Financial Crime World

Liechtenstein’s Struggle to Combat Money Laundering and Terrorism Financing

A recent assessment by the Financial Action Task Force (FATF) has raised concerns about Liechtenstein’s efforts to combat money laundering and terrorism financing. While the country has made significant progress in some areas, it still falls short in others.

One of the main issues is the lack of criminal liability for legal persons that finance terrorism. This means that companies or organizations can avoid accountability for their actions, even if they are found to be funding terrorist activities.

  • Failure to have a specific disclosure or declaration system in place to detect the physical cross-border transportation of currency and bearer negotiable instruments related to money laundering or terrorism financing.
  • Risk-based approach to customer due diligence seen as a weakness, with excessive discretion given to financial institutions when applying this system.

Supervision and Oversight

In terms of supervision, while the Financial Market Authority (FMA) is an independent authority responsible for prudential and AML/CFT supervision, there is a need for greater involvement by FMA supervisors in on-site inspection work to improve overall effectiveness.

Recommendations

  • Strengthen provisions regarding customer due diligence, particularly in areas such as identification and verification of customers’ and beneficial owners’ identity.
  • Financial institutions should not rely too heavily on domestic and foreign intermediaries for CDD, without adequate oversight.

Progress Made

Despite these challenges, Liechtenstein has made some progress in recent years. The country has established an integrated supervisor, the FMA, which oversees both prudential and AML/CFT supervision, as well as customer protection. All financial institutions are licensed by the FMA, and there is a requirement for annual on-site due diligence examinations.

Conclusion

In conclusion, while Liechtenstein has made some progress in combating money laundering and terrorism financing, it still faces significant challenges. The country needs to strengthen its provisions regarding CDD, improve supervision, and increase accountability for legal persons that finance terrorism. Only then can Liechtenstein be considered a reliable partner in the global fight against financial crime.

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