Liechtenstein's Financial Services Authority announced that following
Parliament's approval in June of the new Law (Organization Act)
on Supervision of the Liechtenstein Financial Market, the new, independent,
and integrated Financial Market Authority created by the Act would
commence operations on 1 January 2005.
The new single
authority assumed the functions and responsibilities of the three
existing regulatory bodies, namely the Financial Services Authority,
the Due Diligence Unit, and the Insurance Division of the Office
of Economic Affairs. The FMA also took over the existing staff of
the three authorities.
Under the auspices
of the legislation, the Financial Market Authority assumed responsibility
for safeguarding the stability of the Liechtenstein financial market,
the protection of customers, the prevention of abuses, and the implementation
of and compliance with recognized international standards.
The core responsibilities
of the FMA encompass the supervision and regulation (on behalf of
the Government) of the Liechtenstein financial market, although
the FMA is independent of the Government and of the financial market
participants under its supervision.
The Law on Asset Management (Asset Management Act, AMA) entered
into force on 1 January 2006. This Act lays the foundation for asset
management companies as new, internationally recognized financial
intermediaries. The FMA supervises implementation of the Asset Management
Act and the related ordinances as well as compliance with regulations.
of Liechtenstein announced on March 12, 2009, that it would commit
to the Organisation of Economic Cooperation and Development's (OECD)
standard on exchange of information for tax purposes, and stood
ready to enter into bilateral tax agreements with individual states.
pressure from neighbouring Germany to dispense with banking secrecy
laws following the previous year's highly publicized tax scandals,
and with the Obama administration in the US demonstrating an equal
level of hostility towards what it considers to be offshore 'secrecy'
jurisdictions, then Prime Minister Otmar Hasler said that the jurisdiction
has become "aware of [its] responsibility as part of a globally
integrated economic area."
today's declaration, we are making our contribution to a joint solution
that will make an effective enforcement of foreign tax claims possible
and takes account of the legitimate interests of the clients of
our financial centre at the same time," Hasler announced.
one of only three jurisdictions to remain on the OECD's original
'blacklist' stemming from the first offshore crackdown by onshore
governments a decade ago, has no plans to discard banking secrecy
just yet and, with its declaration, is attempting to "ensure
legal certainty and conformity" while at the same time "preserving
privacy and bank client confidentiality."
secrecy has always served to ensure the legitimate protection of
the privacy of the citizen, which we will continue to retain. With
this declaration, however, we want to make clear that bank client
confidentiality in future cannot be misused to facilitate tax crime,"
in November 2009 that the OECD has recognized Liechtenstein's implementation
of the agreed international tax cooperation standard, and has removed
the jurisdiction from its “grey list”.
from the so-called 'grey list' is a milestone in the reorientation
of the Liechtenstein location," announced Liechtenstein’s
Prime Minister Klaus Tschütscher. He added: "I took office
to restore the reputation of our country with the steadfastness
demanded by the situation. This is the only way we can do justice
in the long term to the full potential of our businesses and service
Secretary-General of the OECD, welcomed the news: "Liechtenstein
has demonstrated that it honors its commitments and is actively
contributing to the international dialogue on tax cooperation."
Table of Statutes
Liechtenstein is the only civil law
jurisdiction which has adopted largely anglo-saxon trust legislation
(contained in the PGR Code), although, unlike the common law trust,
there is no bar against accumulation of income, nor against perpetuities.
A Liechtenstein Trust
is set up by a written agreement (Trust Deed) between the trustor
(settlor) and trustee(s), or by a written Declaration of Trust by
the trustor, matched by a written Acceptance of Trust by the trustee.
The legislation in fact does not speak of 'trusts' but of 'trusteeship'.
The Trust Deed does not
have to contain the names of beneficiaries. If the Trust Deed is
deposited with the Registrar of Trusts, it will not be publicly
available, and later instruments (eg naming beneficiaries) will
not have to be revealed; if the Trust Deed is not deposited within
12 months, details of the trust must be placed on the public register,
- a description of the trust;
- the date of formation;
- the duration of the trust;
- the name (or trade name) and address
of the trustee.
A registration fee of
US$200 (at the time of writing) is payable on registration.
The trustor can make
quite specific arrangements in the Trust Deed covering the identification
of beneficiaries, and future procedures of various types; the trust
property must be separated from the trustor's other assets, and
the trustee can take action to enforce this against the trustor
under contract law. The Deed must not bind the trustee to the trustor's
continuing directions, or the trust will lapse into ordinary contract
Some of the characteristics
of Liechtenstein Trusts are as follows:
a trustee can be an individual
or a corporation or association; one trustee must be a Liechtenstein-resident
individual with appropriate professional qualifications; trustees
have various specified duties of care towards the trustor
and the trust property; trustees who carry on business as
such must keep an inventory of their trusteeships and must
keep each trust's assets separate from other assets; if trust
assets are deposited with banks they must again be kept separate;
trustees are liable for breach
of trust to the full extent of their assets; joint trustees
must normally act jointly and are jointly liable; supervision
of the trust is ultimately under the Court, even if the Trust
Deed specifies alternative supervision;
the trustee must keep a schedule
of trust assets and update it yearly, submitting trust accounts
as specified in the Trust Deed or to the Court;
the interests of named beneficiaries
can be embodied in trust certificates, which if registered
are transferable securities;
being a civil law jurisdiction,
trust assets are vulnerable to forced heirship provisions,
although there are time limitations on such claims;
in general, there is a limitation
of one year on creditors' claims; the trustee's creditors
have no access to the trust assets; the trustor's creditors
have access to trust property only under certain defined circumstances,
one of which is under law of succession; the beneficiaries'
creditors have access to the trust assets only if the beneficiary
has a claim to payment, and if the trust deed does not bar
distraint; the trust property's creditors have limited access
to the trustee but only to the trust property if the trustee
enjoys specific liability cover from the property.
trust documents, including the
Trust Deed, can be in any language.
Trusts may be set up under foreign
law, but may not have more favourable treatment than would apply
under Liechtenstein law. A trust under foreign law is a Liechtehnstein
Trust and subject to local taxation. Liechtenstein law applies
to a foreign trust if the trustee, or more than half of the trustees,
are resident in Liechtenstein, if the trust property is in Liechtenstein,
or if the Trust Deed says so
In response to its inclusion on
the FATF money laundering blacklist in 2000, Leichtenstein enacted
new money laundering legislation, including a new regulation in
relation to the law on the duty of care, which had been passed
by parliament in its September 2000 session and came into force
on January 1 2001. The government also abolished the existing
privilege of trustees and lawyers by which they did not have to
disclose the identity of their clients to banks where funds are
banking sector is regulated under the Law on Banks and Finance
Companies 1993; this law was substantially amended following
Liechtenstein's entry into the EEA in 1995, through the Law
on Banks and Finance Companies 1998. The Act concerning Banks
and Savings Funds 1960 imposes heavy penalties for breaches
of professional secrecy. Other recent legislation dealt with
due diligence on the part of bankers accepting deposits or assets,
installing 'know your customer' rules.
The "know your
customer" system is legally compulsory (and has been since
October 2000) for all banks that belong to the Liechtenstein
Bankers' Association. This means that banks in Liechtenstein,
previously known as one of Europe's most secretive tax havens,
can no longer guarantee anonymity for new and existing account
holders, although further account details will remain under
normal banking secrecy agreements.
December, 2000, Liechtenstein signed the United Nations Convention
Against Transnational Organised Crime in Palermo, Sicily, to
demonstrate the country's commitment to stamping out money laundering.
in December of that year, Liechtenstein announced that it had
issued a new regulation in relation to the law on the duty of
care, which had been passed by parliament in its September 2000
session. The revised law on the duty of care and the associated
regulation came into force on 1 January 2001.
2003, Parliament approved the adoption of EU Directive 2001/97/EG,
which amended the existing Directive on the prevention of the
use of financial systems for money laundering purposes.
President, Peter Wolff complained: "The report and motion of
the government doesn't mention that this regulation opens up
the issue of fraudulent tax evasion. I gained the impression
that the government intends to sweep the critical points in
the directive under the carpet."
August 2004, the Government decided on a total revision of the
Due Diligence Act; the revised Due Diligence Act entered into
force on 1 January 2005.
Otmar Hasler explained that: 'In order to enhance the efficiency
and attractiveness of the Liechtenstein financial center, due
diligence provisions must be further developed and modernized
in accordance with the changed European guidelines.'
to implementing the 2nd EU Directive on Money Laundering, the
goal of the revision of the Due Diligence Act was to create
a modern law that takes into account the newest developments
and international standards in the prevention of money laundering,
organized crime, and terrorist financing.
benefit of the international community, Liechtenstein has been
and continues to be willing to take action against such grave
abuses,' Prime Minister Hasler explained. 'Against this backdrop,
the Government endeavors to maintain the 'high level of compliance'
ascertained by the International Monetary Fund with respect
to the suppression of money laundering, organized crime, and
financing of terrorism. In the context of international recognition,
due diligence legislation will also take into account the 40
revised recommendations and the 8 special recommendations on
terrorist financing of the FATF and the recommendations arising
from the MONEYVAL and IMF assessments.'
2008, the banking sector became the centre of an international
row over tax evasion, which was sparked by the use by German
taxpayers of Liechtenstein entities to duck their tax liabilities
in their home country.
scandal first broke after it emerged that the home of Klaus
Zumwinkel, Chief Executive of Deutsche Post, one of Germany's
largest companies, had been raided by police as part of a tax
evasion investigation. He was accused of hiding about EUR1 million
from German tax collectors in Liechtenstein.
was subsequently forced to resign by Deutsche Post, but the
affair did not end there. On Monday, it was reported that several
more homes and offices in the Frankfurt area and in southern
Germany have been raided, after the intelligence services received
information from a former employee of a Liechtenstein bank about
hundreds of wealthy German clients.
informant, an ex-employee of LGT, Liechtenstein's largest bank,
was said to have handed over a disc to the German intelligence
service, the BND, containing confidential information on more
than 1,000 clients. The BND was believed to have paid the informant
a sum of between EUR4 and EUR5 million for the disc.
the revelation, Prince Alois reiterated his message that the
jurisdiction would continue to improve its financial sector
regulation, but that this would not come at the expense of an
erosion in individual privacy.
Liechtenstein financial centre has already undertaken considerable
reform efforts in recent years, but more reforms will be necessary,
not only to ensure the competitiveness of the financial centre
for the future, but also to enhance it," the Hereditary
Prince told Parliament.
financial centres have caught up by creating new, attractive
business environments, while the international pressure has
risen on locations offering a high level of protection of privacy,"
scandal had repercussions throughout the world, and in February
2008, US Senator Carl Levin (D-MI), announced that he intended
to investigate whether US citizens may have had dealings with
the Liechtenstein bank at the centre of the row over tax evasion
and offshore secrecy laws.
who had long campaigned for legislation to prevent Americans
from moving money offshore, recently revealed that the Senate
Permanent Committee on Investigations, which he chairs, would
launch a probe into reports that the stolen computer disc containing
details of clients of Liechtenstein's LGT Bank also included
several American names.
also emerged that month that the Internal Revenue Service had
initiated enforcement action involving more than 100 US taxpayers,
to ensure proper income reporting and tax payment in connection
with accounts in Liechtenstein.
national tax administrations of Australia, Canada, France, Italy,
New Zealand, Sweden, United Kingdom, and the United States of
America, all member countries of the OECD's Forum on Tax Administration
(FTA), had also announced that they were working together, following
revelations that Liechtenstein accounts were being used for
tax avoidance and evasion.
off-shore tax avoidance and evasion are high priorities for
the IRS," explained IRS Acting Commissioner Linda Stiff.
are determined to protect the United States tax system from
abuse and ensure that taxpayers pay what they owe. We will use
all our authority to fairly and effectively enforce our tax
laws. It should be clear from recent events that there is no
safe hiding place for the proceeds of tax avoidance and evasion.
Anyone with hidden income and gains would be well-advised to
make a prompt and complete disclosure to the Internal Revenue
Service," she added.
arrival of President Obama in the White House has seen the proposal
of several anti-offshore intiaitives, including the Foreign
Account Tax Compliance Act, which has given the US Internal
Revenue Service new tools to "detect, deter and discourage
offshore tax abuses." The legislation, approved by Congress
in March 2010: imposes a 30% withholding on US source payments
to foreign financial institutions, foreign trusts, and foreign
corporations that do not agree to disclose their US account
holders and owners to the IRS; requires taxpayers to disclose
their foreign accounts on their US tax returns; increases the
statute of limitations to six years for failure to report certain
offshore transactions and income; clarifies when a foreign trust
is considered to have a US beneficiary; and treats substitute
dividend and dividend equivalent payments to foreign persons
as dividends for purposes of US withholding.
August 2009, the UK government announced details of the “groundbreaking”
disclosure agreement with Liechtenstein that gives UK taxpayers
with undisclosed accounts in the Alpine jurisdiction the opportunity
to disclose income at a reduced penalty, or face having their
accounts shut down.
so-called Liechtenstein Disclosure Facility (LDF) agreement,
signed by the two governments on August 11 along with a broader
Tax and Information Exchange Agreement, will allow penalties
on unpaid tax to be capped at 10% of tax evaded over the last
10 years providing that the account holder makes a full disclosure
to HM Revenue and Customs (HMRC).
those who do not make a full disclosure by the end of the program,
which runs from September 1, 2009 to March 31, 2015, will find
their Liechtenstein accounts closed down. They may also face
penalties on any unpaid tax of up to 100%.