Financial Crime World

Money Laundering and Terrorism Financing in Liechtenstein: MONEYVAL Evaluation Reveals Progress, Yet Challenges Remain

Liechtenstein’s Progress in Combating Money Laundering and Terrorism Financing

According to MONEYVAL’s fifth round assessment, Liechtenstein has made significant strides in preventing and tackling money laundering (ML) and terrorism financing (TF). Some of the areas where Liechtenstein has shown progress include:

  1. Strong understanding of ML/TF risks
  2. Implementation of national AML/CFT policies
  3. Effective use of financial intelligence
  4. Impressive records in confiscation of proceeds of crime and TF investigations and prosecution

MONEYVAL’s Concerns and Priority Areas

Despite the progress made, MONEYVAL has highlighted several areas for improvement. Key priority areas identified by the regulator include:

  1. Enhancement of supervision
  2. Application of AML/CFT measures by the private sector
  3. Transparency of beneficial ownership (BO) of legal persons and legal arrangements

Moreover, there are still exemptions, such as the exemption for investment funds, which are not supported by a country risk assessment.

Key Findings

The Role of the Financial Intelligence Unit (FIU)

The FIU plays a crucial role in Liechtenstein’s financial system. While Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs) submitted by individuals subject to the Due Diligence Act (DDA) fairly match the prevalence of revenue-generating crimes, there is a need for more targeted reporting on tax offenses. Liechtenstein’s financial sector could potentially be used to launder proceeds from such crimes abroad.

Prosecution of ML and TF

Liechtenstein’s legal and institutional framework is well-suited for investigating and prosecuting various types of ML. However, the Competent Authorities need to strengthen their efforts to investigate complex ML cases with potentially intricate structures and to implement targeted sanctions that are proportionate to the risks.

Terrorism Financing

Although terrorism financing investigations and prosecutions remain at a minimum, this aligns with Liechtenstein’s risk profile. The initiatives taken in the area of counter-terrorism financing (CFT) indicate a commendable level of commitment.

Non-Profit Organizations (NPOs)

Non-profit organizations have shown good awareness of the risks they face but concerns were raised regarding the lack of understanding among NPOs operating as associations regarding their CFT obligations.

Private Sector’s Role in Combating ML and TF

The private sector, particularly banks and large trust and company service providers (TCSPs), have made significant improvements in understanding ML/TF risks and implementing sophisticated risk mitigation measures. However, there is a need to pay more attention to the identification and confirmation of source of wealth and funds and to report suspicious transactions in a timely and effective manner.

The Importance of International Cooperation

Effective international cooperation is crucial for Liechtenstein due to the primarily foreign origin of ML predicate offenses. While certain legal issues relating to double criminality requirements for tax evasion and the obligation to hear the eligible party before providing evidence to a foreign jurisdiction can complicate cooperation, recent efforts have minimized these risks.