"Scathing" Monaco report puts Jersey finance industry on alert

Thursday 02 February 2023

Jersey believes its financial services industry – together with the laws it follows and the agencies which police it – are much better prepared to face international scrutiny than fellow offshore centre Monaco, which has just been subject of a “scathing” evaluation.

2023 is a key year for the island’s primary sector, with a team from Moneyval – a European organisation which assesses compliance with international standards to counter money laundering and the financing of terrorism – due to visit in September.

A bad report could have dire consequences for Jersey, with the island particularly keen to avoid being added to a ‘grey list’ of jurisdictions which are judged to have inadequate laws, practices and resources to tackle financial crime.

Last February, after a damning evaluation by the Caribbean equivalent of Moneyval, the Cayman Islands were added to this ‘grey list’, which is compiled by an international body called the Financial Action Task Force, which sets the global standards on which assessments are made.

Other grey-listed countries include North Korea, Myanmar and Syria. Countries on the list are subject to increased monitoring by FATF, who decide if and when they can be removed from it.

Last week, Moneyval published its assessment of Monaco. The Mediterranean principality has not joined FATF’s grey list, but the international watchdog is expected to discuss the report at its next meeting at the end of February.

On Tuesday, members of Jersey’s finance industry met to hear about the latest preparations for the island’s own Moneyval assessment. 

Pictured: George Pearmain is leading the Government's preparation for the key Moneyval assessment.

There, George Pearmain – the Government’s Director of Financial Crime Strategy – said that the Monaco evaluation was “very scathing”, but Jersey was in a different position.

He said: “Monaco’s risk profile is not dissimilar to Jersey's, but its approach and preparation [for evaluation] was very different; for instance, Monaco did not make any legislative changes until last April, whereas Jersey has already taken several important steps.”

Mr Pearmain added that Jersey’s position was more akin to another recently evaluated jurisdiction, Estonia, which had received a far more favourable report to Monaco.

“Like Jersey, Estonia invested substantially in its Financial Intelligence Unit and engaged in a sustained programme of outreach [to the industry]. It was able to predict many of the recommendations which Moneyval made; something we too are aiming to do.”

By contrast, Monaco received a critical report, which the 0.76 sq-mile nation says it is now seeking to rectify.

Bloomberg reported that inspectors had found that “ownership databases were largely incomplete, reports on suspicious transactions were filed months late, and authorities lacked the resources or sophistication to tackle the most complex investigations. 

“The findings led the inspectors to give Monaco their worst effectiveness rating for the way it prosecutes money laundering and recovers assets.”

Despite Jersey being better prepared – with the island already passing laws to introduce Deferred Prosecution Agreements and to make ‘Failing to Prevent’ financial crime an offence – the finance industry is not expected to get a clean bill of health.

Richard Pedley, Associate Director of Financial Crime Strategy, told the meeting: “Anecdotally, there seems to be two schools of thought in the run up to the evaluation: one is ‘it’s all going to be fine, so there’s no point doing anything’; and the other is that ‘we’re all completely doomed’.

“I don’t believe either is correct, and the truth is somewhere in the middle. We are not doomed but we are not home free, either. We are better prepared than others, and will be even more prepared by September’s on-site visit.

“One thing we can guarantee is that we will be well prepared, which we expect will serve to reduce the scope of Moneyval’s inevitable recommendations when they come out next year.”