Financial Crime World

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Financial Crime Investigation Methods in Liechtenstein Under Scrutiny

A recent evaluation report by MONEYVAL has highlighted both strengths and weaknesses in Liechtenstein’s efforts to prevent and combat money laundering (ML) and terrorism financing (TF). The report, published on June 29, 2022, acknowledged the country’s substantial level of effectiveness in understanding ML/TF risks, setting national policies, and using financial intelligence. However, it also identified areas that require improvement.

Understanding Risks

The authorities’ understanding of key ML and TF risks is good, but some threats and inherent risks have not been fully assessed. For example:

  • The extent to which the Liechtenstein financial sector could be used to launder proceeds of tax crimes committed abroad has not been estimated.
  • Information on non-bank assets held by trust and company service providers remains unclear.

Financial Intelligence Unit

The Financial Intelligence Unit (FIU) in Liechtenstein is a key source of financial information, and its analytical reports are an essential part of any investigation or operational activity carried out by law enforcement authorities. Suspicious Activity Reports (SARs)/Suspicious Transaction Reports (STRs) submitted by persons subject to the Due Diligence Act (DDA) are generally commensurate with revenue-generating crimes in the country, but there is room for improvement.

The country’s legal and institutional framework allows for effective investigation and prosecution of all types of ML. However:

  • The authorities lack investigations involving complex legal structures established and managed in Liechtenstein.
  • Sanctions imposed are not sufficiently dissuasive for convictions related to various types of ML, including self-laundering of proceeds from foreign fraud.

Confiscation of Proceeds

Confiscation of the proceeds of crime is a policy objective in Liechtenstein, and the outcome of authorities’ actions aligns with the country’s risk profile. The lack of TF prosecutions in Liechtenstein is also in line with its risk profile, although there has been only one prosecution in this regard.

Private Sector

The private sector has a good understanding of ML/TF risks and liabilities:

  • Banks and large trust and company service providers have implemented sophisticated measures to mitigate these risks.
  • However, less attention was paid until recently to identifying and confirming the source of wealth and source of funds, as well as the possible illicit use of “shell” companies.

The authorities are aware of the risk that legal persons (and legal arrangements) can be used to launder proceeds of crime:

  • Effective measures are in place to prevent misuse, including the obligation for legal entities to appoint a qualified member to their governing body.
  • Timely access to basic and beneficial ownership information on legal entities and legal structures has not caused difficulties.

Beneficial Ownership Information

However, there is no evidence that this is the case for beneficial ownership information. Compliance with reporting obligations was limited, and fewer tax offences were reported than expected.

International Cooperation

International cooperation is an important part of Liechtenstein’s AML/ CFT scheme:

  • Certain issues related to double criminality requirements for tax evasion and the obligation to hear the eligible party before providing evidence to a foreign jurisdiction may impact effective cooperation.