On June 28, following a three day long Financial Action Task Force (FATF) Plenary, the intergovernmental organization announced the addition of Monaco to their “grey list”, an index of countries under increased scrutiny due to shortcomings in their anti-money laundering (AML) and countering the financing of terrorism (CFT) frameworks.
Lev Yuriditsky
The grey list includes 20 other countries, with Monaco being the third European country to be added to the list alongside Bulgaria and Croatia.
The FATF announcement comes as no surprise and follows a January 2023 report from the Council of Europe’s AML body, MONEYVAL, which assessed Monaco’s compliance with FATF recommendations made after a March 2022 on-site visit to the country. The recommendations led Monaco to adopt new laws and regulations to strengthen its AML and CFT measures, including new reporting rules for banks and other financial institutions, as well as improved information sharing between domestic regulatory authorities.
While MONEYVAL and FATF recognized Monaco’s significant progress and its efforts to address the gaps highlighted by FATF, the country ultimately fell short of its goals and failed to make adequate changes to prevent illegal financial flows, with the country often viewed as a destination for such activity.
In response, and in order to be removed from the grey list, Monaco created a reform schedule to be implemented by January 2026, with milestones in May and September 2025. Some of these planned reforms include enhanced investigations and prosecutions, confiscation and recovery of illicit assets, further strengthening supervisory systems, and additional improvements to the sharing of information both domestically and internationally.
When it comes to reactions to the grey listing, these vary significantly from country to country. Much of this list is comprised of developing nations with some even in the midst of armed conflict, of which many ultimately remain grey listed long term due to inadequate steps taken to achieve removal. As a result, statistics regarding the negative economic impact of this designation doesn’t accurately apply to Monaco, which represents a stable and safe financial hub that attracts ultra-high net worth individuals (UHNWIs).
Thus, while countries with this designation often see a changed perception of risk among international investors, with a decline in confidence leading to a reduction in investment and demands for higher returns to compensate for this perceived risk, the economic impact on Monaco will be mitigated, much as it was in the case of the UAE during its own, albeit short tenure on the grey list.
Also like the UAE, the fact that the Principality has already made notable strides to address the FATF recommendations and has concrete plans and deadlines to close the remaining gaps further suggests that investor confidence will not be significantly harmed to a point of the country losing business.
That’s not to say that the Principality won’t feel any impact of the grey listing and particularly the enhanced scrutiny that comes hand in hand with such an FATF designation. This is liable to manifest in higher operational costs and additional procedures for local and international financial institutions operating in or transacting with Monaco. Likely examples include an increased need for actors there to apply enhanced due diligence (EDD) to comply with MONEYVAL recommendations and for external parties to apply similar EDD processes to address differing requirements for grey listed countries. At the same time, penalties from Monegasque authorities for non-compliance will also intensify.
Perhaps most importantly, Monaco will need to demonstrate that it is actively working to improve its AML and CFT policies, including by meeting its stipulated deadlines for implementing reforms, in order to preserve what we assess to be the initial and limited impact of the grey listing.