The Financial Action Task Force has added Venezuela and Monaco to its “grey list” due to insufficient progress in curbing illicit financial flows. This designation requires closer monitoring and can deter foreign investment. The move comes amid Venezuela’s pre-election tensions and concerns over money laundering and terrorist financing risks. Monaco, despite making strides in financial supervision, still faces challenges, particularly regarding tax fraud and criminal asset recovery.
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By Ben Bartenstein, Andreina Itriago Acosta and Gaspard Sebag
Venezuela and Monaco have been added to a global watchdog’s “gray list” for not making enough progress to stem illicit financial flows.
The Financial Action Task Force put the two countries on its list after a discussion and vote during the group’s plenary in Singapore, according to a statement on Friday, confirming earlier Bloomberg News reports.
Those added to the list require closer monitoring to address strategic deficiencies, and the move can make foreign investors more wary of doing business there. A 2021 International Monetary Fund report found that gray-listed countries experienced “a large and statistically significant reduction in capital inflows.”
The decision comes at a fraught time for Venezuela, which has faced heavy compliance requirements in the financial sector and elsewhere due to US sanctions.
It also precedes the nation’s July 28 election, in which President Nicolás Maduro is seeking a third consecutive term. While opposition candidate Edmundo González leads the socialist incumbent by at least 20 percentage points in voter opinion polls, Maduro remains convinced he can get enough support to win, and it is said that he has backup plans to hold on to power if he doesn’t.
Informal Economy
In early 2022, an assessment team visited Venezuela to prepare a mutual evaluation report. It raised concerns about money-laundering risks associated with the nation’s large informal economy, including illegal mining. Among the terrorist financing threats highlighted were those tied to the close economic alliance between Caracas and Tehran. Iran is one of three jurisdictions on the FATF’s highest-risk “black list.”
While noting some progress since that assessment, the global watchdog on Friday identified several remaining concerns related to terror financing and pushed for enhanced supervision of the financial sector. It also requested accurate and up-to-date information on beneficial ownership and flagged the lack of prosecutions and sanctions.
For Monaco, which has faced its own series of crises, the FATF list inclusion comes at a critical moment as well.
The tiny principality on the French Riviera is awaiting a report from the Group of States Against Corruption, or Greco, which is examining the government’s ability to stamp out bribery. After multiple political scandals in the past half decade, Prince Albert II, the ruler, cut ties with several of his closest aides last year and is now locked in a public spat with one of them.
The Paris-based FATF did acknowledge that Monaco had made “significant progress” on several concerns flagged by European inspectors in late 2022 such as setting up a new financial intelligence unit that doubles up as an anti-money laundering supervisor. But it flagged remaining shortcomings linked to the principality’s approach to money that might stem from tax fraud committed abroad and its sluggishness in going after criminal assets in other countries.
The watchdog also said Monaco should boost resources allocated to prosecuting money laundering, and ensure “effective, dissuasive and proportionate” sanctions.
Monaco’s government said in a statement that it’s determined to implement the FATF’s recommendations and looking to address the issues within 18 months.
In a separate move, the FATF removed Turkey and Jamaica from its gray list, citing “significant progress” by both countries to improve their regimes for anti-money laundering and countering terrorist financing.
That leaves just over 20 nations spanning several continents on the gray list, including Nigeria, South Africa, Bulgaria, the Democratic Republic of Congo, the Philippines and Syria. The classification isn’t as punitive as the group’s “black list,” and it suggests that officials are taking steps to address current shortcomings.
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