Over the next few months, we will be looking at jurisdictions where the Association for International Life Offices (AILO) membership is growing, and give you a snapshot of each jurisdiction’s history, advantages, opportunities and challenges.
We begin with Liechtenstein, writes AILO chief executive Bob Pain.
A decade of progress
Liechtenstein has come a long way as an international finance centre over the past decade or so.
But Stephan Moltzen, who is a member of the management board at Youplus Assurance AG says it’s important to know about the principality’s centuries of history to appreciate how and why it has been able to establish its modern day status as a safe haven for wealth in a turbulent world.
Centuries of stability
Its geographical location at the heart of Europe, and a proven track record for economic, legal and social stability, created the firm foundations on which its current position is built.
Liechtenstein gained its sovereignty in 1806, but historians trace its foundation back to 1719 when it acquired its present name and became an independent principality of the Holy Roman Empire.
High levels of trust created by centuries of stability is particularly important today in the context of global economic and political crises which make Liechtenstein attractive to corporations and high net worths. That’s now strengthened by being a very modern, well-regulated, forward-thinking jurisdiction with a determination to provide the highest standards of trust and transparency.
Many of its advantages derive from a close economic relationship with the EU through the European Economic Area Agreement (EEA), which Liechtenstein joined in 1995. EEA status includes participation in the EU internal market’s agencies and programmes, and it’s regarded as being a major factor behind Liechtenstein’s economic success.
However, of equal importance are the facts that this is complemented by having a legal system modelled on that of Switzerland, being in a customs union with Switzerland since 1923 and the Swiss Franc as its currency.
Leading on AML & CFT
Over the past decade or so Liechtenstein has made significant progress towards reaching its goal of becoming best in its class for AML/CFT measures and related compliance processes.
One example of the progress that has been made is that it has implemented the fourth and fifth EU Anti-Money Laundering Directives, plus Regulation (EU) 2015/847 which relates to information accompanying transfers of funds.
The Financial Market Authority in Liechtenstein has made it very clear that there is a zero-tolerance policy regarding anti-money laundering and combating the financing of terrorism.
Liechtenstein also offers the advantage of very attractive low tax rates for individuals and businesses. Click here for more details.
Looking ahead, the life sector in Liechtenstein – as it is in many jurisdictions – is moving towards more consolidation, says Moltzen.
That’s a process which he believes is being driven primarily by increased regulatory measures and declining margins.
As it has done over the past decade or so, Liechtenstein is highly likely to continue to steer a steady course in an uncertain world by remaining independent. All the signs are that in addition to its political autonomy it will remain legally independent from Switzerland and economically independent from the EU.
The principality’s international reputation should continue to improve, driven by its commitment to quality, stability, innovation and sustainability. While significant progress has been made to implement robust regulatory processes and achieve conformity with best practice regarding legal and tax matters, there’s more work to be done regarding its image.
In some quarters of the finance industry, there are still outdated perceptions which are shaped by the image that Liechtenstein had over a decade ago. Slowly but surely, those outdated perceptions will continue to be challenged and changed as its life and finance sectors grow.
Most importantly from a life sector point of view, Liechtenstein’s strategy will be based on thinking in terms of generations rather than decades.
This article was written for International Adviser by AILO chief executive Bob Pain.