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- LIECHTENSTEIN
TABLE OF STATUTES
- LIECHTENSTEIN
TRUST LAW
- LIECHTENSTEIN BANKING
LAW
In
November, 2004,
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 Supervisory
Authority created by the Act would commence operations
on 1 January 2005.
The
new single authority has 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 FMSA also
took over the existing staff of the three authorities.
Under
the auspices of the new legislation, the Financial
Market Supervisory Authority is responsible 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 FMSA encompass the
supervision and regulation (on behalf of the Government)
of the Liechtenstein financial market, although
the FMSA is independent of the Government and
of the financial market participants under its
supervision.
The
body will not have the authority to enact laws
or ordinances, and its supervisory activities
will be undertaken according to the principles
of Best Business Practice.
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 FMSA supervises implementation
of the Asset Management Act and the related ordinances
as well as compliance with regulations.
Liechtenstein 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,
comprising:
- 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 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
law.
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 invested.
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Liechtenstein
Banking Law
The
Liechtenstein 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 now
legally compulsory (from 1 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.
In
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.
The treaty will go into effect when ratified
by at least 40 countries, which the UN expects
to happen within two years. The new treaty follows
the OECD Fiscal Committee's recommendation that
its members ban anonymous accounts and require
identification of customers. Under the treaty,
countries must also require banks to keep accurate
records of accounts and report suspicious transactions.
In addition, accounts must be open to inspection
by domestic law enforcement officials. Money
laundering is criminalised, with sanctions against
the people who do the laundering, counsel it,
or acquire the ill-gotten gains.
Also
in December, 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.
At
a press briefing, Head of Government Mario Frick
commented : 'This regulation rounds off legal
measures with regard to Liechtenstein's efforts
to improve the fight against money laundering
and organised crime. The regulation connected
to the law on the duty of care is strict, but
it can still be implemented. We succeeded in
forging a link between high duty of care and
liberal economics.'
In
April, 2002, Prime Minister, Otmar Hasler announced
that more than double the amount of suspected
money laundering transactions were reported
in 2001 than in the previous year.
The
Financial Intelligence Unit attributed the 158
reports received from the banking sector (up
from 67 in 2000) to the new tougher controls,
rather than to an increase in money laundering
activity in the jurisdiction.
Prime
Minister Hasler heaped praise on the financial
sector and its regulator this week, saying:
'This trend is encouraging and must continue.
The financial services industry as a whole has
increased its internal compliance measures and
is applying them in a targeted manner.'
Despite
these encouraging words, however, head of the
Financial Intelligence Unit, Michael Lauber,
believes that there is still progress to be
made. He revealed that despite the increased
reporting figures, only 6 of the jurisdiction's
17 registered banks had registered concerns
regarding suspicious transactions, and a mere
20 of the country's 645 investment trusts had
made reports.
'Does
that mean that they have nothing to report,
or that they're hiding something?' He speculated.
'That's a question that will be answered in
time.'
Late
in 2003, Parliament approved the adoption of
EU Directive 2001/97/EG, which amends the existing
Directive on the prevention of the use of financial
systems for money laundering purposes.
Vice
Parliamentary 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."
In
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. Prime Minister Otmar Hasler stated: '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.'
In
addition to implementing the 2nd EU Directive
on Money Laundering, the goal of the revision
of the Due Diligence Act is 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.
'For
the 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.'
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