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.

Singapore:

Singapore: The Financial Action Task Force (FATF) on Friday adopted a mutual evaluation report that assesses the effectiveness of India’s anti-money laundering and countering the terrorist financing regime, a move the government termed a “significant milestone”.

In its brief outcome statement at the end of its three-day plenary meeting here, the global body said India’s legal regime in these two domains was “achieving good results” and that the country has reached a “high level of technical compliance” with the FATF requirements.

It, however, said the country needs to address “delays” related to the conclusion of money laundering and terrorist financing prosecutions.

The final evaluation report for the country will be published later when the “quality and consistency review” is completed, it said.

Sources involved in the process said India has been placed in the “regular follow up” category, a distinction shared by only four other G20 countries, which means that it needs to submit a progress report on implementing FATF measures only in October 2027.

Countries placed in the ‘enhanced follow up’ category are required to submit a follow up report every year.

The Paris-headquartered body leads global action to tackle money laundering, terrorist and proliferation financing. The latest decisions were made public at the end of the June 26-28 FATF plenary.

The Indian side was represented by Additional secretary in the Union finance ministry and Financial Intelligence Unit (FIU) in-charge Director Vivek Aggarwal.

In New Delhi, the Union finance ministry issued a statement saying the positive evaluation of India by the FATF was a significant milestone in the country’s efforts to combat money laundering and terror financing.

India’s performance on FATF mutual evaluation demonstrates overall stability, integrity of the financial system, the ministry said.

India’s mutual evaluation on FATF guidelines, a measure that checks a country’s efficacy to frame robust laws and policy and implement them to check financial crimes, was last done in 2010.

An FATF peer review of India ended early this year after a team of international experts made an ‘on-site’ or a physical visit to New Delhi and met officials from various central and state intelligence, investigative agencies, financial regulators and judiciary.

The statement issued at the end of the plenary said it was concluded that India has reached a high level of technical compliance with the FATF requirements and its AML/CFT/CPF regime is achieving good results, including in its money laundering and terrorist financing risk understanding, international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets and counter-proliferation financing measures.

AML stands for anti-money laundering, CFT for countering financing of terror and CPF means counter proliferation financing.

The statement, however,added that India required “improvements” to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors.

“India also needs to address delays relating to concluding money laundering and terrorist financing prosecutions, and to ensure that CFT measures aimed at preventing the non-profit sector from being abused for terrorist financing are implemented in line with the risk-based approach, including by conducting outreach to non-profit organisations on their terrorist financing risks,” it said.

The government said India’s performance on the FATF mutual evaluation “accrues significant advantages to our growing economy, as it demonstrates the overall stability and integrity of the financial system.” 

“Good ratings will lead to better access to global financial markets and institutions and increase investor confidence. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system,” it said.

The finance ministry said this recognition from the FATF was a “testament to the rigorous and effective measures implemented by India over the last 10 years to safeguard its financial system from ML/TF threats.” 

“It underscores the country’s commitment to international standards and its proactive stance in the global fight against financial crimes,” it said adding this also sets a benchmark for “countries in our region” to effectively implement international standards on terrorist financing.

The ministry said by this adoption, FATF has recognised India’s efforts mitigating the risks arising from money laundering and terrorist financing, including the laundering of proceeds from corruption, fraud, and organised crime.

External Affairs Ministry spokesperson Randhir Jaiswal said the FATF has given a good and astounding outcome for India.

A session during the FATF plenary in Paris on February 22, 2023. Photo: fatf-gafi.org

The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, has found that many countries are yet to fully implement its requirements aimed at preventing misuse of virtual assets and virtual asset service providers (VASPs).

Virtual assets (crypto assets) refer to “any digital representation of value that can be digitally traded, transferred or used for payment”. The FATF plenary in February 2023 agreed on a road map to strengthen the implementation of its standards on virtual assets and VASPs. Recently, it carried out a survey on the current levels of implementation and has now published a paper on the “Recommendation 15 by FATF Members and Jurisdictions with Materially Important VASP Activity”.

“Following a 12-month process to collect and evaluate information, the FATF is publishing a table which sets out the status of implementation of Recommendation 15 by FATF members and other jurisdictions with the most materially important VASP activity. This table is based on the work of the FATF’s Virtual Assets Contact Group members as well as the extensive input by the FATF Global Network of FATF members and FATF-Style regional bodies,” it has said.

The FATF also had consultations with representatives of the private sector, besides the virtual assets and VASP community.

The study, which involves 58 FATF and non-FATF jurisdictions, found that India has already conducted a risk assessment covering virtual assets and VASPs. Although it has explicitly prohibited the use of virtual assets and VASPs, it is compliant on issues such as enactment of legislation/regulation requiring VASPs to be registered or licensed and application of Anti-money Laundering/Counter-terrorism Financing measures.

India, a member country, has conducted a supervisory inspection or included VASPs in its current inspection plan; has taken enforcement action or other supervisory action against VASPs; and has passed or enacted the travel rule for VASPs. The FATF is yet to evaluate and rate India’s performance with respect to the revised standards on virtual assets and VASPs.

The countries which have explicitly prohibited the use of virtual assets and VASPs are China, Egypt and Saudi Arabia, while it is in progress in Seychelles and Indonesia.

“The table includes all FATF members plus twenty jurisdictions with materially important VASP activity. These jurisdictions were identified based on two criteria: trading volume and userbase, based on open-source datasets from January to December 2022 and cross-checked against data from blockchain analytics companies,” said the FATF.

It added: “It is important to note that large-scale trend data related to virtual assets is difficult to obtain, incomplete, and may change rapidly. This table provides a snapshot in time of jurisdictions that are identified as having materially important VASP activities as well as jurisdictions that are FATF members.”

Listing the reasons for issuing the table, the FATF said as virtual assets were inherently international and borderless, any failure to regulate VASPs in one jurisdiction could have serious global implications.

“This is particularly concerning given emerging trends in this space. Recent reports raise serious concerns about the Democratic People’s Republic of Korea’s (DPRK)… and laundering of hundreds of millions of dollars’ worth of virtual assets for financing the proliferation of weapons of mass destruction, enabling an unprecedented number of recent launches of ballistic missiles. Ransomware incidents have grown significantly in recent years, and ransomware payments are almost exclusively demanded in virtual assets,” said the FATF.

“Terrorist groups, including ISIL, Al Qaeda and their affiliates, as well as ethnically or racially motivated terrorist entities, are also known to be increasingly using virtual assets to raise and move funds globally,” it added.

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.