Global anti-money laundering watchdog the Financial Action Task Force (FATF) said on June 28, 2024, it had added Monaco to a “grey list” of countries subject to increased monitoring. File
| Photo Credit: Reuters

Global anti-money laundering watchdog the Financial Action Task Force (FATF) said on June 28 it had added Monaco to a “grey list” of countries subject to increased monitoring.

The action comes despite Monaco having already taken a series of actions after being singled out by the Council of Europe’s anti-money laundering body following a series of unverified claims against figures close to Prince Albert II.

The FATF, a Paris-based organisation which monitors efforts by more than 200 countries and jurisdictions to prevent money laundering and the financing of terrorism, added Monaco and Venezuela to its grey list at a plenary meeting held in Singapore.

Grey list nations are considered to have “strategic deficiencies” in countering money laundering and terrorist financing, while however cooperating with the FATF to correct the problems.

‘Monaco needs to address strategic deficiencies’

Long known as a playground for the rich and famous, Monaco attracts rich residents due to an extremely favourable tax regime which include an absence of income and wealth taxes. “Despite significant progress achieved since 2022, Monaco needs to address strategic deficiencies,” said FATF president Raja Kumar.

Monaco’s government said it is committed to getting off the grey list. “The principality confirms its determination to implement the latest FATF recommendations set out in the declaration, in accordance with the planned deadlines,” the government of the Mediterranean tax haven said.

Measures already taken by Monaco

The FATF found that Monaco had not made enough efforts to stop laundering money from fraud committed abroad or moved aggressively enough to seize criminal assets. It also judged money-laundering penalties to be insufficient and investigators lacked sufficient resources.

In January 2023, the Council of Europe’s anti-money laundering body Moneyval urged Monaco to intensify its efforts in the investigation and prosecution of money laundering. It has since adopted nine laws to toughen its rules and boost its anti-money laundering body, the AMSF.

Local sources have said it has been difficult to apply the measures immediately due to a lack of qualified staff.

A 2023 census put the number of Monegasques at 9,720, which means that Monaco often needs to rely on foreign experts, which is not in conformity with FATF rules.

Monaco was briefly on a OECD blacklist of financial centres in 2009, which prompted it to undertake a series of transparency measures and put into place cooperation agreements to help crack down on tax evasion.

Monaco has been shaken since the end of 2021 by anonymous denunciations orchestrated by a website “Les Dossiers du Rocher” (“The Rock Files”).

The site accused several figures close to Prince Albert of being in cahoots in a money laundering scheme based on corruption in property deals, and forced the ouster in 2023 of crown assets chief administrator Claude Palmero.

Jamaica, Türkiye removed from grey list

The FATF also removed Jamaica and Türkiye from the grey list after they eliminated the identified deficiencies in their efforts to prevent money laundering and the financing of terrorism.

“Thanks to the good measures we’ve adopted, Türkiye has been removed from the grey list,” the economy ministry said following the decision.

FATF had placed Türkiye on the list in October 2021. A total of 21 nations are on the grey list, including Mali, Vietnam and Yemen.

The FATF also has a “black list” of nations which are considered high-risk jurisdictions. The body urged countries to apply countermeasures against Iran and North Korea and warned about the latter’s “illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing”.

It urged countries to end all business with North Korean banks and limit business with Pyongyang entities.

The FATF also urged countries to apply countermeasures to Iran, which it noted had not ratified the Palermo and Terrorist Financing Conventions.

A general view of Dubai Downtown showing world’s tallest building Burj Al Khalifa, in Dubai United Arab Emirates. File
| Photo Credit: Reuters

The United Arab Emirates, home to the financial hub of Dubai, has been dropped from a global watchdog’s list of countries at risk of illicit money flows, a win for the nation that could bolster its international standing.

The Financial Action Task Force (FATF), a body that groups countries from the United States to China to tackle financial crime, dropped the UAE from its ‘grey list’ of around two-dozen nations considered risky on Februaruy 23.

The Gulf country, a magnet for millionaires, bankers and hedge funds, was placed under closer scrutiny in 2022, when the FATF highlighted the risk of money laundering and terrorist financing involving banks, precious metals and stones as well as property.

Major victory

The delisting is a coup for the UAE as it had made getting off the list a priority, bolstering its anti-money-laundering efforts in a drive spearheaded by the minister of foreign affairs and brother of President Mohamed bin Zayed Al Nahyan.

John Kartonchik, a director at UAE think tank Re/think, said the move could boost confidence in the country and attract more money from overseas. “Investors … may feel more secure,” he said.

Banks would also be able to cut the cost of dealing with wealthy clients in the country, said a senior banker, who asked not to be named.

Despite being grey-listed, the UAE continued to attract the globe’s wealthy and it is an increasingly popular destination for cryptocurrency firms and Russians in the wake of war with Ukraine.

Dubai’s luxury property market trailed only New York, Los Angeles and London in 2022, according to property consultant Knight Frank, while the UAE last year overtook Belgium to become the world’s trading hub for rough diamonds.

Is the FATF list ineffective?

Nonetheless, the delisting jars with the assessment of European officials. The European Union lists the UAE as a high-risk country for money laundering and terrorist financing, alongside more than two dozen other states such as South Africa, North Korea and Afghanistan.

The bloc’s financial markets watchdog ESMA last year barred European banks and others from clearing trades with the Dubai Commodities Clearing Corporation.

Markus Meinzer, director of policy at the Tax Justice Network, which campaigns for financial transparency, said the removal of the UAE showed the FATF list was ineffective. “There is room for interpretation of the rules,” he said. “It’s easy to comply without changing much. Understanding how decisions are taken is impossible because they happen behind closed doors.”

Jonny Bell, director of financial crime compliance and payments at LexisNexis Risk Solutions, said the UAE would likely continue strengthening its anti-money laundering and counter-terrorism financing measures.

There is increasing competition among Gulf states to develop non-oil sectors such as financial services, trade and logistics, and tourism. Attracting money from abroad is a central part of that effort.

Measures taken by the UAE include increasing financial investigations and prosecutions, boosting international cooperation, and aligning virtual asset regulation with international standards.