Monaco Takes Tough Stance On Currency Converters

by Ulrika Lomas, Tax-news.com, Brussels

30 May 2001

Monaco hasn't got to sidle up to the Financial Action Task Force (FATF), which is due in the coming weeks to produce its definitive list of jurisdictions deemed uncooperative in the international fight against money laundering. The mega-rich principality escaped last year's blacklisting initiative by the FATF, but has nevertheless taken steps to tighten up on precautionary measures against financial crime. Now Monaco is reportedly laying down some ground rules for those who might wish to use the principality to change their sacks of cash into euro notes and coins.

As far as converting to the euro is concerned, Monaco is very much joined at the hip with France, which probably accounts for why the Monegasque authorities are out to present the principality as a good, clean place with zero tolerance of any dubious activities. No doubt Monaco has had just about enough vitriol from France over the past few months, with the French on the attack over the principality's tax regime. With the euro, Monaco is following the same timetable as France. It will come into force at midnight on December 31 in Monaco, and its existing currency - the French franc - will cease to be legal tender on February 17 2002. Monaco, like tiny enclaves such as San Marino and the Vatican, will have its own edition of the Euro which will feature the universal euro symbol on one side and ruling Prince Rainier on the other.

Agence France-Presse (AFP) reported this week that Monaco fears many Europeans outside Monaco will use the principality as a means of exchanging their money into euros without drawing too much attention to the size of their assets, and the Monegasque authorities do not want to be associated with this kind of business. Monegasque Banks Association secretary general, Jean-Claude Eude, was quoted by AFP as saying: 'We are less afraid of money laundering than a massive inflow at the border of Italians wanting to convert their currency.'

KPMG warned recently that the introduction of the euro creates substantial money laundering risks. KMPG's Alex Plavsic said recently: 'It is likely that once the euro has been introduced, there will become an unofficial secondary market for the conversion of 'dirty' national currency into the euro. Those with an excess of local currency will pay a premium to convert it to euros. The introduction of the 500 euro note has been widely debated and it looks as if it will provide a means for money launderers to operate on an ongoing basis. While it was heavily criticised [by the UK government], it will allow drug traffickers and others to increase physical cash payments.'

Monaco's deputy public prosecutor, Dominique Auter, stated that Monaco will be more vigilant over currency exchanges during the transition to the euro than many other euro zone countries, including France: 'Unlike France, which has decided during the euro transition to lift banks' responsibility (to report suspicious transactions) for conversions of less than 10,000 euros, the rules remain the same in Monaco. Moreover, the failure to declare suspicions can lead to prosecution,' he said.

Monaco's financial sector is an important pillar of the principality's economy, and the banking sector is continuing to grow. Relations with France have been strained over the last year, but with the introduction of a number of anti-money laundering regulations and this new stance on the euro, Monaco aims to hold its head up high.

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