Council of Europe issues a scathing report on Monaco's ability to fight ML and TF

MONEYVAL, the AML/CFT supervisor for the Council of Europe, gave Monaco a harsh assessment of its capacity to combat financial crime today.

Practically every fundamental component of a strong AML and CFT regime, including Beneficial Ownership, STRs, staffing, and the criminal justice system, has flaws. In all seriousness, that is among the worst judgments in recent memory for a nation with a sophisticated banking and financial system.

Monaco must "step up its efforts to investigate and prosecute money laundering, to confiscate and recover proceeds of crime as well as to strengthen its supervisory system," the agency advises in a harsh evaluation.

Numerous casinos, banks, and some of the richest people in the world can be found in Monaco and its capital city of Monte Carlo. A royal family headed by Prince Albert rules the nation, which is tucked away on the French mainland with a Mediterranean coastline close to the Italian border.

The tiny nation's efforts to "investigate and prosecute money laundering, confiscate and recover proceeds of crime, as well as strengthen its supervisory system" received particular criticism from MONEYVAL.

The organization discovered that there have been no prosecutions or convictions for TF in Monaco.

Assessors claimed that "Given the gaps in the TF risk analysis, it could not be concluded that this is fully in line with the country’s risk profile."

MONEYVAL notes that the Monegasque authorities have a strong awareness of the ML/TF risk linked with the operations of different types of legal persons, but it criticizes significant shortcomings in the collection of beneficial ownership data.

Any mitigating measures used "are insufficient when it comes to a high-risk category of legal persons and in relation to the non-for profit organisations. Most of the applicable sanctions are not dissuasive and are rarely imposed."

To increase the Principality's efficiency in international collaboration, significant upgrades are also required. The report's conclusion is that Monaco "seeks the co-operation of its counterparts, although not entirely in line with the risk and context of the jurisdiction."

Another important and detrimental result is that while the prosecuting authorities satisfactorily carry out requests, Monaco's ability to provide reciprocal legal assistance is hampered by systemic and peculiar statutory restrictions. "As far as extradition is concerned, the restrictive interpretation by the courts of the dual criminality principle results in one out of two requests being refused," it concludes.

MONEYVAL chose to use its enhanced follow-up mechanism based on the findings of its study, and it invited Monaco to provide a report in December 2024.

Monaco has only "demonstrated a moderate level of effectiveness in relation to ML/TF risk understanding, international cooperation," and the use of AML/CFT preventative measures by the private sector, according to MONEYVAL.

According to the report, there is a need for significant improvements in the following areas including TF investigations and prosecutions and transparency of legal persons.

According to the report, major changes are required to increase the efficacy of monitoring, ML investigations and prosecutions, and confiscation of proceeds of crime.

While the country has made commendable attempts to identify ML/TF risks, according to MONEYVAL, this only gives an initial risk knowledge in specific areas.

"Further analysis is needed regarding others (casinos, company services providers, trusts and virtual assets). Furthermore, the threat environment should be further analysed as regards organised crime and external money laundering threats," according to the Council of Europe's oversight body.

Despite having "a significant lack of human and technical resources," Monaco's Financial Intelligence Unit (SICCFIN) is an important source of financial intelligence.

However, SICCFIN has demonstrated its ability to deliver high-quality analysis, which the investigating authorities do not fully utilize.

AML investigations and prosecutions, according to MONEYVAL, do not seem to be in line with Monaco's risk profile, with particular weaknesses relating to complicated instances.

"The report expresses concerns regarding the very low number of convictions achieved, and the even lower number of confiscation measures ordered, none of which covers property of equivalent value or property held by third parties," according to the report.

The document continues, "Monaco needs to enhance its efforts to identify and prioritize ML cases, seize, confiscate and recover the proceeds of ML and predicate offences."

Monaco's oversight structure needs to be significantly improved, according to MONEYVAL.

Significant weaknesses are also found in the fit and adequate checks for beneficial ownership (BO).

Additionally, there are gaps in the authorities' comprehension of BO risk that limit their ability to apply targeted oversight to a variety of required entities. The assessors say that the sanctions for not adhering to the AML/CFT obligations are "limited, not proportionate, not dissuasive, and imposed with delays."

MONEYVAL states that the AML/CFT requirements are only enforced "to some extent" in the private sector.

The level of defensive reporting and extremely long transmission times raise concerns about the accuracy of the information provided, yet the quantity of suspicious transaction reports (STRs) coming from the banking sector can be deemed sufficient.

The DNFBPs (designated non-financial business and professions) have a weaker grasp of AML/CFT risk and a less supportive compliance culture. Despite the fact that casinos and jewelers play significant roles in the Principality, there are still few STRs filed by these businesses.

Monaco deserves praise for updating the legal framework that permits the implementation of TFS relating to TF and PF under UN Security Council Resolutions (UNSCRs).

The delays under the prior system have decreased since May 2021, but technological flaws have been found, particularly with relation to the possibility of freezing restrictions being withdrawn.

Due to the non-profit sector's recent adoption, Monaco conducted an initial risk assessment, but it was not used to create a risk-based approach. The current awareness-raising and oversight initiatives could not be justified as targeted and reasonable.

The report released on Monday evaluates how well the country complies with the FATF Recommendations following an on-site inspection in March 2022.

By fLEXI tEAM