Financial Crime World

Liechtenstein’s Anti-Money Laundering and Combating the Financing of Terrorism Efforts Receive Mixed Review

A recent assessment of Liechtenstein’s anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts has revealed both strengths and weaknesses. While banks and large trust companies have demonstrated a good understanding of ML/TF risks, many other entities subject to the country’s AML/CFT regulations lack such knowledge.

Strengths and Weaknesses

  • Most individuals and organizations under the jurisdiction’s anti-money laundering law (DDA) rely on existing lists to identify persons indirectly controlling or owning funds involved in transactions.
    • However, this approach lacks a thorough understanding of ML/TF risks, leading to inadequate supervision.
  • The Financial Market Authority (FMA) has made efforts to improve its supervisory activities, but some areas remain underdeveloped.
    • For instance, the FMA’s oversight of the performance of customer due diligence activities by qualified members of governing bodies is insufficient.

International Cooperation

  • International cooperation is a critical component of Liechtenstein’s AML/CFT system, given the predominantly foreign nature of predicate crimes to money laundering.
  • The country has a comprehensive legal and institutional framework in place for international cooperation, and competent authorities have demonstrated effective cooperation with various foreign jurisdictions.
  • However, some issues related to dual criminality requirements regarding tax evasion and the obligation to hear an entitled party before rendering evidence to a foreign jurisdiction could impact effective cooperation.

Primary Money Laundering Threats

  • Liechtenstein’s primary money laundering threats stem from non-resident customers seeking to transfer criminal proceeds generated abroad or use Liechtenstein financial intermediaries to facilitate their illicit activities.
  • Economic crime, particularly fraud and tax offenses, are the most relevant predicate offenses.

Risk of Funds Being Used for Terrorism

  • The country has not experienced any terrorist attacks to date, but the risk of funds being used for terrorism in Liechtenstein is deemed medium due to the potential for funds to be moved through its financial system.
  • As an international financial center (IFC), services and products offered in Liechtenstein could potentially be used to finance terrorism abroad.

Conclusion

While Liechtenstein has taken steps to strengthen its legal and regulatory framework since its last evaluation, some areas require improvement to ensure the effectiveness of its AML/CFT system.