Monaco Faces Potential Greylisting by FATF at Upcoming Singapore Plenary

The city-state of Monaco is on the brink of being greylisted at the Financial Action Task Force (FATF) plenary set to take place this week in Singapore.

The small European principality received harsh criticism two years ago from Moneyval, the Council of Europe’s AML monitoring body. Despite a member of Monaco’s Financial Intelligence Unit (FIU) being elected to the leadership of Moneyval earlier this year, and the group now being chaired by a representative from another small European nation, San Marino, Monaco is likely to be added to FATF’s watchlist due to insufficient progress in addressing illicit money flows.

Monaco, known for having the highest concentration of millionaires and billionaires globally, may soon face significant challenges. The International Monetary Fund (IMF) has reported that countries on the greylist experience "a large and statistically significant reduction in capital inflows." This poses a substantial risk to Monaco's financial sector, which manages €160 billion – a figure 20 times the nation’s GDP. Additionally, Monaco’s property market holds the title of the most expensive in the world.

Situated on the Mediterranean between France and Italy, Monaco also faces scrutiny from the Group of States Against Corruption (Greco), which is expected to report on the government’s efforts to combat bribery. Should FATF downgrade Monaco, it would be the highest-profile greylisting since the United Arab Emirates (UAE) was placed on the watchlist in March 2022 before being removed earlier this year.

Interestingly, the European Parliament voted earlier this year to keep the UAE on its own watchlist of high-risk third countries, citing concerns that the Middle Eastern financial hub was being used by Russia to circumvent sanctions. During the same debate, Gibraltar faced significant criticism from Members of the European Parliament (MEPs) over allegations of being used by money launderers.

Venezuela is another country anticipated to be greylisted next Friday. Conversely, Turkey is likely to be removed from the watchlist when decisions are announced.

Founded over three decades ago by the G7, the Paris-based FATF has about 40 members, including the US, China, the European Commission, and the Gulf Cooperation Council. The organization aims to combat money laundering and terrorist financing by discouraging investment in non-compliant countries through its grey and black lists.

Other topics on the FATF agenda include:

- Turkey's removal from the grey list.

- Venezuela's expected greylisting for insufficient progress in curbing illicit financial flows.

- Evaluations of India and Kuwait.

Although Venezuela is not an FATF member, it was evaluated by its regional body, the Caribbean Financial Action Task Force, based on FATF standards. The 2022 assessment raised concerns about money-laundering risks tied to Venezuela's large informal economy, including illegal mining. Additionally, the report highlighted terrorist financing threats linked to Venezuela’s close economic alliance with blacklisted Iran.

For a country to be greylisted, a significant majority of FATF members must agree that it has not made sufficient progress since its evaluation period began. Current countries on the FATF greylist include Nigeria, South Africa, Bulgaria, the Democratic Republic of Congo, the Philippines, and Syria.

By fLEXI tEAM