Evaluating Liechtenstein’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Framework

Liechtenstein has made significant strides in establishing a robust AML/CFT framework, but there are areas that require improvement to enhance its effectiveness. This article provides an overview of the country’s current AML/CFT framework, highlighting both its strengths and weaknesses.

Investigative Judges and Preventive Measures

Investigative Judges

• Liechtenstein has investigative judges who can impose coercive measures.
• However, there is a tendency to transfer cases to the authorities where the predicate offense occurred.

Preventive Measures - Financial Institutions

• The Due Diligence Act and its ordinances define AML/CFT preventive measures.
• Liechtenstein employs an overall risk-based approach for financial institutions, requiring them to build and update customer profiles based on risk-sensitive criteria.
• However, the legal provisions give excessive discretion to financial institutions when applying the risk-based system.

Customer Due Diligence (CDD)

• The DDA and the DDO provide broad instructions for determining high-risk criteria and defining specific due diligence for Politically Exposed Persons (PEPs) or respondent banks.
• Requirements for foreign branches and subsidiaries related to AML/CFT need strengthening.

Regulatory Body - FMA

• The Financial Market Authority (FMA) is an independent authority responsible for prudential and AML/CFT supervision as well as customer protection.
• The FMA has developed a broad range of AML/CFT preventive measures, including annual on-site due diligence examinations carried out by external auditors under its mandate.

Improvement Areas

• There is a need for the judiciary to develop its experience and jurisprudence in stand-alone money laundering prosecutions.
• The risk-based system applied by financial institutions may give excessive discretion, and legal or regulatory requirements do not fully address the misuse of new technologies.