EU’s Push to Grey List Monaco Puts Wealth Hub Under Historic Regulatory Spotlight

Monaco is entering a period of unprecedented regulatory examination, as the European Commission is set to include the principality on its list of high-risk third countries—commonly referred to as the “grey list.”

This move, which still requires European Parliament approval, follows the Financial Action Task Force’s (FATF) 2024 decision to subject Monaco to increased monitoring over critical deficiencies in its anti-money laundering (AML) and counter-terrorist financing (CFT) regime.

The designation signals major consequences for financial institutions, compliance professionals, and investors with ties to Monaco, a well-established private wealth hub deeply integrated into the European financial architecture.

EU Targets Monaco’s AML Framework with Grey List Inclusion

The move to place Monaco on the EU’s high-risk country list stems from years of global evaluations of its AML/CFT framework. In June 2024, FATF placed Monaco under increased monitoring—effectively placing it on the grey list—after identifying strategic shortcomings. The FATF's grey list includes countries with recognized AML/CFT issues that nonetheless demonstrate a willingness to improve.

The EU’s grey list, rooted in Article 9 of the Fourth and Fifth Anti-Money Laundering Directives (Directive (EU) 2015/849 and Directive (EU) 2018/843), mirrors FATF’s approach but specifically targets countries that pose threats to the internal EU market. Once designated as high-risk, EU law mandates that financial institutions apply enhanced due diligence (EDD) on any transaction or business relationship connected to that jurisdiction.

The Commission’s 2025 proposal to include Monaco on this list marks a departure from the country’s traditional portrayal as aligned with international financial standards. Despite improvements acknowledged by Moneyval—the Council of Europe’s AML assessment body—such as legislative reforms, persistent issues remain. These include weak enforcement of beneficial ownership transparency, regulatory gaps in private banking and real estate, and incomplete frameworks for new technologies and crypto-assets.

Compliance Burden Rises as Grey Listing Changes the Game

Grey listing by the EU brings with it a host of compliance obligations. Institutions conducting business with Monaco-linked entities must now apply higher scrutiny to all clients and transactions. This includes:

• Verification of the ultimate beneficial owners (UBOs) of all legal entities.

• Deep due diligence into the source of wealth and source of funds.

• Mandatory approval from senior management before entering or maintaining relationships involving Monaco.

• Enhanced transaction monitoring, particularly of unusual volumes or patterns that could indicate illicit activity.

Given Monaco’s heavy involvement in private banking and investment structures that span multiple jurisdictions—particularly Luxembourg—the compliance workload will increase considerably. Financial institutions are now required to recalibrate their cross-border risk assessments, potentially slowing down onboarding and transaction flows.

The establishment of the new EU Anti-Money Laundering Authority (AMLA) under Regulation (EU) 2023/1114 will further centralize and coordinate enforcement across the Union, particularly regarding high-risk jurisdictions like Monaco.

Why Monaco Landed on the Grey List

The FATF’s mutual evaluation, considered the gold standard of AML assessments, was the basis for Monaco’s grey listing. While Monaco had adopted several of FATF’s 40 Recommendations—including reforms aimed at financial institutions and designated non-financial businesses and professions (DNFBPs)—Moneyval pointed out numerous deficiencies:

• Beneficial ownership: Monaco established a central register but still struggles with accurate and timely information, limiting its ability to expose nominee and front company schemes.

• Supervision of high-risk sectors: Compliance oversight in real estate, legal services, and luxury goods remains insufficient despite their vulnerability in a high-net-worth economy.

• Crypto-assets regulation: FATF Recommendation 15 demands effective regulation of virtual assets and service providers. Monaco has made initial progress, but Moneyval found it only partially compliant.

• International cooperation: Although Monaco typically collaborates with global partners, gaps remain in timely, comprehensive information-sharing in cases of cross-border money laundering or asset recovery.

These findings formed the basis for the European Commission’s consideration under Article 9 of Directive (EU) 2015/849. The EU list is reviewed regularly, with the latest update in March 2024. Monaco’s inclusion will be decided pending a vote by the European Parliament and Council.

Ripple Effects for Investors and the Broader European Market

Beyond regulatory technicalities, grey listing Monaco will have far-reaching effects on investor confidence and capital flow. Many financial products tied to Monaco are linked with those in Luxembourg or other European financial centers. As a result, increased scrutiny may create spillovers, adding delays and compliance hurdles across multiple jurisdictions.

Fund managers, banks, and wealth managers with Monaco-linked clients will face higher documentation standards and closer scrutiny, raising both operational costs and onboarding times. In a highly competitive environment for global capital, some investors may redirect funds to regions like Singapore or Hong Kong, where regulatory clarity is matched by robust financial infrastructure.

A grey list designation also carries reputational risk. Even in the absence of direct sanctions, institutions often become more risk-averse. This can lead to reduced credit lines, more cautious lending, and even de-risking—particularly in sectors like real estate and luxury assets, which have long drawn AML scrutiny.

What Monaco Has Done—and What Lies Ahead

Following the FATF’s findings in 2024, Monaco took several steps to address compliance weaknesses. Reforms include tightened supervision of DNFBPs, improvements in beneficial ownership records, and revised due diligence requirements. The Monegasque government has published a regulatory roadmap with milestones for May and September 2025, and January 2026, with each stage requiring progress reports to international bodies.

Still, the pace of reform may not be enough to prevent grey listing by the EU. Regulators have emphasized that the current compliance gaps must be addressed with demonstrable, lasting outcomes. Until then, Monaco will remain under intense scrutiny, both in Europe and internationally.

Conclusion: A Crucial Moment for Monaco’s Financial Future

The FATF’s grey listing and the EU’s likely inclusion of Monaco on its high-risk third-country list mark a watershed moment for the principality. With increased compliance demands and reputational fallout, institutions connected to Monaco will need to reassess their risk frameworks and operational practices.

“Alignment with international standards is not a one-time achievement but a continuous process of vigilance, transparency, and cooperation,” the article concludes.

Monaco now finds itself at a critical juncture—one where its future as a financial center may depend not only on regulatory reforms but on the speed, transparency, and effectiveness with which they are implemented. 

By fLEXI tEAM