Monaco Slides into “Grey List” as Money Laundering Concerns Grow

Introduction

The Financial Action Task Force (FATF) has added Monaco to its anti-money laundering “grey list”, a move that has sent shockwaves through the financial community. The principality’s inclusion on the list is due to “strategic deficiencies” in its money laundering and terrorist financing safeguards.

FATF’s Concerns

According to FATF, Monaco has made significant progress in some areas, including:

• Establishing a new combined financial intelligence unit (FIU) and AML/CFT supervisor
• Strengthening its understanding of risk
• Increasing the rigor of its identification and seizure of criminal assets abroad
• Enhancing sanctions for AML/CFT breaches

However, Monaco still needs to address six key areas:

• Strengthening its understanding of risk
• Increasing the rigor of its identification and seizure of criminal assets abroad
• Enhancing sanctions for AML/CFT breaches
• Improving its system for reporting suspicious transactions
• Enhancing its powers to investigate and prosecute money laundering offenses
• Improving its cooperation with other countries in the fight against money laundering

Implications for Monaco-based Financial Institutions

The move is likely to have far-reaching implications for Monaco-based financial institutions, corporate service providers, and banks. As one expert noted:

“As a result, corporate service providers, banks, financial entities, MFOs, Trust companies will be implementing some of the toughest KYC on clients. A client not willing to share intimate details will be instantly rejected. No one will take the risk.”

Reaction from Experts

While some have expressed disappointment at Monaco’s inclusion on the list, others see it as an opportunity to promote the principality’s financial reputation. As Ian Petts, partner at Jaffa Prive noted:

“Only clients hesitating between jurisdictions will maybe put off. In fact, some say the grey listing gives more promotion for Monaco.”

Comparison with Other Countries

Monaco is not alone in its inclusion on the list; Venezuela was also added to the grey list during FATF’s recent plenary meeting in Singapore. Turkey and Jamaica, on the other hand, were taken off the list after making significant progress in their anti-money laundering regimes.

Conclusion

The Paris-based FATF monitors more than 200 nations and jurisdictions to prevent money laundering and the financing of terrorism. Monaco’s inclusion on the grey list is likely to have long-term implications for its financial reputation, but it remains to be seen whether the move will have any material impact on the market.