Bloomberg News
VADUZ, Liechtenstein - Liechtenstein has ceased to be a sanctuary for private banking companies since the government tightened anti-money-laundering regulations in response to international criticism.
No banking permits have been requested since the beginning of last year, according to Roland Mueller, the head of the Office for Financial Services. During the previous six years the number of banks operating in the tiny European country more than tripled, to 17.
"The boom has stopped," Mr. Mueller said at a recent briefing in the capital.
In 2000 the Group of Seven's financial action task force put the country on a blacklist of those seen as doing too little to fight laundering. Last year the country, located between Switzerland and Austria, set stricter guidelines for banks and asset managers.
Liechtenstein, which has a population of about 30,000, plans to spend two years building an independent regulator to replace three government units that currently oversee banks and insurers.
When the stock markets surged in the second half of0 the 1990s, banks, rushed to open branches in Liechtenstein, primarily to offer private services for the wealthy; they now manage $71 billion of assets there.
Two banks, which Mr. Mueller would not name, postponed plans to open offices in Liechtenstein when it was put on the blacklist.
In a bid to win back business, the country toughened its anti-laundering laws. Banks, trusts, attorneys, and other so-called financial intermediaries are now required to notify authorities if they encounter suspicious financial activity. They now also must know an accountholder's identity, and in March the government set up a six-member financial intelligence unit to receive and check reports of suspected money laundering.
In June the task force removed Liechtenstein, as well as the Cayman Islands, the Bahamas, and Panama, from the blacklist and said that they had taken measures to better track and prosecute suspected launderers.
Elsewhere, the private banking boom has continued even as equities have declined. In the past year Deutsche Bank AG, Barclays PLC, and other global companies have moved their private banking activities to Geneva, where about 10% of such assets are now managed.
