“Compliance is still sometimes perceived as a technical issue when it’s actually a business issue.”

For companies, compliance represents a substantial cost…Sébastien Prat, co-founder of and partner at Phoenix Consulting, a specialised consulting firm, explains and analyses the investment that compliance requires for companies in the region, from very small businesses to large corporations.

Have you observed a surge in requests for compliance or internal audit services since this decision? Which services are most in demand (commission audit/governance reorganisation/training and so on)? What specific operations do you advise clients to focus on as a priority to show that action is being taken?

Yes, absolutely.  The demand for compliance support had already begun to increase before Monaco was placed on the Grey List but it has clearly accelerated since then, not only because of the decision itself but also primarily due to a more sustained pace of monitoring by the authorities, which is typical of countries that want to get off a negative list fast.  This is particularly evident amongst professionals with less compliance experience, who have had to go through two phases: an initial “defensive” phase, focused on implementing essential legal documents (internal procedures, activity reports, risk mapping, STRIX questionnaire, training) – this is the foundation, but not yet operational compliance; and a second, more demanding phase, which consists of actually applying the due diligence measures outlined in these procedures, notably by conducting a complete, consistent and formalised KYC process.
Conversely, amongst the most advanced professionals (those who already have a compliance culture), the demand increasingly focuses on comprehensive compliance audits to assess the actual level of maturity and anticipate AMSF audits and remediation missions. 

Being placed on the Grey List leads to increased costs for the entities concerned (recruitment, technological tools, reputation).  How do you assess the additional compliance effort that Monégasque businesses will have to bear? How much will it cost?

For many non-financial businesses, compliance has never been a significant budget item.  Today, within a more demanding supervisory framework, it is becoming an essential investment.  Costs vary depending on the size of the company but also on the maturity and risk appetite of the management.
For a small business with fewer than five employees, a minimum of €10,000 per year is needed to cover essential requirements: procedures, KYC, training and monitoring.  For larger organisations or financial institutions, budgets can reach several hundred thousand euros, or even more than a million in some cases, including specialised recruitment, technological tools and regular audits.
However, these expenses should be viewed as a strategic investment: compliance not only protects against sanctions but it also secures transactions, preserves reputation and reassures international partners.  In the long run, the cost of non-compliance would be far greater, both financially and for the image of the company and Monaco.
Currently, a large part of the cost of compliance is absorbed by document collection.  Projects like MonaFile* aim to transform this obligation into a strategic tool for customer knowledge and risk management, freeing up time and resources to focus on what truly creates value.

How does Monaco's situation compare to that of other jurisdictions that have been on the FATF Grey List, such as Malta, Panama and The United Arab Emirates? What lessons can these countries offer Monaco to improve its system and quickly be removed from the list?

Monaco's situation is rather reassuring when compared to other countries that have been on the FATF Grey List.  Other jurisdictions have experienced much more dramatic adjustments: loss of correspondent banks, harsher sanctions and a real impact on certain key sectors. 
What distinguishes Monaco is that the financial institutions have remained stable, controls are targeted and proportionate and that compliance measures are progressing rapidly.  We have avoided the domino effects that some countries have suffered, particularly in terms of reputation and international relations.

The lessons learned from other jurisdictions are clear: we must go beyond mere documentary compliance and demonstrate the concrete application of procedures.  Some countries have wasted time on paperwork without strengthening operational follow-up, which has prolonged their presence on the list.
Strategic alignment with a major partner or ally is a valuable lever.  According to our sources, many small countries have been able to accelerate their removal from the lists by relying on a recognised and credible player, with whom ad hoc alliances have been forged.  In Monaco, this remains an issue we can consider.
Transparency and proactive communication are essential.  Publishing clear reports, demonstrating progress and anticipating the expectations of the FATF, GRECO and the OECD can reduce the time spent on the list and strengthen the country's credibility.
In short, Monaco is on the right track but a swift removal from the list will depend on our ability to combine operational rigour, strategic leadership and constructive dialogue with our international partners.

You noted that prolonged placement on a Grey List can have serious consequences: a decline in GDP, business relocation and investor flight.  In this context, what drift scenarios do you consider most likely in Monaco if action is not taken quickly enough?

It is true that prolonged placement on a Grey List can have significant consequences for a jurisdiction.  In Monaco, if compliance and monitoring measures are not applied consistently and visibly, certain drift scenarios could materialise.  One can imagine an exodus or a reorientation of businesses: some companies, particularly those with an international focus, might decide to transfer their operations or open new subsidiaries in jurisdictions more favourably viewed by foreign investors.  There could be a loss of competitiveness in certain key sectors: yachting, aviation and financial services, which rely heavily on international partners, could see transactions diverted to other countries, indirectly impacting revenue and VAT collected.  Finally, another scenario concerns the potential deterrent to investment: a perception of regulatory uncertainty or high risk could slow the arrival of new international investors or partners, thus limiting economic growth.
That said, Monaco already has robust mechanisms in place and has made significant progress.  These risks can be mitigated if compliance efforts are pursued proactively and the path toward achieving effective international standards is clearly demonstrated.

How do you perceive the evolution of compliance culture in Monaco in recent years? Is it now seen as a regulatory constraint or as a lever for credibility and competitiveness?

Compliance culture in Monaco has evolved significantly in recent years.  Whilst it was previously perceived primarily as a regulatory obligation and constraint, a paradigm shift is now underway: it is increasingly seen as a lever for credibility and competitiveness.  Companies are beginning to understand that compliance is not simply a matter of ticking boxes but that it protects reputation, secures transactions and reassures international partners.  This change is particularly visible in financial institutions and sectors with high international exposure but it is gradually spreading to other areas such as luxury goods and real estate.
Having said that, the transition is still ongoing.  Historically, Monaco has relied on a culture of confidentiality and banking secrecy.  Today, the transition to more structured compliance still requires a genuine shift in approach and methodology for some stakeholders; but progress is tangible and the perception of compliance as a lever rather than a constraint is growing stronger every year.

By Milena Radoman - Monaco Economie

* MonaFile is an innovative initiative, jointly funded by the government and the private sector.  It aims to establish a secure digital platform enabling clients to share their information and documents with all authorised professionals, in order to simplify document collection and strengthen the effectiveness of KYC (Know Your Customer).