Liechtenstein’s Financial Sector Faces Heightened Risk of Money Laundering and Terrorist Financing
A comprehensive national risk assessment conducted by the government has revealed that Liechtenstein’s financial sector is vulnerable to money laundering and terrorist financing. The assessment, which covered various sectors including banking, asset management, insurance, and investment funds, identified several key risks.
Banking Sector at High Risk
The banking sector was found to be particularly susceptible to money laundering due to its high volume of transactions and complex products. The report noted that the majority of Liechtenstein’s target clients are European-based, with a significant proportion coming from countries with low terrorism risk. However, the assessment highlighted the lack of adequate regulation and supervision in some areas, leaving the sector vulnerable to exploitation by criminals.
Key Risks Identified
- High volume of transactions and complex products
- Lack of adequate regulation and supervision in some areas
- European-based clients with limited data on their operations
Asset Management and Investment Funds Under Scrutiny
The asset management and investment fund sectors were also found to be at risk due to their high degree of complexity and limited transparency. The report noted that these products are often used for asset structuring and high-end wealth management, making them attractive to criminals seeking to launder illicit funds.
Key Risks Identified
- High degree of complexity and limited transparency
- Attractive to criminals seeking to launder illicit funds
- Limited data available on their operations
Casinos and Duty-Free Warehouses Lacking Adequate Regulation
The assessment identified a lack of adequate regulation and supervision in the casino and duty-free warehouse sectors, leaving them vulnerable to exploitation by criminal organizations. The report noted that these sectors are still in their early stages of development, with limited data available on their operations.
Low Risk of Terrorist Financing
In contrast, the assessment found that Liechtenstein’s financial sector is at low risk for terrorist financing due to its lack of direct ties to high-risk countries and products. The report noted that there have been virtually no suspicious activity reports or requests for mutual legal assistance related to terrorist financing in recent years.
Conclusion
Liechtenstein’s financial sector is at heightened risk of money laundering and terrorist financing due to its complex products, lack of transparency, and inadequate regulation in some areas. While the sector is at low risk for terrorist financing, it is essential that the government takes steps to address these vulnerabilities and improve regulation and supervision to protect the integrity of the financial system.
Recommendations
- Improve regulation and supervision across all sectors
- Expand data collection and analysis through a second round of the National Risk Assessment
- Address vulnerabilities in banking, asset management, insurance, investment funds, casinos, and duty-free warehouses