Financial Crime World

Fraudulent Transactions in Finance in San Marino Warned Against by European Regulators

Money Laundering Risks Pose a Significant Threat to Europe’s Consumers

The Chair of the European Banking Authority (EBA), José Manuel Campa, has sounded the alarm over the money laundering risks posed by closer financial relationships with Monaco, San Marino, and Andorra. In a letter to the European Commission, Campa warned that these tiny states “historically maintained less rigorous financial regulations” and may be prone to money laundering and other illicit activities.

History of Less Rigorous Financial Regulations

  • These microstates have traditionally had less stringent financial regulations, making them more vulnerable to money laundering and other financial crimes.
  • The EBA Chair warns that companies might deliberately set up shop in these states to benefit from lighter financial standards, creating “significant risks to consumers” if they sell their products across the bloc.

Monaco’s Money Laundering Reputation

  • Monaco has been criticized for its lack of effective anti-financial crime defenses.
  • The Council of Europe issued a scathing assessment of Monaco’s anti-money laundering efforts earlier this year.

Concerns about Closer Ties with Monaco, San Marino, and Andorra

  • The EBA, EIOPA, and ESMA are concerned that closer ties with these states could open the door to illegal money and make it easier for predatory financial firms to target people in the EU.
  • They warn that a failure to reach an agreement on regulatory standards could lead to significant financial harm to Europe’s consumers.

Response from San Marino

  • San Marino has responded to the warnings with astonishment, claiming that past problems had “nothing to do with the virtuous process undertaken by the three states” and that they comply with European regulations.
  • However, the EBA Chair remains concerned about the potential risks posed by these countries’ financial systems.

The Way Forward

  • The proposed deal requires the three countries to follow some EU regulations in order to benefit from free movement of people, goods, services, and capital.
  • Failure to reach an agreement before the European election next June could mean that the plans are abandoned.
  • Financial services are just one part of the bigger association agreements with the three countries, intended to remove trade obstacles.