Pubdate: Thu, 29 Jun 2000 Source: Guardian Weekly, The (UK) Copyright: Guardian Publications 2000 Contact: 75 Farringdon Road London U.K EC1M 3HQ Fax: 44-171-242-0985 Website: http://www.guardianunlimited.co.uk/GWeekly/front/ Page: 29 Author: Erich Inciyan FRENCH PARLIAMENT ACCUSES MONACO OF MONEY LAUNDERING Principality Condemned As A 'Non-Cooperative Territory' The French parliament's Information Mission on Financial Crime and Money Laundering in Europe last week published an explosive report on Monaco. The report, The Principality Of Monaco And Money Laundering: a territory that turns a blind eye under French protection, will mark a milestone in relations between the two states. France's protection of Monaco must now surely be called into question. It goes back to the Treaty of Péronne, signed in 1641 by Louis XIII and Honoré II, and is based on a series of bilateral agreements. The mission, whose proceedings were directed by two Socialist party MPs, its president, Vincent Peillon, and his rapporteur, Arnaud Montebourg, urges the French government to "seriously consider a complete review of our agreements" with Monaco. The report bluntly describes the principality as "an offshore centre conducive to money laundering". It explains the strategy used by Monaco to attract capital in huge amounts without being too fussy about its origin. Prince Rainier's state "can in no sense be regarded exclusively as a tax haven, since the principality gives those who use it all the advantages of a banking, fiduciary and judicial haven". The report does not hold against Monaco the fact that it has chosen, as it is entitled to do, a tax system that is highly attractive to private fortunes. However, it does consider that "the inevitable influx of capital resulting from the existence of a favourable tax system necessitates in return the implementation of a rigorous banking system, the existence of legislation that makes it possible to guard against the anonymity of transactions, and a guarantee that [Monaco] will in criminal cases allow effective international judicial and police cooperation". Monaco, a mini-enclave that is a member of the franc zone, does not provide any such guarantee, says the report. After a detailed examination of legislation and practices current in Monaco, it describes its criminal and financial legislation as "full of holes, and a sham". Money laundering has, it is true, been regarded as a crime under Monegasque law since 1993. "But this legislation should not be allowed to obscure the practical inadequacies of the system, and in particular the absence in Monaco of a centralised bank-account database," says the report. In France, by contrast, the Banque de France's database allows it to obtain details of all bank accounts held in the same name within hours. The report argues that Paris is directly responsible for Monaco's laxity: "France, a member of the European Union that is deeply committed to such international bodies as the Financial Action Task Force (FATF) [a group of 26 nations set up in 1989 at the initiative of the G7 countries] and the Stability Forum in the campaign against money laundering and financial crime, cannot possibly continue to be involved in the workings of Monaco's decision-making structures." Most senior posts in Monaco's civil service and government - the minister of state (head of government), the government adviser for the interior, and the heads of the fiscal and judicial departments - are occupied by French officials, while Monaco-based credit institutions are under the control of the Banque de France. The report argues that Monaco has "deliberately placed itself on the fringes of a community of states it wishes to join", by applying for membership of the Council of Europe and of the euro zone. It feels that "it would be difficult to consider any such membership unless at the same time certain provisions of Monaco's internal legislation, which make it conducive to money laundering, are reviewed". The "reproaches" directed at Monaco are, the report argues, all the more serious because it has acquired a dynamic money market in the past few years. In 1990, although it had only about 30,000 inhabitants (5,000 Monegasques, 12,000 French and 12,900 foreigners), its financial establishments handled 340,000 accounts, of which 61% were in the names of non-resident individuals and legal entities. Monaco has since become a financial centre that operates chiefly for the benefit of a wealthy international clientele. In 1998, 49 credit institutions (17 of them branches of French-registered banks) were established there. "Overall", the report notes, "there are 10 times more current accounts in Monaco than there are residents", and "65% of funds handled there belong to the non-residents". The sum of these shortcomings lead the report's authors to describe Monaco as a "non-cooperative territory" in the international drive against money laundering. Coming at precisely the time when the FATF is about to draw up the list of territories it regards as "non-cooperative" in the anti-money laundering drive, the parliamentary mission's report asks an important political question: are France and Britain prepared to lean on the sovereign entities that are attached to them, namely Monaco and the Channel Islands? The report strongly recommends that the French government reform two areas of Franco-Monegasque cooperation in particular. It feels that the secondment of 15 French magistrates to the principality "is no longer vitally necessary", and that the annual payment by France of 800m francs ($120m) of value added tax to Monaco should be halted. The report notes: "This curious and little-known effort on the part of French taxpayers to the benefit of the principality" is "highly questionable, especially since its aim is to allow some of the wealthiest people in the world to live in Monaco without paying tax". - --- MAP posted-by: Derek