Sanctions on Russia make Liechtenstein face financial crisis
(MENAFN) Liechtenstein is facing a growing financial crisis as Western sanctions on Russia have left hundreds of trust funds in a state of legal paralysis, according to reports.
The disruption centers on so-called “zombie” trusts—financial entities that, while still legally valid, are now effectively frozen. This status followed a wave of mass resignations by fiduciaries and board members seeking to avoid breaching U.S. sanctions.
“We are talking about multibillion-dollar floating zombie trusts. And there is no solution yet. I have never seen anything like it,” said a lawyer based in Vaduz who represents clients tied to several of the affected trusts.
Long known as a discreet and tax-friendly jurisdiction for Europe’s wealthiest individuals, Liechtenstein adopted European Union sanctions on Moscow after the Ukraine conflict intensified in 2022. However, more recent U.S. restrictions introduced in 2024 targeting entities connected to Russian nationals have further destabilized the principality’s major trust sector.
These trusts manage a wide range of assets—from cash holdings as small as \$5 million to luxury real estate, yachts, aircraft, and family offices. Many of the trust beneficiaries are reportedly Russians who reside in countries like France, Italy, or the United Arab Emirates and are not subject to direct sanctions.
Last year, the U.S. issued warnings to Liechtenstein and other European jurisdictions about the risk of secondary sanctions if their financial institutions continued dealings with certain Russian-linked clients, even if those individuals were not specifically sanctioned.
In response, Liechtenstein’s financial regulator stated in September 2024 that severing ties with at-risk clients was “the only appropriate” step to reduce exposure to legal and reputational consequences.
Currently, at least 350 trusts are stuck in limbo, with 85 of them lacking any legal representation—effectively orphaned. Experts and officials now estimate that the number of impacted trusts could rise to as many as 800.
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