Financial Crime World

Liechtenstein Fails to Meet International Standards on Money Laundering and Terrorist Financing

Overview

A recent assessment by international experts has revealed that Liechtenstein is not doing enough to prevent money laundering and terrorist financing. The country’s lack of criminal liability for legal persons that finance terrorism, as well as its failure to introduce a specific disclosure or declaration system to detect the physical cross-border transportation of currency and bearer negotiable instruments, are major concerns.

  • Liechtenstein does not have criminal liability for legal persons that finance terrorism.
  • This lack of liability creates a loophole that can be exploited by criminals.

Physical Cross-Border Transportation of Currency and Bearer Negotiable Instruments

  • Liechtenstein has failed to introduce a specific disclosure or declaration system to detect the physical cross-border transportation of currency and bearer negotiable instruments.
  • This failure makes it difficult for authorities to track and prevent illegal activities.

Criminal Procedure and Confiscation of Assets

  • Liechtenstein’s criminal procedure does provide for the possibility of an in rem (object) forfeiture when conviction cannot be pursued, but this approach has been criticized as being too soft.
  • The confiscation of laundered assets is not formally covered, and the seizure of assets is often delayed or inadequate.

Customer Due Diligence (CDD)

  • Liechtenstein’s laws require financial institutions to build a profile for each long-term customer, but the legal provisions may give excessive discretion to financial institutions when applying the risk-based system.
  • The country’s approach to CDD lacks specific criteria for high-risk customers and does not fully comply with international standards.

Financial Market Authority (FMA) Oversight

  • The FMA has been criticized for its limited involvement in on-site inspections.
  • Annual examinations by external auditors under the FMA’s mandate are not sufficient to ensure effective oversight of financial institutions.

New Technologies

  • Liechtenstein’s laws do not fully address the misuse of new technologies, such as digital currencies and blockchain, which can be used to facilitate money laundering and terrorist financing.

Recommendations

To strengthen its AML/CFT framework, experts recommend that Liechtenstein:

  • Introduce a specific disclosure or declaration system
  • Improve CDD requirements
  • Increase FMA involvement in on-site inspections
  • Address the misuse of new technologies
  • Ensure financial institutions are held accountable for deficiencies in CDD conducted by their intermediaries

Conclusion

Liechtenstein’s failure to meet international standards on money laundering and terrorist financing raises concerns about the country’s ability to prevent and detect these illegal activities. It is imperative that the government takes immediate action to address these shortcomings and bring its AML/CFT framework in line with international best practices.