Liechtenstein reviews control over Russian trusts under pressure from the US

Liechtenstein is considering tightening controls on dozens of trusts linked to Russian citizens that were left without management after their administrators stepped down under pressure from US sanctions, according to several sources familiar with the situation.

This small but wealthy country, known as one of the most popular offshore financial centers, has about 20,000 active trusts, hundreds of which are linked to Russian beneficiaries. Following Russia's full-scale invasion of Ukraine, the US Treasury Department imposed sanctions on a number of individuals and entities in Liechtenstein, including trusts linked to oligarchs Vladimir Potanin and Gennady Timchenko, who are close to the Kremlin.

As a result, many trust directors began to leave their posts en masse, fearing that they would be subject to sanctions. This caused an asset management crisis: dozens of trusts owning real estate, yachts, and other assets were left in limbo — frozen and unmanaged.

According to a representative of the Liechtenstein government, a total of about 475 trusts were affected. Of these, 350 trusts are trying to appoint new managers, 40 have already been liquidated, and in 85 cases, attempts to appoint a liquidator have been unsuccessful.

This situation has become a serious challenge for Liechtenstein's trust industry, one of the country's main economic sectors with assets of approximately US$930 billion. According to government officials, local banks have also been affected, although details have not been disclosed. The US has the ability to impose tough financial measures on banks that work with sanctioned individuals, including restricting access to the dollar system.

The Liechtenstein government is currently considering options for centralizing the management of “ownerless” trusts and strengthening oversight of the entire industry. Officials also assure that no assets will be transferred to sanctioned individuals.

Source: Reuters