Financial Crime World

Liechtenstein Tightens Banking Regulations to Prevent Financial Crime

The Principality of Liechtenstein has strengthened its banking regulations to enhance its reputation as a safe haven for legitimate financial transactions while combating illicit activities. The revised regime aims to ensure that banks in the country adhere to high standards of regulation, supervision, and resolution.

New Regulatory Framework for Banking Licenses

National authorities will oversee all aspects of banking regulation, supervision, and resolution in Liechtenstein. To obtain a banking license, institutions must demonstrate:

  • A solid track record
  • Adequate capital
  • Robust risk management practices

This revised framework ensures that financial institutions can offer a range of services to cater to diverse customer needs while maintaining high standards of regulation.

Diverse License Options for Various Banking Services

The regulatory framework offers different licenses for various banking services, including:

  • Payment services
  • E-money issuance
  • Securities trading

This approach allows banks in Liechtenstein to offer a range of services while maintaining strict regulatory requirements.

Strengthened Capital Requirements for Crypto Asset Holding

Banks in Liechtenstein will be required to hold specific capital against crypto assets to mitigate the risks associated with cryptocurrency transactions. This measure aims to prevent illicit activities and protect customers’ assets.

Simplified Application Process and Timeline

The new regulatory framework has introduced a streamlined application process for bank licenses, which is expected to reduce the average processing time. Mere cross-border activity will be permissible subject to certain requirements.

Enhanced Corporate Governance and Remuneration Practices

Banks in Liechtenstein will be required to adopt robust corporate governance practices and adhere to strict remuneration policies to prevent excessive risk-taking.

Basel III Framework Implementation

The country has implemented the Basel III framework, including:

  • The leverage ratio
  • Liquidity requirements

Banks must maintain a minimum capital adequacy ratio of 10.5% and adhere to the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

Client Asset Protection and Resolution Regime

Client assets and cash deposits are protected through a combination of deposit insurance and segregation of funds. The resolution regime for banks in Liechtenstein includes a bail-in tool, which can be applied in situations of a mere liquidity crisis.

Sanctions for Non-Compliance

Banks that fail to comply with the revised regulatory framework may face significant sanctions, including:

  • Fines
  • Penalties
  • License revocation