LIECHTENSTEIN: An Introduction to Dispute Resolution: White-Collar Crime
Overview
Despite being the fourth smallest country in Europe (only 160 square kilometres and with approximately 40,000 inhabitants), the Principality of Liechtenstein plays quite an important international role. This is due to its attractive legal system and liberal corporate legislation, making it a centre for international top holding and asset protection structures (eg, trusts and foundations) as well as a stable financial market that, in particular, provides direct market access to the EU/EEA and the Swiss Economic Area at the same time.
Accordingly, due to its strong international focus, Liechtenstein also has points of contact with international white-collar crime cases – this leads not only to domestic criminal investigations but, in particular, to proceedings on requests for legal assistance from and to authorities of other jurisdictions. Often, such procedures coincide with or lead to international asset-recovery efforts of damaged parties in which Liechtenstein structures are directly or indirectly affected. It is fair to say that, due to Liechtenstein’s nature as a finance and holding location, white-collar crimes play the dominant role.
Criminal investigations in Liechtenstein are usually initiated by reports of damaged parties, foreign authorities’ letters rogatory or reports of the Financial Intelligence Unit (FIU), which is the central authority for obtaining and analysing information necessary to detect money laundering, predicate offences to money laundering, organised crime and terrorist financing.
In particular, in international asset-recovery cases, the damaged parties often not only initiate criminal proceedings but specifically focus on tracing assets and on initiating measures to secure their claims related to the alleged white-collar crime activities (such as obtaining injunctions to freeze assets and claims located in Liechtenstein). Compared to other jurisdictions, it should be emphasised that, in addition to being able to obtain a lien (and, thus, priority satisfaction on assets), the damaged party can also attach all kinds of rights and claims with injunctions that grant indirect access to certain assets. Thus, there is often a strong overlap of white-collar crime investigations and asset-recovery matters under civil law.
The recent past has generally seen increased focus in investigations on bankruptcy offences (such as fraudulent bankruptcy, unlawful favouring of creditors, and obstruction of enforcement of creditors); as a result, an increased focus on protecting creditors has been observed.
Recent Developments: National Criminal Law
Liechtenstein criminal law is based on the Austrian Criminal Code, whereby partial reference was also made to the Swiss and the German Criminal Code. According to the law-in-action principles applied by the Supreme Court, criminal law provisions shall be interpreted in the same manner as in the country of reception unless important reasons argue against such interpretation.
Given the needs of society and criminal policy, criminal law is subject to constant change. Accordingly, some recent relevant developments in relation to white-collar crime are highlighted below.
Freezing virtual assets
In one of the latest amendments of the Criminal Procedure Code, Liechtenstein’s legislature introduced virtual assets as assets that can also be made the subject of a freezing order directing the transfer of the virtual assets to a wallet kept by the police, in order to secure them for confiscation (forfeiture).
Refusal of legal assistance
Under the European Convention on Mutual Assistance in Criminal Matters, which is applicable in Liechtenstein, a member state is allowed to refuse legal assistance in favour of a foreign state, if, inter alia, the requested state is of the opinion that the execution of the request is likely to prejudice the sovereignty, security, public order (ordre public) or other essential interests of its country. According to the most recent case law of the Liechtenstein Constitutional Court, there is a risk of blatantly unfair proceedings and, thus, of a violation of Liechtenstein public order if there are indications that criminal proceedings abroad are being conducted for political reasons. This requires concrete evidence that the person concerned is being prosecuted for hidden reasons – in particular, in connection with their political convictions.
Private parties’ right to inspect court files
Private parties who joined criminal investigations by asserting civil claims caused by a suspect (eg, claims for compensation or reimbursement of unjustified enrichment) are entitled to inspect court files to the extent that they have a legal interest in such inspection. In a remarkable judgment, the Constitutional Court held that the application for granting the right to inspect the files is not required to be delivered to the suspects in any case to enable them to be heard and to plead against the application. However, the court shall conduct a comprehensive balancing of interests before handing down a formal order granting or denying the requested access to the files. From a practical perspective, due to this requirement the court is expected to hear the suspects prior to its decision in most cases.
Recent Developments: Prevention and Suppression of Money Laundering and Terrorist Financing
As a member of the EEA and Moneyval, and as a financial hub, Liechtenstein plays an active role in combating money laundering and terrorist financing. In adherence with international provisions, Liechtenstein has already implemented the Fourth and Fifth EU Money Laundering Directives, as well as the Regulation on information accompanying transfers of funds. In contrast, the Sixth EU Money Laundering Directive (AMLD VI) has not yet been implemented. It essentially contains provisions on:
• co-operation between the competent authorities;
• the responsibilities and tasks of the FIUs;
• the register of beneficial owners and the bank account register; and
• administrative measures and sanctions.
In addition, in its Article 3(1)(c), AMLD VI provides that member states must take the necessary measures to ensure that the acquisition, possession or use of property – knowing at the time of receipt that such property was derived from criminal activity – is punishable as a criminal offence, when committed intentionally. The mandatory implementation of this rule would lead to a considerable mitigation of the relevant Liechtenstein money-laundering provisions, pursuant to which the knowledge that such property was derived from criminal activity is currently not required at the time of receipt in order to consider an action an offence.
Accordingly, for implementing EU law, the Liechtenstein Due Diligence Act and the Due Diligence Ordinance were amended, leading to considerable strengthening of the combating of money laundering. The Act’s scope of applicability was extended, and there was harmonisation of the enhanced due diligence obligations regarding high-risk third countries; measures to be applied were also further specified. In particular, the provisions of the Due Diligence Act also apply to virtual asset service providers and to operators of trading platforms for non-fungible tokens (NFTs).
Further, a central account register was established enabling FIUs and competent authorities timely access to information on bank holder identities, payment accounts, safe deposit boxes, and the identity of authorised holders and beneficial owners. Through this implementation, the co-operation between national and foreign authorities was strengthened, and the protection of reporting persons against adverse measures was enhanced.
Furthermore, the Act on the Register of Beneficial Owners of Legal Entities is in force, as is the corresponding ordinance implementing requirements to register beneficial owners of legal entities (ie, trusts and foundations). In order to protect the interests of beneficial owners, the rights of inspection were limited for foundations and trusts. Accordingly, the following may inspect the register, under different conditions:
• domestic authorities;
• foreign authorities;
• domestic and foreign financial institutions;
• domestic persons subject to due diligence; and
• third parties.
As regards the right of the public to inspect the register under the Fifth EU Money Laundering Directive, recent case law of the EU Court of Justice deserves mention, as a justified interest to do so is required. This highly relevant jurisprudence applies in Liechtenstein as well.