Reuters: US Sanctions Hit Russian Oligarchs' Enclave In The Center Of Europe

Dozens of directors have left Russia-linked trust funds.

One of the world's smallest and richest countries has thousands of low-tax trusts, hundreds of which are linked to Russians. This puts Liechtenstein in the crosshairs of Western sanctions against Moscow.

This is reported by RBC-Ukraine, citing Reuters.

After Russia invaded Ukraine, the U.S. Treasury Department imposed sanctions on several individuals and trusts in Liechtenstein that were linked to oligarchs, including Vladimir Potanin, and Vladimir Putin's longtime ally Gennady Timchenko.

Director resignations from trusts

Sanctions have prompted other directors fearing punishment to withdraw from hundreds of Russia-linked trusts, according to several people familiar with the situation. That revealed a much larger problem with Russian money in this small country of about 40,000 people.

The mass resignations have put dozens of trusts in limbo, essentially freezing Russian ownership. Trusts are the backbone of fortunes, including yachts or real estate, that are scattered around the world.

The suspensions put those properties out of reach, another potential leverage against Russia amid U.S. President Donald Trump's attempts to broker a peace deal.

U.S. sanctions tightening in defiance of Trump's statements

Reuters spoke to several people with direct knowledge of the developments, who asked not to be named because of the sensitivity of the issue.

They described how pressure from Washington has forced dozens of directors to leave Russia-linked trust funds and how the government is struggling to resolve the crisis.

According to knowledgeable sources, Liechtenstein's recently elected government is trying to address the problem by emphasizing the continued pressure from Washington over sanctions against Russia, despite previous statements by U.S. President Donald Trump that he may ease them.

Liechtenstein also sees its approach to sanctions enforcement as a factor that could influence its government's efforts to reduce recently imposed U.S. duties on exports, one source said.

A government spokesman

The official said Liechtenstein's justice ministry is trying to appoint new trustees at 350 trust funds, while 40 are in the process of liquidation and attempts to appoint a liquidator at another 85 trust funds have been unsuccessful.

A blow to Liechtenstein's shadow economy

This episode deals a blow to the trust industry, a crucial pillar of Liechtenstein's roughly 770 billion franc ($930 billion) financial center that supports the country's economy.

A government official said local banks were also affected but did not go into detail.

The banks are particularly vulnerable because the United States has the ability to strangle them by cutting off their access to the dollar, threatening a wider crisis.

This episode has put the country facing its biggest crisis since 2008, when a leak of customer data from LGT Bank, a bank owned by the country's princely family, revealed widespread tax evasion.

The government is currently exploring options to centralize the management of the abandoned trusts under its control and tighten oversight of the trusts.

The Liechtenstein official also said that authorities are in touch with their international counterparts and that no trust fund assets will be transferred to persons on the It is closely tied to Switzerland, using its currency, the franc, but also enjoys the freedom to do business in the European Union's single market.

The country, which has been criticized in the past for hiding the fortunes of wealthy individuals, has implemented reforms and joined the International Monetary Fund.

According to two people familiar with the situation, it once housed about 80,000 tax trusts but now has about 20,000, equivalent to about one trust fund per two residents.

The crackdown on Liechtenstein followed similar pressure on neighboring Austria and Switzerland.

This episode, which took place in a sleepy Alpine enclave run by a billionaire princely family, also shows how deep and opaque Russia's business ties to Europe remain more than three years after Russia invaded Ukraine.

Lichtenstein is a tiny principality nestled in the Alps between Switzerland and Austria. Despite its modest size (about 160 square kilometers and less than 40,000 inhabitants), the country is known for its high standard of living.

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