gibraltar, Morocco, and Panama.
- International Scrutiny: The country’s financial industry will be under intense scrutiny, potentially damaging its reputation and attracting unwanted attention from regulators and law enforcement agencies.
Conclusion
The report is a wake-up call for Monaco’s financial industry, which has recently been accused of protecting the fortunes of Russian oligarchs despite international sanctions against Russia. The country must take swift action to address these vulnerabilities and align itself with international standards to avoid being placed under intense scrutiny by FATF.