Liechtenstein’s Fight Against Money Laundering and Terrorist Financing: A Mixed Bag

The Financial Action Task Force (FATF) has recently praised Liechtenstein’s efforts to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) framework. However, the report also highlighted several areas where improvement is needed.

Shell Companies: A Hidden Threat

The report noted that while Liechtenstein has taken steps to prevent the misuse of “shell” companies, there remains a risk that these entities could be used for illicit activities. Authorities have implemented measures to ensure that beneficial ownership information is accurate and up-to-date, but more needs to be done to prevent the use of shell companies as fronts for money laundering or terrorist financing.

CDD and Record-Keeping Obligations

The report found that while most financial institutions in Liechtenstein are diligent in applying customer due diligence (CDD) and record-keeping obligations, there is room for improvement. Some entities have been reported to the Office of the Public Prosecutor for failing to make reports, and some persons subject to the Due Diligence Act (DDA) have never filed a Suspicious Activity Report (SAR)/Strategic Terrorist Financing Report.

Supervision and Enforcement

The report praised the Financial Market Authority (FMA) for its efforts to improve supervision and enforcement, including the introduction of a specific supervisory risk model. However, it noted that direct FMA supervisory activity is not sufficient, particularly in high-risk areas such as trust companies and investment funds.

International Cooperation

Liechtenstein’s international cooperation framework has been praised by the FATF, with authorities demonstrating effective cooperation in providing and seeking information from foreign jurisdictions. However, there are still some issues related to dual criminality requirements that could impact effective cooperation.

Risks and General Situation

The report highlighted the risks posed by Liechtenstein’s international clientele and the services offered in the field of wealth management. The country is an attractive location for layering criminal proceeds, and economic crime and corruption are significant predicate offenses.

Overall Level of Compliance and Effectiveness

While Liechtenstein has taken steps to strengthen its AML/CFT framework, there is still room for improvement. The report praised the jurisdiction’s efforts to remedy deficiencies identified during its last evaluation, but noted that more needs to be done to ensure effective implementation of existing laws and regulations.

Conclusion

In conclusion, while Liechtenstein has made progress in strengthening its AML/CFT framework, there are still areas where improvement is needed. The country must continue to work to prevent the misuse of shell companies, improve supervision and enforcement, and enhance international cooperation to combat money laundering and terrorist financing.