France Threatens Monaco Over Money Laundering

Jason Gorringe, Tax-news.com, Paris

12 October 2000

The French government has long been wagging its finger and shaking its head at the Mediterranean principality of Monaco. Earlier this year, the French used a parliamentary report to criticise Monaco and brand it a money laundering hub. Now France has threatened to take a range of legislative measures against Monaco unless it tightens up its efforts to prevent "dirty" money passing through its banks and financial institutions.

The banking system in Monaco is run by the French banking commission, but the principality has strict secrecy laws, limiting what information can be revealed to outside parties. A French Finance Ministry report says Monaco has been hiding vital information about secret bank accounts and been lax in monitoring dubious transactions. The report showed a "large gap between law and reality" in the customs, tax, banking and financial cooperation meant to exist between Paris and Monte Carlo. A Finance Ministry statement warned: 'Failing a rapid accord on necessary measures and a timetable for implementing them, the government will submit legislation to parliament to end these situations.'

The French Finance Ministry report, accompanied by a Justice Ministry report on legal cooperation, said financial relations with Monaco were rather tense and the principality showed ill will when asked to help investigate money laundering cases. It said: 'The attitude of the Monaco authorities raises concerns that they want to restrict the powers and investigative capacity of French customs agents.' The report said Monaco should require all its banks and financial services companies to reveal the accounts they held. In addition, it said, Monaco should also expand its understaffed watchdog agency, allow more French banking inspections, sign legal cooperation agreements with European Union countries and bar transactions by front companies whose ownership was not clear.

The latest French threat against Monaco is no doubt a serious body blow to their relations, which were already shaky given France's repeated attacks on the principality. The French government has vowed to tear up all its political, economic and administrative agreements with Monaco unless its government takes step to curb money laundering from drug-trafficking and organised crime. The threat creates a bizarre state of affairs between the two, given that Monaco is largely administered by French officials.

Patrick Leclercq, Monaco's chief minister, has refuted allegations made by the French and vehemently denied that Monaco has been reluctant ot co-operate with France. He said: 'the way Monaco's fight against money laundering is presented does not consider the steps taken in recent months to apply the laws more strictly.'

If France goes ahead with imposing legislative measures, arrangements negotiated between Monaco and France in 1962 and 1963 could be scrapped. For example VAT in Monaco is collected by France. Under the existing arrangement Monaco is given up to £170m a year, which is more than half its budget.

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