Financial Crime World

Financial Crime Definition in Liechtenstein: A Growing Concern for Authorities

Introduction

Located between Switzerland and Austria, Liechtenstein is a small but significant country with a GDP of USS$6.5 billion in 2018. The Principality’s financial services sector has attracted non-resident businesses, making it an attractive location for money laundering and other financial crimes.

The Growing Concern

According to the FATF Country Evaluation Report published in April 2014, Liechtenstein’s business model focuses on private banking, wealth management, and mostly non-resident business, which are considered high-risk activities. The report highlighted that banks in Liechtenstein offer a variety of products that can be abused for money laundering purposes.

Vulnerable Sectors

  • Trust & Company Service Provider: This sector was identified as particularly vulnerable to money laundering and terrorist financing due to the services offered and the types of customers served.
  • Private Banking: Private banking, financial consulting and planning, and the life insurance sector were identified as exposed to heightened risks.

Progress Made

Liechtenstein has made progress in addressing these concerns by completing its first National Risk Assessment (NRA) in January 2018. The NRA identified individual business areas of the financial centre as exposed to heightened risks, including international clients and new “growth markets”.

Key Findings

  • Liechtenstein is no longer considered a Country/Jurisdiction of Primary Concern according to the US State Department’s 2016 Report on Money Laundering and Financial Crimes.
  • The country has a well-developed offshore financial services sector, low tax rates, and tradition of bank secrecy, which contribute to its ability to attract funds from abroad.

Statistics

  • The Financial Intelligence Unit (FIU) received 330 suspicious activity reports in 2016, a decrease of 12% compared with 2015.
  • The main predicate offences connected to SARs were fraud, criminal breach of trust, embezzlement, corruption, and money laundering.

Exposure to Terrorist Financing

Liechtenstein’s exposure to terrorist financing is considered low, according to the NRA. However, the country can be expected to be exposed to additional laundering from criminal funds generated from abroad due to its popularity for dealing with foreign assets and customers in its finance sector.

Global Perspective

  • Estimates suggest that global proceeds of criminal activity are estimated at US$5.8 trillion, with money laundering accounting for an estimated US$4.4 trillion.
  • Based on Liechtenstein’s share of global GDP, criminal proceeds generated in the country would be estimated at US$1.2 billion, with estimates for laundering at US$923 million.

Conclusion

The growing concern over financial crime in Liechtenstein highlights the need for continued vigilance and cooperation among authorities to combat money laundering and other financial crimes.