Financial Crime World

Banking Regulations in Liechtenstein: Preventing Financial Crime

Liechtenstein has established itself as a leader in anti-money laundering and combating the financing of terrorism (AML/CFT) efforts. This country’s zero-tolerance policy towards financial crimes is reflected in its robust AML/CFT framework.

A Strong Framework for AML/CFT

Liechtenstein’s AML/CFT framework is governed by several key pieces of legislation, including:

  • Law on Professional Due Diligence for the Prevention of Money Laundering, Organised Crime and Financing of Terrorism (Due Diligence Act; SPG): This law sets out the requirements for due diligence in preventing money laundering, organised crime, and financing of terrorism.
  • Ordinance on Professional Due Diligence for the Prevention of Money Laundering, Organised Crime and Financing of Terrorism (Due Diligence Ordinance; SPV): This ordinance provides further guidance on the implementation of the Due Diligence Act.
  • Act on the Register of the Beneficial Owners of Legal Entities (VwbPG): This law requires companies to maintain a register of their beneficial owners.

Key Responsibilities in AML/CFT

Financial institutions, trust service providers, and designated non-financial businesses and professions (DNFBPs) must comply with anti-money laundering rules when dealing with their clients. Key responsibilities include:

  • Identification and verification of clients: Financial institutions must verify the identity of their clients.
  • Identification and verification of beneficial owners: Financial institutions must identify and verify the beneficial owners of companies.
  • Clarification of clients’ source of funds and source of wealth: Financial institutions must clarify the source of funds and wealth of their clients.
  • Ongoing transaction monitoring: Financial institutions must monitor transactions to detect suspicious activity.
  • Filing of reports of suspicion: Financial institutions must file reports with the Financial Intelligence Unit (FIU) if they suspect that a client is involved in money laundering or financing terrorism.

The Role of the Financial Market Authority (FMA)

The FMA is responsible for monitoring compliance with AML/CFT obligations by persons subject to due diligence and imposing measures and sanctions where violations occur. The FIU receives and analyses reports of suspicion from persons subject to due diligence and public authorities.

International Cooperation in AML/CFT Efforts

Liechtenstein has actively participated in AML/CFT efforts for decades, guided by the international standards of the Financial Action Task Force (FATF). Since 1999, Liechtenstein has been a member of MONEYVAL, an FATF-style regional body, which is based at the Council of Europe in Strasbourg.

In 2021/2022, implementation of the FATF Recommendations in Liechtenstein was reviewed by MONEYVAL as part of its fifth round of evaluations. The report showed that Liechtenstein has a broad and convergent understanding of its money laundering and terrorist financing risks and that it pursues a strong supervisory approach commensurate to the risks.

With regard to its AML/CFT laws, ordinances, and guidance, Liechtenstein was rated “compliant” or “largely compliant” with 37 of the 40 recommendations (no ratings of “non-compliant”). In assessing the effective application of legal regulations in practice, Liechtenstein scored above average in five of 11 “immediate outcomes” examined.

Conclusion

Liechtenstein’s robust AML/CFT framework and its commitment to international cooperation have earned it a reputation as a leader in anti-money laundering and combating the financing of terrorism efforts.