Liechtenstein’s Efforts to Combat Money Laundering and Terrorist Financing

A recent evaluation by the Financial Action Task Force (FATF) has highlighted Liechtenstein’s progress in strengthening its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime. While the country still faces challenges, the report commends Liechtenstein for implementing various measures to prevent illegal activities.

Source of Wealth and Source of Funds

The FATF evaluation noted that Liechtenstein has implemented effective controls to prevent criminals from holding or benefiting from significant interests in legal persons or holding management functions. The Financial Market Authority (FMA) has also introduced a specific supervisory risk model, which helps identify high-risk entities.

Shell Companies

However, the report highlighted concerns over the use of “shell” companies for illicit purposes. While there have been efforts to improve CDD and record-keeping obligations, reporting obligations have not been fully met. Many persons subject to the DDA (Domestic Disclosure Act) have never filed a SAR/STR (Suspicious Activity Report/Suspicious Transaction Report).

Challenges in Supervision

The FMA’s supervisory approach has undergone significant changes, with greater use of inspections and thematic reviews. However, there remains a need for more general supervisory activity to test compliance with AML/CFT requirements at all levels of risk.

International Cooperation

Liechtenstein has demonstrated effective cooperation with foreign jurisdictions through formal and informal channels. The country’s comprehensive legal and institutional framework allows for efficient information exchange and mutual assistance.

Risks and General Situation

As an international financial centre, Liechtenstein faces significant risks from non-resident customers seeking to transfer criminal proceeds or use its financial intermediaries for illicit activities. Economic crime, corruption, and tax offences are the most relevant predicate offenses.

Terrorism Financing Risk

While Liechtenstein has not experienced any terrorist attacks and is considered a low-risk country in this regard, there remains a medium risk that funds could be used to finance terrorism abroad due to its role as an IFC (International Financial Centre).

Overall Level of Compliance and Effectiveness

The FATF evaluation concluded that Liechtenstein has taken steps to remedy deficiencies identified in previous evaluations. The country’s legal and regulatory framework has been strengthened, and a comprehensive NRA (National Risk Assessment) was conducted.

While there are still areas for improvement, the report acknowledges that Liechtenstein has made significant progress in strengthening its AML/CFT regime. Further efforts are needed to ensure the effective implementation of these measures and to address ongoing challenges.

Key Takeaways

• Liechtenstein has implemented effective controls to prevent criminals from holding or benefiting from significant interests in legal persons or holding management functions.
• The FMA has introduced a specific supervisory risk model, which helps identify high-risk entities.
• Concerns remain over the use of “shell” companies for illicit purposes.
• There is a need for more general supervisory activity to test compliance with AML/CFT requirements at all levels of risk.
• Liechtenstein has demonstrated effective cooperation with foreign jurisdictions through formal and informal channels.