Financial Crime World

MoneyVAL Report: Liechtenstein’s Progress in Fighting Financial Crimes, but Room for Improvement

On June 29, 2022, the European Money Valuation Authority (MONEYVAL) published its fifth assessment report on Liechtenstein’s efforts to combat money laundering (ML) and terrorism financing (TF). In this article, we will discuss Liechtenstein’s substantial progress and areas for improvement as outlined in the report.

Areas of Progress

  1. Assessment of ML/TF risks
  2. Setting national AML/CFT policies and coordination
  3. Use of financial intelligence
  4. Confiscation of proceeds of crime
  5. TF investigations and prosecution
  6. International cooperation

Areas for Improvement

MONEYVAL calls for further improvements in the following areas:

Enhancing supervision

  • authorities should fully assess potential threats related to tax crimes and non-bank assets held by trust and company service providers

Private sector application of AML/CFT preventative measures

  • concerns remain over identification and confirmation of the source of wealth and funds
  • possible illicit use of “shell” companies
  • authorities express concerns over limited compliance with reporting obligations
  • lack of SAR/STR filings by some entities

Money laundering investigation and prosecution

  • the authorities lack in complex investigations involving legal structures established and managed in the country

Implementation of targeted financial sanctions

  • the sanctions imposed are not sufficiently dissuasive and proportionate

Understanding ML and TF risks

Despite acknowledging Liechtenstein’s progress in understanding ML and TF risks, authorities have yet to fully assess potential threats related to tax crimes and non-bank assets held by trust and company service providers. The report highlights exemptions for investment funds that are not supported by a country risk assessment, calling for further examination.

Financial Intelligence Unit

The Financial Intelligence Unit (FIU) plays a crucial role in financial investigations, with Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs) usually commensurate with the prevalence of revenue-generating crimes. However, reports targeting tax offenses have been scarce. The FIU could benefit from more analysis on TF, foreign tax crimes, and SAR/STR reporting on these crimes.

Liechtenstein’s legal and institutional framework allows for effective investigation and prosecution of all types of ML. However, the authorities are lacking in complex investigations involving legal structures established and managed in the country. While the country has introduced criminal law measures, such as non-conviction based confiscation, the sanctions imposed are not sufficiently dissuasive and proportionate.

Lack of TF prosecutions

The report expresses concern over the lack of TF prosecutions in Liechtenstein, despite successful prosecution as confirmation of the country’s expertise in detecting and investigating TF activities. The report also commends efforts made by non-profit organizations to increase awareness of risks but calls for more attention towards NPOs operating as associations in relation to CFT measures.

Private Sector Compliance

Liechtenstein’s private sector, particularly banks and large trust and company service providers, have significantly improved their understanding of and response to ML/TF risks, implementing sophisticated measures. However, authorities express concerns over the transparency of beneficial ownership information, limited compliance with reporting obligations, and a lack of SAR/STR filings by some entities, including TCSPs and asset managers, and some banks.

International Cooperation

International cooperation remains vital to addressing financial crimes, with challenges related to the double criminality requirements for tax evasion and jurisdictional issues. The report concludes that current measures are generally effective.

Conclusion

Though Liechtenstein has made significant strides in combating financial crimes, the MONEYVAL report calls for continued attention to addressing gaps, particularly in enhancing supervision, boosting private sector compliance, improving transparency, increasing prosecutions, and implementing targeted financial sanctions.