Financial Crime World

Liechtenstein’s Financial Crime Prevention Efforts Face New Challenges

Emerging Risks Threaten Compliance Officials

Compliance officials in Liechtenstein are facing new challenges as the financial industry adapts to rapidly changing technologies and geopolitical shifts. Recent conferences have highlighted emerging risks, including digital disruption, cyber threats, and the increasing presence of digital assets.

Key Challenges Facing Compliance Leaders

  • Digital Disruption: The growing presence of digital assets is adding a new layer of complexity, with many false positives and significant time and resources spent on low-risk reducing activities.
  • Cyber Threats: The increasing use of technology has created new vulnerabilities for financial institutions to address.
  • Global Collaboration: Compliance officials are struggling to keep pace with innovation, with some organizations still relying on basic processes such as Know Your Customer (KYC) and alert reviews.

Recommendations for Building Resilience

To build resilience, experts recommend that compliance organizations:

  • Stay Abreast of Old and New Challenges: Focus on staying up-to-date with emerging risks, including digital assets and integration between cyber and AML.
  • Embrace Innovation: Use technology to improve their ability to detect and prevent financial crime.
  • Share Best Practices: Collaborate with other organizations to share best practices and improve compliance efforts.

Shift from “Check the Box” Mindset to Risk Management Approach

Compliance leaders are shifting from a “check the box” mindset to a risk management approach, recognizing that financial crime is a risk rather than just a compliance activity. This shift is leading to more sophistication in the AML and anti-financial crime industry, with regulators acknowledging that increased innovation is necessary for true financial-risk management.

Pressure to Innovate

Liechtenstein’s compliance officials are facing pressure to innovate as regulation increases to address existing risks and new risks such as digital assets and sanctions. The country’s FinCEN2 financial intelligence unit is developing regulations to define compliance in the face of new technologies and digital currencies.

Key Takeaways for Compliance Organizations

To remain relevant, organizations must be flexible and adapt to changing circumstances, understanding their risk appetite and following a strategic plan to mitigate identified risks. As Peter Wild noted, “Flexibility is key, and if your organization is rigid in terms of a particular program, that may limit your relevancy and effectiveness.”