Europe’s Finance Watchdogs Raise Alarm Over Economic Ties with San Marino, Monaco, and Andorra

Less Rigorous Oversight Rules: A Potential Backdoor for Illicit Flows into the EU

In a joint letter, European financial regulators have expressed concerns over the EU’s plans to deepen economic ties with San Marino, Monaco, and Andorra. The regulators, including the European Central Bank and the European Commission, argue that these countries’ “less rigorous” oversight rules could allow illicit financial flows into the European Union.

Previous Use as Tax Havens and Money Laundering Hubs

The letter obtained by the International Consortium of Investigative Journalists (ICIJ) highlights these countries’ historical use as havens for tax evasion and money laundering. Despite the EU’s intentions to strengthen relations, the regulators believe that the potential risks outweigh the benefits.

Removal from EU’s List of Non-Cooperative Jurisdictions

The European Commission has announced plans to remove non-EU countries, including San Marino, Monaco, and Andorra, from its list of non-cooperative jurisdictions for tax purposes. However, the financial watchdogs argue that these countries do not meet the necessary transparency and tax compliance standards.

Lack of Transparency and Opacity

• San Marino: Known for its complex corporate structure and lack of public company registers.
• Monaco: One of the world’s largest tax havens, criticized for its opacity and lack of transparency.
• Andorra: Recently began implementing anti-money laundering measures.

Implications and Recommendations

The letter urges the EU to consider the implications of its actions carefully. The regulators recommend continued push for greater transparency and cooperation with non-EU countries, as well as more resources for enforcement agencies and greater information-sharing between member states.

renewed calls for action on financial crime

With the EU under pressure to address financial crime following high-profile scandals like Wirecard and LuxLeaks, European Commission Vice-President Valdis Dombrovskis has acknowledged the need for action. The regulators call for a ‘zero-tolerance approach’ to financial crime and increased transparency, accountability, and cooperation.

Significance and Renewed Debate

The publication of the letter is likely to renew calls for action on financial crime from civil society organizations and anti-corruption groups. The European Parliament has already expressed concern over the matter, with MEPs urging the EU to take a strong stance against financial crime.

The letter serves as a reminder of the ongoing fight against financial crime and the importance of transparency, accountability, and cooperation in protecting the integrity of the EU’s financial system.