• a trustee can be an individual or a corporation or association; one trustee must be a Liechtenstein-resident individual with appropriate professional qualifications; trustees have various specified duties of care towards the trustor and the trust property; trustees who carry on business as such must keep an inventory of their trusteeships and must keep each trust's assets separate from other assets; if trust assets are deposited with banks they must again be kept separate;

• trustees are liable for breach of trust to the full extent of their assets; joint trustees must normally act jointly and are jointly liable; supervision of the trust is ultimately under the Court, even if the Trust Deed specifies alternative supervision;

• the trustee must keep a schedule of trust assets and update it yearly, submitting trust accounts as specified in the Trust Deed or to the Court;

• the interests of named beneficiaries can be embodied in trust certificates, which if registered are transferable securities;

• being a civil law jurisdiction, trust assets are vulnerable to forced heirship provisions, although there are time limitations on such claims;

• in general, there is a limitation of one year on creditors' claims; the trustee's creditors have no access to the trust assets; the trustor's creditors have access to trust property only under certain defined circumstances, one of which is under law of succession; the beneficiaries' creditors have access to the trust assets only if the beneficiary has a claim to payment, and if the trust deed does not bar distraint; the trust property's creditors have limited access to the trustee but only to the trust property if the trustee enjoys specific liability cover from the property.

• trust documents, including the Trust Deed, can be in any language.

Trusts may be set up under foreign law, but may not have more favourable treatment than would apply under Liechtenstein law. A trust under foreign law is a Liechtehnstein Trust and subject to local taxation. Liechtenstein law applies to a foreign trust if the trustee, or more than half of the trustees, are resident in Liechtenstein, if the trust property is in Liechtenstein, or if the Trust Deed says so

In response to its inclusion on the FATF money laundering blacklist in 2000, Leichtenstein enacted new money laundering legislation, including a new regulation in relation to the law on the duty of care, which had been passed by parliament in its September 2000 session and came into force on January 1 2001. The government also abolished the existing privilege of trustees and lawyers by which they did not have to disclose the identity of their clients to banks where funds are invested.

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Liechtenstein Banking Law

The Liechtenstein banking sector is regulated under the Law on Banks and Finance Companies 1993; this law was substantially amended following Liechtenstein's entry into the EEA in 1995, through the Law on Banks and Finance Companies 1998. The Act concerning Banks and Savings Funds 1960 imposes heavy penalties for breaches of professional secrecy. Other recent legislation dealt with due diligence on the part of bankers accepting deposits or assets, installing 'know your customer' rules.

The "know your customer" system is legally compulsory (and has been since October 2000) for all banks that belong to the Liechtenstein Bankers' Association. This means that banks in Liechtenstein, previously known as one of Europe's most secretive tax havens, can no longer guarantee anonymity for new and existing account holders, although further account details will remain under normal banking secrecy agreements.

In December, 2000, Liechtenstein signed the United Nations Convention Against Transnational Organised Crime in Palermo, Sicily, to demonstrate the country's commitment to stamping out money laundering.

Also in December of that year, Liechtenstein announced that it had issued a new regulation in relation to the law on the duty of care, which had been passed by parliament in its September 2000 session. The revised law on the duty of care and the associated regulation came into force on 1 January 2001.

Late in 2003, Parliament approved the adoption of EU Directive 2001/97/EG, which amended the existing Directive on the prevention of the use of financial systems for money laundering purposes.

Vice Parliamentary President, Peter Wolff complained: "The report and motion of the government doesn't mention that this regulation opens up the issue of fraudulent tax evasion. I gained the impression that the government intends to sweep the critical points in the directive under the carpet."

In August 2004, the Government decided on a total revision of the Due Diligence Act; the revised Due Diligence Act entered into force on 1 January 2005.

Prime Minister Otmar Hasler explained that: 'In order to enhance the efficiency and attractiveness of the Liechtenstein financial center, due diligence provisions must be further developed and modernized in accordance with the changed European guidelines.'

In addition to implementing the 2nd EU Directive on Money Laundering, the goal of the revision of the Due Diligence Act was to create a modern law that takes into account the newest developments and international standards in the prevention of money laundering, organized crime, and terrorist financing.

'For the benefit of the international community, Liechtenstein has been and continues to be willing to take action against such grave abuses,' Prime Minister Hasler explained. 'Against this backdrop, the Government endeavors to maintain the 'high level of compliance' ascertained by the International Monetary Fund with respect to the suppression of money laundering, organized crime, and financing of terrorism. In the context of international recognition, due diligence legislation will also take into account the 40 revised recommendations and the 8 special recommendations on terrorist financing of the FATF and the recommendations arising from the MONEYVAL and IMF assessments.'

In 2008, the banking sector became the centre of an international row over tax evasion, which was sparked by the use by German taxpayers of Liechtenstein entities to duck their tax liabilities in their home country.

The scandal first broke after it emerged that the home of Klaus Zumwinkel, Chief Executive of Deutsche Post, one of Germany's largest companies, had been raided by police as part of a tax evasion investigation. He was accused of hiding about EUR1 million from German tax collectors in Liechtenstein.

Zumwinkel was subsequently forced to resign by Deutsche Post, but the affair did not end there. On Monday, it was reported that several more homes and offices in the Frankfurt area and in southern Germany have been raided, after the intelligence services received information from a former employee of a Liechtenstein bank about hundreds of wealthy German clients.

The informant, an ex-employee of LGT, Liechtenstein's largest bank, was said to have handed over a disc to the German intelligence service, the BND, containing confidential information on more than 1,000 clients. The BND was believed to have paid the informant a sum of between EUR4 and EUR5 million for the disc.

Following the revelation, Prince Alois reiterated his message that the jurisdiction would continue to improve its financial sector regulation, but that this would not come at the expense of an erosion in individual privacy.

"The Liechtenstein financial centre has already undertaken considerable reform efforts in recent years, but more reforms will be necessary, not only to ensure the competitiveness of the financial centre for the future, but also to enhance it," the Hereditary Prince told Parliament.

"Other financial centres have caught up by creating new, attractive business environments, while the international pressure has risen on locations offering a high level of protection of privacy," he observed.

The scandal had repercussions throughout the world, and in February 2008, US Senator Carl Levin (D-MI), announced that he intended to investigate whether US citizens may have had dealings with the Liechtenstein bank at the centre of the row over tax evasion and offshore secrecy laws.

Levin, who had long campaigned for legislation to prevent Americans from moving money offshore, recently revealed that the Senate Permanent Committee on Investigations, which he chairs, would launch a probe into reports that the stolen computer disc containing details of clients of Liechtenstein's LGT Bank also included several American names.

It also emerged that month that the Internal Revenue Service had initiated enforcement action involving more than 100 US taxpayers, to ensure proper income reporting and tax payment in connection with accounts in Liechtenstein.

The national tax administrations of Australia, Canada, France, Italy, New Zealand, Sweden, United Kingdom, and the United States of America, all member countries of the OECD's Forum on Tax Administration (FTA), had also announced that they were working together, following revelations that Liechtenstein accounts were being used for tax avoidance and evasion.

"Combating off-shore tax avoidance and evasion are high priorities for the IRS," explained IRS Acting Commissioner Linda Stiff.

“We are determined to protect the United States tax system from abuse and ensure that taxpayers pay what they owe. We will use all our authority to fairly and effectively enforce our tax laws. It should be clear from recent events that there is no safe hiding place for the proceeds of tax avoidance and evasion. Anyone with hidden income and gains would be well-advised to make a prompt and complete disclosure to the Internal Revenue Service," she added.

The arrival of President Obama in the White House has seen the proposal of several anti-offshore intiaitives, including the Foreign Account Tax Compliance Act, which has given the US Internal Revenue Service new tools to "detect, deter and discourage offshore tax abuses." The legislation, approved by Congress in March 2010: imposes a 30% withholding on US source payments to foreign financial institutions, foreign trusts, and foreign corporations that do not agree to disclose their US account holders and owners to the IRS; requires taxpayers to disclose their foreign accounts on their US tax returns; increases the statute of limitations to six years for failure to report certain offshore transactions and income; clarifies when a foreign trust is considered to have a US beneficiary; and treats substitute dividend and dividend equivalent payments to foreign persons as dividends for purposes of US withholding.

In August 2009, the UK government announced details of the “groundbreaking” disclosure agreement with Liechtenstein that gives UK taxpayers with undisclosed accounts in the Alpine jurisdiction the opportunity to disclose income at a reduced penalty, or face having their accounts shut down.

The so-called Liechtenstein Disclosure Facility (LDF) agreement, signed by the two governments on August 11 along with a broader Tax and Information Exchange Agreement, will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last 10 years providing that the account holder makes a full disclosure to HM Revenue and Customs (HMRC).

However, those who do not make a full disclosure by the end of the program, which runs from September 1, 2009 to March 31, 2015, will find their Liechtenstein accounts closed down. They may also face penalties on any unpaid tax of up to 100%.