MONACO AT RISK OF BEING ‘GREY-LISTED’ OVER MONEY LAUNDERING CONCERNS

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

Money Laundering Risks

The report identifies Monaco as a “prime target” for illicit cross-border financial flows due to its internationally oriented financial activities. In most cases, frauds are committed abroad, while the proceeds of crime are laundered in Monaco.

AML System Criticized

The effectiveness of Monaco’s Anti-Money Laundering (AML) system is criticized as “uneven” and failing to account for all risks, particularly with regards to laundering income tax fraud committed abroad. Income tax evasion is not criminalised in Monaco, and no serious risk analysis has been undertaken.

Supervisory Activities

The report highlights the need for significant improvements in Monaco’s supervisory activities of financial institutions and non-financial businesses such as real estate agents, property dealers, and private banking. These sectors represent high-risk financial fraud profiles, but no adequate system was implemented during the evaluation period.

Investigations and Prosecutions

Moreover, the report notes that investigations and prosecutions related to money laundering are inadequate, with many cases failing to be identified by authorities in the first place, and those that are prosecuted taking an average of 10 years to complete. Only six convictions were handed down between 2017 and 2021.

International Cooperation

The report also criticizes Monaco’s international cooperation, citing obstacles to returning responses to requesting countries and lengthy appeal processes.

Next Steps

Monaco is due to enter a one-year observation phase after the report goes to FATF plenary on February 20th. Should structural reforms not be implemented within this period, Monaco risks being named and shamed in a public “grey list”.