Swiss banks distance themselves from Liechtenstein

The ongoing series of scandals involving Liechtenstein foundations and self-enriching trustees has consequences. Its use is discouraged.

The potential side effects of a Liechtenstein foundation have implications for the Swiss financial center. Swiss banks have been remarkably reserved about this.

“Pictet does not promote the foundation business with Liechtenstein foundations.” Julius Baer seconded this: “Demand for foundation solutions is minimal.”

Since Liechtenstein foundations have ceased to be a vehicle for tax evasion thanks to AIA, their number has shrunk from over 50,000 to under 8,000.

But the number of trustees in the state has remained the same. So the approximately 140 trustees, who are required to sit on the foundation's board, are fighting over the remaining sinecures.

They often use illegal methods. Decanting became popular.

So the trustee transfers the foundation's assets into a new container and tells the founder or beneficiary that, unfortunately, the accounts are empty, and where the money has disappeared, well, he can't say anything for reasons of attorney-client privilege.

But the defrauded founder is welcome to take legal action.

This is a rocky road in Liechtenstein. The Prince's justice system, especially those related and related by marriage to the trustees, sends plaintiffs into endless loops, into Kafkaesque processes. Civil proceedings that last for years are not the exception, but the rule.

For example, a fiduciary is currently causing the constant postponement of his testimony in a civil case seeking his removal, which will soon enter its third year in the first instance.

He seized control of the foundation and had the foundation president and beneficiaries ousted through the courts.

When he resisted, the prince's justice system also withdrew his privileges and thus his right to information and to sue.

Cute new reason for the second postponement: Unfortunately, he was unable to attend because he absolutely had to attend the funeral ceremonies for His Serene Highness Prince Konstantin von und zu Liechtenstein.

Although he was neither related nor related by marriage, nor was he a best man or a sponsor, he had nevertheless had a close relationship. The judge accepted this nonsense.

There is even less that can be done criminally against such behavior; due to a lack of initial suspicion, the public prosecutor's office routinely dismisses charges.

Many founders put a stop to this self-enrichment by taking seats on the foundation board themselves so that they could keep an eye on the trustees.

But greed is the mother of invention. Now this dual role is being used to oust the foundation's actual owners through the courts due to "a mere appearance of a possible conflict of interest."

“It does not offer this itself,” says the ZKB when asked whether it carries out or supports the establishment of foundations.

Support or advice on establishing a Liechtenstein foundation “does not fall within Raiffeisen’s range of services.”

And Rahn+Bodmer adds: “We do not offer advice in connection with the selection, establishment, or management of structures.”

In general, there is a sense of reserve; of the 15 banks contacted, only 6 responded; all the others, including UBS, Vontobel, and VP Bank, did not.

Liechtenstein and Swiss banks – as well as law firms – are in a dilemma.

On the one hand, they would like to earn money by brokering and establishing foundations in Liechtenstein, since this financial vehicle does not exist in Switzerland.

And if a Liechtenstein bank does not take over the management of the funds, the Swiss bank can collect the money again.

On the other hand, banks and lawyers say off the record that the constant narrative when a new scandal pops up, that these are just unfortunate isolated incidents, is simply a lie.

The decanting, the expulsion of donors from their own foundation, the complicity of the Liechtenstein judiciary, this has become systemic.

In addition to the well-known Bacardí case, which involved the withholding of around a billion euros, and the Kindler case, which involved 250 million euros, there is an increasing number of unreported similar scandals.

However, those affected often shy away from going public, not because they have something to hide for tax reasons.

Rather, it's out of shame at having been so blatantly ripped off. Or because they simply want to protect their privacy.

Therefore, more and more bankers and lawyers in Switzerland are not only advising their customers or clients against establishing a Liechtenstein foundation.

They even recommend dissolving existing foundations and securing the assets as quickly as possible.

Since the tax scandals during the Batliner era, Liechtenstein has made every effort to shed its image as a haven of illicit funds or funds of criminal origin.

The Principality has been much better than Switzerland in reaching agreement on solutions with the USA, Germany and other countries.

But the trust system still accounts for a significant share of the state's GDP, around 23 percent. Naturally, the Prince doesn't want to give that up.

On the other hand, the treasury agents are systematically damaging Liechtenstein's reputation, while the judiciary has so far graciously provided administrative assistance.

Of course, this problem is repeatedly brought to the attention of the Princely Court and the government – ​​so far without any reaction.

But when it comes to the contents of the princely coffers, the future of the Princely Bank and the Liechtenstein financial center, the last prince to rule largely absolutistically in Europe, or rather his heir apparent, could take action without further ado. This is long overdue.