Reds fans unfurled the banner during the warm-up before the clash in Belgium, which the club say "perpetuated a racist stereotype".
In a statement issued before kick-off, the club confirmed it took swift action to have it removed.
"Liverpool condemns the offensive banner displayed in our section of the ground prior to kick off," the statement read.
"To be clear, the image used perpetuated a racist stereotype. This is completely unacceptable.
"We acted swiftly to have the banner removed and we are now working with the local authorities and stadium team in Genk to identify those responsible.
"Any subsequent action will be taken in keeping with our sanctions process."