LIECHTENSTEIN: An Introduction to Dispute Resolution: White-Collar Crime
Despite being the fourth smallest state in Europe with only 160 km² and approximately 40,000 inhabitants, the Principality of Liechtenstein has quite an important global role – thanks to its attractive legal system and liberal corporate legislation – as a centre for international top holding and asset protection structures (eg, trusts and foundations) and a stable financial market that provides direct market access to the EU/European Economic Area (EEA) and the Swiss Economic Area at the same time. Accordingly, owing to its strong international orientation, Liechtenstein also has points of contact with international white-collar crime cases, which not only lead to domestic criminal investigations but – specifically – proceedings on requests for legal assistance from and to authorities of any other jurisdiction. Often such procedures come along with or lead to international asset recovery efforts by damaged parties, in which Liechtenstein structures are directly or indirectly affected. It is fair to say that, owingto the nature of Liechtenstein as a finance and holding location, white-collar crimes play a dominant role.
Criminal investigations in Liechtenstein are usually initiated by reports from damaged parties, letters rogatory from foreign authorities, or reports from the Financial Intelligence Unit (FIU). The FIU 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 international asset recovery cases, the damaged parties often not only initiate criminal proceedings but specifically focus on tracing assets and initiating measures to secure their claims in relation to the alleged white-collar crime activities – for example, obtaining injunctions to freeze assets and claims located in Liechtenstein. It should be emphasised that, unlike in other jurisdictions, the damaged party is not only able to get a lien and thus priority satisfaction on such assets; rather, all kinds of rights and claims can be attached with injunctions that only grant indirect access on certain assets. Thus, there often is a strong overlap in white-collar crime investigations and asset recovery matters under civil law.
Most recently, investigations have increasingly focused on bankruptcy offences such as fraudulent bankruptcy, unlawful favouring of creditors, and obstruction of enforcement of creditors. As a result, there has generally been an increased focus on protecting creditors.
Recent Developments in National Criminal Law
Liechtenstein criminal law is based on a reception of the Austrian Criminal Code, whereby partial reference was also made to the Swiss Criminal Code and the German Criminal Code. According to the law in action principles applied by the Supreme Court, the provisions of criminal law shall be interpreted in the same manner as in the country of reception unless important reasons speak 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 here.
Freezing virtual assets
During the course of one of the latest amendments of the Criminal Procedure Code, the Liechtenstein legislator introduced virtual assets as assets that can also be made subject to a freezing order directing the transfer of the virtual assets to a wallet kept by the police so as 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 too, an EU member state is allowed to refuse legal assistance in favour of a foreign state if 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 most recent case law of the Liechtenstein Constitutional Court, there is a risk of blatantly unfair proceedings and thus 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 the 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, owing to this requirement, the court is expected to hear the suspects prior to its decision in most of the cases.
Prevention and Suppression of Money Laundering and Terrorist Financing
As a member of the EEA and Moneyval, and as a financial hub, Liechtenstein has an active role in combating money laundering and terrorist financing. In adherence with international provisions, Liechtenstein already implemented the 4th and 5th EU Money Laundering Directives, as well as the Regulation on information accompanying transfers of funds. By contrast, the 6th EU Money Laundering Directive (“AMLD6”) has not been implemented yet. Article 3(1)(c) of the AMLD6 provides that EU member states must take the necessary measures to ensure that the acquisition, possession or use of property, while knowing at the time of receipt that such property was derived from criminal activity, is punishable as a criminal offence when committed intentionally. The implementation of this rule would lead to a considerable mitigation of the relevant Liechtenstein money laundering provision pursuant to which the knowledge that such property was derived from criminal activity is currently not required at the time of receipt for an action to be considered an offence under the provision.
Accordingly, by implementing EU law, the Liechtenstein Due Diligence Act and the Due Diligence Ordinance were amended – leading to a considerable strengthening in the combat of money laundering. The scope of applicability of the Act was extended and there was a harmonisation of the enhanced due diligence obligations regarding high-risk third countries and measures to be applied were further specified. In particular, the provisions of the Due Diligence Act also apply to virtual asset service providers and operators of trading platforms for non-fungible tokens (NFTs).
Further, a central account register was established to enable FIUs and competent authorities timely access to information on bank holder identities, payment accounts and safe deposit boxes, as well as the identity of authorised holders and beneficial owners.
In the course of this implementation, the co-operation between national and foreign authorities was also strengthened and the protection of whistle-blowers against adverse measures was enhanced.
Furthermore, the Act on the Register of Beneficial Owners of Legal Entities as well as the corresponding ordinance implementing requirements to register beneficial owners of legal entities (ie, trusts and foundations too) are in force. In order to protect the interests of beneficial owners, the rights of inspection were limited for foundations and trusts. Accordingly, domestic authorities, foreign authorities, domestic and foreign financial institutions, domestic persons subject to due diligence, and third parties may inspect the register under different conditions. As regards the right of the public to inspect the register under the 5th EU Money Laundering Directive, recent ECJ case law deserves mention, as a justified interest in doing so is required. This highly relevant jurisprudence applies in Liechtenstein, too.