Financial Crime World

Title: Liechtenstein’s Financial Center at a Crossroads: An In-depth Analysis of Money Laundering and Terrorist Financing Risks Based on the National Risk Assessment (NRA) July 2018

Subtitle: Results and Key Findings

The Principality of Liechtenstein, an international financial hub, has been under scrutiny as the global community tackles money laundering and terrorist financing challenges. In response, the Liechtenstein government and financial regulatory bodies conducted a thorough National Risk Assessment (NRA) to assess these risks and outline potential strategies for mitigation.

Acknowledging the Inherent Risks

The NRA results, released in July 2018, acknowledge the inherent risks associated with Liechtenstein’s financial sector and the importance of adopting a more risk-based approach.

## Key Findings: Money Laundering

1. **Sectors with heightened risks**: Private banking, financial consulting, planning, trust and company services (TCSPs), and certain life insurance products carry increased risks due to their international orientation, dependence on introduced business, and high net worth individual client bases.

## Key Findings: Terrorist Financing

1. **Relative low risk**: The risks related to terrorist financing are comparatively lower, but vulnerabilities, primarily within the non-profit organization (NPO) sector, still exist.

Mitigation Measures

The necessary measures to counteract these identified risks include:

  • Establishing risk-based supervision
  • Improving information exchange between regulatory bodies
  • Raising awareness for suspicious activity reporting
  • Ensuring timely implementation of regulations, such as The 4th EU Anti-Money Laundering Directive

TCSPs-Specific Mitigation

In the case of TCSPs, addressing vulnerabilities involves:

  • Strengthening regulation and supervision
  • Optimizing dual supervision
  • Improving the system of sanctions
  • Increasing the effectiveness of the compliance function

Insurers, Securities, and Other Sectors

Insurers, securities asset managers, auditors, and other sectors have already implemented proportional measures to address their identified vulnerabilities.

The Importance of the NRA

According to the President of the Financial Market Authority of Liechtenstein, the NRA is crucial in understanding the risks and the steps needed to mitigate them. The commitment to transparency, cooperation, and vigilance will ensure a stable and trustworthy financial climate.

Upcoming Releases and Next Steps

The full NRA report, which will provide further insights and action plans, is anticipated to be released in the coming months. This comprehensive assessment will serve as the basis for targeted measures aimed at combating money laundering and terrorist financing in Liechtenstein’s financial sector.

The second round of the NRA will address previously limited data areas, such as payment flows, nationality and place of establishment of beneficial owners, and the number and purpose of transferring assets abroad by Liechtenstein NPOs.

As regulatory bodies and market participants in Liechtenstein collaborate and evolve their efforts to combat these persistent financial threats, the NRA will play a pivotal role in guiding these efforts and fostering a more robust and dynamic risk management approach.