With the OECD's Harmful Tax Forum and the Financial Action Task Force (FATF) both due to meet in the latter part of June, Liechtenstein, along with other offshore jurisdictions that were blacklisted last year, are busy burnishing their anti-money laundering credentials in the hope, if not the expectation, of being removed from the lists.
Liechtenstein's latest ploy is the establishment of an 'Institute for Compliance and Quality Management' (ICQM) which will concentrate on teaching local professionals how to identify suspicious customers and transactions. The idea is the brainchild of Prince Philipp, brother of the ruling Prince Hans-Adam II von und zu Liechtenstein, and chairman of LGT Group, the banking conglomerate owned by the royal family which which controls more than a third of Liechtenstein's managed assets.
The Liechtenstein Global Trust (LGT) Bank, the principality's largest bank, reported record results for the year 2000 with an increase in net profits of 18 per cent to SFr206m while cash flow expanded by 18.3 per cent to SFr330.5m. Client assets under administration however increased only slightly by 1.2 per cent to SFr48.3bn. Thomas Piske, CEO of the LGT Bank in Vaduz, said that the relatively small increase in assets under management was down to the intense scrutiny the principality has come under in recent months. He commented: 'The difficulties around Liechtenstein as a location for financial services have certainly not had a positive effect on business development. Furthermore, the lack of QI (Qualified Intermediary) status had an essential influence upon the slight increase in customers' assets.'
LGT sees the new institute as a symbol of Liechtenstein's determination to clean up its reputation. Prince Philipp has assembled an impressive team for the project, whose directors include Brian Bruh, a long-serving US anti-money laundering official, and Ray Kendall, honorary secretary-general of Interpol. KPMG, the international accounting firm, has had up to 10 people working on the project for the past five months.
Other measures taken by Liechtenstein to smarten up its anti-money laundering credentials over the past few months include the installation of KYC (Know Your Customer) rules for banks and their intermediaries, and improvements in mutual assistance treaties. The country also agreed intensified collaboration procedures with the law enforcement agencies of Italy, Switzerland, France, Germany, Austria and Liechtensten at a meeting in Sicily last March.
Despite all this activity, the FATF's next review, to be published July 31, may well leave Liechtenstein on the list. The Bush administration's reluctance to back the OECD initiative has not reduced the commitment by other industrial nations to keep wealthy citizens, corrupt politicians and international criminals from sheltering their money offshore, and many officials think that Liechtenstein has just been window-dressing without fundamentally changing its regime.
'The choice for Liechtenstein is, does it want to become a viable financial services center that does not have to rely on money laundering and not have to rely on tax evasion,' said Jeffrey Owens, head of fiscal affairs for the OECD. Countries that choose otherwise 'will be on the list and subject to defensive measures.'
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