Financial Crime World

Here is the article rewritten in markdown format with proper headings and subheadings:

Monaco Faces Scrutiny Over Economic Sanctions and Compliance

Monaco’s financial industry has come under intense scrutiny following a report by the Council of Europe that highlighted key vulnerabilities in its measures against money laundering. The country faces significant risks due to its internationally oriented financial activities, making it a prime target for illicit cross-border financial flows.

Key Vulnerabilities Exposed

  • Internationally Oriented Financial Activities: Monaco’s financial industry is at risk due to its globally focused operations.
  • Fraud and Corruption Risks: The country’s risk analysis, international cooperation, and dissuasiveness of sanctions are not fully equipped to address these risks.
  • Terrorism Financing: While relatively low, more in-depth analyses are required by Monégasque authorities.

AML System Found to be “Uneven”

The effectiveness of Monaco’s Anti-Money Laundering (AML) system is uneven, and not all risks have been effectively accounted for. This is particularly true regarding laundering the proceeds of income tax fraud committed abroad.

Income Tax Evasion

  • Income tax evasion is not criminalised in Monaco.
  • No serious risk analysis has been undertaken.

Investigations and Prosecutions Found to be Inadequate

Many money laundering-related cases fail to be identified by authorities, and investigations can last up to 10 years. This highlights inherent problems in the Monaco judiciary system, including:

Limited Investigatory Powers

The Prosecutor General has limited investigatory powers.

Insufficient Staff Numbers

Staff numbers are insufficient to effectively handle investigations.

Unlimited Filing of Appeals

Filing an appeal is not time-limited, leading to prolonged investigations.

International Cooperation Facing Obstacles

While Monaco is active in enhancing international cooperation, domestic legislation imposes unusual and fundamental obstacles to returning responses to requesting countries. This has hindered international investigations in the past.

Risk of “Red-Listing”

Monaco is almost certain to be placed under a one-year observation period by FATF on February 20. Should it fail to address structural deficiencies, it runs the risk of being grey-listed as early as mid-2024.

Countries that have been Grey Listed

  • Albania
  • Barbados
  • Gibraltar
  • Morocco
  • Panama, among others

One-Year Observation Period

The Monegasque authorities have undertaken legislative reforms since April 2022 to tackle the report’s priority concerns. This one-year observation period does not speak to a general failure of the AML system in Monaco but rather is the sum of observations made on different issues.