Banks in Liechtenstein have bowed to international pressure and agreed to stop allowing customers to operate accounts anonymously by going through intermediaries.

Stung by criticism from two major global organisations concerned about money laundering, banks in the German-speaking principality will now be required to know the identities of all their customers.

Less than a month ago, the G7 group of leading industrialised nations put Liechtenstein on a blacklist of 15 countries.

It said the principality, which sits on the border of Austria and Switzerland, was uncooperative in the global fight against money laundering, whereby illegally acquired funds are hidden from the sight of the authorities.

Embarrassment

The Organisation for Economic Cooperation and Development published a similar list and again included Liechtenstein - the only Western European country to suffer this embarrassment.

Now, the Liechtenstein Banking Association has told its members to comply with the order.

The new practice is expected to be voluntary for the banks at first but will later become Liechtenstein law.

A similar "Know Your Customer" practice has been operating in Switzerland for the past decade, and banking authorities in Liechtenstein are hoping to be able to repair the damage done to their industry over recent months.

It is estimated that every year, $600bn in illegal money passes through banks in major financial centres around the world.