1. Anstalten (Establishments)

83. Anstalten are autonomous funds with legal personality that serve a permanent commercial or other purpose that is not governed by public law. Although the law does not define “commercial purpose,” the office of the public registrar stated that this term would entail any commercial activity whatsoever. The pure management of assets would not be deemed commercial. The Anstalt’s founding statute needs to be in writing and contain the entity’s explicit designation as “Anstalt.” Name, purpose, and estimated amount of the Anstalt funds as well as the powers of the Anstalt’s highest organ and its management need to be determined in the statute as well. In addition to a notarized copy of the statute, the registry has to be provided with information on the amount of Anstalt funds and the name and address of the Anstalt’s management. Information on founders or persons in whom founder rights are vested does not have to be provided. All registered information is accessible by the public. Documents and statutes provided to the register may be accessed upon proof of a legitimate interest in the information or authorization by the company concerned.

84. An Anstalt is set up by one or more founders, who may be natural or legal persons. Typically, the founder is the Anstalt’s highest organ. However, a founder may transfer his rights or execute them through authorized third parties. Founders or persons in whom founder rights are vested may change the Anstalt’s statute at any time, including the rights of the beneficiaries and the amount of the Anstalt’s funds, whereby founders and directors may themselves be beneficiaries. Anstalt funds have to be at least CHF30,000. The Anstalt’s beneficiaries as well as persons in whom founder rights are vested are typically determined through by-statute, which do not have to be submitted to the registry. If no beneficiaries are provided for, individuals in whom founder rights are vested are presumed to be beneficiaries of the Anstalt.

2. Stiftungen (Foundations)

85. Stiftungen are autonomous funds with legal personality that serve a designated purpose, such as religious, family, or charitable purposes. Unlike Anstalten, Stiftungen may conduct commercial business only in pursuit of its stated non-commercial purpose. Generally, Stiftungen have to be registered to obtain legal personality. Religious and family Stiftungen as well as Stiftungen with ascertained or ascertainable beneficiaries do not have to be registered but obtain legal personality merely through an act of formation. Pure investment and holding Stiftungen do not require registration. Stiftungen not required to register have to deposit their statutes with the registrar. Any Stiftung that conducts commercial business, regardless of its designated purpose, has to be registered.

86. Stiftungen are set up by one or more natural or legal persons through statute, will, or will contract. The founding deed has to provide name, address and purpose of the Stiftung, and designate and provide for procedures to make changes in a Stiftungsvorstand (board of directors). Stiftungen required to register have to provide the registry with a notarized copy of the founding deed as well as names and addresses of all members of the Stiftungsvorstand. All registered information is accessible by the public. Documents and statutes provided in the course of registration may be accessed upon proof of a legitimate interest in the information. Stiftungen exempted from the registration requirement must deposit a notarized copy of the founding deed with the GBOERA. Any information on deposited Stiftungen, including copies of the founding deed, may only be accessed through court order. However, law enforcement authorities, the FIU, and the FMA may be provided with the name and address of the representative of a deposited legal entity or arrangement. Information on founders and beneficiaries is typically contained in the by-laws, which do not have to be registered or deposited. As of March 10, 2007, 60 percent of all entries in the Liechtenstein registry related to deposited Stiftungen and trust deeds. The registry could not provide clarification on the exact amount of deposited Stiftungen versus deposited trust deeds. However, representatives of the GBOERA stated that there was a clear preference for Stiftungen over trusts. Whereas the number of entities registered in Liechtenstein decreased since 2004, the number of deposited Stiftungen and trusts increased by 8.5 percent.

87. In contrast to the founder of an Anstalt, the founder of a Stiftung loses all rights in relation to the Stiftung, unless the statute explicitly provides for certain non-transferable rights to be reserved. The founder may not, however, influence the organization or management of the Stiftung in a continuous and exclusive way. The founder may name himself as beneficiary or designate a third party (Kollator) to determine the beneficiaries of the Stiftung. Based on Article 567 in connection with Articles 552.4. PGR and 117.2. TrUG, Stiftungen may issue Treuhandzertifikate (trust certificates) on bearer. The minimum amount of the Stiftungsfunds (assets) is CHF30,000. Generally, Stiftungen are not required to keep books of account.

1. Trusts

88. Under Liechtenstein law a trustee is any natural or legal person to whom a trust settlor transfers movable or immovable assets or rights with the obligation to administer and hold these assets in his own name as an independent legal owner for the benefit of one or more beneficiaries and with effect towards all other persons.

89. A Liechtenstein trust may be established through trust deed, written declaration by the settlor and written acceptance of the trustee, or by will. In contrast to the Stiftung, the trust is not limited to a certain designated non-commercial purpose. The trust deed has to provide information on the settlor, the trustees, name, date and domicile of the trust, amount of the trust assets, as well as rights and obligations maintained by the settlor. The trust deed may provide for a protector to limit the trustees’ discretion by requiring protector consent for any or certain actions. Trusts set up for a duration of more than 12 months have to be either registered or deposited if at least one trustee is domiciled in Liechtenstein, whereby the choice is at the settlor’s discretion. Registration requires a trustee to provide information on the name, date of establishment, and duration of the trust, as well as the name and address of all trustees. A copy of the trust deed does not have to be submitted. All registered information is accessible by the public. Alternatively, a settlor may choose to deposit a notarized copy of the trust deed with the GBOERA. Deposited trust deeds may only be accessed through court order. However, law enforcement authorities, the FIU, and the FMA may be provided with the name and address of the trustee of a deposited trust.

90. The settlor may determine the terms of the trust relationship and specify conditions or a period of time after which the trust assets are reverted back to the settlor or transferred to another natural or legal person (flee clauses). The law does not limit the conditions that may trigger a transfer or revocation of trust assets. The settlor may determine the conditions according to which an appointed trustee or designated beneficiary may be removed or exchanged. Trustees have fiduciary duties, are obliged to adhere to the terms of the trust as determined in the trust deed, and are liable according to the principles of contract law. The settlor may be beneficiary of the trust. If no beneficiaries are provided for in the deed, the settlor is assumed to be the trust beneficiary. The trustee may not be the sole beneficiary. According to Article 928 PGR, trust deeds may provide for the issuance of shares in the form of “Treuhandzertifikate” (trust certificates) on name or bearer. The relationship of participants in relation to the trust enterprise, to each other, and to third parties may be determined and regulated through reglements or by-laws, sometimes also called letters of wishes.

91. There is no required minimum of trust assets. Trusts are not required to keep books or appoint a Revisionsstelle. The trust deed determines the law of which country applies to a specific trust relationship. In cases of doubt, the law of the country in which the trustee or the majority of trustees is located applies. Trusts set up in other jurisdictions may be established in Liechtenstein. However, Liechtenstein law always applies to the relationship between the trust and third parties.

2. Trust Enterprises

92. A trust enterprise as eigentliche Geschaeftstreuhand is an enterprise without legal personality, which is set up by one or more trustees and is acting under its own name and is endowed with its own trust assets. The eigentliche Geschaeftstreuhand is liable according to the TrUG. The statute may also provide for the trust enterprise to have legal personality (uneigentliche Treuunternehmen). If not otherwise provided for in the deed, a trust enterprise is presumed to have no legal personality and the general provisions on Partnerships (Personenverbaende) apply. In contrast to the trust deed, all trust enterprises are required to register.

93. The trust enterprise’s founding statute has to provide information on name, address, duration, purpose, and assets of the enterprise as well as on the number of trustees and how they are appointed. In addition to a notarized copy of the trust deed, the registry needs to be provided with the name, occupation, and address of all trustees. All registered information is accessible by the public. Documents and statutes provided to the public registry may be accessed upon proof of a legitimate interest in the information of authorization by the trust enterprise. Information on the settlors and beneficiaries is usually contained in the by-laws, which do not have to be registered. The settlor may also be beneficiary of the trust. As in the case of trust deeds, the settlor of a trust enterprise may provide for a “protector” who has the discretionary powers to remove or exchange trustees and beneficiaries. Unless otherwise provided for in the trust deed, all trustees together form the Treuhaenderrat (board of trustees) as the managing organ of the trust enterprise. According to Article 114 TrUG, trust enterprise may issue securities on name or bearer. Trust assets have to be at least CHF30,000. Trustees are generally not personally liable for obligations of the trust enterprise.

94. As of March 10, 2007, 2,005 trusts were registered in Liechtenstein. It could not be established during the assessment how many of the 2,005 were registered trust deeds and how many were trust enterprises with or without legal personality.

Organs

• the Board, elected by Parliament, term of office 5 years (5 members):

  • overall supervision, mission statement, strategy, organization,

  • finances, plus special powers in important cases

• the General Management, nominated by the Board (4 members):

  • operational management of the FMA

• the National Audit Office serves as the Auditing Office

Objectives

• safeguarding the stability of the Liechtenstein financial center;

• protection of clients;

• prevention of abuses; and

• implementation of and compliance with recognized international standards.

Responsibilities

• supervision and execution of the special legislation;

• regulation, in particular, adoption into domestic law of relevant EEA enactments, in coordination with the government; issuing of guidelines and recommendations;

• representation of the interests of Liechtenstein in international bodies, in coordination with the government.

110. The FMA is the competent authority to supervise the DDA pursuant to Article 23 DDA. It is, therefore, the competent authority for AML/CFT purposes for all financial institutions and DNFBPs in Liechtenstein. In addition, the FMA is mandated by the government with elaborating proposals to implement international due diligence standards (e.g., the relevant parts of the FATF 40+9 or the third EU Money Laundering Directive). Furthermore, the FMA represents Liechtenstein regarding due diligence issues on an international level. The CEO of the FMA is the head of the Liechtenstein MONEYVAL delegation.

• Office of Land and Public Registration (GBOERA)

111. The Public Registry is a register with public access and public evidentiary value, the primary purpose of which is to ensure the legal certainty of commercial transactions by disclosing arrangements under private law, especially liability and representation arrangements, entered into by the natural and legal persons operating in this sphere.

112. Its main responsibilities are:

• Entry of businesses, foundations, establishments, etc.;

• Deposit of documents relating to foundations, trusts/settlements, and other instruments;

• Public authorizations; and

• Clarification of names and business names, performance of the legally-required announcements, various official acts such as monitoring compliance with various requirements (submission of balance sheet, etc.), changes of domicile, reviews, and preliminary reviews.

113. The Public Registry, including the registrations and documentation, is accessible to the public; however, only for persons who can assert a legitimate interest. With respect to companies limited by shares, partnerships limited by shares, and limited liability companies, reviewing and copying register files is permissible upon written request even without certification of a legitimate interest. The review, extracts, copies, or certifications of deposited files and documents (especially the deposit of foundation documents, trust deeds, and the like) may, however, only be demanded by the depositor and the authorized persons, as well as overall legal successors. Accordingly, there is no right of review and information vis-à-vis the Office of Land and Public Registry. Extracts from the register of listed undertakings (Extracts from the Public Registry) may, however, be ordered at any time without evidence of interest. These extracts are generally only issued in certified form and are not sent by fax. The Public Registry is a register with public access and public evidentiary value, the primary purpose of which is to ensure the legal certainty of commercial transactions by disclosing arrangements under private law, especially liability and representation arrangements, entered into by the natural and legal persons operating in this sphere.

• Role of other authorities

114. Pursuant to Article 16.1 DDA, all State offices have a duty to report to the FIU in relation to money laundering and financing of terrorism, especially the FMA, the Fiscal Authority, and the Office of Trade and Transportation.

1) IMF assessment end-2002

118. In the last OFC assessment of Liechtenstein conducted by the IMF (end of 2002), with respect to the due diligence law, the IMF issued the following main recommendations:

1. the prohibition against tipping-off after a suspicious activity report should be unlimited in time;

2. the blocking of assets after a suspicious activity report should not be automatic, but rather should be ordered by the Financial Intelligence Unit as required;

3. there should be an administrative penalty for a breach of the prohibition against tipping-off; and

4. in the case of banks, due diligence inspections and audits pursuant to banking supervision law should be consolidated and carried out by the same auditor.

119. The 2002 IMF assessment was based on the 1996 version of the FATF Recommendations and associated assessment methodology. Since the 2002 assessment, Liechtenstein has totally revised the DDA and DDO in the course of implementing the Second EU Money Laundering Directive. The revised enactments entered into force on February 1, 2005, entailing the following principal changes:

• Extension of the object of the Act to the suppression of terrorist financing;

• Extension of the personal scope of application to auditors, audit companies, and audit offices appointed under special laws, and more precision concerning the material scope of application;

• New obligations relating to correspondent bank relationships and electronic payment orders, as well as with regard to shell banks and passbooks, accounts, and custody accounts payable to bearer;

• Obligation of risk-adequate and global monitoring;

• Competence of the FMA; and

• Inclusion of the provisions in the Act on mandating auditors, audit companies, and audit offices appointed under special laws to conduct due diligence inspections.

120. With respect to the specific recommendations of the 2002 IMF assessment, the following was the position at the time of the 2007 assessment:

• The first recommendation has not been implemented so far. It was based on the rule in force at the time providing for a prohibition against tipping-off for 10 days, with the possibility of extension by 20 days. As part of the revision of the DDA, this rule was adjusted so that a prohibition against tipping-off of 20 days without the possibility of extension is provided for. In the Report and Application to Parliament, prepared in the context of the revisions proposed to the DDA, the government stated: “Already before the consultation procedure, the government had encountered wide-spread resistance among persons subject to due diligence against a ‘life-long’ prohibition against tipping-off. It recognizes that such a solution would be unduly burdensome for the persons subject to due diligence, since they would accordingly not have the possibility of subsequently explaining any irregularities that may have arisen from the prohibition against tipping-off to clients or other persons subject to due diligence or foreign financial intermediaries with whom they work together on a regular basis. […] The duration of 20 days now recommended is a compromise solution with the aim of ensuring legal certainty.”

• The second recommendation has been taken into account in part in that the revision of the DDA has introduced “flexible” blocking of assets. Assets continue to be blocked as before, however, only for a maximum of five days. However, the blocking may be suspended by the FIU for specified individual transactions.

• The third recommendation has been implemented in the meantime by Article 30.1(k) DDA in the course of the revision of the DDA.

• The fourth recommendation was taken into account in 2003 through a change in practice. This practice has now been enshrined in law in Article 24.5 of the revised DDA.

Analysis of Effectiveness

142. Statistics kept at the Office of the Public Prosecutor show that since 2003, 128 cases of money laundering have been investigated under Article 165 StGB, of which 36 investigations were conducted in 2006. Only two out of these 128 cases were actually prosecuted under Article 165 StGB. Both prosecutions were triggered by suspicious activity reports. One of the prosecutions related to self-laundering in accordance with Article 165.1 StGB, whereas the second was prosecuted under Article 165.2 StGB. The first case was transferred to the Spanish courts. The second case is currently being heard before the Liechtenstein courts. 11 cases have been transferred to other jurisdictions, of which two led to a conviction for money laundering, one led to a conviction for a predicate offense, and eight cases are still pending. Although there have been a number of convictions for violation of the DDA and the commission of predicate offenses, in particular breach of trust, there were no convictions for money laundering under Article 165 StGB. According to the public prosecutor, money laundering investigations would in many cases lead to in rem proceedings and result in the forfeiture of considerable amounts. Furthermore, money laundering investigations would often be conducted with a view to collecting evidence for prosecutions in other jurisdictions. All these proceedings are classified as terminated investigations in the statistics.

Statistics on money laundering offenses under Article 165 StGB

Statistics on money laundering offenses under Article 165 StGB

	2003	2004	2005	2006
Investigations	25	34	33	36
Prosecutions	0	0	1	1
Convictions	0	0	0	0
Transfer of proceedings to another jurisdiction	1	3	4	3

View Table

Statistics on money laundering offenses under Article 165 StGB

	2003	2004	2005	2006
Investigations	25	34	33	36
Prosecutions	0	0	1	1
Convictions	0	0	0	0
Transfer of proceedings to another jurisdiction	1	3	4	3

143. According to the public prosecutor, there were two main reasons for the low number of prosecutions and convictions: Firstly, in typical money laundering cases, neither the location where the predicate offense has been committed nor the location of the offender is Liechtenstein. Rather, cases are linked to Liechtenstein through a single transaction, the use of a front company incorporated in Liechtenstein, or a Liechtenstein financial intermediary. In such cases, it would be difficult to collect the necessary evidence, such as witness statements and documents from other countries, in particular from countries outside Europe. In addition, in cases where the launderer has been convicted for the predicated offense abroad, he/she may no longer be held liable for money laundering under Liechtenstein law. Secondly, in cases that involved Liechtenstein trustees, the investigation often revealed negligence on the part of the suspect trustee, which would allow a prosecution of a DDA and/or DDO violation. However, it was difficult to prove the required intent by the trustee needed to initiate prosecutions for money laundering. Furthermore, in cases where intent could be established, the offender was typically prosecuted for the predicate offense rather than the money laundering offense.

144. The assessors agree that Liechtenstein might be in a more difficult position to prosecute money laundering given the sometimes weak links of cases to conduct or individuals located in Liechtenstein. Out of consideration of efficiency, it seems reasonable to transfer cases to other countries when essential information is present in these countries. However, the assessors would consider it important that Liechtenstein also develops its own case law to establish that money laundering is a stand-alone offense and may be prosecuted independently from prosecutions relating to the predicate offense. This would also clarify the level of proof required to determine that proceeds are illicit and how specific the evidence has to be in relation to a particular predicate offense.

Analysis of Effectiveness

165. Liechtenstein conducted three investigations in relation to terrorist financing, one in 2001, one in 2004, and one in 2006. The investigation in 2001 was initiated by the Swiss authorities. The investigation did not support any suspicions and was terminated in 2004. The other two investigations were initiated by Liechtenstein authorities. One of the two investigations has been terminated, while, in the second case, the proceedings were referred to the Spanish authorities. This investigation was triggered by a suspicious activity report filed by a Liechtenstein financial intermediary.

Conviction based confiscation

167. The Penal Code provides for three distinct forms of confiscation: Abschöpfung der Berreicherung, Verfall, and Einziehung.

A. Proceeds

I. The general rules on confiscation of criminal proceeds are laid down in Article 20 StGB.

• 1) Abschöpfung der Berreicherung (literally: “deprivation of enrichment”) relates to all “pecuniary benefits” derived from a criminal offense or received to perpetrate such act. On conviction the offender is ordered to pay an amount of money equal to the “unlawful enrichment”. If the amount of the enrichment cannot be determined readily, the court decides at its discretion (ex aequo et bono).

• 2) In doing so, the court can take into account the fact that

  • - the defendant is a repeat or continuous offender and that the crimes¹¹ he committed generated proceeds or were rewarded, and

  • - the benefits he obtained around the time of the commission of the crimes can be assumed to originate from similar crimes, and no credible explanation can be given of the lawful origin (reversed onus).

• 3) A similar presumption applies against members of a criminal or terrorist organization (Article 278a and 278b StGB) who have obtained benefits at the time of their participation and cannot demonstrate the lawful origin.

• 4) Individuals, legal entities, or partnerships that profited from criminal activity by a third person are also liable to pay an amount equal to those benefits.

• 5) In the event of the offender dying or the legal entity being dissolved, the legal successor, bona fide or not, is liable if that benefit still existed at the time of transfer of the rights.

• 6) In case of several beneficiaries, their liability is proportional to their share, with the court deciding ex aequo et bono, if necessary.

II. Article 20b StGB provides for a further legal basis for confiscation (“Verfall”):

• 1) Assets belonging to criminal or terrorist organizations (as defined in Article 278a and 278b StGB) or being made available or collected in the context of terrorism financing (Article 278d StGB), must be confiscated.

• 2) Assets derived from criminal activity performed in a foreign jurisdiction are also subject to confiscation even when the predicate offense is not punishable in Liechtenstein, except if it relates to a fiscal (tax) offense.

168. This latter provision effectively reinforces the confiscation regime and preempts all possible discussions on the scope of the measure. All assets that can be linked to a terrorism or terrorism-financing-related situation, as defined in the StGB, are subject to mandatory confiscation once the offense is proven in a conviction or non-conviction-based procedure (as described below). It also deals with any controversy that may derive from the dual criminality principle in respect of the predicate offense. The fiscal exception is a typical feature in the Liechtenstein legal tradition.

169. Equivalent value confiscation is basically captured by Article 20 StGB (payment of amount corresponding with the illegal proceeds). Article 20b StGB in connection with Article 165.4 StGB (money laundering) also provides for a form of equivalent value confiscation in that it goes beyond the direct and indirect proceeds. All assets subject to the power of disposal of a criminal or terrorist organization or criminal proceeds must be forfeited. All these assets are considered to originate from a punishable act, even if in fact they have replaced the original criminal proceeds and represent their equivalent value.

170. Several provisions exclude forfeiture or allow for reducing the amount:

• Article 20a StGB gives priority over confiscation to the payment of damages resulting from the offense and excludes the benefits from forfeiture if the enrichment is absorbed through other legal means. Considerations of proportionality in respect of the procedural efforts and the punishment of the offender may also limit the application of forfeiture.

• Article 20c StGB excludes confiscation of assets that are subject of legal claims of persons who are not involved in the criminal offense or criminal organization, or the purpose of the forfeiture may be achieved by other legal measures, particularly when the illegal benefits are forfeited as a result of foreign procedures enforceable in Liechtenstein. Forfeiture is also refrained from if the measure is disproportionate to the importance of the case or requires exaggerated procedural efforts or costs.

• Article 31a (4) StGB allows for reduction after conviction if circumstances for the offender have changed substantially and the penalty is no longer appropriate.

171. These exclusion or reduction grounds are inspired by two basic considerations: confiscation should not interfere with the compensation of the victims or the rights of the bona fide third parties, nor should its application give rise to unfair or disproportionate consequences. The principle of the priority of the prejudiced or bona fide third parties over confiscation to the benefit of the State is a universally-accepted principle. The second consideration is born more out of a legitimate concern to avoid exaggerated effects and aims at preserving proportionality. As such, it does not undermine the general confiscation rule; the discretionary phrasing gives the judge some latitude to take special and legally-defined circumstances into consideration to determine the scope of the confiscation measure.

B. Instrumentalities and product

172. Article 26.1 StGB provides for the confiscation (“Einziehung”) of objects intended to be or actually used to commit criminal acts (instrumenta sceleris), or that have been produced by such activity (producta sceleris), but only when the specific nature of these items is conducive to the commission of (further) offenses, i.e., dangerous or illegal goods such as drugs, weapons, or forged documents. It is seen predominantly as a security measure, so confiscation of such objects is mandatory also in the absence of a prosecution or conviction (Article 26.3). Instrumentalities that have been rendered harmless or unusable, or where an innocent third party lays legal claim to, with the guarantee that the object(s) will not be used for criminal activity, are generally exempted from confiscation (Article 26.2)

Non-conviction based confiscation

173. Beside criminal forfeiture, which takes priority according to Article 353.1 StPO, the Liechtenstein StPO also provides for the possibility of an in rem (object) forfeiture.

174. Article 353 to 357 StPO install a separate procedure to ensure confiscation in the form of an in rem measure in case the criminal proceedings did or would not suffice to come to a substantiated judgment on this issue, provided there are sufficient grounds to assume that the conditions for forfeiture/confiscation are present. This implies the offense has to be proven according to the rules of evidence applicable to a criminal procedure, i.e., according to the civil law principle of free evidence supply. Such forfeiture orders are issued by a court at the request of the Public Prosecutor and can be directed both against individuals and legal entities. They are mostly used in MLA cases, or when conviction is impossible because of the statute of limitation, or when the defendant is deceased or has absconded (the Liechtenstein criminal procedure rules, as in Article 295 StPO, do not allow for convictions in absentia in serious cases).

Confiscation of Property Derived from Proceeds of Crime (c. 3.1.1 applying c. 3.1):

175. The confiscation provision of Article 20 StGB covers all assets (“Vermögensvorteile” literally: “patrimonial advantages”) that are the proceeds of crime. There is no formal definition in the law of what is to be understood as “proceeds”. The wording is broad enough, however, to encompass not only the direct, but also any indirect proceeds, including substitute assets and investment yields.¹² The money laundering offense text expressly refers to assets that “represent the value of the asset originally obtained or received” as object of the offense (Article 165.4 StGB). The confiscation measure covered by Article 20 StGB is formulated in such a way as to translate every asset to its equivalent value. Once this order is issued, it is then executed against all assets of the convicted.

176. The relevant provisions do not specify any condition as to the location, possession, or ownership of the assets subject to confiscation. Consequently, in principle, it is irrelevant if they are in the hands of third persons or not.¹³

177. In summary, the legal provisions cover all assets and circumstances that are relevant for an effective anti-money laundering and terrorism financing regime, i.e., direct and indirect criminal proceeds wherever located, instrumentalities intended to be or actually used, and equivalent value. They are effectively used in this context, as the statistics show. Some reservations need to be made, however, that relate to the confiscation of the money laundered as object of the offense and the restriction of the instrumentalities, as described later.

Seizure

178. The seizure regime is incorporated in Article 96, 97a, 98a StPO and is used either for evidentiary purposes or to ensure effective forfeiture/confiscation. Seizure takes the items and assets into judicial custody.

179. Seizure actions require the involvement of the Court pursuant to Article 97a StPO. The procedure is unilateral and does not require prior notification of the interested parties. It is widely used and can be executed in a speedy manner, when necessary to prevent the dissipation of assets. The FIU, the “Kommissariat Wirtschaftskriminalität” (Economic Crime Unit), and the Public Prosecutor have wide authority to identify and trace property that may become subject to confiscation or is suspected of being the proceeds of crime. The police is empowered to immobilize or provisionally seize such items discovered during their investigations (Article 87.2 Organization of the Police Ordinance).

180. The Court issues the seizure order at the request of the Public Prosecutor to safeguard the effective implementation of a confiscation order:

• if a suspicion of illegal benefits exists and it may be assumed that Article 20 StGB is applicable;

• on suspicion of assets being at the disposal of a criminal or terrorist organization (Articles 278a and 278b StGB) or being made available or having been collected for financing of terrorism (Article 278d StGB); or

• when they originate from criminal activity and it must be assumed that they will be subject to forfeiture (“Verfall”) under Article 20b StGB.

181. Although not expressly stated as such, the seizure of instrumentalities subject to confiscation (Article 26 StGB) is also covered by the general provision of Article 96 StPO, imposing judicial custody of all items that are to be confiscated.

182. The seizure order implies:

• the restraint, custody, and management of moveable physical property, including the depositing of money;

• the prohibition to sell or pledge moveable physical property;

• the prohibition to dispose of credit balances or of other assets; and

• the prohibition to sell, burden, or pledge real estate or rights, which is entered in the Land Registry.

183. The seizure order is valid for two years, with possibility of extension. According to Article 97a.4 StPO, the Court shall determine the duration for which the order is issued. This deadline may be extended upon application. If two years have passed since the order was first issued, without an indictment being made or an application submitted for civil in rem forfeiture according to Article 356 StPO, further extension of the deadline for one additional year needs approval of the Court of Appeal.

Identification and Tracing of Property subject to Confiscation (c. 3.4):

184. Articles 96, 97a, and 98a StPO provide the law enforcement authorities with extensive means for identifying and tracking assets.

185. Of specific interest is Article 98a StPO that provides for access to confidential account information, specifically in cases related to money laundering, its predicate offenses, criminal and terrorist organizations, or terrorism financing, with the aim of tracing criminal assets or proceeds and of following the money trail. Within this context the investigative judge can issue an order obliging banks and finance companies to:

• disclose the identity of the holder of a business relationship/account (Article 98a.1.1);

• inform whether a suspect maintains a business relationship with the credit or financial institution or has power of disposal over such a business relationship (account information – Article 98a.1.2);

• inform on the content of the business relationship and the transactions conducted through this relationship for a past or specific future time period (account monitoring – Article 98a.1.3).

186. The general condition for such order is:

• that it must appear “necessary to solve” a case of money laundering, a predicate offense to money laundering, or an offense related to organized crime; or

• that “due to certain facts” there is the assumption of a relation with criminal proceeds (Article 20 StGB) or with a criminal organization, a terrorist group or financing of terrorism (Article 20b StGB).

187. The divergent wording of the precondition depending on the specific offense is, prima facie, not justified by any objective consideration as both criminal phenomena are quite similar.

188. Article 98a.3 StPO expressly stipulates a “tipping off” prohibition against notifying clients or other persons with powers of disposal over the account on the ongoing investigation. This rule also applies to staff of the bank or finance company.

189. The FIU also has tracing powers to a certain extent in that it can, on receipt of a suspicious activity report, demand additional information from the financial intermediary, who is obliged to comply immediately (Article 23.1 DDO). This specific “investigative” power of the FIU does not extend, however, beyond the disclosing entity.

Protection of Bona Fide Third Parties (c. 3.5):

190. In addition to the protection given to the prejudiced third party (civil party) by Article 20a StGB, Article 20c StGB excludes forfeiture of assets if these are subject to legal claims of persons who are not involved in the punishable act or criminal organization. All parties that can show a licit interest in the assets have the right to intervene during the criminal or in rem procedures. Once the proceedings have been concluded with a final forfeiture decision, the innocent bona fide third party may fall back on Article 354.2 StPO to exercise rights over the confiscated assets or claim damages from the State in a civil procedure.

Power to Void Actions (c. 3.6):

191. Seizure is obviously meant to precisely prevent any alienation or burdening of the items subject to confiscation, and to ensure effective and full implementation of the confiscation measures. The bona fide third party protection rules aside, no contract, agreement, or any other civil action can affect the confiscation itself, as they legally cannot be opposed to the penal (confiscation) judge and consequently have no prejudicial or restraining impact on the effective implementation of forfeiture orders.

Freezing

192. After having filed a suspicious activity report with the FIU (Article 16.4 DDA), the persons subject to the DDA have the duty to freeze and restrain the assets in question until they receive a notice from the FIU or the Public Prosecutor or until the period of five working days has elapsed without reaction.

193. Additional Elements (R.3) – Provision for a) Confiscation of assets from organizations principally criminal in nature; b) Civil forfeiture; and c) Confiscation of Property which Reverses Burden of Proof (c. 3.7):

194. Assets of criminal organizations are subject to confiscation according to Article 20b StGB that provides for the forfeiture of any assets belonging to or at the disposal of a criminal organization, as defined by Article 278a StGB.

195. Although forfeiture is primarily criminal-procedure based, there is also the possibility of recovering assets through an in rem forfeiture procedure pursuant to Articles 353 to 357 StPO.

196. Reversal of the burden of proof is provided for in the context of confiscation under certain circumstances (Article 20.2 & 3 StGB).

Statistics

197. The Office of the Public Prosecutor supplied the following statistics on seizures and searches targeting proceeds or evidence related to predicate crimes for money laundering and terrorism-related offenses:

General

General

	2003	2004	2005	2006
Account seizures	24	24	28	13
House searches and seizures	25 searches	22 searches	17 searches	18 searches
	43 seizures	54 seizures	43 seizures	38 seizures

View Table

General

	2003	2004	2005	2006
Account seizures	24	24	28	13
House searches and seizures	25 searches	22 searches	17 searches	18 searches
	43 seizures	54 seizures	43 seizures	38 seizures

198. A precise amount of the blocked assets could not be provided to the assessors. However, the approximate amount currently blocked is CHF500 million. No accounts were blocked, nor were any house searches or seizures conducted, in terrorism financing cases.

Objective (in rem) forfeiture proceedings

Objective (in rem) forfeiture proceedings

	2003	2004	2005	2006
Pending as of end of previous year	14	31	56	60
New cases	25	43	30	20
Cases completed	13	17	37	29
Applications for forfeiture submitted	1 (4 St.2003.27)	2	4	17
Forfeiture declared	6	3 (in MLA proceedings)	9	15
Amounts declared forfeited to the State	CHF3,748,000 USD15,386,033	CHF77,165 USD125,000	CHF1,620,000 USD280,000	CHF913,072 EUR4,919
Other assets secured, e.g. for injured parties	CHF65 million to Nigeria, CHF8,700 to Triumph, USD12.5 million to USA	CHF46,745 USD125,000	CHF2,252,274 USD1,535,190 EUR3,411,743 (in 5St.2002.18 sharing agreement underway, approx. CHF1.7 million)	CHF1,718,572 USD1,367,300 EUR1,177,154

View Table

Objective (in rem) forfeiture proceedings

	2003	2004	2005	2006
Pending as of end of previous year	14	31	56	60
New cases	25	43	30	20
Cases completed	13	17	37	29
Applications for forfeiture submitted	1 (4 St.2003.27)	2	4	17
Forfeiture declared	6	3 (in MLA proceedings)	9	15
Amounts declared forfeited to the State	CHF3,748,000 USD15,386,033	CHF77,165 USD125,000	CHF1,620,000 USD280,000	CHF913,072 EUR4,919
Other assets secured, e.g. for injured parties	CHF65 million to Nigeria, CHF8,700 to Triumph, USD12.5 million to USA	CHF46,745 USD125,000	CHF2,252,274 USD1,535,190 EUR3,411,743 (in 5St.2002.18 sharing agreement underway, approx. CHF1.7 million)	CHF1,718,572 USD1,367,300 EUR1,177,154

199. No forfeiture was pronounced in terrorist financing cases.

Analysis of effectiveness

200. The Liechtenstein seizure and confiscation regime is solid and comprehensive and, as such, largely meets the relevant international standards. Because of its mandatory character and the specific situation of Liechtenstein as a financial center, it is being used systematically and to a positive effect.

201. For a civil law tradition-based regime, it shows some uncharacteristic features including the absence of the general principle of the confiscation of the object of the crime and the possibility of in rem confiscation. The possibility for the judge to exclude or limit confiscation out of specific considerations of proportionality is also rather uncommon, but not contradictory to the international standards.

202. Confiscation of the direct and indirect criminal proceeds (including substitute assets and investment yields), the product of the crime, the (intended or used) instrumentalities, and equivalent value is broadly covered by Articles 20, 20b, and 26 StGB. The situation is less clear where the confiscation of the laundered property as the object of the money laundering offense is concerned. There is no problem if the money laundering is prosecuted together with the predicate offense, as then the assets will be confiscated as the proceeds of the predicate offense. In a stand-alone money laundering prosecution, however, the predicate offense is not subject to the jurisdiction of the judge, who can only pronounce himself on the money laundering offense as such. In that case, the assets laundered are not the instrument, nor the product, nor the proceeds of the money laundering, but the object of the offense itself. It is noteworthy that in the case of terrorist-related assets or terrorism financing this is not an issue, because there the need was felt to declare the assets (that are the object of the Article 278a, b, and d StGB offenses) expressly and specifically subject to confiscation (Article 20b.1 StGB). There is no jurisprudence on this issue because no convictions in Article 165 StGB money laundering cases have occurred in Liechtenstein yet. The general solution lies in the application of Article 20b.2 StGB in an in rem, non-conviction based, confiscation procedure. According to this provision, all proceeds must be confiscated in any case, even when they originate from a foreign predicate criminality that is not an offense in Liechtenstein (the customary exemption of fiscal offenses excepted). This provision was apparently introduced to allow confiscation even if the penal judge in Liechtenstein has no jurisdiction over the predicate offense or no conviction according to Article 20 StGB is possible. But in any case, the criminal confiscation of the laundered assets as object of the offense as such is not covered.

203. In principle, Article 26 StGB covers the confiscation of (intended) instrumentalities. It is, however, seriously restricted by the condition that these objects can only be forfeited when they have a dangerous nature or are apt to be used in other crimes, which, for instance, excludes the confiscation of a car that is used in the commission of illegal acts. Here, forfeiture is seen more as a security measure than a penalty. This soft approach risks undermining the deterrent effect of the measure and may deplete it substantially. As such, it is also contrary to the international standards of Recommendation 3 that do not provide for any restriction to the comprehensive coverage of the seizure/confiscation regime.

204. The absence of corporate criminal liability, which could be an issue in a conviction-based regime, does not cause problems in terms of confiscation of assets held by legal persons. Article 20.4 in fine StGB provides for the liability of the legal persons for the payment of the value of the criminal proceeds. Additionally, there is always the possibility of the in rem procedure in case the criminal procedure cannot be applied.

205. On the other hand, there is a deficiency in safeguarding the efficiency of asset recovery in that nothing is provided for voiding contracts or other actions that have the effect and purpose of obstructing such recovery. Such maneuvers are normally pre-empted by timely conservatory measures, but in case these have not been taken—which would not be exceptional in MLA cases where a confiscation order needs to be executed—it is a problem for which the procedural laws do not provide an appropriate answer.

206. The seizure regime follows the confiscation system. Everything that is subject to confiscation can be seized, thus including equivalent value seizure of untainted assets. The (few) legal deficiencies in the confiscation regime logically also affect the effectiveness of the seizure measures.

207. Article 98a StPO is an efficient instrument to obtain relevant documents and information without the need of conducting a search. However, the different wording of the pre-conditions in the text gives the impression that in the second circumstance related to terrorist organizations and financing, the condition is more specific and stricter (“certain facts”). Apparently, it has not been an issue yet in the absence of such cases, so it will be up to the jurisprudence to provide an answer. More preferable would be that, if the intention was not to differentiate, the formulation would be made identical for all instances.

Statistics and analysis of effectiveness

208. The statistics supplied are partial and only give a good overview of the in rem proceedings and confiscations. There are no overall figures on the seizure and confiscation of criminal proceeds in general, and no figures specifically on the criminal procedure-based seizure and confiscations.

209. The effectiveness of the regime seems quite good, mainly because of the catch-all of the in rem confiscation procedure that closes all (potential) gaps. The system takes into account the specific situation of Liechtenstein as a financial center and focuses particularly on asset recovery, which is widely used.

General

210. UNSCR 1267: The Law of May 8, 1991 on Measures pertaining to Economic Transactions with Foreign States provides the legal basis for the Government to implement by ordinance all sanctions adopted by the United Nations Security Council. In the case of the sanctions promulgated by UNSCR 1267 (1999) and its successor resolutions, the targeted persons and entities are listed in a Government ordinance, published in the Landesgesetzblatt (Liechtenstein Legal Gazette), freezing all assets of the relevant subjects. All natural and legal persons that hold or administer such assets are required to immobilize them and notify the Government (Regierungskanzlei) immediately. This information is passed on to the FIU who, for UNSCR Resolution 1267 purposes, acts as the central authority, being the Chair of the Terrorist Financing Coordination Group. This task force group further comprises the Public Prosecutor, the ECU, the FMA, the Prime Minister’s Office, the Foreign Office, and the Registrar. It is mandated by the Governmental Decision of October 31, 2001 and coordinates the further steps with the Public Prosecutor focusing on the penal aspects.

211. UNSCR 1373: As Liechtenstein has not established a national terrorist list, the implementation of UN Resolution 1373 (2001) relates only to the international cooperation aspect, which triggers a different response. Foreign requests or national lists (such as the EU Regulation based and U.S. OFAC list) are forwarded to the FIU, which passes them on to the FMA. The FMA, as the regulator, informs the financial intermediaries to check their records and if necessary to report according to their DDA obligations, which automatically blocks the assets for a maximum of five days. It is then up to the FIU to decide on the destination of the information: either the case is forwarded to the Public Prosecutor as terrorist-related money laundering or financing, who then can seize the account or assets, or the case is filed within the FIU and no further action is taken.

Freezing Assets under UNSCR 1267 (c. III.1):

212. The sanctions against Al-Qaida and the Taliban under UNSCR 1267 (1999) and its successor resolutions have been implemented by Ordinance of October 10, 2000 “on Measures against Persons and Organizations with Connections to Usama bin Laden, the Al-Qaida group or the Taliban”, published in the Landesgesetzblatt of October 13, 2000 (hereafter: the Taliban Ordinance), based on Article 3.1 of the framework Law of May 8, 1991 on Measures pertaining to Economic Transactions with Foreign States.

213. The names of the designated persons and entities are listed in Appendix 2 of this ordinance, which is continuously updated with the additions and amendments issued by the UN Sanctions Committee. The names are also disseminated in electronic format to the professional associations and to all financial intermediaries via the FMA-website.

214. According to the Taliban Ordinance:

• All funds and economic resources belonging to or under control of the designated persons or entities are frozen de jure and without delay (Article 3.1). Although not expressly stated as such, this happens without prior notification of the persons and entities affected by the designation, as the freezing has to be executed immediately;

• It is prohibited to transfer assets or otherwise directly or indirectly make assets and economic resources available to the designated natural and legal persons, groups, and organizations (Article 3.2);

• Persons and institutions holding or managing assets (mostly banks and other financial intermediaries, but not restricted to them) or who have knowledge of economic resources that may be falling under the freezing measure, must report to the Government without delay (Article 4.1 and 2).

215. Any discovery of assets related to listed persons or entities should normally also trigger a disclosure (SAR) to the FIU to comply with the obligations of the DDA. This report is independent of the notification that still must be made separately to the Government.

Freezing Assets under UNSCR 1373 (c. III.2): Freezing Actions Taken by Other Countries (c. III.3):

216. In relation to the freezing of assets of terrorists in the context of UNSCR 1373 (2001), Liechtenstein applies the relevant provisions of the DDA and of the StPO, as explained above. Liechtenstein has not drafted its own terrorist list. If the necessity would arise, the drafting of domestic lists would normally be the responsibility of the Terrorist Financing Coordination Group.

217. Ultimately, the FMA is in charge of the dissemination of such lists, domestic or foreign, notifying all persons and enterprises subjected to the DDA by means of a circular reminding them of their obligations in this respect. In the event of the subjected entities owning or controlling such funds, they are under the obligation to report to the FIU and immediately freeze the assets for a period of five days. The report then follows the process of any other SAR. This procedure has, for instance, been applied with the U.S. OFAC lists and the EU regulations on terrorism-related persons and groups. The FMA brings such lists to the attention of the persons subject to due diligence by way of a circular and calls upon them:

• to verify whether business relationships with the persons or organizations on the list exist;

• to verify whether persons or organizations on the list are beneficial owners of a business relationship;

• to take the measures set out in article 16 DDA upon carrying out the inquiries under Article 15, paragraph 2 DDA.

Liechtenstein has not established a formal screening procedure for the incoming lists, but in practice this is done by the FIU in consultation with the other participants of the Terrorist Financing Coordination Group.

Extension of c. III.1-III.3 to funds or assets controlled by designated persons (c. III.4):

218. The freezing obligation according to Article 3.1 of the Taliban Ordinance relates to funds (“Gelder”) and economic resources in possession or under control of the designated persons, groups, and organizations as enumerated in its Annex 2. The term “funds”, as defined in Article 5.b of the Ordinance, covers an exhaustive list of all forms of assets, including claims and derived income, such as interests, dividends or other added values. “Economic resources” are broadly defined in Article 5.d to cover all kinds of values, whether tangible or intangible, mobilia (personal property) or immobilia (real estate).

219. The term “control” in Article 3.1 of the Ordinance is supposed to cover both direct and indirect control, and the term “possession” is said to include both sole ownership and co-ownership. There is, however, no formal text or precedent substantiating this opinion.

Communication to the Financial Sector (c. III.5):

220. UNSCR 1267 and Taliban Ordinance lists and changes are first published in the national newspapers and the Liechtenstein Law Gazette. Moreover, all relevant information is immediately communicated by the FMA to the professional associations for distribution to their members.

221. The FMA publishes all lists relating to the implementation of UNSCR 1267 and UNSCR 1373 on its website www.fma-li.li and sends e-mail messages (FMA Newsletter) in the case of amendments to the lists. The FMA Newsletter currently has about 500 subscribers, including all professional associations.

Guidance to Financial Institutions (c. III.6):

222. The FMA gives guidance to the financial sector through its Newsletter. Punctual advice can also be sought in consultation with the FIU and other involved governmental authorities. The training courses given to the financial industry also address the UN Resolution obligations.

De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7):

223. There is a specific procedure provided for de-listing of persons designated in the context of UNSCR 1267. In its Circular 1/2007 of March 13, 2007, the FMA informed the financial intermediaries of the de-listing procedure, as adopted by UNSCR 1730 of December 19, 2006. All Liechtenstein citizens or residents, including legal persons, who are affected by the freezing measures are informed that they can address a focal point at the UN and the FIU can render assistance. They also have the possibility to address the Liechtenstein Government, who will then examine if their request is founded, and if so, will apply for de-listing. De-listing automatically unfreezes the affected assets.

224. No specific procedure for de-listing or unfreezing is provided in the context of UNSCR 1373. Any resulting SAR freezes the assets for five days, and automatically unfreezes them after five days without intervention of the Public Prosecutor.

Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c.III.8)

225. In case of confusion or mistaken identity, no specific procedure has been provided for. The affected party has the option to argue its case before the relevant administrative or judicial authorities according to the normal procedures.

Access to frozen funds for expenses and other purposes (c. III.9):

226. According to Article 3.2 and 4 of the Taliban Ordinance, the Government may make an exception on humanitarian grounds and allow access to frozen accounts for certain payments, transfers of such assets, and the release of frozen economic resources in protection of Liechtenstein interests or prevention of hardship. Each request for exceptional authorization is evaluated as to its conformity with the conditions set out in UNSCR 1452 (2002). No such possibility is specifically provided for in the context of UNSCR 1373. When the case is referred to the Public Prosecutor under the suspicion that terrorist-related assets are involved, the normal rules of the seizure procedure apply according to Article 96 to 98 StGB. Any decision on the disposal of the assets is in the hands of the Public Prosecutor, the Investigating Judge, or the Court.

Review of Freezing Decisions (c. III.10):

227. For UNSCR 1267 cases, no special procedure has been elaborated for challenging the freezing measure before a court. Any challenge needs to follow the de-listing procedure. There is the general possibility to appeal against administrative government decisions with the Administrative Court (Verwaltungsgerichtshof), but that would only be applicable in case the Government refuses to submit an unfreezing application to the UN focal point (see SR.III.7).

228. In the UNSCR 1373 context, the common criminal procedure applies. If assets are blocked on the basis of Article 16.1 DDA, no challenge is possible until receipt of a seizure order according to Article 97a StPO (within five days). Once the assets are seized, the affected person or entity has recourse to the Court of Appeal (Article 97a.6 StPO).

Freezing, Seizing, and Confiscation in Other Circumstances (applying c. 3.1–3.4 and 3.6 in R.3, c. III.11)

229. The relevant provisions of the StPO and the StGB also apply to the seizure and confiscation of terrorist-related assets. Article 20b StGB and Article 97a StPO expressly impose seizure and confiscation of assets belonging to or at the disposal of terrorist groups and those used for financing of terrorism. Assets belonging to an individual terrorist would then be covered by Article 20b.1 StGB, imposing confiscation of all means of financing terrorism.

Protection of Rights of Third Parties (c. III.12):

230. In confiscation matters, third party protection is covered by Article 20c.1.1 StGB, expressly excluding from forfeiture those assets that are subject to legal claims from persons who were not involved in the criminal activity or criminal/terrorist organization. Outside the penal law context, there are no special and appropriate provisions on protection of bona fide third parties caught in the administrative freezing process, except the arrangement for innocent third parties who may make use of the laborious procedure of de-listing in case of administrative freezing (UNSCR 1730 – see III.7).

Enforcing the Obligations under SR.III (c. III.13):

Monitoring:

231. Article 6 of the Law of May 8, 1991 on Measures pertaining to Economic Transactions with Foreign States stipulates that the authorities and persons mandated to implement this Act may demand any information necessary to monitor compliance with the Act and related Ordinances. For this purpose, they may demand that business documents be submitted and may conduct on-site verification of the persons required to provide the information. The FMA uses this power by regularly verifying compliance in the framework of due diligence inspections.

Sanctions:

232. Pursuant to Article 6 of the Taliban-Ordinance, Article 4 and 5 of the Law of May 8, 1991 on Measures pertaining to Economic Transactions with Foreign States apply.

233. Article 4 of the Law of May 8, 1991 on Measures pertaining to Economic Transactions with Foreign States stipulates that:

• The Court can impose a fine of up to CHF1 million on anyone who violates the provisions enacted by the Government on the basis of this Act, insofar as the StGB provisions do not apply.

• In case of negligence, the maximum penalty is reduced by half.

• If the violations are committed in the business operations of a legal person, a general partnership, a limited partnership, or a sole proprietorship, then the penal provisions shall apply to the persons that acted or should have acted on their behalf, but with joint and several liability of the legal person, the company, or the sole proprietorship for the fines and costs.

234. Article 5 of the 1991 Law imposes confiscation of the object and the instrumentalities of the offense, and refers also to the Articles 26 StGB (confiscation of instrumentalities and products) and 353 to 357 StPO for the applicable procedure. It is not immediately clear, however, how seizure and confiscation is applied in practice in case of violation of the Taliban Ordinance.

235. As for compliance monitoring and sanctions in respect of the measures to be taken in relation with other terrorism-related assets, the relevant DDA and StPO provisions apply.

Statistics

236. The following relevant statistics were submitted:

• Since 2001, a total of five reports have been submitted to the Government pursuant to the Taliban Ordinance under the 1267 regime (2001: 2 reports, 2002: 1 report, 2003: 1 report, 2006: 1 report). Approximately CHF205,200 was blocked ex lege. At the end of 2006, approximately CHF115,000 was officially released for humanitarian reasons after consultations with the Sanctions Committee. So approximately CHF90,200 is presently still blocked.

• Moreover, two reports were submitted in 2006 pursuant to Article 16 DDA, which were triggered by list hits (EU list) under UNSCR 1373. In these cases, no assets were located in Liechtenstein.

Suspicious Activity reports (received by FIU)	2003	2004	2005	2006
Suspicious Activity report DDA 16/1 (terrorism)	0	0	1	2

View Table

Suspicious Activity reports (received by FIU)	2003	2004	2005	2006
Suspicious Activity report DDA 16/1 (terrorism)	0	0	1	2

Analysis of Effectiveness

UNSCR 1267

237. The appropriate measures to freeze assets under UNSCR 1267 are in place in Liechtenstein, covering all aspects to make compliance effective and adapted in the special context of an extraordinary procedure. In this respect, only some details remain to be addressed:

• In the absence of a clear statement in the law, it is not clear if the control over the targeted assets also comprises indirect control;

• Similarly, it is unclear if possession implies also partial or joint ownership; and

• No review process is provided for challenging the freezing measures.

UNSCR 1373

238. The Liechtenstein response to the requirements of SR.III outside the scope of UNSCR 1267 is a pragmatic one. In the absence of a national terrorist list, measures have not been introduced in Liechtenstein to freeze and manage assets suspected to belong to other suspected terrorists and terrorist-related entities according to an appropriate and specific procedure. Foreign lists are addressed by applying the common preventive and repressive process. The following are some of the features already in place, though they are not organized in Liechtenstein into a specific and formal legal framework:

• The FIU, in its role as central authority for Liechtenstein in the context of UNSCR 1267 and as chair of the Terrorist Financing Coordination Group, decides on and screens the incoming lists. Suspected assets are subject to automatic freezing (although only for a limited period of five days) and reported to the FIU;

• There is an effective communication system to the financial institutions and other relevant entities and guidance is provided by the FMA;

• Beyond this phase, the normal criminal procedure applies. No specific administrative measures exist that deal with the other requirements of an appropriate freezing regime, adapted to the implementation of UNSCR 1373.

239. In respect of the seizure and confiscation of terrorist related assets in general, reference is made to the comments made earlier for Recommendation 3.

Statistics

264. For a good understanding of the statistics it is important to note that one disclosure is counted as one report. One report can relate to more than one transaction. Subsequent complementary reports containing new information are also counted separately. Only when there are several reports referring to the same activity and suspect, are they aggregated and counted as one case (report).

Statistics Suspicious activity reports (received by FIU)	2003	2004	2005	2006
Suspicious activity reports total	172	234	193	163
Suspicious activity reports DDA 16/1 or 9/2	143	217	173	129
Suspicious activity reports DDA 16/1 (terrorism)	0	0	1	2
Suspicious activity reports (special ordinances)	1	0	0	1
Suspicious activity reports DDA 17/1 or 9a	28	17	19	29
Suspicious activity reports by sector
Banks	82	133	105	84
Professional trustees	82	89	74	65
Lawyers	5	9	8	9
Insurers	2	2	1	0
Postal Service	1	1	1	1
Investment undertakings	-	-	-	1
Authorities/FMA	-	-	4	3
Reason/trigger for submission of a suspicious activity report
Internal compliance	124	123	101	109
Domestic proceedings	14	56	36	14
Mutual legal assistance proceedings	34	55	56	40
Suspicious activity reports forwarded to the prosecution authorities
Forwarded	123	185	139	113
Not forwarded	49	49	54	50

View Table

Statistics Suspicious activity reports (received by FIU)	2003	2004	2005	2006
Suspicious activity reports total	172	234	193	163
Suspicious activity reports DDA 16/1 or 9/2	143	217	173	129
Suspicious activity reports DDA 16/1 (terrorism)	0	0	1	2
Suspicious activity reports (special ordinances)	1	0	0	1
Suspicious activity reports DDA 17/1 or 9a	28	17	19	29
Suspicious activity reports by sector
Banks	82	133	105	84
Professional trustees	82	89	74	65
Lawyers	5	9	8	9
Insurers	2	2	1	0
Postal Service	1	1	1	1
Investment undertakings	-	-	-	1
Authorities/FMA	-	-	4	3
Reason/trigger for submission of a suspicious activity report
Internal compliance	124	123	101	109
Domestic proceedings	14	56	36	14
Mutual legal assistance proceedings	34	55	56	40
Suspicious activity reports forwarded to the prosecution authorities
Forwarded	123	185	139	113
Not forwarded	49	49	54	50

Analysis of effectiveness

265. The FIU plays a pivotal role in the AML/CFT system. Not only does it perform the functions of a typical intermediary administrative financial intelligence unit, it is also a repository for all relevant data relating to criminal proceeds and terrorism, and as such also fulfils a general intelligence function. It is adequately staffed with qualified personnel and conducts thorough operational analysis of the SAR information it receives. It has established a relationship of trust with the reporting entities and puts a lot of effort into raising the awareness among entities covered by the DDA, mainly in cooperation with the FMA.

266. To be able to perform its tasks in an efficient way, the FIU Act has endowed the unit with specific powers to collect additional information in its search for indications of ML or FT. Its access to law enforcement and administrative information is comprehensive and adequate. The difficulties in accessing information and documents deposited with the Registrar have very recently been resolved. Its powers to query additional financial information of a confidential nature from the reporting entities is restricted, however, to the disclosing entity itself and does not extend to other entities subject to the DDA that have not disclosed, even in the event that the disclosures would contain references or links to such additional sources. Bearing in mind that strong analytical and “investigative” powers are of the utmost importance for any FIU to deliver a product that is of effective use for the ensuing law enforcement action, this restriction may affect the quality and timeliness of the analysis, and consequently may negatively impact on the efficiency of the FIU.

267. In addition to the practice of the FIU prompting the nonreporting entities to consider filing an SAR, the FIU can request the FMA in special cases to collect that information on its behalf. This indirect approach may be a solution born out of pragmatism and may prima facie seem to be in line with the criteria that allow such indirect access, but it is delaying the analytical process and is not entirely free of challenge as it is not expressly provided for in the law. The FMA intervention is based on Article 9 FIU Act and Article 36 DDA, giving the FIU access to FMA information on the one hand and on the other providing for an exchange of information between the FMA and the FIU. The combined provisions, however, make no reference to the FMA collecting information on behalf of and at the request of the FIU and do not appear to cover such eventuality.

268. Articles 3; 4.3; 5d, f and g; 6 and 7d FIU Act still need to be supplemented to formally bring the terrorism financing aspect within the remit of the FIU and achieve consistency with the relevant provisions of the DDA.

269. In terms of effectiveness, the statistics over the last four years show an interesting picture:

• The number of SARs is broadly stable, with the exception of 2004. The decrease from 2005 can be explained by selective impact of the enhanced practice of the reporting entities of consulting the FIU in an evaluation talk before deciding on filing.

• The proportion of disclosures triggered by an outside source (domestic law enforcement or MLA proceedings) is still quite high: from 30 to 50 percent of the total number. This is not surprising considering that the Liechtenstein financial sector manages money and assets from all over the world. On the other hand, it is also indicative of a largely reactive attitude of the sector.

• The output of cases to the Public Prosecutor is remarkably high and reaches an average of some 70 percent of the incoming SARS. This can be explained partially by the fact that a lot of the disclosures relate to ongoing law enforcement or MLA cases. It is, however, also an indication of high quality reporting and analysis.

270. Overall, the FIU is fulfilling its task in an effective way and produces a high standard of reports, taking into account the restrictions it faces in accessing additional relevant information.

Legal Framework:

Designation of Authorities ML/FT Investigations (c. 27.1):

272. The Office of the Public Prosecutor (Staatsaanwaltschaft) is ultimately responsible for the investigation and the prosecution of ML and FT offenses in accordance with Article 20 CPC. If the needs of the investigation so require, he can request the investigating judge to order specific coercive actions (warrants), in which case the prosecutor remains in charge of the proceedings, or to take over the investigation in his sole charge (which is always the case when the suspect is placed under investigative custody). The public prosecutor and the investigating judge conduct the investigations through the National Police, and in particular for ML and FT cases the Economic Crimes Unit, which possesses the expertise necessary for such special investigations. In practice, most ML investigations are triggered by FIU reports (more than two thirds) with the balance from other sources, such as MLA requests and direct police investigations.

Ability to Postpone/Waive Arrest of Suspects or Seizure of Property (c. 27.2):

273. The decision if and when a person is arrested or accounts or assets are seized is the responsibility both of the Office of the Public Prosecutor, which submits an application to the investigating judge, and of the investigating judge, who decides on the applications and, where appropriate, issues the order. There are no specific rules on the timing of such measures. The Public Prosecutor, as head of the investigation, is normally the authority who in such cases decides when and where the police will intervene, and in this he will be guided by the aim of maximum result. Therefore, it is perfectly possible and legal to postpone or waive an arrest or seizure if the efficiency of the investigation so requires, e.g., in order to follow the money trail or identify accomplices. Controlled delivery as such is even specifically provided for in Article 12 of the trilateral cooperation treaty between Liechtenstein, Switzerland, and Austria.

Additional Element - Ability to Use Special Investigative Techniques (c. 27.3):

274. The following special investigative techniques are allowed for law enforcement purposes:

• Observations;

• Surveillance of telecommunications, including video surveillance and recording of the content (telephone tapping), subject to approval by the President of the Court of Appeal (Article 103 StPO);

• Controlled delivery, mostly in drug trafficking cases;

• Infiltration and undercover actions, such as a controlled sale or purchase of drugs by a law enforcement officer (Article 27 Narcotics Act); and

• The use of informants.

275. Insofar as the basic human rights are respected and the investigation is conducted under judiciary control, an express provision is not specifically required. The techniques are closely monitored by the public prosecutor, who is ultimately responsible for ensuring the full legality of their use. Entrapment is absolutely forbidden and invalidates the whole ensuing procedure (Article 9 StPO). It has been ruled, however, that controlled delivery and undercover operations do not fall under the concept of “entrapment.” In practice, the small size of the country and its population inhibit a frequent use of undercover techniques.

276. Mixed investigation teams are provided for in the Police Cooperation Agreement with Austria and Switzerland.

277. The more frequently used special investigation methods are observation and telephone tapping. Seven telephone surveillance measures and seven observation measures, including video surveillance, were carried out in 2006.

Additional Element - Use of Special Investigative Techniques for ML/FT Techniques (c. 27.4):

278. As far as the investigation of white collar criminality is concerned, surveillance of telecommunications is an appropriate investigative tool. The entire telecommunication system, including internet, can be monitored retroactively or on ongoing basis. Currently an amendment to the StPO is being drafted, modeling the special investigative procedures after the new Austrian criminal procedure code.

Additional Element - Specialized Investigation Groups & Conducting Multi-National Cooperative Investigations (c. 27.5): see 27.3

Additional Elements - Review of ML & FT Trends by Law Enforcement Authorities (c. 27.6): see 27.3

Ability to Compel Production of and Searches for Documents and Information (c. 28.1):

279. Article 98a StPO specifically provides the legal framework for obtaining evidence from banks and financial institutions in the sense of Article 3.1.a DDA. The court (mostly the investigating judge) can order them:

• to provide detailed information on the identity of persons and business relations, the nature of the relationship, as well as on the beneficial owners and proxies; and

• to supply all related relevant documentation,

Provided this appears necessary in the context of an investigation into money laundering, a predicate offense, or an offense related to organized crime, or if the assumption is justified that the client relationship is used for handling criminal proceeds or fees (Article 20 StPO), or is at the disposal of criminal or terrorist organizations, or within the context of the terrorism financing offense (Article 20b StPO–see on this point the comments on R.3).

280. The obligation to surrender the requested documents or other relevant items or values is enforceable by the investigating judge and any person who refuses is liable to a fine of CHF1,000 or imprisonment of up to six weeks, except if he is the suspect himself or if he is absolved to testify (Article 96.2 StPO). For seizure of documents held by other entities, such as trustees, the procedure according to Article 96 StPO is applied for all items that may be relevant to the investigation (evidence) or subject to confiscation. This is usually preceded by a search warrant.

281. House and personal searches, including premises and vehicles, are conducted according to Article 92 StPO. As a rule, this is based on a search warrant issued by the investigating judge, but can also be performed by the police on their own authority in certain circumstances (Article 94 StPO): an arrest warrant having been issued, a suspect being caught in the act or in possession of objects linked to an offense or with consent of the inhabitant.

Power to Take Witnesses’ Statement (c. 28.2):

282. It belongs to the normal execution of the police function to be empowered to take witness statements. If the witness is unwilling to testify, the court can impose coercive measures at the request of the Public Prosecutor (Articles 105–124 StPO). In principle, witnesses are required to testify, subject to a coercive penalty of up to CHF1,000 and, in the event of continued refusal, coercive detention of up to six weeks. Witnesses located in Liechtenstein may, on threat of a fine of up to CHF1,000 in the event of nonappearance, be summoned by the police if they do not comply with the order to appear. False testimony in court is punished by imprisonment of up to three years and perjury with imprisonment of up to five years (Article 288 StPO).

Adequacy of Resources to Law Enforcement and Other AML/CFT Investigative or Prosecutorial Agencies (c. 30.1):

283. Since December 1, 2005, the Liechtenstein Office of the Public Prosecutor consists of six Public Prosecutors. They all carry the general responsibility to prosecute offenses, including cases of money laundering, predicates and terrorism financing, though with none of them specializing in dealing with these offenses. The Office of the Public Prosecutor also employs four persons full-time for its administration. Organizationally, the Public Prosecutor is subordinate to the Government, but acts as an independent magistrate whenever he exercises his functions in the proceedings before the courts.¹⁴ The financial, human, and technical resources are deemed sufficient. There are 14 judges in the Liechtenstein Court of First Instance (Landgericht, Kriminalgericht, and Jugendgericht). This number is considered adequate and there is no significant backlog of pending cases.

284. In the Economic Crimes Unit (ECU) of the Liechtenstein National Police, nine qualified officers deal with financial investigations, with one investigator specialized in cases of terrorist financing. The technical equipment is modern, with adequate hardware and software being available for operational case analysis. The Unit is supported by the forensic specialists of the criminal police. On average, the ECU investigates 100 domestic and 100 mutual legal assistance cases annually, and conducts between 80 and 100 searches. The Unit considers this workload to be manageable.

Integrity of Competent Authorities (c. 30.2):

285. Over the last six years magistrates from Austria who had already served there as judges or prosecutors have been recruited as Public Prosecutors in Liechtenstein. Of the Liechtenstein citizens trained in Liechtenstein between 2002 and 2005, one person joined the team of Public Prosecutors in December 2005, and the second followed in January 2007. When recruiting new staff members, training and experience in criminal prosecution are important criteria. All Public Prosecutors working in Liechtenstein have a university degree in law and years of practical experience.

286. The ECU of the Liechtenstein National Police, which is responsible for investigating money laundering and terrorist financing, employs specialists recruited either abroad (Germany, Austria) or in Liechtenstein. They have specialized expertise relating to banking, accounting, auditing, trusts, and insurance. Recruits are trained in Liechtenstein and abroad as criminal police investigators for two years. They are screened on their integrity through database and criminal record checks. Recruits from outside Liechtenstein are checked through the foreign authorities.

Training for Competent Authorities (c. 30.3):

287. The Office of the Public Prosecutor meets the challenges of the increased sophistication of criminal behavior with appropriate and continuing training. The prosecutors attend several lectures on legal issues in Liechtenstein each year, and they also participate in international conferences and training courses. The Prosecutor General represents the Liechtenstein Office of the Public Prosecutor in international bodies. The Office of the Public Prosecutor is a member of the International Association of Prosecutors (IAP), the CCPG of the Council of Europe, and regularly takes part in the conferences of these organizations and the regional meetings of prosecution authorities. Liechtenstein is also associated with Eurojust and the European Judicial Network (EJN) as a third State, and its prosecutors attend the training courses offered by these organizations. Prosecutors attend each year the continued education program of the Academy of European Law in Trier. Two prosecutors completed post-graduate studies on the suppression of economic crime between 2003 and 2005 in Lucerne (Executive Master of Economic Crime Investigation, EMECI).

288. The staff members of the ECU attend annual expert training courses in Austria, Germany, Switzerland, and other countries (e.g., Interpol and FBI continued training courses). An annual budget of over CHF20,000 is available for this purpose.

Additional Element (R.30) - Special Training for Judges (c. 30.4):

289. A budget for continued training of judges in all areas is available. They can attend programs, especially in Switzerland, Austria, and also at the Academy of European Law in Trier. One judge of the Court of Justice successfully completed his Executive Master of Economic Crime Investigation post-graduate studies at the Lucerne School of Business in Switzerland. One other judge has been active for many years in the delegation of the MONEYVAL committee at the Council of Europe. The four investigating judges and judges for mutual legal assistance who primarily deal with money laundering and (occasionally) terrorist financing are grouped together in their own division of the Court of Justice.

Analysis of effectiveness

290. The investigative powers available to the law enforcement authorities are comprehensive enough to enable them to conduct serious investigations in an effective way. Taking into account the workload and the number of cases, the human and material resources are not particularly abundant but they seem adequate to meet the challenge. The assessors appreciated the professionalism the investigating and prosecuting magistrates and police representatives demonstrated during the interviews. Expertise and training opportunities are sufficiently available so the environment and conditions for an efficient law enforcement approach are in place. The statistical figures support the impression of a targeted effort to counter ML and an acceptable level of effectiveness.

291. In terms of effectiveness at prosecutorial level, it is interesting to compare the statistical data from the FIU with those from the Office of the Public Prosecutor.

	Forwarded by FIU	New cases opened by PP (ML + DDA)	Opened as % of forwarded
2003	123	25+14 = 39	(31.7%)
2004	185	34+15 = 49	(26.5%)
2005	139	33 + 2 = 35	(25.2%)
2006	113	36 + 8 = 44	(38.9%)

View Table

	Forwarded by FIU	New cases opened by PP (ML + DDA)	Opened as % of forwarded
2003	123	25+14 = 39	(31.7%)
2004	185	34+15 = 49	(26.5%)
2005	139	33 + 2 = 35	(25.2%)
2006	113	36 + 8 = 44	(38.9%)

Even taking into account that a portion of the cases forwarded by the FIU relate to MLA cases that do not warrant the opening of a new file with the Public Prosecutor’s office and the fact that some FIU reports may have predominantly an intelligence value that is not immediately exploitable, the percentage of investigations triggered by an FIU report is rather low. One factor may be that the international dimension of the money laundering cases calls for intensive and laborious investigations, so the Public Prosecutor will automatically conduct a selection process in terms of feasibility and cost/benefit ratio. There is also the general tendency to transfer the cases to the predicate offense foreign authority, rather than taking up the prosecution in Liechtenstein. Reference is made once again to the importance of developing their own experience and jurisprudence in stand-alone money laundering prosecutions, and taking the matter more in their own hands, even if in a lot of cases it must be acknowledged that the transfer of prosecution is likely to be an appropriate approach.

Legal Framework:

332. Under the 2004 Assessment Methodology for the FATF Recommendations, an asterisk applied to a criterion indicates that the relevant measures must be in law or regulations (as indicated in the appropriate headings throughout Section 3 below). In setting the requirements in Liechtenstein for customer due diligence (CDD), the Due Diligence Act (DDA), as primary legislation, and the related Due Diligence Ordinance (DDO), which as a government ordinance has the status of secondary legislation, qualify as ‘law or regulation’. Among the guidance issued by the financial supervisory agency, the Financial Market Authority (FMA), Guideline 2005/1 defines binding risk criteria in direct implementation of Article 13.2 DDA. On that basis, the assessors considered those requirements to qualify as “other enforceable means”. Other guidance issued by the FMA, of less relevance to the implementation of the FATF Recommendations, does not enjoy such direct legislative support and has not been accepted as other enforceable means for the purposes of this assessment.

Prohibition of Anonymous Accounts (c. 5.1):

333. In accordance with Article 12.3 and 12.4 DDA, banks and postal institutions are prohibited from maintaining accounts, passbooks or deposits which are anonymous, payable to the bearer, or opened under a fictitious name. Bearer passbooks that existed before the prohibition must be closed “without delay as soon as the corresponding documents are submitted to the bank or postal institution” (Article 40.4 DDA). During interviews, banks told the assessors that bearer passbooks are systematically converted into deposit accounts when clients show up at the counter but that some passbooks have not been presented yet. The authorities informed the assessors that, if a bearer of a passbook requests access to the funds on the account, the outflow of assets is subject to relevant CDD measures in cases where the assets exceed CHF25,000, specifically that the identity of the holder of the passbook must be established at that point and must be required to provide a written statement concerning the identity of the beneficial owner (Article 40.4 DDA). A small number of bearer passbooks remain in circulation: there were 789 bearer passbooks with CHF19 million in deposits as of February 2007, compared with 2,098 passbooks with CHF45 million in deposits in 2002. However, they still convey an inherent risk of being used improperly, as it is not possible to control or monitor the physical transfer of passbooks from one person to another. In the circumstances, the measures described above seem to address as far as feasible the residual risk of bearer passbooks, when combined with such information as is available to the bank dating from the account-opening stage regarding the identity of the original account holder.

334. Numbered accounts are not proscribed. No specific regulation has been issued with regard to such accounts. In interviews, assessors were told by bankers and external auditors that some customers request numbered accounts in which case a very limited number of staff within the bank know the clients’ identity, typically the relationship manager and the compliance officer. Pursuant to the DDA, customer due diligence for numbered accounts is not different from diligence conducted on regular accounts and no additional due diligence is applied or risk recognized in practice by the financial institution arising solely from the fact of a request for the creation of a numbered account. However, in the view of the assessors, such a request from a customer for an additional level of confidentiality on top of banking secrecy should give rise to questions regarding the customer’s motivation that should be taken into account by financial institutions in determining the appropriate level of due diligence to apply, as the ongoing monitoring of numbered accounts can be more difficult (and therefore may be less effective in practice) than is the case with nominal accounts. According to the authorities, numbered accounts are estimated to represent significantly less than 10 percent of the total of accounts in Liechtenstein.

When is CDD required (c. 5.2):

335. Pursuant to Articles 5 and 7 DDA, customer due diligence (CDD) is required when entering into a business relationship. Identification of the contracting party, and where different, the beneficial owner, is based on “documentation with probative value”.

336. 5.2.b^* In accordance with Article 6 DDA, exceptions to identification requirements of the contracting party and where different, the beneficial owner (Article 8 DDA), concern transactions that do not exceed thresholds:

• spot transactions¹⁷ below CHF25,000¹⁸, whether the transaction is made in a single step or in several steps that obviously appear to be linked;

• remittances or transfers¹⁹ below CHF5,000.

337. For remittance and transfers, the threshold in Liechtenstein, equivalent to EUR3,000/USD4,000, exceeds the limit set by the FATF standard (EUR/USD1,000).

338. According to Article 20.3 DDA, the reasons why there is no obligation to identify the beneficial owner must be evident from the due diligence files which are required to be maintained by the financial institution. The authorities consider that, in situations where the identification requirement can be waived under the DDA, the persons subject to due diligence are still required by law to complete a profile and conduct ongoing monitoring of the business relationships.

339. 5.2.c^* VII.1 Under FATF Recommendation 5, financial institutions should be required to undertake CDD measures when carrying out occasional transactions that are wire transfers in the circumstances covered by the Interpretive Note to SR.VII. This would include collecting and transmitting full originator information for cross-border wire transfers above USD1,000 and, in this context, transfers to Switzerland should be defined as cross-border transfers. In Liechtenstein, according to Article 5 DDA, while financial institutions must identify their contracting party, this requirement is waived for occasional transfers that do not exceed CHF5,000²⁰ (Article 6.1.b DDA)—significantly in excess of the SR.VII threshold. Article 15.1 DDO requires banks and postal institutions to provide the name, account number and domicile, or the name and an identification number, of the originator of an international wire transfer. However, this falls short of the SR.VII definition of full originator information. A further concern is that wire transfers between Liechtenstein and Switzerland are treated as domestic (in recognition of the monetary union) and, as such, the DDO obligations for international transfers do not apply. Moreover, the requirement to collect customer information may be waived entirely in Liechtenstein if “legitimate reasons” prevent the financial institutions from obtaining customer information. The example given in the DDO of a “legitimate reason” is the case of standing orders, and such reasons must be clarified and documented (Article 15.2 DDO). Issues regarding wire transfers are discussed in more detail in the analysis of SR.VII.

340. 5.2.d^* According to Article 6.3 DDA, in case of suspicions of connections with money laundering, predicate offense for money laundering, organized crime, or financing of terrorism, identification diligence must be conducted, without taking into consideration the exceptions listed in the DDA. However, the identification is not required if the person subject to due diligence refrains from entering into a business relationship, but the financial institution may then file an SAR (DDA, Article 17.1).

341. 5.2.e^* Identification diligence of the contracting party must be conducted again if doubts about initial data arise during the course of the relationship (Article 9 DDA).

342. To summarize the findings of the assessors for criterion 5.2, CDD is a standard requirement in Liechtenstein when initiating a relationship. Each person subject to due diligence must compile and keep updated a profile in respect of each long-term business relationship. However, the requirements in Liechtenstein for the application of CDD measures in respect of cross-border wire transfers for occasional customers are not in line with the FATF Recommendations in a number of important respects.

Identification measures and verification sources (c. 5.3):

343. Contracting parties and beneficial owners must be identified when entering into a business relationship (Article 5 DDA). Identification requirements apply to contracting parties, without any restriction based on their legal status: entities with limited capacities, which are eligible to act as contracting parties or beneficial owners, are subject to identification (Article 17 DDO). No distinction is made between occasional and permanent relationships, but minimum thresholds are set for occasional transactions (see 5.2).

344. The DDO stipulates that:

• documents with probative value must be original forms or certified copies (Article 3 DDO); and

• copies of these documents must be dated and signed, in order to certify that the original forms or certified copies have been verified (Article 7.2 DDO).

345. According to Article 6 DDO, copies of documents can be certified by:

• a branch or a subsidiary of entities subject to CDD;

• a lawyer, a professional trustee, an auditor, or an asset manager subject to regulation and supervision; or

• a public notary.

346. Such certifications may not be older than twelve months (Article 7 DDO).

347. For natural persons, data that must be collected encompass: last name, first name, date of birth, address and state of residence, and citizenship. A valid official identity paper (passport, identity card or driving license) with a picture is required for natural persons, or, if the contracting party cannot provide such a document, a confirmation of identity from the authority in the country of his domicile (Articles 3 and 4 DDO).

348. In accordance with Article 14 DDA, a customer profile must be compiled for each long-term relationship and must include (Article 21 DDO):

• the (names) of the contracting party, the beneficial owner and authorized parties;

• the economic background and origin of the assets;

• the profession and business activities of the beneficial owner or of the effective founder, if the counterparty is acting as an organ of, or is a legal entity that does not operate in the domiciliary state; and

• the intended use of assets.

349. There is no provision defining how often a profile must be updated. Financial institutions’ representatives told the assessors that inconsistencies between customer’s transactions and profile would initiate inquiries, which could result in a profile update.

350. Insurance undertakings must also collect identification documents with probative value when making payments to recipients (Article 8 DDO).

351. The large use of domestic and foreign intermediaries for due diligence restricts financial institutions’ ability to access original identification documents. They must rely on certification of copies that is essentially provided by the intermediaries themselves. Pursuant to Article 4.2 DDO, when the contracting party cannot present an identification document with probative value, he shall provide a confirmation of identity provided by the authority of the country of residence.

352. Requirements for verification of customer identification data do not extend beyond the identification requirement outlined above which is based on obtaining “documentation with probative value”. The authorities consider that using one of the methods of possible verification listed in the Basel Committee’s General Guide to Account Opening and Customer identification is sufficient, and no additional verification step is required in Liechtenstein. However, having regard to the largely non-resident client base and the fact that often the Liechtenstein financial institution does not have sight of original documentation, the approach to verification in Liechtenstein is minimalist at best and could not be considered an adequate response to the higher-risk nature of much of the business.

Identification of Legal Persons or Other Arrangements (c. 5.4):

353. Pursuant to Article 21.1 DDO, authorized parties must be named in the client profile. Civil and criminal laws require financial institutions to verify that any person purporting to act on behalf of a legal person is so authorized, but verification of authorized parties’ identity is not formally required by the DDA or the DDO.

354. 5.4.b Financial institutions must obtain for legal persons, companies, trusts, other associations, and asset entities the following information (Article 3 DDO): name or firm name, address, domiciliary state, and date of formation.

355. Other documents required under Article 5 DDO are:

• for registered entities, an extract from the Public Register or a written extract from trustworthy, privately-managed registers and databases;

• for deposited entities,²¹ documents with probative value which shall be an official certificate issued in Liechtenstein; the statutes, the formation documents or agreement; a certification by the external auditor of the entity’s name, address, domiciliary state, and date of formation; an official license to conduct its activities; or a written extract from trustworthy, privately-managed registers and databases.

356. The written extract from databases maintained by the Public Register Authority and from “trustworthy, privately-managed registers and databases” must be obtained by the person subject to due diligence itself (Article 5.1.b.c and 5.2.e DDO).

357. Financial institutions and external auditors have not mentioned to the assessors any difficulty in obtaining and maintaining information and documents required for CDD, notably from intermediaries and service providers.²²

358. Verification of the identity of parties authorized to act on behalf of a customer is not formally required by the DDA or the DDO. In order to obtain a certification of registration for legal entities, financial institutions are permitted to rely on non-official foreign sources (“trustworthy privately-managed registers and databases” Article 5.b.1.c DDO) or on documents provided by the client himself (in Liechtenstein, the certificate for deposited entities is provided by the customer and financial institutions can only obtain confirmation of their existence from the Public Registry). According to the authorities, in practice the documents would not typically be provided by the client but by his authorized representative, most commonly a Liechtenstein trustee.

Identification of Beneficial Owners (c. 5.5; 5.5.1 & 5.5.2):

359. Beneficial owners are defined in Article 11 DDO as those persons who ultimately hold the economic rights to the assets. The effective founder of a revocable trust or the person paying the insurance premium are considered as beneficial owners (Article 11 DDO).

360. 5.5.1^* Pursuant to Article 7.1 DDA, the persons subject to due diligence must identify the beneficial owner when entering into a business relationship with care that is appropriate to the circumstances. In doing so, they may start from the assumption that the contracting party is identical to the beneficial owner. If, however, doubts arise as to whether this assumption is correct, the person subject to due diligence must require from the contracting party a written statement identifying the beneficial owner. A written statement is also always required from the client pursuant to Article 7.2 DDA in case of:

• spot (occasional) transactions above CHF25,000;

• remittances or transfers above CHF5,000;

• total annual insurance premiums above CHF1,500;

• one-time insurance premium above CHF4,000;

• a business relationship with a natural person is initiated by correspondence; or

• a contracting party that is a legal entity that does not operate commercially in the domiciliary state—a point that is particularly relevant to Liechtenstein foundations and trusts which, as described elsewhere in this report, represent a substantive part of the financial services business provided in Liechtenstein, particularly to non-residents. The Liechtenstein requirements recognize this by excluding this category from the lighter treatment which would otherwise apply under the law in terms of establishing the identity of the beneficial owner.

361. According to Article 9 DDO, doubts regarding the assumption that the contracting party is the beneficial owner can become manifest in case of:

• a person who does not have a sufficiently close relation to the contracting party possesses a power of attorney;

• a financial transaction amount beyond the financial reach of the contracting party; or

• unusual findings resulting from contacts with the contracting party.

362. Financial institutions and external auditors informed the assessors that clients are always requested to certify in the initial identification form whether or not they are the beneficial owner of the assets.

363. 5.5.2.a and 5.5.2.b^* Identification of the beneficial owner is required “with care that is appropriate to the circumstances”. Due diligence requirements are the same as for a contracting party (Article 10 DDO): the profile, as defined in Article 21 DDO, must include information about the economic background and origin of the assets presented, the profession and business activities of the beneficial owner, or of the effective founder, if the counterparty is, or is acting as an organ of, a legal entity that does not operate in the domiciliary state. However, as noted above, the obligation to obtain beneficial ownership information, without availing of the concession to be able to assume that the contracting party is the beneficial owner, only covers legal entities that are not commercially active in the domiciliary state and does not extend to commercially-active companies.

364. For entities having no specific beneficiary, such as discretionary trusts or foundations, the contracting party must provide in a written statement the name of the effective founder, the persons authorized to instruct the contracting party or its organs, the persons or circle of persons eligible as beneficiaries and any curator, protector, or other appointed person (Article 10.4 DDO). There are no specific provisions regarding any additional risk-based measures to be taken to verify identification of beneficial owners of companies with bearer shares and nominee shareholders.

365. The definition of “beneficial owner” pursuant to Article 11 DDO is not in line with the definition in the FATF Recommendations, as it only covers persons holding the economic rights to the legal entity’s assets and does not extend to persons holding control rights or interests, such as protectors/curators, nominee directors, or other persons with control over the mind and management of a legal entity. Article 10.4 requires identification of such persons but only with regard to legal entities that have no, or only a class of, designated beneficial owner.

366. To summarize for criterion 5.5, under Article 7.1 DDA, identification of the beneficial owner must take place when entering into a business relationship with care that is appropriate to the circumstances. In general, financial institutions are entitled to assume that the contracting party is the beneficial owner, and only when doubts arise as to whether this assumption is correct, the contracting party must provide a written statement identifying the beneficial owner. The DDA lists the cases in which this power of assumption cannot be applied such that direct identification of the beneficial owner is mandatory, encompassing a mixed set of criteria based on transaction amounts and types of business relationships. Most significant, given the volume and importance of such business relationships in Liechtenstein, is the requirement that persons subject to due diligence must identify the beneficial owners of a legal entity that does not operate commercially in the domiciliary state, including trusts and foundations. However, the obligation does not extend to persons holding control rights or interests. Overall, therefore, these provisions fall short of the criterion which requires financial institutions to identify in every case the natural person who is the ultimate beneficial owner. The position of the authorities is that the beneficial owner is always identified and, during the on-site visit, the assessors did not encounter situations where identification of the beneficial owner was not being conducted in practice by financial institutions, though it was not possible for the assessors to determine the depth and quality of this work.

367. In respect of the identification information provided by the contracting party, there is no explicit requirement for verification. In practice, some measures of verification may take place based on the requirement to determine the economic background and origin of the assets. This falls short of the criteria that call for an understanding of the ownership and control structure of the customer and a determination of the natural person that exercises the ultimate effective ownership or control over the customer. In discussions with financial institutions and external auditors, assessors understood that when the beneficial owner is identified in practice, the extent to which ownership is determined is not always clear. The authorities maintain that the information provided by the “contracting party”—often a trustee or other intermediary, in Liechtenstein or abroad—provides an element of verification of the identity of the beneficial owner. They also point to the requirement in FMA Guideline 2005/1 for financial institutions to have access to the information needed to carry out enquiries in the event of doubts or suspicions in the context of Article 15 DDA. Having regard to the higher-risk nature of most of the financial sector business in Liechtenstein, however, it is critically important that sufficient verification takes place to ensure that the natural person who is the ultimate beneficial owner had been determined. The current range of measures in Liechtenstein, though of value in themselves, are not sufficiently direct or comprehensive to fully respond to the underlying risks.

Information on Purpose and Nature of Business Relationship (c. 5.6):

368. The data required to be collected when establishing a customer profile (which is mandatory when entering into a long-term relationship) include the economic background, origin, and intended use of assets (Article 21 DDO).

Ongoing Due Diligence on Business Relationship (c. 5.7; 5.7.1 & 5.7.2):

369. 5.7^* Article 13 DDA requires entities to carry out a risk-based monitoring of their long-term business relationship.

370. 5.7.1 Pursuant to Article 14 DDA, long term relationship profiles must be established. Profile requirements are listed in Article 21 DDO:

• names of the contracting party, the beneficial owner and the authorized parties;

• origin and sources of the assets;

• profession and business activities of the beneficial owner or of the effective founder, if the client is a legal entity or an organ of a legal entity that does not operate commercially in the domiciliary state; and

• intended use of assets.

371. Information related to the assets and the activities of the beneficial owner or the effective founder shall depend upon the risk assessment of the business relationship (Article 21.2 DDO).

372. 5.7.2 Long term relationship profiles must be updated regularly (Article 14 DDA), higher-risk criteria must be established and such risks must be limited and monitored (Article 13.2 DDA). Reidentification of the contracting party or the beneficial owner is required if:

• doubts about initial data arise during the course of the relationship (Article 9 DDA); or

• in the case of an insurance policy, the insurance holder is replaced by another holder (Article 13.1 DDO).

373. Article 14 of the DDA requires financial institutions to establish and maintain a client profile which is the major tool they use for transaction and customer monitoring, as circumstances or transactions which deviate from the profile require simple inquiries to be conducted (Article 15 DDA). The profile contains information related to the contracting party, the beneficial owner, and authorized parties, as well as the economic background, origin and intended use of assets and the profession and business activities of the beneficial owner or the effective founder of a legal entity. This profile is based on information collected during the customer and beneficial owner identification process.

Risk – Enhanced Due Diligence for Higher Risk Customers (c. 5.8):

374. Pursuant to Article 13.2 DDA, persons subject to due diligence must establish higher-risk criteria and define how these risks are to be limited and monitored. The FMA has issued “certain binding risk criteria” in its Guideline on Monitoring of Business Relationships 2005/1. Criteria listed in the Guideline refer to large cash transactions, politically-exposed persons (PEPs), and to 32 indicators of money laundering. Entities subject to due diligence should not limit their investigations to this non-exhaustive list of indicators, but make use also of their own criteria when monitoring business relationships (Paragraph I, Annex to Guideline 2005/1). If transactions or circumstances meet one of the risk criteria, simple inquiries must be conducted (Article 15.1 DDA), in order to ensure that operations are plausible and understandable (Article 22.1 DDA).

375. In discussions with financial institutions, the assessors were told that customer profile and transaction monitoring was critical for detecting unusual operations and initiating further investigations. Higher-risk areas defined by banks may include also country of residence, type of business, or source of funding. Some of the largest banks met by the assessors have defined criteria in customer acceptance policies.

376. None of the examples of high-risk categories defined in the FATF Methodology under Recommendation 5.8 is included in the Guideline criteria and indicators, although they are extremely relevant in Liechtenstein’s financial sector, notably for non-resident customers and personal asset-holding vehicles. For high-risk categories, there is no explicit definition or requirement in the DDA or the DDO for enhanced due diligence. The primary obligation is to conduct simple inquiries when circumstances or transactions either deviate from the profile or meet a high-risk criterion. Therefore, defining, limiting, and monitoring the higher risks is left to a significant extent to the discretion of the financial institutions. As noted already, the risk-based approach as developed in Liechtenstein has merit and it is appropriate to call for financial institutions to take responsibility for developing the detail of their due diligence measures and applying them on a risk-sensitive basis. However, in order to comply with the FATF Recommendations, it is also necessary that there is a clear legal requirement for enhanced due diligence for higher-risk categories of customers and that financial institutions are left with no room for doubt as to the general categories of business that, at a minimum, should be subject to such enhanced due diligence. If such parameters were clearly in place in the legal framework in Liechtenstein, it would provide a much stronger and clearer foundation for the implementation of proportionate and effective risk-based measures.

Risk – Application of Simplified/Reduced CDD Measures when appropriate (c. 5.9):

377. Laws or regulations do not define any simplified or reduced CDD measures, but Articles 6 and 8 DDA set out exceptions to identification requirements of the contracting party and the beneficial owner:

• total annual insurance premiums less than CHF1,500;²³

• one-time insurance premiums less than CHF4,000;²⁴

• specific clients or client transactions, such as a legal entity quoted on a stock exchange, or escrow accounts for rental or capital deposits, or rental deposits for properties located in an EEA member state or in Switzerland;

• when payment for an insurance contract is made through an account of the same customer that is opened in an EEA member country or in Switzerland; and

• clients previously identified by third parties within the same group or enterprise, and clients previously identified for other financial transactions by a person subject to due diligence who accepts an insurance application; copies of the original documents for identification must be collected and filed by the insurance undertaking.

378. However, while simplified or reduced measures may be appropriate for a number of the categories listed above, the provisions in Liechtenstein are not consistent with FATF criterion 5.9 which does not provide any basis for countries to waive CDD measures totally in such cases. The authorities point out that the exception in the DDA is only for identification requirements, and even then the name of the contracting party and the reason for the exception must be evident from the due diligence file (and is potentially subject to audit). Importantly, no exemption is available in relation to ongoing due diligence which is still legally required in all cases. However, it is difficult to accept that, in practice, significant due diligence is carried out by financial institutions for categories of customer or transaction that, according to the DDA, are exempted from identification.

Risk – Simplification / Reduction of CDD Measures relating to nonresidents (c. 5.10):

379. There are no such measures for nonresidents.

Risk – Simplified/Reduced CDD Measures Not to Apply when Suspicions of ML/FT or other high risk scenarios exist (c. 5.11):

380. CDD must always be conducted in case of suspicions of money laundering, predicate offense of money laundering, organized crime, or terrorist financing, except where the person subject to due diligence refrains from entering into a business relationship (Article 6.3 DDA). In such cases, financial institutions may file a SAR (Article 17.1 DDA)

Risk-Based Application of CDD to be Consistent with Guidelines (c. 5.12):

381. Pursuant to Article 13.2 DDA, persons subject to due diligence must define higher-risk criteria for their business relationships. The FMA has defined “certain binding risk criteria” in the Guideline 2005/1. As indicated in the annex to the Guideline, entities subject to due diligence should not limit their investigations to this non-exhaustive list of indicators, but make use also of their own criteria when monitoring business relationships.

Timing of Verification of Identity – general rule (c. 5.13):

382. In accordance with Articles 5 and 7 DDA, the identification of the contracting party and the beneficial owner, when different from the contracting party, should be obtained when entering into a business relationship. According to Article 16.1 DDO, all information and documents must be available in full and in due form at the inception of the business relationship.

Timing of Verification of Identity – treatment of exceptional circumstances (c.5.14 & 5.14.1):

383. On “an exceptional basis”, necessary information and documents can be provided within 30 days after the relationship began if the person subject to due diligence ensures that no outflow of assets will occur in the meantime (Article 16 DDO).

Failure to Complete CDD before commencing the Business Relationship (c. 5.15):

384. Identification of the contracting party and, where different from the contracting party, the beneficial owner must be conducted when entering into a business relationship (Articles 5 and 7 DDA), with the exception of the 30 days grace period possible under Article 16.1 DDO.

385. CDD must always be conducted in case of suspicions of money laundering, predicate offense of money laundering, organized crime, or terrorist financing, except where the person subject to due diligence refrains from entering into a business relationship (Article 6.3 DDA). Article 17 DDA provides that entities subject to the DDA have the right to file an SAR with the FIU in such circumstances, but there is no requirement for them to do so.

Failure to Complete CDD after commencing the Business Relationship (c. 5.16):

386. When information and documents are not provided within 30 days, the relationship must be discontinued. The outflow of assets must be sufficiently documented and an SAR may be filed if there is a suspicion of a connection with money laundering, predicate offense of money laundering, organized crime or terrorist financing (Article 16.2 DDO; Article 16.1 DDA). Therefore, there is no requirement for financial institutions to consider making a suspicious activity report when unable to complete the CDD, although they may do so.

Existing Customers – CDD Requirements (c. 5.17):

387. The CDD requirements apply to all contracting parties and beneficial owners, including to all business relationships in existence on the date the DDA entered into force. Financial institutions must compile and keep updated a profile for each long-term business relationship (Article 14 DDA). Some financial institutions informed the assessors that they had to close a significant number of accounts in 2003 on the coming into force of the 2002 version of the DDA because the new CDD could not be completed satisfactorily.

Existing Anonymous-account Customers – CDD Requirements (c. 5.18):

388. In accordance with Article 12.4 DDA, banks and postal institutions are prohibited from maintaining accounts, passbooks, or deposits that are anonymous, payable to the bearer, or opened under a fictitious name. Bearer passbooks that existed before the prohibition should have been closed “without delay, as soon as the corresponding documents are submitted to the bank or the postal institution” (Article 40.4 DDA). During interviews, banks told the assessors that bearer passbooks are systematically converted into deposit accounts when clients show up at the counter and that some passbooks have not been presented yet.

Analysis of effectiveness

389. Customer identification requirements apply to clients when initiating a relationship and data must be updated and completed when necessary. These data are consolidated into individual customer profiles that financial institutions must establish and maintain to monitor customers and transactions. Financial institutions informed the assessors that customer profiles were an essential tool for transaction monitoring. In addition, some of the largest banks have defined customer acceptance policies.

390. Under the Liechtenstein approach, defining, limiting, and monitoring the higher-risk categories, as well as related enhanced due diligence, is left to a significant extent to the discretion of the financial institutions. The limited number of high-risk categories clearly defined in legal terms by the FMA does not include some of the most relevant risks in Liechtenstein (e.g., non-resident accounts, accounts opened through an intermediary, entities with bearer shares, and trusts and foundations).

391. In interviews with financial institutions, assessors were not made aware of any current difficulties in practice in obtaining or maintaining identification data. However, some counterparts informed the assessors that they had to close a number of accounts when the DDA was brought into force in 2002 as they were unable to complete CDD on all of the existing accounts. One of the issues that needed to be addressed at that time related to bearer passbooks. Banks confirmed that they convert bearer passbooks into deposit accounts, applying CDD requirements, once the holders of the passbooks come forward. The assessors were also informed that, where customers request numbered accounts, Liechtenstein banks apply the standard CDD measures.

392. Requirements for verification of customer identification data do not extend beyond the identification requirement based on obtaining “documentation with probative value”. No additional verification step is required in Liechtenstein and there is no guidance that refers, for example, to the use by financial institutions as appropriate of any of the verification methods listed in the Basel Committee’s General Guide to Account Opening and Customer identification. Financial institutions in Liechtenstein depend particularly on domestic and foreign intermediaries to bring in customers and convey to them identification information. Access to original identification documents for non-resident clients is limited for financial institutions in Lichtenstein that rely on certified copies that are largely provided by the intermediaries themselves. There is no general requirement that third parties who conduct the due diligence be based in countries that adequately apply the FATF Recommendations. With regard to clients, additional risks may come from the reliability of information provided by non-official foreign sources (“trustworthy privately-managed registers and databases”) or the client himself (e.g., information on deposited entities, in relation to which financial institutions do not have access to the records held in the Public Registry), or from the structure of legal entities (e.g., companies with bearer shares and nominee shareholders or trusts).

393. Some exceptions for client and beneficial owner identification exist and verification of authorized parties’ identity is not formally required by the DDA or the DDO. Financial institutions and external auditors informed the assessors that, at the inception of a business relationship, contracting parties are always requested in practice to identify beneficial owners. However, under the DDA, financial institutions may start from the assumption that the contracting party is the beneficial owner, with the important exception of trusts and foundations. Beneficial owner identification must be verified with the profile that provides the economic background and origin of the assets, but identification obligations do not expressly include persons holding control rights or interests, nor the natural person who is the ultimate beneficial owner. This falls short of the criterion that calls for an understanding of the ownership and control structure of the customer and a determination in all cases of the natural person that exercises the ultimate effective control. The assessors were not in a position to assess the depth and quality of the due diligence actually conducted for the identification of beneficial owners.

394. In summary, there is a need for the authorities to define more clearly and broadly the minimum set of activities to be treated as higher risks. Entities subject to due diligence should continue to be encouraged to define their own high-risk categories of business, which should at a minimum include all of the relevant categories defined by the authorities. There is also a need to define and require the implementation of enhanced due diligence measures. While the FMA has issued binding risk criteria, they do not unequivocally define any risk categories of customers or business relationships other than PEPs and enhanced due diligence is limited in the first instance to conducting “simple inquiries”. Defining, limiting, and monitoring the higher risks is left largely to the discretion of the financial institutions and there is currently no definition of, or formal requirement for enhanced due diligence.

Foreign PEPs – Requirement to Identify (c. 6.1):

395. Politically-exposed persons (PEPS) are not addressed in primary legislation in Liechtenstein but are defined in the Due Diligence Ordinance (Article 1(c) DDO) as:

• “1. persons holding prominent public positions abroad: heads of State and heads of government; high-level politicians; high-level officials in administrative bodies, the courts, the military, and political parties; the highest decision-makers in State-owned enterprises; and

• 2. enterprises and persons who are recognizably close to the persons listed in point 1 for family, personal, or business reasons.”

The definition does not include domestic PEPs.

396. The definition of PEPs as contained in the DDO does not depart materially from the scope of the definition in Recommendation 6, although the wording differs somewhat in that Recommendation 6 provides that “business relationships with family members or close associates” pose a risk, whereas the DDO refers to “enterprises and persons who are recognizably close” to PEPs.

397. In addition to the provisions set out above, the DDO contains a requirement for persons subject to due diligence to issue internal instructions on how to meet the obligations of the DDA and DDO, including the issuance of a business policy concerning politically-exposed persons and the use of a risk management system to determine whether or not a client is a politically-exposed person (Article 27. 2.i DDO). Article 19 DDO provides that, if the persons subject to due diligence do not use computerized systems as an aid in the assessment of business relationships, they shall ensure that other appropriate risk management systems are used to identify PEPs.

398. The authorities informed the assessors that financial institutions in Liechtenstein are aware of the reputational risk associated with PEPs and that the use of electronic systems to identify PEPs is the norm. This was confirmed during meetings with representatives of the financial institutions, all of which identified PEPs as one of the (few) high-risk categories of customer to which they applied enhanced due diligence in practice. Most of the financial institutions interviewed confirmed that they relied principally on well-known commercial databases as their information source, although at least one indicated that internet searches are also routinely conducted to supplement the information available from the database.

Foreign PEPs – Risk Management (c. 6.2; 6.2.1):

399. In setting out management responsibilities, Article 33.1.a DDO (original German version) provides that at least one member of the senior management shall decide on whether or not a business relationship with politically-exposed persons should be initiated in a specific case and decide on the continuation of such business relationships on an annual basis. The requirements do not address cases in which an existing client turns out to be or becomes a PEP.

Foreign PEPs – Requirement to Determine Source of Wealth and Funds (c. 6.3):

400. There are no specific requirements for entities subject to the DDA to establish the source of wealth and funds of customers and beneficial owners identified as PEPs. The general obligations under the DDA and DDO apply. Article 14 DDA provides for a general obligation to compile and keep an updated customer profile and Article 21 DDO provides that a profile has to be kept, establishing a client’s economic background, the origin of the assets presented, and the profession and business activities of the beneficial owner.

Foreign PEPs – Ongoing Monitoring (c. 6.4):

401. Business conducted with PEPs is subject to the overall risk-based provisions of the legislation and ordinance. There are no explicit requirements in Liechtenstein for enhanced due diligence for high-risk customers, including in the case of PEPs. The applicable requirements apply to customers in general and allow for discretion in applying risk-based measures. Article 13.2 DDA authorizes the FMA to issue binding risk criteria for the monitoring of business relationships in a guideline, which it did in the form of FMA Guideline 2005/1. The Guideline’s risk criteria include in paragraph 3(b) “business relationships with politically-exposed persons” (cross-referred to Article 1.c DDO). However, the guideline does not clarify the measures entities covered by the DDA have to take to adequately address this risk other than those provided for in Article 13.1 DDA, which requires entities subject to due diligence to monitor their expected long-term business relationships in a way adequate to the risks involved. The DDA does not provide for specific due diligence requirements in relation to PEPs, beyond carrying out simple inquiries when circumstances or transactions meet a risk criterion. Under Article 27.2.i DDO, the persons subject to due diligence must define a business policy for PEPs and a risk management system to determine whether or not a client is a PEP, but they have the discretion to put in place procedures they consider appropriate. Guidance has been issued by the FMA that requests the due diligence auditors to assess the risk monitoring systems in place. Assessors found a high level of awareness with regard to risks related to PEPs, and all financial institutions interviewed during the assessment confirmed that, in practice, they treat foreign PEPs as higher risk and apply due diligence that they consider appropriate to the risks.

Domestic PEPs – Requirements (Additional Element c. 6.5):

402. Under Liechtenstein law, the definition of PEPs does not include domestic PEPs.

Domestic PEPs - Ratification of the Merida Convention (Additional Element c. 6.6):

403. The authorities informed the assessors that, in December 2003, Liechtenstein signed the United Nations Convention against Corruption and that preparatory work for its ratification and full implementation is under way.

Analysis relating to PEPs

404. Based on past media reports and on the responses provided by some financial institutions interviewed in the course of the on-site visit, foreign PEP-related business is relevant in an assessment of Liechtenstein. The current requirements are not sufficient to fully meet the criteria of Recommendation 6. To a large extent, the CDD requirements for business relationships with PEPs are not sufficiently explicit but are covered by the risk-based approach adopted by Liechtenstein. Given the risks that have emerged for Liechtenstein in the past, an explicit requirement for enhanced due diligence is warranted in order to address more directly the risk associated with PEPs. As noted, the implementation of current requirements by financial institutions seems to be strong. All financial institutions interviewed confirmed that they regard it as mandatory to apply risk-control measures to foreign PEPs, in compliance with their internal AML/CFT procedures, and implement them in practice.

Cross Border Correspondent Accounts and Similar Relationships – introduction

405. Article 10 DDA provides that the Liechtenstein Government may by ordinance issue more stringent due diligence obligations than for customers in general for banks and postal institutions that carry out correspondent banking services for foreign banks and postal institutions. The relevant measures were issued in the DDO.

406. Financial institutions informed the assessors that correspondent banking services provided by Liechtenstein banks are limited. Only a few banks provide such services at a material level, the currency involved is Swiss Francs (CHF accounts), and the service is provided mainly to banks in neighboring jurisdictions.

Requirement to Obtain Information on Respondent Institution (c. 7.1):

407. Pursuant to Article 14 DDO, banks and postal institutions must obtain sufficient information on respondent institutions to obtain complete clarity on the main areas of business and the locations of their respondent institutions, as well as on how they are regulated and supervised. There is no explicit requirement to determine whether the respondent has been the subject of a money laundering or terrorist financing investigation or regulatory action.

Assessment of AML/CFT Controls in Respondent Institution (c. 7.2):

408. Pursuant to Article 14 DDO, banks and postal institutions must satisfy themselves that the respondent bank has taken adequate and efficient measures to prevent money laundering, organized crime, and the financing of terrorism.

Approval of Establishing Correspondent Relationships (c. 7.3):

409. A member of senior management must approve the initiation of correspondent banking relationships (Article 33.1 DDO – original German version).

Documentation of AML/CFT Responsibilities for Each Institution (c. 7.4):

410. Article 14.d DDO requires banks and postal institutions to document in the due diligence files the information obtained and the arrangements made pursuant to the implementation of the above mentioned measures, including obtained documents or records. However, the provision does not refer expressly to documenting the respective AML/CFT responsibilities of each institution.

Payable-Through Accounts (c. 7.5):

411. Article 14 DDO requires banks and postal institutions to pay special attention to the risk that a correspondent account might, under certain circumstances, be used directly by a third party for its own transactions (“payable-through accounts”). There is no specific requirement to ensure that, if such cases arise, the customer (respondent financial institution) has performed all the normal CDD requirements of Recommendation 5 and is able to provide relevant customer identification data upon request. In discussions with representatives of the financial institutions in Liechtenstein, the assessors were not provided with any indication of significant use in the Liechtenstein context of payable-through accounts. However, information was provided by banks that a small number of select customers in relation to funds business are granted direct access to correspondent accounts by means of limited power of attorney to allow them to place stock market orders outside Liechtenstein banking hours.

Analysis of correspondent accounts

412. The coverage of the DDA requirement for enhanced due diligence regarding the provision of correspondent banking services does not extend to all financial institutions. Despite its limited application to banks and postal institutions, it is likely in the case of Liechtenstein that all relevant institutions are covered. The assessors had no indication that, for example, securities businesses in Liechtenstein offer, or are in a position to offer, any services analogous to correspondent services to other financial services providers and the authorities indicated that there was no scope for such services to be offered from Liechtenstein.

Misuse of New Technology for ML/FT (c. 8.1):

413. There is no specific requirement in Liechtenstein to address the risk of misuse of new technologies in the financial services area from an AML/CFT perspective (including, for example, in relation to internet banking). The E-Money Act regulating the activities of e-money institutions includes some provisions that contribute to limiting risks associated with the use of new technologies, by restricting, for example, the value of e-money instruments to a maximum of CHF3,000 (Article 10.1 E-Money Act). Pursuant to Article 9g of the E-Money Act, relevant provisions of the BA are applicable to providers of e-money services, including the application by the FMA of fit and proper criteria. The authorities also referred to the enactment of the E-Signature Act which contributes to providing a secure basis for the conduct of electronic business. In the absence of any specific measures to address more broadly the risks of new technology, the overall requirement set out in Article 13.2 DDA applies, requiring persons subject to due diligence to establish criteria indicating higher risks and to issue internal instructions on how such risks are to be limited and monitored.

414. Financial institutions informed the assessors that only limited (and in some cases no) services are available over the internet or through the use of new technologies. The assessors did not encounter any case where it was possible to open a business relationship with a Liechtenstein financial institution over the internet. Some banks allow existing customers to conduct limited transactions via internet, while others allow only balance enquiries or access to non-account specific information. However, even if not material at the direct customer level, technology is key for many of the customer-related financial operations of Liechtenstein financial institutions. Technology is particularly important in supporting the area of business conducted with or through intermediaries and in financial market transactions. The general provisions for higher risks should be applied by financial institutions which, pursuant to Article 13.2 DDA, should classify such activities as higher risks and define procedures to limit and monitor them. While there was no indication that there are particular vulnerabilities in the current systems, financial institutions should nonetheless be under a more explicit requirement to address the risks involved.

Risk of Non-Face to Face Business Relationships (c. 8.2 & 8.2.1):

415. According to Article 3.2 DDO, the identification data and proof of identity requirements for establishing a business relationship by way of correspondence are similar to those for personal contact, except that identification documentation can be either the original or a notarized copy and the information must be confirmed by signature or by a secure electronic signature of a representative of the legal person, in accordance with the E-Signature Act (Article 18 DDO). A written statement identifying the beneficial owner is required from the contracting party when the business relationship is initiated with a natural person by correspondence (Article 7.2.b. DDA).

416. Pursuant to Article 18.1 DDA, financial institutions may deal with customers through intermediaries, who, applying Liechtenstein CDD provisions, collect and transfer all information necessary for the creation of the customer profile, and provide certified copies of identification documents with probative value. Intermediaries may also conduct ongoing due diligence, which should not be delegated according to FATF Recommendation 9. Intermediary business is not treated as high-risk, as such, in Liechtenstein, but is subject to the overall risk-based approach.

417. There are no legal or regulatory requirements for other types of non-face to face transactions, and no express requirement, other than Article 3.2 DDO, for financial institutions to have policies and procedures in place to reflect the additional risks involved in non-face to face business relationships or transactions.

Analysis for non-face to face business

418. Financial institutions informed the assessors that some financial business continues to be conducted directly with clients by means of correspondence, in which cases the requirements of the DDA and DDO apply. In addition, a substantial proportion of the business of Liechtenstein financial institutions—including the creation of new customer relationships—is conducted without ever having face to face contact with the customer. On this basis, the provisions of Recommendation 8 are material to Liechtenstein and need to be reflected more clearly and firmly in the requirements. However, as the risks relate also specifically to the scope of Recommendations 5 and 9, they are analyzed in more depth in those sections.

Analysis of Effectiveness

429. Financial institutions in Liechtenstein rely to a great extent on business introduced by banks or intermediaries abroad, particularly from Switzerland and EU member states. In this regard, a number of business models were described by financial institutions to the assessors. A common approach, for example, is for Swiss or U.K. banks or lawyers to market to their clients products unique to Liechtenstein (deposited foundations) or on which Liechtenstein has a tax-based or other competitive advantage (for example, in private banking or private insurance). A Liechtenstein financial institution may rely on a foreign intermediary to deal with such business. Documents and information must be obtained and prepared in accordance with the DDA and DDO provisions and must be transferred immediately to Liechtenstein. In particular, the foreign intermediary collects and provides to the Liechtenstein financial institution the information necessary for the creation of the customer profile as required under the DDA, as well as providing a certified copy of an identification document with probative value. Financial institutions informed the assessors that these arrangements work well in practice and it is rare at this stage to encounter delays or deficiencies in the work of the intermediaries, as they are well versed in the Liechtenstein requirements. Should any of the information be unclear or missing, the Liechtenstein financial institution will request clarification and, if necessary, the intermediary will revert to its customer to obtain the necessary supplementary information. The customer information supplied does not appear to be particularly detailed but, significantly and as required by the DDA, it includes information on the beneficial owner and the source of funds. Financial institutions emphasized to the assessors that they check the information provided by the information for plausibility prior to adding it to their customer profile and accepting the customer and his business. They also confirmed that they accept responsibility for the information placed in the customer profile and do not consider this responsibility delegated to the intermediary.

430. A number of factors suggest that business obtained through intermediaries in this manner might warrant an increased level of due diligence, including the typical absence of any face-to-face contact with the customer, the likelihood that the customer is already and will remain a customer of the intermediary, which might prefer to limit for commercial reasons the information access of the Liechtenstein financial institution to customer information. However, cross-border intermediary business is not treated as high-risk, as such, in Liechtenstein, but is subject as is all other financial business to the overall risk-based approach. As noted, the information that the delegate is required to provide is broadly in line with the provisions of Recommendations 5.3 to 5.6. However, according to FATF Recommendation 9, it is not acceptable to delegate to third parties the performance of ongoing due diligence.

Criminal Prosecution

- Communication of information, documents and materials

433. Banks and finance companies may be required through court order to communicate customer information to the authorities to the extent it appears necessary for solving a case of money laundering within the meaning of the Criminal Code, a predicate offense of money laundering, or an offense in connection with organized crime (Article 98a, StPO). This provision applies only to banks and finance companies, which may be requested to provide:

• the name, other data, and the address of the holder of a business relationship;

• information on whether a suspect maintains a business relationship with them, is a beneficial owner or authorized person of such a business relationship, all information necessary to precisely determine this business relationship, and all documents concerning the identity of the holder of the business relationship and his powers of disposal; and

• all documents and other materials concerning the type and scope of the business relationship and associated business processes and other business incidents in a specific past or future time period.

434. Similar provisions apply to FT under Article 20b StGB.

435. In all cases, the information must be required by a court order. The bank or the finance company must maintain secrecy with respect to all facts and processes associated with the court order vis-à-vis its clients and third parties. If the bank or the finance company refuses to provide certain documents or other materials or does not want to divulge certain information, then legal provisions for seizure under Article 96 StPO would apply.

436. Information relevant to AML/CFT that is tax-related would not be made available—as mentioned in Section 2.1.1 fiscal offenses, including serious and organized fiscal fraud, are not predicate offenses for money laundering.²⁵

Duty of witness

437. Generally, everybody who is summoned as a witness to court is compelled to testify in relation to the pending case (Article 105 StPO). Lawyers, law agents, auditors, and patent lawyers do not have to provide evidence concerning issues that a client has entrusted to them (Article 107 StPO).

FIU

438. Banking secrecy may indirectly impact on information access by the FIU. The FIU is authorized to request information either directly from a reporting financial institution or through the FMA under certain conditions (as described under Section 2.5.1). However, there is no provision in law that expressly provides for either a direct or indirect right of access of the FIU, through the FMA, to financial and other relevant information held by persons subject to the DDA (other than in the case of the entity filing a SAR).

Supervision

- Authorities’ access to information

439. The FMA, which is responsible for supervising DDA implementation (Article 23 DDA), may demand all information and records which are necessary to perform its supervisory functions (Article 28.3 DDA). It has the power to fine anyone who refuses to give information, makes incorrect statements, or withholds significant facts vis-à-vis the FMA, an auditor, auditing company or office subject to special legislation (Article 31 DDA).

- Information-sharing with national authorities

440. The Liechtenstein authorities responsible for combating money laundering, organized crime, and terrorism financing may freely exchange all information and records necessary for the enforcement of the DDA (Article 36 DDA).

- Information-sharing with foreign authorities

Administrative assistance

441. Article 37 DDA defines conditions for cooperation with foreign authorities that apply for AML/CFT matters with the exception of activities (banking, insurance, investment, asset management) which are regulated by special regulations. Only the AMA directly authorizes exchange of information with supervisors based in an EU country (Article 53) and with supervisors based in a third country (Article 57), subject to the conclusion of cooperation agreements. The BA (Article 36), the ISA (Article 61), and the IUA (Article 102) contain provisions that prohibit information sharing with foreign supervisors if secrecy obligations stated in these laws are thereby violated. However, the authorities pointed out Superior Court decisions which constitute a consistent jurisprudence that allows information exchange related to customer information, including on beneficial ownership, and, it appears, also applies to information on transactions:

• Decision VBI 2003/33 of the Supreme Administrative Court: the FMA may upon request share information on customer identification with foreign financial supervisors subject to a number of conditions, of which the following are particularly significant:

  • - The information has to be used exclusively for supervisory purposes (termed ‘specialty’), though this term is considered by the FMA to encompass AML/CFT-relevant information requested under appropriate authority by a foreign supervisory agency;

  • - Confidentiality: the receiving authority must be covered by official secrecy provisions; and

  • - The FMA must retain control over the subsequent use and any further dissemination of the information (termed ‘the long arm’ principle).

  The request must also be reasonable and “fishing expeditions” would not be permitted. Where information is shared, it may be used with the FMA’s consent for sanctioning purposes and in court proceedings. However, in relation to criminal proceedings, Article 36 BA may not be used to circumnavigate the principle of dual criminality²⁶ and the mutual legal assistance procedures have to be conformed with.

• Another relevant decision (VBI 2003/1) deals with transfer of information related to a specific securities transaction (contracting partner, beneficial owner, and stock sale date and price); although the request was based on Article 8a BA (securities-related services), and 35 BA (FMA responsibilities), the Court based its decision on Article 36.3a BA which states that the FMA can exchange information with domestic and foreign institutions entrusted by law or public mandate to monitor financial institutions to the extent that they need this information to fulfill their duties; although no explicit reference to transactional information is made in the Court decision, it is considered that all information can be shared;

• A further decision (VBI 2005/003) addresses the issue of exchange of customer-related information; the Court found that beneficial ownership information may be provided to foreign authorities as part of customer-related information.

442. However, it is noted that the Courts’ decisions reference the provisions of the BA and not other special legislation for financial institutions or, specifically, the DDA, so that their application to the full range of possible AML/CFT-related requests remain open to some degree of legal question. A proposal to amend the BA is currently before parliament, including the deletion of the current references to banking secrecy acting as a barrier to the sharing of information with foreign supervisors; the assessors are not aware of any proposal to similarly amend the other sectoral laws or the DDA.

443. Insofar as the requested information would include customer data, the Administrative Proceedings Law applies. In this regard, an order must be issued by the FMA requiring the financial institution to provide the requested information. The order may be appealed by the financial institution—and by the customer directly if he elects to do so—to the Superior Court. A concern is that this appeals process could be used to delay and, potentially, undermine the information-sharing procedure.

444. In practice, however, the FMA has made constructive use of the legal precedent created by the available jurisprudence and has established a reputation (confirmed in some instances by the assessors in contacts with supervisors abroad) for a high level of cooperation and efficient implementation in response to information requests received from foreign supervisors, including in the AML/CFT area.

445. The FMA may also request foreign authorities to provide it with information or records in accordance with the purpose of the DDA (Article 37.2 DDA). Information received may only be used to verify compliance with CDD, impose sanctions, or appeal decisions in administrative or judicial proceedings (Article 37.5 DDA).

Legal assistance (see section 6.3)

446. A Court, the Office of the Public Prosecutor, or an authority active in sentence and measure enforcement may order that legal assistance be granted at the request of a foreign authority. Legal assistance covers every kind of support granted for foreign proceedings in criminal matters (Article 50 RHG).

447. Exceptions to granting legal assistance include cases where the act underlying the request is either not sanctioned with legal punishment under Liechtenstein law or not subject to extradition (Article 51 RHG). Acts not subject to extradition include notably violations of provisions relating exclusively to taxes, monopolies, customs, foreign currencies, or controlled movement of goods, or to foreign trade under Liechtenstein law (Article 15 RHG).²⁷

Information sharing between financial institutions

448. There is no specific provision exempting financial institutions from bank secrecy requirements to permit them to share information when establishing or carrying on business relationships with respondent banks and intermediaries. However, Article 10 DDA gives the government power to define due diligence obligations in correspondent banking which it did through Article 14 DDO. Article 11 DDA requires banks and postal institutions to provide sufficient originator information for electronic payment orders. However, they can avoid doing so for a “legitimate reason” (Article 15.2 DDO), for example for standing orders. The assessors found that at least one bank was interpreting “legitimate reason” to include customer requests not to reveal their identity. This issue is discussed in detail under SR.VII. It was evident to the assessors that Liechtenstein financial institutions take the concept of bank secrecy very seriously and take strong measures to protect the anonymity of their clients.

Analysis – record keeping

455. Financial institutions interviewed by the assessors confirmed that all records are maintained as required by law for at least the time periods specified in the law and in many cases longer. Neither the authorities nor the external auditors identified to the assessors any difficulties in obtaining the records of financial institutions in a timely manner. All records are required to be maintained within Liechtenstein, though not necessarily in a single due diligence file nor in a single location, but they must be capable of being assembled within a reasonable time.

Obtain Originator Information for Wire Transfers (applying c. 5.2 & 5.3 in R.5, c.VII.1):

456. According to Article 5 DDA, financial institutions must identify their contracting party. This requirement is waived for wire transfers, being occasional transfers, that do not exceed CHF5,000²⁸ (Article 6.1.b DDA). However, under SR.VII.1, customer information should be collected for all transfers above the threshold EUR/USD1,000.

Inclusion of Originator Information in Cross-Border Wire Transfers (c. VII.2):

457. Article 15.1 DDO requests banks and postal institutions to provide the name, account number, and domicile, or the name and an identification number of the originator of an international wire transfer. This second alternative, as provided for by the DDO, is not one of the options acceptable under SR.VII.

458. Banks and postal institutions may avoid giving originator information for a “legitimate reason” (Article 15.2 DDO). The example given by the DDO as a legitimate reason is standing orders. Banks are required to clarify and document the reasons for not providing identification information with the wire transfer. In discussions with the assessors, banks identified a customer request as a potential legitimate reason for not transmitting any customer information. In sending wire transfers without originator information, banks are aware that they run the risk of rejection of the transaction by the recipient bank, as sometimes happens. The assessors were not able to establish the frequency with which Liechtenstein banks withhold originator information when transmitting wire transfers.

Inclusion of Originator Information in Domestic Wire Transfers (c. VII.3):

459. No due diligence is expressly required for domestic wire transfers. Moreover, such domestic transfers are defined in Liechtenstein to include transactions with Switzerland. The assessors had difficulty in clarifying whether the Liechtenstein banks make a distinction in practice between domestic (including Switzerland) and foreign transfers. In either case, under Article 15.2 DDO, banks and postal institutions may refrain from providing customer information for “legitimate” reasons, as described above.

Maintenance of Originator Information (c. VII.4):

460. There is no provision requiring each intermediary and beneficiary financial institution in the payment chain to ensure that all originator information accompanies and is transmitted with the transfer.

Risk-Based Procedures for Transfers not accompanied by Originator Information (c. VII.5):

461. There is no requirement for beneficiary financial institutions to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete identifier information.

Monitoring of Implementation of SR.VII (c. VII.6)

462. Liechtenstein has not put in place measures to monitor effectively compliance of financial institutions with rules and regulations implementing SR.VII. One option would be for compliance with wire transfer requirements to be subject to checking by FMA-mandated auditors when conducting annual due diligence inspections.

Sanctions (applying c. 17.1–17.4 in R.17, c. VII.9):

463. No specific sanctions have been defined with regard to the provisions implementing SR.VII

Inclusion of Originator Information in Incoming Cross-border Wire Transfers (c.VII.8)

464. Liechtenstein has not required that all incoming cross-border wire transfers (including those below EUR/USD1,000) contain full and accurate originator information.

Inclusion of Originator Information in Outgoing Cross-border Wire Transfers (c. VII.9)

465. Liechtenstein has not required that all outgoing cross-border wire transfers (including those below EUR/USD1,000) contain full and accurate originator information.

466. The authorities indicated to the assessors that EC Regulation 1781/2006 on information on the payer accompanying transfers of funds is likely to be adopted into the EEA Agreement and will be applicable in Liechtenstein in due course to provide an EU-defined solution to improve the current weak system.

Analysis – complex and unusual transactions

477. Although the system established by Liechtenstein provides a practical application of a risk-based approach, it does not reflect with sufficient precision the relevant FATF requirements. While the overall approach is mandatory for entities subject to the DDA, the manner of implementation appears to provide excessive discretion in determining high-risk categories. There appears to be an inconsistency in referring on the one hand in the DDA to binding-risk criteria to be defined in a guideline and inclusion of many of the selected criteria as a list of indicators in an annex to FMA Guideline 2005/1, preceded by the following text:

“The purpose of the indicators of possible money laundering listed below is to raise awareness among entities subject to due diligence. They apply to expected long-term business relationships as well as to expected short-term business relationships. In themselves, however, the individual indicators do not constitute sufficient grounds for suspicion to trigger the reporting obligation; they are, however, grounds for conducting background inquiries as specified in Article 15 DDA. Above all, however, the list of indicators is not in any way exhaustive and also needs to be continually adapted to changed circumstances and new methods of money laundering. It should be used as an aid and not become the basis of routine actions to the exclusion of basic common sense.”

478. In the view of the assessors, full compliance with Recommendation 11 would require firmer requirements and a more explicit reflection of the terminology of its criteria. In response, the authorities pointed out that, where an indicator from the list in the annex to FMA Guideline 2005/1 is met, although it is not automatically necessary to file an SAR, it is required to conduct enquiries into the transaction or activity (at least simple enquiries) pursuant to Article 15 DDA. In so doing, institutions pay additional attention to transactions that are unusual in reference to the client profile. In this way, there is a measure of practical implementation relevant to complex, unusual large transactions, despite the fact that the laws and regulations do not explicitly address some of the measures called for by Recommendation 11.

Special Attention to Countries Not Sufficiently Applying FATF Recommendations (c. 21.1 & 21.1.1):

479. FMA Guideline 2005/1 provides for binding-risk criteria, some of which are presented only in the form of indicators for money laundering listed in an annex. Indicator A20 refers to large and/or frequent transfers to or from drug-producing countries or from countries listed as noncooperative countries and territories (NCCT)–of which none was still listed by the FATF at the time of the assessment visit.

480. The scope of this requirement, which is limited to drug-producing countries and NCCTs and to large or frequent transfers,³⁰ falls short of the criteria of Recommendation 21. There is no specific reference in the Liechtenstein requirements to the need for additional measures for countries that do not or insufficiently apply the FATF Recommendations. However, most financial institutions interviewed during the assessment indicated that country of origin was an important risk criterion in their customer acceptance policies and in agreeing to conduct transactions. Each had developed a list of high-risk countries to be avoided or (more commonly) that warranted additional risk mitigation measures and due diligence.

481. The FMA indicated that financial institutions are informed that FATF and FSRBs assessment reports are available to assist in identifying countries with weak AML/CFT measures. The FMA website provides the lists of names issued by some countries or international organizations. It is not clear that this is sufficient to meet the criteria of Recommendation 21, which calls for effective measures to be in place to ensure that financial institutions are advised of countries that do not or insufficiently apply the FATF Recommendations (see also Section 3.3.1).

Examinations of Transactions with no Apparent Economic or Visible Lawful Purpose from Countries Not Sufficiently Applying FATF Recommendations (c. 21.2):

482. Large and/or frequent transfers to or from drug-producing countries or from countries listed as NCCTs are an indicator for money laundering in the context of the binding risk criteria set out in the annex to FMA Guideline 2005/1. Simple inquiries must be conducted when circumstances or transactions meet a risk criterion (Article 15.1 DDA) and special inquiries are initiated only when suspicions of a connection with an ML/FT offense arise (Article 15.2 DDA). Records, documents, and receipts of inquiries are to be kept in due diligence files (DDO, Article 25, paragraph 1c).

483. However, there are no specific measures in place to address transactions with persons from countries that do not or inadequately apply the FATF Recommendations and that have no apparent economic or visible lawful purpose. While it is not required expressly that the background and purpose of such transactions should be examined and written findings made available to assist competent authorities (e.g., supervisors, law enforcement agencies, and the FIU) and auditors, Liechtenstein’s requirement for the maintenance of due diligence files fulfils a similar purpose and it is accepted that the general CDD requirements are applicable. However, there is no explicit requirement for enhanced due diligence and the scope of the current requirements is limited to drug-producing countries and NCCTs and to large or frequent transfers and only simple inquiries are required in the event that unusual activity is noted.

Ability to Apply Counter Measures with Regard to Countries Not Sufficiently Applying FATF Recommendations (c. 21.3):

484. No legal basis in Liechtenstein for applying counter-measures have been identified to the assessors, although the authorities indicated that they are in a position to apply such counter-measures when appropriate. They have done so in practice in the past, the last occurrence being in 2003.

Analysis of SAR reporting

492. The basis for forming a suspicion is more complicated than appears necessary. Article 15 DDA requires the conducting of simple inquiries in the event of circumstances or transactions that deviate from a customer’s expected behavior based in his profile, and then the conducting of special inquiries in the event of suspicions. This article is cross-referenced from Article 16 DDA dealing with the SAR reporting requirement but could be read as conflicting with the obligation to report SARs immediately. It is difficult to identify the value in practice of the distinction between simple and special enquiries and there would appear to be a potential that the double process could delay the submission of SARs to the FIU.

493. Liechtenstein has opted to apply the subjective standard of “suspicion” rather than an objective test based on having reasonable grounds to suspect. The reporting obligation under Article 16 DDA includes the financing of terrorism, but has not been extended to explicitly include funds that are linked or related to, or to be used for terrorism, terrorist acts, or by terrorist organizations, in addition to those who finance terrorism.

494. Reporting to the FIU should be mandatory in case of suspicions relating to attempted occasional transactions and whether or not a business relationship is established.

495. There are conflicting indications as to whether the SAR reporting system is operating effectively in Liechtenstein. As discussed under Recommendation 26, the number of SARs reported annually to the FIU appears low by comparison with the size and complexity of the Liechtenstein financial system and its level of dependence on international non-face to face business.

Suspicious Activity Reports (Statistics)

Suspicious Activity Reports (Statistics)

	2003	2004	2005	2006
Received by the FIU
Suspicious activity reports total	172	234	193	163
Suspicious activity reports DDA 16/1 or 9/2	143	217	173	129
Suspicious activity reports DDA 16/1 (terrorism)	0	0	1	2
Suspicious activity reports (special ordinances)	1	0	0	1
Suspicious activity reports DDA 17/1 or 9a	28	17	19	29
SARs by sector
Banks	82	133	105	84
Professional trustees	82	89	74	65
Lawyers	5	9	8	9
Insurers	2	2	1	0
Postal Service	1	1	1	1
Investment undertakings	-	-	-	1
Authorities/FMA	-	-	4	3
Reason/trigger for submission of a SAR
Internal compliance	124	123	101	109
Domestic proceedings	14	56	36	14
Mutual legal assistance proceedings	34	55	56	40
SARs forwarded to the prosecution authorities
Forwarded	123	185	139	113
Not forwarded	49	49	54	50

View Table

Suspicious Activity Reports (Statistics)

	2003	2004	2005	2006
Received by the FIU
Suspicious activity reports total	172	234	193	163
Suspicious activity reports DDA 16/1 or 9/2	143	217	173	129
Suspicious activity reports DDA 16/1 (terrorism)	0	0	1	2
Suspicious activity reports (special ordinances)	1	0	0	1
Suspicious activity reports DDA 17/1 or 9a	28	17	19	29
SARs by sector
Banks	82	133	105	84
Professional trustees	82	89	74	65
Lawyers	5	9	8	9
Insurers	2	2	1	0
Postal Service	1	1	1	1
Investment undertakings	-	-	-	1
Authorities/FMA	-	-	4	3
Reason/trigger for submission of a SAR
Internal compliance	124	123	101	109
Domestic proceedings	14	56	36	14
Mutual legal assistance proceedings	34	55	56	40
SARs forwarded to the prosecution authorities
Forwarded	123	185	139	113
Not forwarded	49	49	54	50

496. In terms of the volume of SARs, the recent statistical trend has begun to turn downward. On the other hand, the analysis of Recommendation 26 concludes that the SARs received are of a high quality. An explanatory factor is the practice of the FIU to expand its so-called evaluation talks. These talks allow financial intermediaries to contact the FIU at as early a stage as possible and to receive support when deciding whether to submit SARs. The authorities report that this has led to a significant improvement in the quality of the SARs. It is, however, a practice for which Recommendation 13 does not provide a basis, and it could potentially result in the later submission of SARs to the FIU and to lowering the numbers of reports. If that is the case, it is also difficult to reconcile the practice with the requirements of Article 16, DDA which requires, in the first instance, immediate reporting of suspicions. The issue also has to be balanced with the importance of dialogue between reporting institutions and the FIU in improving the quality of reporting and, thereby, the effectiveness of the system.

Protection for Making STRs (c. 14.1):

497. Pursuant to Article 16.3 DDA, if a person has submitted a SAR to the FIU and the report turns out to have been unjustified, such person shall be free of any liability under civil or criminal law, unless the person was acting willfully in filing a false report (the English translation of this provision is open to alternative interpretations, but the assessors were satisfied that the intention of the German original text was to exclude reporting in bad faith from protection). Under Article 16.3, in order to claim compensation for damages or take any other legal action regarding a SAR filed concerning them, a person would have to demonstrate that the reporting institution or its staff member willfully filed a false report, with the burden of proof resting with the claimant. The law provides broad protection but does not specifically reflect all of the details of the criteria of Recommendation 14 in that it does not expressly refer to protection for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory, or administrative provision or to protection being available even if the underlying criminal activity was not known precisely and regardless of whether illegal activity actually occurred. Neither does it explicitly provide protection for directors, officers and employees (permanent and temporary) of the reporting entity, referring only to the person subject to obligations of the DDA. The authorities explained that SARs are usually signed by an officer of the reporting institution expressly on its behalf, so the protection of Article 16.3 would be available both to the individual who signed and to the reporting legal entity. However, the provision is not sufficiently wide to protect any other officer or employee of the reporting institution who had some involvement with the report but did not sign it.

Prohibition Against Tipping-Off (c. 14.2):

498. Under Article 16.5 DDA, financial intermediaries may not inform the contracting party, the beneficial owner, or third parties that they have submitted a report to the FIU until an order from the competent prosecution authority arrives, but at most until the conclusion of 20 business days from receipt of the report by the FIU. At the time of the 2002 OFC assessment of Liechtenstein, the tipping off prohibition had a lifespan of just 10 days and a strong recommendation was made by the IMF assessors to remove the time limit completely in line with the FATF Recommendations. Liechtenstein responded by extending the tipping off prohibition to 20 days, so the situation remains clearly noncompliant with the FATF standard. The prohibition on tipping-off is also not explicitly extended to directors, officers and employees (permanent and temporary) of the reporting entity, referring only to the person subject to obligations of the DDA. In response to a separate recommendation of the 2002 OFC Assessment, the authorities criminalized tipping-off, as defined in the DDA, in the course of the 2005 revision of the DDA (Article 30.1(k) DDA).

Additional Element – Confidentiality of Reporting Staff (c. 14.3):

499. Liechtenstein laws, regulations, or any other measures make no reference to ensuring that the names and personal details of staff of financial institutions that make a SAR are kept confidential by the FIU. However, the authorities informed the assessors that when the FIU conducts evaluation talks with the financial intermediaries, the relevant personal data remains with the FIU.

Analysis – protection on reporting SARs

500. While Article 16.3 DDA provides for protection for reporting SARs in good faith, the provision could be drafted with greater clarity, and the protection does not specifically extend to directors, officers, and employees other than those who had a direct role in submitting the SAR. Nonetheless, the assessors acknowledged that the available protection is strongly based and broadly meets criterion 14.1. As regards criterion 14.2, there is no basis in the FATF Recommendations for a time limit on the tipping-off prohibition. This is a significant issue of noncompliance on which the Liechtenstein authorities already received recommendations from previous IMF and MONEYVAL assessments, which have been only partially implemented. The rating of the assessors is, therefore, a composite based on a strong implementation of one of the two essential criteria and a partial implementation in relation to the second.³¹

Consideration of Reporting of Currency Transactions Above a Threshold (c. 19.1):

501. Liechtenstein opted not to implement a system of reporting to the FIU of all cash transactions above a fixed threshold. The authorities provided the assessors in writing with relevant background information concerning the decision in 2000 to focus on reporting of suspicious transactions. The Liechtenstein officials involved at that time found that, in the specific case of the Liechtenstein financial centre, a threshold-based reporting system would very probably work ineffectively, due to the fact that most transactions are operated through Switzerland. They concluded that the Liechtenstein financial center had to implement a reporting system equivalent to Switzerland, due to the very close relations and cooperation with the Swiss financial centre. There was a concern at the time that a threshold-based system could possibly obstruct the homogeneous subjective reporting system. After due consideration, therefore, the Parliament decided to enact the current legislation which focuses on the reporting of suspicious transactions.

Additional Elements- Computerized Database for Currency Transactions Above a Threshold and Access by Competent Authorities (c. 19.2) and Proper Use of Reports of Currency Transactions Above a Threshold (c. 19.3):

502. Liechtenstein opted not to introduce a threshold-based reporting system.

Guidelines for Financial Institutions with respect to SAR and other reporting (c. 25.1)

503. No specific written guidelines, as such, have been issued on reporting to the FIU, in line with the provisions of Recommendation 25. Some relevant material, including examples of typologies, is contained in the annual reports issued by the FIU and in newsletters which were distributed to the reporting entities by the predecessor to the current FIU. The FIU also regularly provides training to the staff of reporting institutions, including on SAR reporting. Reporting entities also take advantage of the opportunity offered by the FIU for pre-submission consultations on possible cases of suspicious transactions, which provides a form of guidance (though not actually guidelines) to assist the reporting entity to decide whether to file a SAR.

Feedback to Financial Institutions with respect to SAR and other reporting (c. 25.2):

504. Feedback is provided by the FIU in several ways:

• FIU annual reports;

• Training courses;

• Bilateral evaluation talks with financial intermediaries;

• FIU briefings on SARs; and

• Feedback letter informing the financial intermediary that filed the SAR whether or not the SAR has been transmitted to the prosecution authorities.

In meetings with the assessors, a number of the reporting entities expressed satisfaction with the nature and level of guidance and feedback they receive from the FIU.