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An EU plan to forge closer ties with three tiny countries that sit within its borders risks causing significant financial harm to Europe’s consumers, the bloc’s own watchdogs warned.

In a dramatic intervention that threatens to blow apart trade talks with Andorra, Monaco and San Marino just months before they were due to conclude, Europe’s top finance regulators said a deeper relationship with the trio could open the backdoor to illegal money and make it easier for predatory financial firms to target people in the EU.

The three nations, with a combined population of 150,000 and bordering France, Italy and Spain, aren’t members of the EU but since 2015 have been negotiating with the European Commission on deeper economic ties that would give them access to the single market.

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.”

In their strongly worded letter to the Commission, obtained by POLITICO, they said that companies might be tempted to set up in the so-called microstates in a deliberate attempt to benefit from lighter financial standards, which would create “significant risks to consumers” if they sold their wares across the bloc.

Any financial-services backdoor into the EU would undermine years of regulatory efforts to tighten up the supervision of financial firms. Smaller countries inside the EU, such as Cyprus, have come under intense pressure to get tougher. The bloc is also introducing a clampdown on risky cross-border digital sales.

Outside the EU’s borders, international scandals like the Panama Papers have led to a global crackdown on money laundering and tax avoidance. Yet among the trio of countries, Monaco, for one, has long had a reputation as a tax haven and playground for the world’s rich and famous.

“Proper scrutiny and safeguards are essential to ensure we don’t let any Trojan horse through our gates,” said Paul Tang, a Dutch MEP for the Socialists & Democrats, who has worked on money laundering and tax legislation. “When the European watchdogs issue a joint warning, we’d better listen.”

Financial services is only one part of the bigger association agreements with the three countries, intended to remove trade obstacles, that the Commission hoped to conclude by the end of the year. Stopping short of fully fledged membership, the countries would have to follow some EU regulations to benefit from free movement of people, goods, services and capital.

In January, Maroš Šefčovič, vice president of the Commission, described a deal with the three by 2024 as “an ambitious yet achievable goal and the Commission’s priority.” A failure to reach an agreement before the European election next June would risk the plans falling by the wayside.

The San Marino government read the warnings “with astonishment,” a spokesperson for the country’s foreign affairs ministry said. Problems in the past had “nothing to do with the virtuous 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.”

A spokesperson for the Commission said it replied to “all letters in due course.”

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