Financial Crime World

Title: Money Laundering in Liechtenstein: A Close Look at the Country’s AML/CFT System

Subtitle: MONEYVAL Report Reveals Strengths and Areas for Improvement

The tiny European principality of Liechtenstein, recognized as an international financial center (IFC), is under renewed scrutiny in the global fight against money laundering (ML) and terrorist financing (TF). A recent report by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) provides insights into Liechtenstein’s current Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) regime.

Money Laundering Risks

  • Acknowledged Threats: Liechtenstein acknowledges its primary money laundering threats stem from non-resident customers who may try to transfer criminal proceeds generated abroad or use Liechtenstein financial intermediaries to facilitate their illicit activities.
  • Predicate Offenses: Economic crime, such as fraud and tax offenses, and corruption are the most significant predicate offenses.
  • Diverse Financial Offerings: The principality’s diverse financial offerings, including the establishment and administration of legal persons and arrangements, bank accounts, trading in securities, insurance policies, and virtual asset services, make it an attractive location for layering criminal proceeds.

Effectiveness and Compliance

  • Progress and Challenges: MONEYVAL concludes that Liechtenstein has made strides since its last evaluation but still needs to improve practical applications of its existing framework.
  • Areas for Improvement: Improvements include better understanding of ML threats associated with the current tax regime, increased supervisory activity for entities presenting a high or medium risk, and a better understanding of reporting by persons subject to the DDA.

Financial Intelligence Unit (FIU)

  • Role in Financial Intelligence Sharing: Liechtenstein’s FIU has been commended for its role in financial intelligence sharing and analysis.
  • Challenges: There is a need for further work in strategic analysis regarding laundering of foreign tax offense proceeds, TF, and assessing the appropriateness of SARs/STRs in relation to these offenses.

International Cooperation

  • Strategic Analysis and SARs/STRs: The FIU has generally effective cooperation with foreign jurisdictions, but there are ongoing challenges related to dual criminality requirements related to tax evasion and obligations to hear an entitled party before rendering evidence to a foreign jurisdiction.

Conclusion

  1. While Liechtenstein has made progress in strengthening its AML/CFT framework, there is still work to be done in several critical areas.
  2. By addressing these deficiencies as outlined in the MONEYVAL report, the principality can further bolster its defenses against ML and TF threats while maintaining its status as a reputable international financial center.