Financial Crime in Liechtenstein: A Nation’s Struggle to Comply with International Standards

Liechtenstein, a small European principality nestled between Switzerland and Austria, has long been known for its strict banking secrecy laws. However, this reputation is also tied to concerns over financial crime and money laundering. In recent years, the country has made efforts to comply with international standards set by the Financial Action Task Force (FATF), but it still lags behind in several areas.

Progress Made

According to a report by the FATF, Liechtenstein has made progress in implementing key recommendations aimed at preventing financial crime. These include:

• Assessment of risk
• Application of a risk-based approach

However, there are still significant gaps in its compliance with international standards.

Key Areas of Concern

The report highlights several key areas where Liechtenstein needs to improve its efforts:

Non-Profit Organisations

• The country has not implemented effective measures to regulate non-profit organisations, which can be used for money laundering and terrorist financing.
• This lack of regulation makes it difficult to track the flow of funds through these organisations.

Financial Institution Secrecy Laws

• While Liechtenstein has made efforts to strengthen its anti-money laundering laws, it still maintains strict banking secrecy rules that hinder international cooperation in investigating financial crimes.
• These secrecy laws make it challenging for authorities to access information about financial transactions and account holders.

Customer Due Diligence

• The country needs to improve its customer due diligence requirements to prevent the use of shell companies and other financial instruments for money laundering and terrorist financing.
• This includes verifying the identity of customers, understanding their business activities, and monitoring their transactions.

Beneficial Ownership Transparency

• Liechtenstein has not implemented effective measures to provide transparency on beneficial ownership, making it difficult to track who is ultimately behind corporate structures.
• Beneficial ownership refers to the individual or entity that ultimately controls a company or organization.

Regulation and Supervision of DNFBPs

• The country needs to improve its regulation and supervision of designated non-financial businesses and professions (DNFBPs), which include lawyers, accountants, and real estate agents.
• These professionals often have access to sensitive information about their clients and must be regulated to prevent money laundering and terrorist financing.

International Cooperation

Liechtenstein has made efforts to cooperate with other countries in investigating financial crimes, including the signing of agreements on mutual legal assistance and extradition. However, more needs to be done to ensure effective cooperation and information exchange.

Conclusion

While Liechtenstein has made progress in implementing key recommendations aimed at preventing financial crime, there are still significant gaps in its compliance with international standards. To address these concerns, the country needs to strengthen its anti-money laundering laws, improve customer due diligence requirements, and provide transparency on beneficial ownership. International cooperation is also crucial in investigating and prosecuting financial crimes.