Financial Crime World

Monaco’s Trust and Company Service Providers (TCSPs) Sector: Moderate High Risk of Financial Crime - A New Assessment

Monaco’s financial sector undergoes in-depth assessments to identify money laundering and terrorist financing risks. In the second National Risk Assessment (NRA 2), Monaco’s Financial Analysis Unit (AMSF) focused on areas requiring improvement, specifically the TCSP sector and trusts/trustees. In response, AMSF conducted the 2023 Sectoral Risk Assessment for the TCSP Sector (2023 TCSP SRA) to further understand the risks in this sector.

The 2023 TCSP Sector Risk Assessment

The 2023 TCSP SRA analyzed potential risks within three sub-sectors: TCSP companies, business centers, and trustees.

TCSP Companies

This sub-sector, with a high customer risk, primarily offers company services and limited trust services. With a heavy focus on offshore business and clients from higher-risk jurisdictions, the sub-sector remains significant in the Monaco financial sector.

Business Centers

Business centers are now under Monaco’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime. The sector’s residual risk rating is medium. These centers provide addresses to civil law partnerships, allowing for anonymous real estate transactions, leading to potential money laundering and terrorist financing risks.

Trustees

Trustees provide services mainly to a niche Monaco resident group from common law jurisdictions. With adequate controls and regulatory requirements, the sub-sector’s residual risk rating is assessed as low.

The 2023 TCSP Sector Risk Assessment Findings

The 2023 TCSP SRA findings indicate a decrease in the activity levels and materiality of the TCSP sector. However, due to high customer risks exposure, the sector remains under moderate high risk. It is crucial for TCSPs to further strengthen controls and mitigate these risks.

Recommendations for Monaco’s Private Sector

  1. TCSPs must improve customer risk assessment and accurately distinguish all relevant risk factors.
  2. Business centers should build a comprehensive AML/CFT framework to meet new regulatory requirements.
  3. Trustees need to perform thorough due diligence and report relevant information to the Register of Trusts.

AMSF’s Approach

AMSF will prioritize risk-based inspections and targeted thematic inspections to identify weaker areas in the TCSP sector. The upcoming supervisory cycle focuses on inspections of TCSP companies, business centers, and trustees.

Continuous Review and Updating

Monaco remains committed to reviewing global, regional, and national developments and updating the SRA to maintain a focus on the sectors where its efforts yield the most value.