Financial Crime World

Liechtenstein’s Anti-Money Laundering (AML) / Combating Financing of Terrorism (CFT) Framework: Weaknesses and Recommendations

Weaknesses in Liechtenstein’s AML/CFT Framework

Liechtenstein’s AML/CFT framework has several weaknesses that need to be addressed. Some of the key concerns include:

Insufficient Onsite Inspections

  • The Financial Market Authority (FMA) only carries out onsite inspections at Trust and Corporate Service Providers (TCSPs) every three years, unless there is a reason for increasing the frequency.

Inaccurate Beneficial Owner Information

  • There are concerns that information held by Liechtenstein professional trustees may not always be accurate, as they rely on introducers who may provide mistaken or inaccurate information about beneficial owners.

Weaknesses in TCSP Sector Can Spread Quickly Through Financial System

  • TCSPs in their capacity as representatives, shareholders, and managers of legal entities are also customers of Financial Institutions (FIs), which means that any weaknesses in the TCSP sector can spread quickly through the financial system.

Liechtenstein has made some changes to its legal framework concerning legal persons and arrangements and non-profit organizations. Some of the key updates include:

Definition of Beneficial Owner

  • The definition of beneficial owner has been amended to also extend it to those who control legal entities.

New Law on Foundations

  • A new law on foundations was adopted in 2008.

Requirements for Bearer Shares and Certificates

  • A new law introduced requirements concerning bearer shares and certificates and for certain types of companies to keep shareholders registers at the registered seat of the company.

Inherent Vulnerabilities and Weaknesses in Regime of Access to Beneficial Owner Information

Liechtenstein’s regime of access to beneficial owner information has several inherent vulnerabilities and weaknesses. Some of the key concerns include:

Effectiveness of TCSP as Main Repository of Beneficial Owners’ Information

  • The characteristics of Liechtenstein’s regime of access to beneficial owner information, based on TCSP as the main repository of beneficial owners’ information and FMA and law enforcement authorities’ access to that information raises questions on its effectiveness.

Issues with Trustees’ Implementation of CDD Requirements

  • The issues of effectiveness noted with regard to trustees’ implementation of CDD requirements and their supervision by the FMA.

To improve transparency of legal persons and arrangements established under Liechtenstein law, several recommendations can be made. Some of the key suggestions include:

Strengthening Supervision of TCSPs

  • Strengthening supervision of TCSPs to ensure that they obtain and maintain full, accurate, and up-to-date information on beneficial owners of legal entities and arrangements.

Clarifying Powers of Competent Authorities

  • Clarifying the powers of competent authorities to obtain, compel, and share confidential information, domestically and internationally, for the purpose of Recommendation 33.

Registration Requirements for “Deposited” Foundations

  • Subjecting “deposited” foundations to the same registration requirements as “registered” foundations.