Implementation of International Sanctions in Liechtenstein
International sanctions have been on everyone's lips in recent weeks and months. The implementation of international sanctions in Liechtenstein raises numerous questions for local financial intermediaries as well as international clients and advisors. We provide you with an overview of the mechanisms of the applicable sanctions regime in Liechtenstein.
The legal basis for the implementation of international sanctions in Liechtenstein is the Law on the Enforcement of International Sanctions (International Sanctions Act, ISA), which serves to enforce international sanctions that have been adopted by the United Nations ("UN") or by Liechtenstein’s most significant trading partners.
Liechtenstein joined the UN in 1990 and automatically adopts UN sanctions lists and relevant amendments. Thus, changes to UN sanctions lists (accessible via the UN Security Council website) immediately become legally binding in Liechtenstein. The Financial Intelligence Unit ("FIU") offers a newsletter service about changes to UN sanctions lists (registration available here).
Further, on the basis of the ISA, Liechtenstein may independently implement EU sanctions in its national legislation. However, unlike sanctions imposed by the UN Security Council, there is no obligation for Liechtenstein to implement EU sanctions. Implementation takes place on a case-by-case basis by ordinance. The EU sanctions map provides comprehensive details of all EU sanctions regimes. Liechtenstein regularly aligns with EU sanctions as part of the political dialogue between the EU and EEA/EFTA states and on the basis of its foreign policy priorities.
Under the ISA, the government may enforce international sanctions by issuing coercive measures at the national level, implemented by ordinances based on the ISA. A list of all Liechtenstein ordinances implementing international sanctions can be found here.
Coercive measures may, for example (directly or indirectly), restrict transactions in goods and services, payment and capital transfers, travel restrictions, as well as licensing and reporting obligations. They may stipulate exceptions in order to support humanitarian activities, in particular for the provision of food supplies, medicine and therapeutic products, or in order to safeguard Liechtenstein's interests.
In connection with the recent situation in Ukraine, the following sanctions regarding trusts and similar legal arrangements are of particular importance for Liechtenstein intermediaries and clients:
1) Establishing trusts or similar legal arrangements and the provision of a registered office, business or administrative address or administrative services for trusts or similar legal arrangements are prohibited if any of the following persons, entities or bodies are settlors or beneficiaries:
a) Russian citizens or natural persons resident in the Russian Federation; If the settlors or beneficiaries are citizens of an EEA Contracting State or Switzerland or hold a temporary or permanent residence title in an EEA Contract State or Switzerland, these prohibitions do not apply.
b) legal entities, enterprises or organizations established in the Russian Federation;
c) legal entities, enterprises or organizations in which natural or legal persons, enterprises or organizations referred to in sections a) and b) above have a direct or indirect participation of more than 50%;
d) legal entities, enterprises or organizations controlled by a natural or legal person, enterprise or organization referred to in sections a) to c) above;
e) natural or legal persons, enterprises or organizations acting on behalf of or at the direction of a natural or legal person, an enterprise or an organization referred to in sections a) to d) above.
2) It is further prohibited to act as a trustee, nominee shareholder, manager, secretary or in a similar function for a trust or similar legal arrangement as described under section 1 above or to enable another person to do so. However, under certain circumstances the continuation of services in connection with transactions necessary for the termination of contracts may be allowed.
The government may grant exemptions from the prohibitions under sections 1) and 2) above for services that are necessary for:
a) humanitarian activities such as the provision or facilitation of relief, including the provision of medical supplies and food, the transportation of humanitarian workers and related assistance, or evacuations;
b) civil society activities directly promoting democracy, human rights, or the rule of law in the Russian Federation; or
c) the operation of trusts or similar legal arrangements whose purpose is the management of occupational pension funds, insurance contracts or employee stock ownership programs, charitable non-profit organizations, amateur sports clubs, or funds for minors or vulnerable adults.
Applications for such exemptions must be submitted to the FIU. The FIU has published guidance on frequently asked questions regarding sanctions in connection with trusts and similar legal arrangements and applications for exemptions (available here).
What is particularly noteworthy is that the aforementioned sanctions only apply for trusts and similar legal arrangements, but not for legal entities such as foundations and establishments.
For further information, please contact Carmen Oehri.