The Micro and the Macro
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Three microstates with a combined population of only 150,000 people could pose macroeconomic threats to Europe.
Andorra, a principality that sits on the border between France and Spain; Monaco, a city-state within France near the Italian border; and San Marino, a tiny country that is an enclave in Italy, are not members of the European Union. But they are currently negotiating closer economic relations with the massive bloc, including access to the European single market.
But recently, reported Politico, EU regulators sounded alarm bells about loosening the barriers between Europe and the three small states, citing “historically … less rigorous financial regulations,” that could facilitate “money laundering and other illicit activities.”
As the International Consortium of Investigative Journalists (ICIJ) noted, the three states have long facilitated “opaque financial arrangements,” that include banking money from individuals and businesses in corrupt countries with poor human rights records.
The ICIJ cited how the Pandora Papers, a trove of documents that exposed global elites’ dodgy offshore bank accounts, revealed how Russian President Vladimir Putin’s girlfriend, Svetlana Krivonogikh, a former cleaner whose daughter is allegedly Putin’s child, purchased a $4 million apartment in Monaco 20 years ago with the help of a Monaco wealth manager.
Early this year, EU watchdogs issued a report finding that Monaco needed to overhaul its anti-money laundering measures and mechanisms to prevent the funding of terrorism, reported AML Intelligence. “It was one of the worst assessments of recent times for a country with an advanced banking and financial system,” wrote the publication.
Similarly, between 2007 and 2015, the Banca Privada d’Andorra kept $1.14 billion of money plundered from Venezuela’s state-owned Petróleos de Venezuela, wrote El País. Businessman Luis Mariano Rodríguez Cabello, an unassuming accountant who helped facilitate the scheme, was the depositor.
Among the transactions for the funds in Andorra was a payment of more than $600,000 to the Four Seasons Hotel George V in Paris for the cousin of a corrupt Venezuelan politician who enjoyed the hotel, where guests marvel at views of the Eiffel Tower and a bevy of Michelin-starred eateries.
Meanwhile, San Marino was once known as a tax haven. Only nine miles long, the tiny county has six banks where foreigners could discreetly hide their cash from pesky government revenue agencies. Now, however, as Reuters reported, most account holders are locals.
Accordingly, Sammarinese officials were highly critical of European bureaucrats, saying the negative comments flew in the face of efforts to integrate into the EU.
However, financial contagion, many EU officials believe, must be guarded against – like its biological counterparts.