Liechtenstein Financial Institutions Suspected of Laundering Proceeds through Complex Schemes

Money Laundering Investigation Reveals Financial Institutions’ Involvement

A recent investigation has uncovered evidence that financial institutions in Liechtenstein may have been used to launder proceeds from criminal activities, including fraud and tax evasion, committed abroad.

Majority of Predicate Offenses Committed Outside Liechtenstein

According to sources, the majority of predicate offenses were committed outside of Liechtenstein, prompting authorities to rely on incoming requests for mutual legal assistance (MLA) to trigger ML investigations. As a result, financial flow analysis has become an essential part of any ML investigation in the country.

Lack of Prosecutions for Sophisticated Schemes

Despite efforts to combat money laundering (ML), investigators have noted a lack of prosecutions targeting sophisticated schemes that involve complex legal structures established and managed in Liechtenstein.

Importance of Confiscation of Proceeds from Crime

The report highlights the importance of confiscation of proceeds from crime as a policy objective, with authorities having established strong inter-institutional cooperation to detect, seize, and confiscate assets. Sanctions imposed by Liechtenstein courts for ML offenses have been criticized as being neither proportionate nor dissuasive.

Weaknesses in Cross-Border Controls

In addition, the country’s framework treaty with Switzerland has revealed certain weaknesses in the system of cross-border controls, although communication between the Swiss Border Guard Corps and Liechtenstein’s National Police is described as intensive and smooth.

No Terrorist Financing Prosecutions or Convictions

The report also notes that there have been no terrorist financing (TF) prosecutions or convictions in Liechtenstein to date, despite a medium-risk assessment for TF in the country. Authorities have not received any MLA requests from foreign counterparts related to terrorism or TF, and there is currently no specific counter-terrorism strategy developed by the government.

Compliance with UN Sanctions

Liechtenstein’s legal framework ensures automatic implementation of UN sanctions related to TF and proliferation financing (PF), and the country has recently amended its legislation to comply with FATF Recommendations. However, there have been no individuals or entities designated under UNSCRs 1267/1989 or 1988, which is consistent with the country’s TF risk profile.

Call for Strengthened Efforts

The investigation highlights the need for Liechtenstein authorities to strengthen their efforts to combat ML and TF, particularly in relation to sophisticated schemes that involve complex legal structures.