Liechtenstein’s Wealth Management System Under Scrutiny
A Recent Scandal Raises Concerns about Secrecy Surrounding Liechtenstein’s Wealth Management System
A recent scandal involving a top judge and allegations of fraud has raised concerns about the secrecy surrounding Liechtenstein’s wealth management system. The principality’s laws on trusts and foundations have long been criticized for their opacity, allowing wealthy individuals to keep their assets and beneficiaries hidden from public view.
A High-Profile Case Exposes Flaws in the System
The case in question involves Harry Gstöhl, a former judge who pleaded guilty to money laundering and fraud charges related to his role as a trustee between 2010 and 2014. The sentence was later extended after additional charges were brought against him.
Another high-profile case has erupted into a legal battle involving Tamar Perry, the daughter of an Israeli tycoon, who accuses the trustee of a fund set up by her late father of misusing money meant for her family. The case has resulted in legal action in multiple countries, including Liechtenstein, the US, UK, Switzerland, and Israel.
Critics Argue that Secrecy Prioritizes Over Transparency
Critics argue that these cases expose serious flaws in Liechtenstein’s system, which prioritizes secrecy over transparency. “The new culture of openness has not yet reached the mindset of all participants and will need something more than just changes in the law,” says Professor Schauer.
Efforts to Improve Transparency and Accountability
In response to criticism, the Liechtenstein Institute of Professional Trustees and Fiduciaries is discussing amendments with the government that would clarify rights to information for discretionary beneficiaries. The institute has also overhauled its code of conduct to make it easier for beneficiaries to switch trustees.
The Liechtenstein Financial Market Authority (FMA) is pushing for increased supervisory powers over the fiduciary sector, which relies largely on self-regulation. “We recognize the need for action in the supervisory system,” said Mario Gassner, the FMA’s chief executive.
More Needs to be Done
Despite these efforts, critics argue that more needs to be done to ensure transparency and accountability in Liechtenstein’s wealth management system. “They can be reformed, but we need the rule of law for beneficiaries. They cannot be left in the dark,” says Johannes Gasser, a lawyer who works with beneficiaries taking action against trustees.
EU Anti-Money Laundering Rules Bring Some Transparency
In the meantime, Liechtenstein is set to implement EU anti-money laundering rules requiring the creation of a register of trusts and beneficiaries by the end of the year. While this may provide some level of transparency, critics argue that it falls short of what is needed to ensure trust in the system.
The Future of Liechtenstein’s Wealth Management Industry
The future of Liechtenstein’s wealth management industry remains uncertain, but one thing is clear: the principality must balance its commitment to privacy with a need for greater transparency and accountability if it hopes to maintain its reputation as a hub for international wealth management.