FinCrime Central - Latest AML/CFT News & Vendor Directory

How ThetaRay and Spayce Are Transforming Financial Crime Detection in Cross-Border Payments
Breakthrough Productivity and Risk Reduction with Fenergo’s FinCrime OS and Agentic AI
Azentio AMLOCK Delivers Powerful AI-Driven Compliance and Financial Crime Protection
Revolut Partners with Fourthline for Seamless Identity Verification
Capgemini Launches Industry-First Perpetual KYC Sandbox for Real-Time Financial Compliance
AI-Powered AML Compliance and Fraud Detection with CSI’s TruDetect and TruProtect Solutions
Hawk Secures $56M Series C to Supercharge AI-Powered AML Innovation
How First AML Partners with Know Your Customer for Global Impact

EU Push to Grey List Monaco Triggers Unprecedented Scrutiny for Investors

monaco grey list eu high-risk country aml compliance

This image is AI-generated.

Monaco is facing a new era of scrutiny as the European Commission moves to add the principality to its high-risk third country list, better known as the “grey list.” This follows the Financial Action Task Force’s (FATF) decision in 2024 to place Monaco under increased monitoring for strategic deficiencies in its anti-money laundering (AML) and counter-terrorist financing (CFT) framework. This potential grey listing, which still requires approval by the European Parliament, has significant implications for compliance professionals, financial institutions, and cross-border investors, especially given Monaco’s reputation as a private wealth hub closely intertwined with European and global markets.

Monaco’s anticipated inclusion on the European Union’s grey list is the culmination of years of international AML assessments. The FATF, the global standard setter on financial crime, identified areas for improvement in Monaco’s AML/CFT regime during its latest round of mutual evaluations. In June 2024, FATF placed Monaco under increased monitoring, commonly referred to as the “grey list,” which spotlights jurisdictions with strategic AML/CFT shortcomings but a demonstrated commitment to remedy them.

The EU’s high-risk country list, mandated under Article 9 of the Fourth and Fifth Anti-Money Laundering Directives (Directive (EU) 2015/849 and Directive (EU) 2018/843), mirrors FATF’s monitoring process but is tailored to the Union’s internal market. Inclusion on this list means financial institutions in the EU are legally required to apply enhanced due diligence (EDD) when dealing with entities or transactions involving the listed country.

The European Commission’s proposal in 2025 to add Monaco to its own list marks a significant shift for a jurisdiction that has long promoted its efforts to align with international best practices. While Moneyval, the Council of Europe’s expert committee, acknowledged improvements in Monaco’s compliance with FATF’s 40 Recommendations, persistent weaknesses, particularly in the practical implementation of certain standards, led to the current situation. These include gaps in the detection and supervision of beneficial ownership, the management of risks related to new technologies, and sustained weaknesses in the private banking and real estate sectors.

How EU Grey Listing Changes the Compliance Landscape for Monaco

For compliance professionals and financial institutions, grey listing triggers mandatory legal obligations. Under EU law, when a third country is designated high-risk, regulated entities must conduct a higher level of scrutiny on clients and transactions linked to that jurisdiction. This includes:

Verifying the identity of ultimate beneficial owners (UBOs) of companies and trusts
Performing source of funds and source of wealth checks on all clients and business relationships connected to Monaco
Requiring senior management approval for establishing or continuing business relationships with Monaco-linked entities
Implementing ongoing monitoring of transactions, including review of unusual patterns or volumes that could indicate money laundering or terrorist financing

Monaco’s status as a private banking center amplifies the impact of these measures. Many clients hold dual exposure to Monaco and Luxembourg or other European centers, which means risk assessments for cross-border transactions are likely to become more complex and time-consuming. International correspondent banks may revisit their risk appetite for transactions routed through or to Monaco, increasing compliance costs for both local and foreign institutions.

Furthermore, the new EU AML Authority (AMLA), established under Regulation (EU) 2023/1114, will play a key role in coordinating supervisory actions for high-risk countries, setting a new bar for harmonized enforcement across the Union.

Regulatory Background: Why Monaco Is Facing the Grey List

The FATF’s mutual evaluation reports are the gold standard for assessing a country’s AML/CFT framework. Monaco’s most recent evaluation, carried out by Moneyval, acknowledged the principality’s legislative alignment with most FATF recommendations, including recent reforms to strengthen the reporting obligations of banks, financial institutions, and designated non-financial businesses and professions (DNFBPs). However, Moneyval identified ongoing challenges in several areas:

Beneficial ownership transparency: While Monaco established a central register for beneficial owners, there remain gaps in the accuracy and timeliness of data collection, making it harder to detect nominee arrangements and front companies.
Supervision of non-financial sectors: Sectors like real estate, luxury goods, and legal services continue to face compliance gaps, despite their heightened risk exposure in a high-net-worth environment.
New technologies and crypto-assets: FATF’s Recommendation 15 requires jurisdictions to adequately regulate virtual assets and service providers. Monaco has implemented initial measures, but Moneyval found partial compliance, citing the need for more robust controls and oversight.
International cooperation: While Monaco generally cooperates with foreign counterparts, some deficiencies persist in the timely and comprehensive sharing of information for international money laundering and asset recovery cases.

The European Commission uses these detailed, evidence-based reports to make its own determinations. Article 9 of Directive (EU) 2015/849 obligates the Commission to maintain a list of high-risk third countries that pose a significant threat to the EU’s financial system. The list is regularly updated, most recently in March 2024, and a proposal to add Monaco will be subject to scrutiny and vote by the European Parliament and Council.

Wider Consequences for Investors and European Financial Markets

The proposed grey listing of Monaco is not only a regulatory matter but also a strategic concern for global investors and cross-border financial services providers. Many private wealth products marketed in Monaco are mirrored in Luxembourg and other European centers, making regulatory spillover inevitable.

Enhanced due diligence requirements are likely to slow down client onboarding, transaction processing, and product approval cycles for Monaco-related business. Some investors may seek alternative jurisdictions with lower perceived compliance risk, particularly as Asian wealth centers like Singapore and Hong Kong continue to offer both regulatory stability and attractive tax environments. For fund managers and private banks, maintaining relationships with Monaco-based clients will demand more intensive documentation and risk assessment, raising operational costs.

Additionally, the reputational impact of a grey listing can be profound. Even where formal sanctions are not applied, financial institutions may adopt a more conservative stance, reducing credit lines or de-risking certain categories of clients. The pressure will be especially acute for Monaco’s real estate sector and luxury goods markets, which have historically attracted scrutiny for their potential misuse as money laundering channels.

What Monaco Has Done So Far and the Road Ahead

Since the FATF’s decision in 2024, Monaco’s government has taken several steps to address the identified gaps. Legislative amendments have been enacted to strengthen the supervision of DNFBPs, improve beneficial ownership transparency, and tighten customer due diligence standards. A new regulatory calendar published by the Monegasque government sets out a series of milestones, with monitoring reports due in May and September 2025 and January 2026. These reports will document the country’s progress toward full compliance with FATF standards.

Despite these efforts, regulators have signaled that more time and tangible results are needed before Monaco can exit the grey list process. The European Commission’s pending decision will keep Monaco under the international spotlight, reinforcing the urgency for continued reforms and proactive engagement with both EU and global AML bodies.

Conclusion: Lasting Implications of the Monaco Grey List

Monaco’s journey through enhanced monitoring by the FATF and now potential grey listing by the EU represents a pivotal test of its AML/CFT resilience. The immediate impact will be seen in stricter compliance requirements for banks, asset managers, and professional services operating in or with the principality. Over time, the reputational consequences could reshape investor sentiment and business flows, particularly as global financial centers compete for mobile private capital.

For compliance teams, this development underscores the importance of robust due diligence, real-time monitoring, and ongoing adaptation to evolving regulatory landscapes. Monaco’s experience also serves as a reminder to other jurisdictions: alignment with international standards is not a one-time achievement but a continuous process of vigilance, transparency, and cooperation.