Financial Crime World

Mutual Evaluation Report on Liechtenstein’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Measures

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Overview

The following report highlights key points from the Mutual Evaluation Report (MER) on Liechtenstein’s AML/CFT measures, emphasizing both the country’s efforts and areas requiring improvement.

Investigative Judges and Investigation Initiation

  • Investigative Judges: Liechtenstein’s investigative judges possess the power to impose coercive measures and conduct serious investigations and effective prosecutions.
  • Initiation of Investigations: Most Money Laundering (ML)-related investigations and proceedings are initiated by mutual legal assistance requests and Financial Intelligence Unit (FIU) reports, with a low percentage being triggered by an FIU report directly.

AML/CFT Preventive Measures

  • Preventive Measures Defined: AML/CFT preventive measures are defined in the Due Diligence Act (DDA) and expanded in secondary legislation by the Due Diligence Ordinance (DDO).
  • Revised DDA: The DDA was revised to transpose the FATF Recommendations and EU Directive 2001/97/EC.

Risk-Based Approach

  • Risk-Based System: Liechtenstein has an overall risk-based approach requiring financial institutions to build profiles for each long-term customer, which consolidates CDD data, including beneficial ownership information, source of funds, and purpose of the relationship.
  • Detection of Suspicious Activities: Detection of suspicious activities is based on deviations from these profiles.

Compliance with International Standards

  • Compliance Issues: The report notes that legal provisions give excessive discretion to financial institutions when applying the risk-based system and do not fully comply with several specific criteria of the FATF Recommendations.
  • Requirements for Identifying PEPs or Respondent Banks: Requirements for identifying Politically Exposed Persons (PEPs) or respondent banks are also not fully addressed, nor is the misuse of new technologies.

CDD Provisions

  • CDD Provisions Overview: CDD provisions are broadly in line with international standards but need strengthening in some areas, including identification requirements and verification of customers’ and beneficial owners’ identity.
  • Identification Requirements and Verification: Identification requirements and verification procedures for customers and beneficial owners should be strengthened.

Supervision

  • FMA’s Role: The FMA is an independent authority responsible for prudential and AML/CFT supervision as well as customer protection.
  • Supervisory Involvement: However, there’s a need for greater involvement of FMA supervisors in on-site inspection work.

Internal Instructions and Training

  • Internal Instructions: Financial institutions have defined internal instructions for AML/CFT diligence, implemented training programs for their staff, and designated managers to ensure compliance with laws and regulations.
  • Training Programs: Training programs should be regularly updated to address emerging threats and risks in the financial sector.

Conclusion

These points highlight the efforts Liechtenstein has made in implementing AML/CFT measures but also identify areas that require improvement, including enhancing the risk-based approach, improving identification procedures, addressing the misuse of new technologies, and increasing supervisory involvement.