Liechtenstein vulnerable to money-laundering: IMF

Liechtenstein remains vulnerable to money-laundering despite efforts by authorities to tighten regulations, International Monetary Fund and Council of Europe experts said Wednesday.

The tiny Alpine principality, currently at the heart of an international tax evasion scandal, offers "discreet and flexible legal structures, strict bank secrecy and favourable tax arrangements," the IMF said in a report.

Around 90 percent of Liechtenstein's financial services business is provided to non-residents, it noted.

"By it's nature, Liechtenstein's financial sector business creates a particular money laundering risk," the IMF said.

The opaque and complex structure of the financial sector makes it very difficult to identify asset holders and thus "Liechtenstein is vulnerable, mainly in the layering phase of money laundering," the report said.

Liechtenstein recorded 616 economic crimes in 2006, more than half of the total 1,189 recorded crimes in the principality that year.

The IMF did not find any particular vulnerability to terrorist financing although it urged Liechtenstein to bring its legal definition of terrorism finance fully into line with international norms.

The Council of Europe's MONEYVAL committee (which monitors money-laundering and the financing of terrorism) also released its evaluation report Wednesday.

It concurred that Liechtenstein law makes it easier for money-laundering.

"The legal provisions may give excessive discretion to financial institutions when applying (Liechtenstein's) risk-based system," the authors said of client profiling regulations.

"Liechtenstein cannot provide mutual legal assistance relating to facts that are exclusively qualified as fiscal offences under Liechtenstein law.

"Serious organised fiscal fraud should be removed from the fiscal exemption," it concluded.

With just two prosecutions in Liechtenstein for money-laundering and no convictions, the practice of handing investigations over to foreign states where persons or organisations are registered also means Liechtenstein's judiciary lacks experience, the report said.

Liechtenstein's prime minister welcomed the IMF report and said it showed the correct policies were in place to avert abuses.

The IMF report "shows that we are on the right track with our reforms," Otmar Hasler told a press conference here.

"We have followed this path in a coherent manner so far and will continue to do so," he pledged.

Vaduz has been under scrutiny in recent weeks after Germany began investigating 600 of its citizens featuring on a client list of a Liechtenstein bank containing 1,400 names which it then made available to other nations.

The United States, Britain, Australia, Italy, France, Sweden, Canada, New Zealand, Greece and Spain have all said they too are hunting for taxpayers hiding their money in the tiny Alpine state.

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