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State of Financial Crime 2023 Report

Monaco’s AML System Deemed “Inadequate” in MONEYVAL Report

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On January 23, 2023, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) published Monaco’s fifth mutual evaluation report (MER). Following an on-site visit that concluded in March 2022, the report analyzes the level of compliance with the Financial Action Task Force’s 40 Recommendations and the level of effectiveness of Monaco’s anti-money laundering and combatting the financing of terrorism (AML/CFT) system. It also provides recommendations on how the system could be strengthened.

Overall, the effectiveness of Monaco’s AML/CFT system was described as “uneven,” with the authority saying Monaco needs to “step up its efforts.” Based on the results of its MER, MONEYVAL decided to initiate its enhanced follow-up procedure and invited Monaco to report back in December 2024.

Key Findings and Priority Actions

In the report, MONEYVAL highlights that Monaco faces a significant money laundering risk originating largely from the amount of internationally oriented financial activities that offer a wide range of products and financial services. Despite believing the principality faces a low risk of terrorism, MONEYVAL noted it will not rule this risk out  as they “believe the threat of terrorism has spread to the whole of the western world.”

In light of this, MONEYVAL found that while Monaco authorities are aware of the country’s main ML predicate offenses – which include obtaining property by deception/scamming, corruption, and VAT and income tax evasion — Monaco’s understanding of TF risks needs to be improved.

Monaco’s latest national risk assessment (NRA 2) – adopted in 2021 – was also highlighted by MONEYVAL. However, the report says further analysis is needed across some sectors – including casinos, company service providers (CSPs), trusts, and virtual assets – and threats, such as organized crime. 

As a result of the investigation, MONEYVAL compiled the following priority actions for Monaco:

  • Strengthen supervision and preventive measures
  • Improve internal cooperation
  • Encourage investigative authorities to tackle money laundering and the confiscation of property located abroad
  • Enhance risk understanding, demonstrate greater regard for relevant indicators
  • Uplevel competent authorities’ ability to detect and investigate potential terrorist financing cases
  • Remedy the technical deficiencies identified in the new United Nations target financial sanctions (TFS) implementation mechanism
  • Increase the transparency of legal persons

SICCFIN’s Digital Transformation

In January 2022, Monaco’s Financial Channels Supervisory and Monitoring Service (SICCFIN) Director, Michel Hunault, reiterated the authority’s aim to ramp up its digital transformation. Hunault expressed SICCFIN’s desire to use artificial intelligence (AI) to improve the efficiency and effectiveness of its AML/CFT tools. Specifically, he mentioned utilizing AI for risk mapping, processing reports, and receiving requests for information from foreign counterparts.

In our 2023 global compliance survey, we asked 800 C-suite and senior compliance decision-makers worldwide which benefits of AI-based transaction monitoring would add the most value for your organization. Only 1 percent of firms said they would see no benefit. Out of the 99 percent who expect AI to impact financial crime risk detection positively, firms identified the following top transaction monitoring use cases that AI could best help them with:

  • Alert prioritization – enabling teams to catch more risky activity at a faster rate
  • Flexible tuning – helping compliance staff adjust thresholds and fine-tune alerts responsively
  • Relationship identification – allowing teams to uncover new relationships between monitored entities and individuals 

Monaco’s National Strategy on AML/TF and proliferation financing (PF) 2022-2024 also touches on the principality’s core priority of strengthening technical resources, citing the need for “appropriate and secure digital tools” to combat the emergence of new potential threats. 

Key Takeaways

Firms operating in Monaco should ensure they review the report in detail, particularly the executive summary and priority actions, as these may form the basis of future changes to Monaco’s AML legislation, as well as efforts to improve the effectiveness of existing regulations. 

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Originally published 26 January 2023, updated 27 January 2023

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