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4 International Cooperation to Combat Money Laundering and the Financing of Terrorism: Legal Position and Practice in the Principality of Liechtenstein

Author(s):
International Monetary Fund
Published Date:
June 2007
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DUNJA SUESSLI

1. Description

  • 1.1. This chapter gives an overview of the legal position and practice in the Principality of Liechtenstein with respect to international cooperation in the context of anti-money laundering/combating the financing of terrorism (AML/CFT).

2. Liechtenstein: Facts and Figures

  • 2.1. Bordering on Switzerland to the west and on Austria to the east, Liechtenstein, with an area of 160 square kilometers, is the sixth small est state in the world. It has a population of approximately 34,000.

  • 2.2. Financial services are an important economic sector but not the largest. About 40 percent of the country’s GDP is the result of value added in industrial production and manufacturing. The financial services sector contributes 30 percent of GDP.

3. Liechtenstein’s Commitment to Fight Money Laundering and Financing of Terrorism

  • 3.1. Liechtenstein has joined in, and fully supports, the intense cooperation of the international community in the fight against money laundering and financing of terrorism. The relevant standards in Liechtenstein have been acknowledged by international bodies such as the IMF on the occasion of the offshore financial center (OFC) assessment in 2002. The mission team observed “a high level of compliance” with international standards for AML and CFT.

4. General Framework

  • 4.1. The crime of money laundering encompasses a comprehensive list of predicate offenses including corruption and financing of terrorism and also covers own-funds laundering. Participating in organized crime, forming and participating in terrorist groups, committing terrorist offenses, and financing of terrorism constitute criminal and extraditable offenses as well.

5. Mutual Legal Assistance

  • 5.1. Liechtenstein grants mutual legal assistance with respect to the aforementioned crimes. The main legal basis for granting mutual legal assistance is the Law on International Mutual Legal Assistance in Criminal Matters (MLA Law). The MLA Law allows the granting of mutual legal assistance to every jurisdiction in the world. But if and insofar as there are special agreements, namely bilateral or multilateral treaties, the MLA Law is overridden by these treaties.

  • 5.2. One of the most important bilateral agreements for Liechtenstein is the mutual legal assistance treaty (MLAT) between the United States and Liechtenstein. Liechtenstein is also a signatory of the multilateral European Convention on Mutual Legal Assistance in Criminal Matters.

6. Law on International Mutual Legal Assistance in Criminal Matters (MLA Law)

  • 6.1. Pursuant to the provisions of the MLA Law,1 Liechtenstein can grant extradition, transit, and what is called genuine legal assistance. This term means every kind of support for foreign proceedings in criminal matters, including sending of objects and documents, serving summonses on witnesses to appear, and transferring arrested persons for the purpose of providing evidence. Liechtenstein can also, itself, assume prosecution of offenses committed in other jurisdictions and can enforce decisions taken by foreign criminal courts. For example, it can enforce foreign forfeiture orders. In this respect, Liechtenstein can enter into agreements for the sharing of proceeds.

  • 6.2. There are some prerequisites for mutual legal assistance. One such prerequisite is dual criminality. Furthermore, mutual legal assistance for fiscal offenses is precluded. This means that mutual legal assistance is not granted with regard to a request referring exclusively to a fiscal offense. But in criminal cases where fiscal matters are involved, mutual legal assistance is granted subject to a proviso that the information given may not be used to prosecute a fiscal matter.

  • 6.3. Banking secrecy forms no obstacle in this context. It may be lifted whenever knowledge of a person’s private data is essential to the conduct of domestic or foreign criminal proceedings. Banking secrecy cannot justify a refusal to testify or produce documents. If the financial intermediary fails to produce relevant documents, the examining magistrate has the power to order a search.

  • 6.4. Also, the use of other compulsory powers is permitted in an investigation in the context of mutual legal assistance. A wide range of investigative techniques is allowed, such as the confiscation and opening of letters and the monitoring of telephone conversations. What is prohibited is the use of agents provocateurs and sting operations.

7. MLAT for United States and Liechtenstein

  • 7.1. The MLAT between the United States and Liechtenstein, which entered into force on August 1, 2003, has some special features. Perhaps the most important aspect of the treaty is that a lack of dual criminality cannot justify a refusal unless the execution of the request would require a court order for search and seizure or other coercive measures.

  • 7.2. Moreover, mutual legal assistance is granted with respect to tax fraud as defined by the contracting parties.

8. Statistics

  • 8.1. Figure 4.1 shows the number of foreign mutual legal assistance requests to Liechtenstein during the years 2001–2003. It also shows the percent age of requests already completed. The figures were last updated in April 2004.

  • 8.2. In more than 75 percent of the cases, it takes less than four months to complete a request. To achieve such a benchmark, Liechtenstein has had to expend a lot of effort and make many improvements with respect to personnel, legal framework, and processes.

  • 8.3. The bulk of requests come from neighboring countries such as Switzerland, Germany, and Austria. Only a few requests come from farther afield.

  • 8.4. In most cases, the underlying offense is fraud; embezzlement and money laundering are the next most frequent offenses.

Figure 4.1.Mutual Legal Assistance Requests to Lichtenstein, 2001-2003

9. Information Exchange by FIU

  • 9.1. In addition to the exchange of information by way of mutual legal assistance, the Liechtenstein financial intelligence unit (FIU) is widely empowered to exchange information (including account- and transaction-specific information) with foreign counterpart FIUs.

  • 9.2. For this information exchange, the Liechtenstein FIU does not need a memorandum of understanding but will enter into one if this is required by the counterpart FIU.

  • 9.3. With respect to national authorities, the FIU is provided, upon request with the information required for the discharge of its responsibilities.

10. Administrative Assistance

  • 10.1. Furthermore, the financial market supervisory authorities and also the future Financial Market Authority (FMA)2 may grant international administrative assistance under the condition that specific requirement are complied with.

  • 10.2. It is notable, in this context, that banking secrecy does not limit the ability to forward client account information.

The following is equally valid for mutual legal assistance granted by Liechtenstein pursuant to the provisions of the European Convention on Mutual Legal Assistance in Criminal Matters. There are only slight differences with regard to the procedure.

Liechtenstein created the Integrated Financial Market Authority on January 1, 2005.

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