Banking Industry Faces Pressure Over Financial Crime in Liechtenstein
Warning Issued by the United States Department of the Treasury
The United States Department of the Treasury has issued a warning to banks and financial institutions operating in the US to exercise enhanced scrutiny over transactions involving Liechtenstein, citing serious systemic problems with the country’s counter-money laundering regime.
Systemic Problems in Liechtenstein’s Counter-Money Laundering Regime
Vulnerabilities in Laws and Regulations
According to the advisory, Liechtenstein’s banking system is vulnerable to money laundering due to weaknesses in its laws and regulations. Banks in Liechtenstein are not required to verify the identity of their customers, making it difficult for them to detect suspicious transactions.
Key Issues with Liechtenstein’s Financial Sector
- Lack of Customer Identity Verification: Banks in Liechtenstein do not have to verify the identity of their customers.
- Difficulty in Detecting Suspicious Transactions: The lack of customer verification makes it challenging for banks to identify and report suspicious transactions.
- Strict Bank Secrecy: Liechtenstein has a commitment to strict bank secrecy, which makes it difficult for investigators to track down the financial trail of illicit transactions.
Financial Action Task Force (FATF) Assessment
Liechtenstein has been identified by the Financial Action Task Force (FATF) as non-cooperative in the fight against money laundering. However, the country has acknowledged its deficiencies and is working to improve its counter-money laundering systems.
US Treasury Department’s Advisory Recommendations
Enhanced Scrutiny for Transactions Involving Liechtenstein
The advisory recommends that US banks and financial institutions give enhanced scrutiny to any transaction originating from or routed through Liechtenstein, or involving entities organized or domiciled in the country. Financial institutions are also advised to examine available facts related to such transactions to determine if they require reporting under the Bank Secrecy Act.
Technical Assistance Offered to Liechtenstein Officials
The US Treasury Department has offered technical assistance to Liechtenstein officials as they work to improve their counter-money laundering systems.
Conclusion
While the advisory does not mean that US banks should curtail legitimate business with Liechtenstein, it highlights the need for enhanced vigilance in dealing with high-risk jurisdictions like this one. The Financial Crimes Enforcement Network (FinCEN) will consider any report relating to a transaction described in the advisory as constituting a report of a suspicious transaction relevant to a possible violation of law or regulation.