In an astonishing intervention, leaders of European financial policing bodies have warned of the dangers of concluding an Association Agreement with Andorra, Monaco, and San Marino, Europe’s three smallest states.

They warn that all three micro-states employ less stringent money-laundering controls than the bigger, established European Countries and that there is a danger that entities would seek to base themselves there in order to circumvent regulations.

As Politico reports, “the chairs of three EU regulators, which police Europe’s banks, financial markets and the insurance and pensions sectors, warned that the trio “historically maintained less rigorous financial regulations” and “may be prone to money laundering and other illicit activities.”

This strongly-worded letter to the European Commission jars with the substance and tone of the ongoing talks in which the two sides speak of the desirability and likelihood of an agreement, despite the fact that negotiations started eight years ago and are still dragging on.

As far as Monaco is concerned, the authorities have acted vigorously to enforce strict money-laundering controls. On top of that, there is strong domestic opposition to the concept of free movement of people and labour which is one of the central tenets of the European Union. In addition, many leading professionals in Monaco have banded together under the banner Objectif Monaco to defend the strict entry requirements to the Monaco marketplace that are currently in place.

The National Council has also weighed in in recent months, with its insistence on the continuation of the National Priority and the special treatment of Monegasques in terms of housing and employment. On the Monaco side, the elected body will have the last say on the matter.

Leaders in San Marino reacted with astonishment to the regulators’ intervention, speaking of ‘the process undertaken by the three states that have been transposing European regulations for years and that comply with the main mechanisms for fostering tax and financial cooperation between states with an effort equal to that of EU member states.”

The likelihood of any meaningful Association Agreement is becoming weaker by the day. Perhaps the biggest unknown is whether Monaco will go it alone, or whether Andorra and San Marino will also find EU demands unrealistic and unacceptable.

FILE PHOTO: EU flags fly in Brussels