LONDON (REUTERS) - Soccer club AS Monaco are living up to the principality's reputation for big spending as they prepare for their return to the French first division next season.

Bankrolled by Russian owner Dmitry Rybolovlev, the club has signed coveted Colombian striker Radamel Falcao as part of a 120 million euro (S$200 million) investment to try to regain a place among Europe's elite despite attracting only a few thousand fans to home games at the Stade Louis II.

However, the spending spree has put the club on a collision course with French soccer authorities unhappy at the way they use local laws to tempt top foreign players with tax-free salaries.

Monaco also ultimately risk falling foul of Financial Fair Play rules designed to force Europe's top clubs to curb their losses or face exclusion from continental competitions.

Rybolovlev, who had lived in Monaco for a number of years before buying the club in 2011, has made it clear he wants the club to make a swift return to the Champions League, a competition in which Monaco were runners-up as recently as 2004.

Though French champions on seven occasions, the club had fallen on hard times and were languishing in the second tier of French soccer when Rybolovlev bought control in late 2011.

The Russian had cash to spend after selling his stake in fertiliser producer Uralkali for billions of dollars the previous year.

However, soccer has changed over the past decade and its European governing body, Uefa, is keen to ensure that notoriously spendthrift clubs move to a sounder financial footing and stop relying on the deep pockets of benefactor owners.

The new season does not start until August, but Monaco have an important date on Friday, when they begin legal action over a ruling by the French league that would force the club to move their head office to France next year.

That would mean all Monaco's players would be liable to pay tax in France. "The decision puts the future of the club in jeopardy," Monaco said in a statement last month.