AML Update – Effectiveness and the Monaco FATF Review
Overview
In this AML update, lessons for the Jersey authorities can be learnt from Monaco’s recent assessment in the recent Council of Europe report. The report highlights key vulnerabilities in Monaco’s measures against money laundering and the country risks being placed on a grey list by the international Financial Action Task Force (FATF) should improvements not be made over the next year.
Facts
Overall, the effectiveness rating of Monaco was poor with 3 Low and 8 Moderate ratings against the 4 levels of effectiveness being High, Substantial, Moderate and Low. Against the 40 plus 9 recommendations the scores were 14 Partially Compliants and only 4 Compliants - against the levels of Compliant, Largely Compliant, Partially Compliant and Non-compliant. This was a disappointing score for the Monaco authorities. In contrast Jersey in its 2015 Report received only one PC against the FATF Recommendations then in force and the remaining assessments were Largely Compliant or fully Compliant.
Review
Easy wins were not achieved as Monaco’s legal framework for combatting money laundering was lacking in a number of key areas. This is not acceptable in a modern jurisdiction which faces significant money laundering risks, mostly due to the “internationally oriented financial activities” that are being offered. Further the report notes that risk analyses, international cooperation, and the dissuasiveness of sanctions are not completely fit to face fraud and corruption risks. There are some easy results where the Jersey authorities would expect to emerge significantly ahead of the Monaco regime. However, there will be much challenge over the new yard stick of effectiveness, and significant work to persuade the assessors reviewing Jersey of the regime in place. Past experience demonstrates that the assessors can be extremely pedantic in determining whether the language used in a statute for example matches the FATF standard precisely enough.
Monaco is due to enter a one-year observation phase after the report goes to FATF plenary on 20 February. Should structural reforms not take place in that period, Monaco risks being named and shamed in a public ‘grey list’ officially .
To read the summary and the report see:
https://www.fatf-gafi.org/en/countries/j-m/monaco/documents/mutualevaluationofmonaco.html
Conclusion
For the Jersey authorities the report shows clear water in a number of areas between the strength of Jersey’s AML regime and that in Monaco. The report also pinpoints a number of weaknesses in the regime in Monaco. The examples set out in the report should assist the Jersey authorities to be further ahead of Monaco, for example, in areas where procedures were lacking in Monaco based on a risk based approach.
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