Christina White
| Prince Rainier | ||||||
It’s far from a random authoritarian attack on the unsuspecting principality. France has the backing of international organizations, and can cite reports and symposiums issued recently on the hot topic of fighting financial crime. A report released in October by the French ministry of finance condemns “an important gap between law and reality”, specifically attacking the tax and money-laundering systems.
Although France and Monaco have the same financial laws, Monaco, whose banks fall under the supervision of French central bank, the Banque de France, doesn’t adequately enforce the laws in a relationship that depends on cooperation. Criticisms cited in the report were directed at the understaffed Financial Intelligence Unit, formed to combat money laundering, at financial institutions that don’t declare bank accounts, the tax system offering major concessions to taxpayers compared with France’s, and the casino, owned by the reigning Grimaldis and suspected of being used in money laundering.
The French suggestions – or demands – to ameliorate the current deficiencies call for Monaco to pledge cooperation with international organizations combating financial crime, as well as for its banks to reveal all accounts and assist the anti-money-laundering agency. But the report also threatens that “failing a rapid accord on the necessary measures and a timetable for applying them, the government will propose to parliament legislative measures to put an end to these situations”.
The principality has retaliated with statements from minister of state Patrick LeClercq. “The French parliament is not competent enough to legislate on Monaco,” he says. LeClercq also suggested the crackdown was a political move: “I can only assume that during France’s presidency of the EU [which lasts until the end of this year], France wants to prove a point by putting on such an extraordinary show of toughness.”
The minister has the support of his head of state. Prince Rainier even went so far as to tell Le Figaro that “the principality intends to regain its full sovereignty” and that he would “give back Monaco to the Monegasques”.
Even though Rainier denied the accusations in the French report, France’s assessment is along the lines of similar condemnations from international organizations. The Financial Action Task Force (FATF), created by the G7 more than a decade ago to combat money laundering, does not shy away from offering criticism. A report published in June blacklisted money-laundering centres and put additional pressure on 15 non-cooperative countries and territories.
“This report is important to the international fight of money laundering. For the first time an international group has named countries and has had the courage to make such a public statement,” says Patrick Moulette, executive secretary of the FATF. Though Monaco did not end up in the worst classification, the FATF did not let it slide by unscathed. The FATF, like France, noted the “great lack of adequate resources” of the principality’s Financial Intelligence Unit. Contributing to the deficiencies was the lack of cooperation sought by foreign financial institutions and the “impossibility for judiciaries to cooperate with tax matters”, says Moulette.
Even though Monaco escaped the blacklist, its actions, or lack thereof, are certainly being watched. Moulette says the IMF, World Bank, UN, Interpol, and regional development banks including the European Bank for Reconstruction&Development have all been observers at FATF meetings recently.
The report from the G7 finance ministers’ July meeting in Japan cites the FATF report and proposes to “implement coordinated countermeasures” against money-laundering centres that persist in not cooperating. A primary task of the FATF, says Moulette, is to establish an anti-money-laundering network. With encouragement from such organizations as the G7 and IMF, the FATF hopes measures of exclusion against these rebel financial centres will “really make the lives of money launderers more difficult”.
Like the FATF, the Financial Stability Forum (FSF) benefits from relationships with international organizations in addressing problems in global financial stability. And as with the FATF, Monaco has appeared in a report published by the FSF in May.The FSF, also established by the G7, is concerned with offshore financial centres that “constitute weak links in an increasingly integrated financial system”. The calls for “soundness and transparency” by the FSF are echoed in France’s recent report.
Monaco didn’t completely fail on this listing either, keeping itself off the list of the worst offshore financial centres. It fell into what is classified as a mediocre middle group, keeping company with Andorra, Bermuda and Gibraltar.
This judgement by the FSF, based on the quality of supervision and degree of cooperation by each country, might appear to be an acknowledgement of the principality’s superiority compared with other offshore centres. But there’s a catch. The report calls on the IMF in its efforts to assess and reform these centres to give the highest priority to this mediocre group.The FSF points out in its report that countries in this group “are likely to show the greatest improvement by undertaking an assessment process” because their infrastructures and levels of resources are generally better than in the blacklisted countries.
What these reports indicate as well as references by organizations such as the IMF and G7 is that even if Monaco makes good on its threat to break ties with France, it’s not off the hook. As the US proposes legislation to initiate sanctions against non-cooperative countries and other countries prepare similar actions, there are fewer ways around the mess for places such as Monaco. Time limits, such as a year to commit itself to cooperate with the FATF, suggest patience won’t last either.
What does all the recent action mean for those caught in the middle? A spokesperson for Société Générale in Monaco describes the conflict for the bank in precise terms: “We are a French bank operating in Monaco. It is a subject of importance to us but it is very delicate.”
While French banks are caught in the uncomfortable crossfire, and Société Générale insists that the conflict “is no longer economic but has turned political”, it in fact does come down to numbers, which are quite incriminating. For instance, Monaco’s population is 35,000 but there are 10 times that number of bank accounts. The IMF estimates that between $500 billion and $1.5 trillion is laundered by banks there every year. Moulette says, “We all agree that it’s a huge problem. But no one knows the size of the problem.”
Prince Rainier still refuses to budge. “What is good for Monaco is good for France,” he says. But France cannot just ignore Monaco’s deficiencies any more because France has become a member of the same international organizations that have pledged to fight financial crime. The rules may be changing for Monaco.
