Financial Crime World

Liechtenstein’s Banking Industry Urged to Enhance Financial Crime Prevention Measures

MONEYVAL Fifth Round Evaluation Report Highlights Areas for Improvement

The MONEYVAL fifth round evaluation report, published on June 29th, has emphasized several areas where Liechtenstein’s banking industry can improve its financial crime prevention measures. Despite being recognized for its substantial level of effectiveness in preventing and combating money laundering (ML) and terrorism financing (TF), the report highlights the need for further improvements.

Key Areas for Improvement

  • Assessment of ML/TF Risks: The authorities have a good understanding of key ML and TF risks, but some threats and inherent risks remain unassessed.
  • Financial Sector’s Role in Laundering Proceeds from Tax Crimes: The extent to which the Liechtenstein financial sector could be used to launder proceeds from tax crimes committed abroad is still unknown.
  • Information on Non-Bank Assets Held by Trust and Company Service Providers: Information on non-bank assets held by trust and company service providers is also lacking.

Improvement Opportunities for the Financial Intelligence Unit (FIU)

  • Providing Financial Information: The FIU plays a crucial role in providing financial information, but there is scope for improvement.
  • Suspicious Activity Reports (SARs)/Suspicious Transaction Reports (STRs): While SARs/STRs submitted by persons subject to the Due Diligence Act (DDA) are generally commensurate with revenue-generating crimes, further reports on TF and the laundering of proceeds from foreign tax crimes could be useful.

Strengthening Investigation and Prosecution of ML Cases

  • Complex Legal Structures: Investigations involving complex legal structures established in Liechtenstein require improvement.
  • Sanctions for Non-Conviction Based Confiscation and Failure to Report Suspicious Transactions: Sanctions imposed for non-conviction based confiscation and failure to report suspicious transactions are not sufficiently dissuasive or proportionate.

Enhancing International Cooperation

  • Double Criminality Requirements for Tax Evasion: Issues related to double criminality requirements for tax evasion may hinder effective cooperation.
  • Obligation to Hear the Eligible Party Before Providing Evidence to a Foreign Jurisdiction: The obligation to hear the eligible party before providing evidence to a foreign jurisdiction also presents challenges.

Recommendations for the Banking Industry

To address these concerns, the banking industry in Liechtenstein is urged to enhance its AML/CFT measures by:

  • Improving Supervision and Oversight of Financial Institutions
  • Enhancing Transparency of Beneficial Ownership Information
  • Strengthening Investigation and Prosecution of ML Cases Involving Complex Legal Structures
  • Increasing Sanctions for Non-Conviction Based Confiscation and Failure to Report Suspicious Transactions
  • Addressing Issues Related to International Cooperation, Including Double Criminality Requirements and the Obligation to Hear the Eligible Party Before Providing Evidence to a Foreign Jurisdiction

By taking these steps, Liechtenstein can further enhance its reputation as a leader in financial crime prevention and maintain the trust of its citizens and international partners.