Monaco at Risk of Grey-Listing Over Money Laundering Concerns
A recent report by the Council of Europe has warned that Monaco’s measures against money laundering and terrorism financing are inadequate, putting the country at risk of being placed under intense scrutiny by the international Financial Action Task Force (FATF) watchdog.
Inadequate Anti-Money Laundering System
The report highlights key vulnerabilities in Monaco’s Anti-Money Laundering (AML) system, warning that the Principality faces significant money laundering risks due to its internationally oriented financial activities. The report notes that risk analyses, international cooperation, and sanctions are not fully effective in addressing fraud and corruption risks.
Criticisms of Monetary System
The Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) assessed Monaco’s compliance with international standards, concluding that the effectiveness of the AML system is “uneven” and not all risks have been effectively accounted for.
Specific Areas of Concern
- Supervisory Activities: The report highlights the need for significant improvements in supervisory activities of financial institutions and non-financial businesses, such as real estate agents and private banking firms.
- Judiciary System: Investigations and prosecutions are inadequate, with many cases failing to be identified by authorities and lengthy appeals processes hindering complex financial fraud cases. Only six convictions were handed down between 2017 and 2021.
Consequences of Inaction
If Monaco fails to address these concerns, it risks being “grey-listed” as early as mid-2024, joining countries such as Albania, Barbados, and Panama among others. This would result in increased scrutiny and pressure on the country’s financial sector to reform.
Government Response
The Monegasque government has pledged to implement the report’s recommendations quickly, but the country’s authorities still face significant challenges in addressing its AML deficiencies.
Timeline for Reform
Monaco is due to enter a one-year observation phase after the report goes to FATF plenary on February 20. If structural reforms are not implemented during this period, Monaco risks being named and shamed in a public “grey list”.