LIECHTENSTEIN Trends and Developments Contributed by: Lukas-Florian Gilhofer and Mathias Bitschnau, Ospelt & Partner Attorneys at Law Ltd
Recognition at EU level A noteworthy development is Liechtenstein’s inclusion in the EU’s list of partner countries implementing EU sanctions on iron and steel imports from Russia on an equivalent basis. As a result, Liechtenstein exports in this area are treated in the same manner as intra-EU exports, removing a potential competitive disadvan - tage for Liechtenstein-based businesses operating in these sectors. This recognition is not merely symbolic: it demonstrates that the EU regards Liechtenstein’s autonomous adoption practice as substantively equivalent to its own implementation, and that con - sistent alignment can yield concrete practical benefits for the Principality’s economy. Compliance challenges for the financial centre Of particular relevance for the Liechtenstein financial centre is the substantive expansion of EU sanctions packages, which is equally transposed through auton - omous adoption. Recent EU packages have increas - ingly targeted not only Russian nationals and entities but also actors in third countries – such as Chinese technology companies, Iranian arms manufacturers and Central Asian logistics operators – that materi - ally support Russia’s war effort or contribute to the circumvention of sanctions. This expansion presents a specific and growing com - pliance challenge for Liechtenstein financial interme - diaries. Clients and structures that were previously outside the scope of the sanctions regimes may now be indirectly affected by the listing of third-country actors with whom they maintain business relation - ships. Due diligence processes must therefore look beyond the immediate client relationship and examine the broader network of counterparties, suppliers and business partners. For trustees, asset managers and banks operating in Liechtenstein, this requires invest - ment in robust screening systems and ongoing moni - toring processes that are capable of capturing these indirect exposure risks in a timely manner. Trend two: the crisis of “orphaned legal entities” – US secondary sanctions as a structural threat The most serious challenge currently facing the Liech - tenstein financial centre does not emanate from the EU but from the United States. OFAC has placed dozens of Russian individuals and entities on its sanctions list
in the context of the Russia sanctions regime. Many of these individuals had over the years established foundations, establishments and other legal entities in Liechtenstein, administered by Liechtenstein trustees as part of legitimate wealth structuring and succes - sion planning arrangements. The existence of these structures was, at the time of their formation, entirely consistent with applicable law and regulatory require - ments. Although foreign sanctions are formally not directly applicable in Liechtenstein – as the Financial Market Authority (FMA) confirmed in a communication to mar - ket participants in 2024 – OFAC sanctions nonetheless produce factual effects of considerable reach. Any trustee who continues to act for OFAC-sanctioned persons risks not only significant reputational dam - age but potentially being listed on the OFAC sanc - tions list themselves. This threat of so-called second - ary sanctions has led many Liechtenstein trustees to adopt a risk aversion that extends well beyond cases of direct sanctioned status, often encompassing situ - ations where the sanctions nexus is indirect, unclear or even merely speculative. What are orphaned legal entities ? The consequence is a phenomenon with no prior equivalent in Liechtenstein legal practice: the emer - gence of so-called “orphaned legal entities” or “gov - erning-body-less entities”. These are foundations and establishments whose trustees were required to resign their mandates under a directly applicable directive of the Liechtenstein Chamber of Professional Trus - tees, issued on sanctions compliance grounds. The affected structures find themselves in a state of legal paralysis, characterised by the following features. • They can neither be properly administered on an ongoing basis nor formally dissolved. • Without functioning organs, they are capable nei - ther of taking operational decisions nor of carrying out liquidations. • Assets held within these structures are effectively frozen in practice, even where no formal asset freeze has been imposed under applicable Liech - tenstein law.
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