IMF: Liechtenstein Vulnerable To Money-laundering-AFP

VADUZ, Liechtenstein (AFP)-- Liechtenstein remains vulnerable to money-laundering despite efforts by authorities to tighten regulations, theInternational Monetary Fund said Wednesday.

The tiny Alpine principality, currently at the heart of an international taxevasion scandal, offers "discrete and flexible legal structures, strict banksecrecy and favorable tax arrangements," the IMF said in a report.

Around 90% of Liechtenstein's financial services business is provided tononresidents, it noted.

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

The opaque and complex structure of the financial sector makes it verydifficult 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 thetotal 1,189 recorded crimes in the principality that year.

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

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

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

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

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

The U.S., U.K., Australia, Italy, France, Sweden, Canada, New Zealand, Greeceand Spain have all said they too are hunting for taxpayers hiding their money inthe tiny Alpine state.

(END) Dow Jones Newswires 03-05-08 0649ET Copyright (c) 2008 Dow Jones & Company, Inc.