Financial Crime World

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Financial Crimes on the Rise in Liechtenstein

The Principality of Liechtenstein, a small country nestled between Switzerland and Austria, has been facing increasing threats from financial crimes. With a GDP of USS$6.5 billion in 2018, the country’s financial services sector, including banks, asset managers, and trust & company service providers, has proven attractive to non-resident businesses.

Focus on Private Banking and Wealth Management

According to a recent report by the Council of Europe and Moneyval, Liechtenstein’s business model focuses on private banking, wealth management, and mostly non-resident business, which are considered high-risk activities. The report also highlighted the vulnerability of the country’s trust & company service provider sector to money laundering (ML) and terrorist financing (TF).

National Risk Assessment

In its first National Risk Assessment (NRA), Liechtenstein identified individual business areas, such as:

  • Private banking
  • Financial consulting
  • Planning
  • Life insurance sector

as being exposed to heightened risks. The assessment also noted that international clients and the associated focus on new “growth markets” posed a significant risk.

US State Department Report

The US State Department has removed Liechtenstein from its list of countries categorised as a Country/Jurisdiction of Primary Concern, but previous reports have highlighted the country’s reputation for bank secrecy and its ability to attract funds from abroad. The 2016 Report by the US Department of State described Liechtenstein as “the richest country on earth” with a well-developed offshore financial services sector.

Suspicious Activity Reports

According to Liechtenstein’s Financial Intelligence Unit (FIU), there has been a decline in suspicious activity reports (SARs) over the past few years, from 376 in 2015 to 259 in 2017. The main predicate offences connected to SARs were:

  • Fraud
  • Criminal breach of trust
  • Embezzlement
  • Corruption
  • Money laundering

Threat Assessment

The country’s threat assessment also noted that while there was no evidence of terrorist activity planned or carried out in Liechtenstein, the threat situation remains low. However, the country is expected to be exposed to additional money laundering from criminal funds generated abroad due to its popularity for dealing with foreign assets and customers.

Global Financial Crimes

Estimates suggest that global proceeds of criminal activity are around US$5.8 trillion, while money laundering amounts to an estimated US$4.4 trillion. If these figures were applied to Liechtenstein’s GDP, the country could be expected to be exposed to:

  • Criminal proceeds: approximately US$1.2 billion
  • Laundered sums: approximately US$923 million

Conclusion

The threat of financial crimes in Liechtenstein is a growing concern, and it is essential for the country to strengthen its anti-money laundering (AML) and counter-terrorist financing (CFT) measures to prevent and detect these illegal activities.