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24/ Jan
2023

Legal news

Banking and financial law — Companies and taxation — International and European law — Property and construction law — Insurance law — Yatching and maritime law — Public law — Family Office — Compliance

MONEYVAL evaluation of measures to combat money laundering and terrorist financing

Monaco 5th cycle Evaluation (2015-2021):

The 5th round of mutual evaluation of the Principality by MONEYVAL (Council of Europe Committee of Experts on Evaluation of Anti-Money Laundering and the Financing of Terrorism Measures) started in 2020. The on-site visit took place from 21 February to 4 March 2022.

The Mutual Evaluation Report of the 5th cycle (2015-2021) of Monaco was discussed and adopted at the 64th plenary meeting of MONEYVAL (also marking the 25th anniversary of the Committee) held from 5 to 9 December 2022. The Report analyses the level of compliance with the 40 Recommendations of the Financial Action Task Force (FATF), the level of effectiveness of the Principality of Monaco's anti-money laundering and combating the financing of terrorism (AML/CFT) system and makes recommendations to strengthen it. Read the Report (french) > https://rm.coe.int/moneyval-20...

Summary of the general conclusions of the Report :

  • Understanding of money laundering and terrorist financing risks by the authorities : Based on the results of the National Risk Assessment 2 (ENR 2, see below) which places fraud, corruption, tax evasion (VAT and income tax) as the main offences underlying money laundering, this still needs to be improved; the understanding of money laundering and terrorist financing risks related to legal persons and legal arrangements is quite satisfactory as regards the activities carried out but remains limited as regards the way in which they are or may be used for AML/CFT purposes;
  • Authorities' access to information (largely indirect): Although investigative authorities have access to financial and other intelligence to establish evidence and trace the proceeds of crime related to money laundering, terrorist financing and related offences, the contribution of non-banking professionals (the majority of suspicious transaction reports come from banks) remains limited. Despite the support and practical guidance provided to reporting entities, some key issues have not been specifically analysed;
  • Investigations and prosecutions: Despite Monaco's ability to obtain convictions for money laundering involving the proceeds of crime generated abroad and for autonomous money laundering, shortcomings remain (number of money laundering investigations still modest; regarding complex cases, third party money laundering, sanctions in terms of effectiveness and deterrence); As regards terrorist financing, the full capacity to detect potential cases is not demonstrated (absence of specific procedures in this area and if cooperation between competent authorities seems adequate, a major shortcoming in practice lies in the lack of exchange of information with the French customs);
  • Asset recovery: Effectiveness with an increase in the application of provisional measures. The results of confiscation measures ordered need to be improved (low number, not targeting assets of corresponding value or assets held by a third party, lack of consistency with the money laundering risk profile);
  • Legal framework for the implementation of targeted financial sanctions (terrorist and proliferation financing) at international, EU and national level: new and broadly appropriate framework that is beginning to prove its effectiveness. Large financial institutions have a satisfactory understanding of their obligations in this area, while the implementation of this framework can be improved for smaller financial institutions and designated non-financial businesses and professions. An important step was taken with the first risk assessment of the non-profit sector in 2022;
  • Understanding of risks, implementation of due diligence and freezing measures by reporting entities: Despite their understanding of the risks, few financial institutions were able to specifically explain the money laundering and terrorist financing risks related to the characteristics of their clients portfolios or their business profile. Regulatory gaps relating to beneficial owners and politically exposed persons affect both the financial and non-financial sectors. The application of measures to freeze assets and economic resources varies across sectors but is generally satisfactory;
  • Supervision policy: This is more akin to raising awareness of the obligations of those subject to supervision than to supervision in line with international standards and recourse to sanctions (lack of human resources and IT tools adapted to SICCFIN's missions);
  • International cooperation: The execution of mutual assistance requests by prosecution authorities is satisfactory, police cooperation is adequate. Nevertheless, legislative obstacles hinder Monaco's international cooperation, the solicitation of foreign counterparts appears limited in view of the risk and the Monegasque context, SICCFIN's response times to its counterparts in the context of financial intelligence are inadequate.

Following the return of MONEYVAL’s evaluators as part of the technical evaluation of Monaco’s legal framework, adjustments to the prevention of money laundering, terrorist financing and corruption have been made by Law No. 1.520 of 11 February 2022 (new subjects to the law, internal organisation requirement, bank correspondent, reform of the CERC procedure, etc.) and by Law No.1.537 of 9 December 2022 (activity of domiciliation).

Similarly, the MONEYVAL Committee's observations led to the reform of the common law regime of international mutual legal assistance (Law No. 1.536 of 9 December 2022) and of the provisions of the Code of Criminal Procedure on the seizure and confiscation of instruments and proceeds of crime (Law No. 1.535 of 9 December 2022).

In total, during the 5th evaluation round, nine laws related to the fight against money laundering, terrorist financing and corruption were adopted by the Principality. In addition to the four laws mentioned above adopted in 2022, the following five laws should be added:

  • Law No. 1.534 of 9 December 2022 amending certain provisions of the Criminal Code and the Code of Criminal Procedure relating to the investigation and the appeal for review in criminal matters;
  • Law No. 1.533 of 9 December 2022 on the preliminary investigation and alternative measures to prosecution;
  • Law No. 1.521 of 11 February 2022 on various criminal measures to combat money laundering and fraud and counterfeiting of non-cash means of payment;
  • Law No. 1.503 of 23 December 2020 strengthening the system for combating money laundering, terrorist financing and corruption;
  • Law No 1.462 of 28 June 2018 strengthening the system for combating money laundering, terrorist financing and corruption.

MONEYVAL Committee and its evaluation system:

MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism), a permanent monitoring body of the Council of Europe, is the “FATF-style regional body” responsible for evaluating the Principality of Monaco (the FATF directly evaluates its 38 members, including the neighbouring country which, like Monaco, will be subject to an on-site visit in 2021).

The evaluation system of MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) is a peer review, i.e. a self-assessment and mutual evaluation process based on the FATF model, with a more comprehensive set of anti-money laundering standards.

The international standards on which MONEYVAL’s evaluations are based are as follows:

  • 40 FATF Recommendations of 16 February 2012 on combating money laundering, terrorist financing and the proliferation of weapons of mass destruction ;
  • 9 FATF Special Recommendations on Terrorist Financing ;
  • United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 (Vienna Convention);
  • United Nations Convention against Transnational Organised Crime 2000 (Palermo Convention);
  • Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of 1990 (Strasbourg Convention);
  • International Convention for the Suppression of the Financing of Terrorism of 1999 (New York Convention);
  • United Nations Security Council Resolutions on the freezing of assets linked to terrorism;
  • 5th Directive (EU) on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing.
  • 6th Directive (UE) on combating money laundering by criminal law.

As a reminder, the Principality of Monaco shall take measures with equivalent effect to the European Union directives relating to the fight against money laundering and the financing of terrorisme in accordance with the recommendations of the Financial Action Task Force against Money Laundering and the Financing of Terrorism (FATF), which are set out in Annex B of the Monetary Agreement concluded with the European Union, which has been in force since 1 December 2011.

Methodological training:

On 9-10 December 2020, the MONEYVAL Secretariat provided (virtual) the usual training (taking place 1 year prior to the on-site visit) to representatives of the financial intelligence unit (SICCFIN), law enforcement and supervisory agencies, representatives of financial institutions and the non-financial sector.

A one-day (face-to-face) training session has been scheduled for early February 2021. This training aims to familiarise all national actors involved in the assessment with the underlying Financial Action Task Force (FATF) standards and methodology and the MONEYVAL assessment approach.

National Risk Assessment on Money Laundering, Terrorist Financing and Corruption (ENR 2) 2020/2021:

The National Risk Assessment (Evaluation nationale des risques - ENR) aimed at identifying, assessing and understanding money laundering and terrorist financing risks in Monaco, in order to adapt national procedures according to the risks, is part of the elements submitted to MONEYVAL for evaluation.

The first National Risk Assessment (ENR 1) was conducted between December 2015 and May 2017. See >https://www.siccfin.mc/en/The-...

ENR 2 was launched in 2020. On 15 April 2021, the Director of SICCFIN, who is also the head of the Monegasque delegation to the MONEYVAL Committee, presented a progress report on the work of ENR 2 to representatives of the public and private sectors and the main leaders of the Monegasque economic forces. ENR 2 was published in December 2021. See > https://www.siccfin.mc/en/The-...

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