MONACO: An Introduction

General Presentation

The Principality of Monaco is a small, yet highly attractive, state located on the French Riviera. It is headed by the Grimaldi family, a dynasty that has ruled for over 700 years, and is currently led by His Serene Highness Prince Albert II, renowned globally for his dedication to sustainable development. While Monaco joined the Council of Europe in 2004, it remains outside both the EU and the EEA.

Monaco boasts a cosmopolitan population of nearly 40,000 residents, representing 120 nationalities, including approximately 9,500 Monegasques, 10,000 French, 5,000 Italians and 2,000 British citizens. Its private sector employs more than 58,000 individuals, most of whom commute daily from neighbouring French towns.

In 2023, Monaco’s GDP reached EUR9.24 billion. A significant portion of the Principality’s income comes from its share of French VAT. Three key sectors account for nearly half of its economic output:

• scientific and technical activities, administrative and support services (24.4%);
• financial and insurance services (18.6%); and
• wholesale trade (9.3%).

The year 2024 continued along the trajectory set in 2023, characterised by legislative advancements especially in anti-money laundering (AML), data protection, corporate law and large-scale construction projects.

In 2023, Monaco underwent a MONEYVAL evaluation. The results, released in 2024, placed the Principality on the Financial Action Task Force (FATF) grey list. Despite this setback, Monaco’s government, regulatory authorities and market participants have united with a shared objective to ensure Monaco’s removal from the grey list. Substantial measures have already been implemented, and the legislative framework continues to evolve to align with FATF recommendations and meet emerging challenges.

A significant milestone in 2024 was the inauguration of the Mareterra district, a luxurious offshore extension into the Mediterranean Sea. DL Corporate & Regulatory is proud to have supported restaurants slated to open in early 2025 as part of this ambitious project.

Monaco’s real estate market remains one of the most expensive globally, with average property prices exceeding EUR50,000 per square metre. Several major development projects are either underway or nearing completion, further shaping the Principality’s skyline and infrastructure.

Monaco continues its ambitious “Extended Monaco” programme, focused on digital transformation and big data management. This initiative aims to enhance living standards and public services through innovations, such as:

• comprehensive 5G coverage;
• a sovereign cloud infrastructure;
• high-performance mobility solutions;
• advanced medical technologies and coding education; and
• cleantech innovations.

In addition to improving quality of life for residents, the programme seeks to position Monaco as a premier global business hub.

Legal and Regulatory Background

The Principality of Monaco, as a sovereign state, maintains its own legal system, which encompasses its laws, regulations, court system and regulatory authorities.

Although Monaco is not a member of the EU, it shares specific ties, including:

• a customs union with France, situating it within the EU customs territory;
• membership in the Eurozone; and
• alignment of its VAT system with France, applying the same rates.

Monaco was engaged in negotiations with the EU for an Association Agreement to enable participation in the EU’s internal market while safeguarding national interests. However, on 15 September 2023, Monaco and the European Commission mutually agreed to suspend negotiations. This decision stemmed from the challenge of reconciling Monaco's unique characteristics with certain fundamental EU principles. The Principality remains focused on protecting its nationals and preserving their living, working and housing conditions.

Business activities requiring prior authorisation

In Monaco, business activities conducted by non-Monegasque individuals are subjected to prior authorisation from the authorities. Certain regulated sectors, such as banking, insurance and financial services, are subject to additional requirements, including specific legal structures, minimum capital thresholds, qualified management and adequate infrastructure and staffing.

Banking and financial activities

Monaco's financial sector consists of 35 banking institutions and 58 asset management companies employing approximately 4,000 individuals and managing assets of nearly EUR120 billion. The sector continues to experience a trend of consolidation through M&A, with DL Corporate & Regulatory continuing to serve as the leading advisor for these transactions.

The Monaco banking and financial regulatory framework is intricate. As Monaco is not part of the EEA, European passporting rules do not apply. However, through treaties with the EU, several EU regulations (eg, CRR/CRD IV, PSD, EMIR) are applicable in Monaco.

Since 1945, a treaty with France has made French banking laws directly applicable in Monaco. Banking licences are granted by the French Autorité de Contrôle Prudentiel et de Résolution (ACPR) in collaboration with Monaco’s Direction du Budget et du Trésor, a department of the Ministry of State.

Portfolio and investment management services in Monaco may only be carried out “habitually or professionally” by entities authorised and regulated by the Monaco Commission de Contrôle des Activités Financières (CCAF).

Monaco’s financial activities laws have been significantly revised in recent years. These changes, which sparked considerable debate among Monaco’s financial professionals, reinforced the legal obligations of licensed entities while introducing a general prohibition on the solicitation of Monaco investors by non-licensed entities.

Privacy and data protection

The Principality of Monaco ratified the Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, along with its additional protocol, in 2008.

2024 marked a significant turning point in Monaco’s data protection framework with the enactment of Law 1.565 on 3 December 2024. This long-awaited legislation aligns Monaco’s data protection laws with the EU GDPR, establishing the Principality as a jurisdiction with an adequate level of privacy protection. Among its key reforms, the law eliminates the requirement for data controllers to notify or seek prior authorisation from the Monaco Data Protection Authority before processing data. Certain exceptions remain. For instance, prior authorisation is still required for transferring data to countries without an adequate level of protection, such as the USA.

AML and anti-corruption measures

Monaco enforces one of the world’s strictest AML regimes, with robust administrative and criminal sanctions in place. As a member of MONEYVAL, the Council of Europe’s permanent AML monitoring body, the Principality implemented the EU’s 5th AML Directive on 23 December 2020.

Monaco’s anti-bribery legislation addresses the giving or receiving of gifts, commissions or other advantages in connection with acts or omissions by recipients ‒ including civil servants, international or foreign public officials, private sector employees, magistrates or jurors ‒ in the course of their duties. These rules are currently under review concerning magistrates, in line with recommendations from the Group of States against Corruption (GRECO).

In 2024, following its MONEYVAL evaluation process initiated in 2021, Monaco was placed on the FATF grey list. While the FATF recognised the Principality’s significant progress and improvements, work remains to fully meet its recommendations. Monaco aims to be removed from the grey list before January 2026, with interim reviews scheduled for May and September 2025.

In response to the MONEYVAL evaluation and FATF recommendations, Monaco enacted multiple new laws throughout 2023 and 2024, bolstering its legislative arsenal to combat money laundering and reinforce compliance with international standards.

E-commerce, e-signatures and digital innovation

Monaco is connected to the Europe-India-Gateway and was one of the first countries in the world to be fully 5G covered with high-quality internet connection from computers, mobile phones as well as all other connected objects (eg, connected cars).

In 2020, Monaco took a significant step forward with the adoption of token offering regulations by the Monaco Parliament. This legislation, along with its implementing Sovereign Ordinances, established a legal framework for token offerings, creating an innovative funding mechanism for Monaco-based companies. The framework aims to enhance Monaco’s reputation as an attractive financial hub while safeguarding investor interests and the Principality’s credibility.

Since August 2011, when Monaco introduced its first law dedicated to digital activities, the Principality has consistently updated its regulations to support e-commerce, e-signatures and emerging technologies like blockchain.

As part of the “Extended Monaco” programme, the Principality achieved another milestone in its digital transformation in 2022 by launching an online service for obtaining registration extracts from the Monaco Trade and Industry Registry.

Monaco’s unique legal specificities

Monaco’s legal environment presents unique challenges for investors:

• sole-shareholder companies are prohibited;
• directors must hold shares in their companies;
• sales of shares and businesses are subject to strict registration requirements and fees; and
• corporate objects clauses are narrowly construed, regardless of activity type.

Discussions are underway to simplify these rules and enhance business flexibility.

Employment law mandates a priority order in hiring and firing practices. Additionally, foreign investment regulations influenced by changes in French law have introduced complexities in regulatory filings for sensitive industries.

These legal nuances necessitate meticulous planning for corporate and M&A transactions involving Monaco entities.

The legal landscape in Monaco underwent significant transformation in 2024, particularly in data protection and AML. These developments, alongside ongoing modernisation efforts, reflect Monaco’s commitment to aligning its regulatory framework with international standards while preserving its unique identity.