Legislation and Supervisory Authorities
VP Bank Ltd, Vaduz, is constituted as a joint-stock company under Liechtenstein law. It is the parent company of VP Bank Group. The competent supervisory body in the country of its registered office is the Financial Market Authority (FMA) Liechtenstein. As the registered shares A of the parent company are listed on the SIX Swiss Exchange, VP Bank is also subject to the rules and regulations issued by SIX on the basis of the legislation pertaining to stock exchanges, in particular, the Financial Market Infrastructure Law. The business activities of VP Bank Group are supervised by the competent local authorities of each country in which the Group is active through subsidiary companies or representative offices.
In Liechtenstein, the activities of VP Bank are subject primarily to the Act on Banks and Securities Firms (Banking Act, BankA) of 21 October 1992, as well as the Ordinance on Banks and Securities Firms (Banking Ordinance, FL-BankO) of 22 February 1994. The Banking Act lays down the framework for the supervisory activities of the FMA. The latter – together with the external banking-law auditors, who must in turn possess a licence from the FMA and are also under its supervision – constitutes the main pillar of the Liechtenstein system of supervision.
Under the Banking Act, banks and securities firms in Liechtenstein can offer a comprehensive array of financial services. The Law on Professional Due Diligence to Combat Money Laundering, Organised Crime and Terrorist Financing (Due Diligence Act, DDA) of 11 December 2008 and its related Ordinance (Due Diligence Ordinance, DDO) of 17 February 2009 – in conjunction with the article on money-laundering contained in Art. 165 of the Liechtenstein Penal Code – constitute the relevant legal basis governing the entire financial services sector in Liechtenstein subject to the due-diligence requirements. These were revised on repeated occasions and comply with international requirements and standards.
Within the scope of its business activities, and the financial services offered by it, VP Bank must observe, in particular, the following laws and related ordinances:
Payment Services Act (PSA);
Law on Certain Undertakings for Collective Investments in Transferable Securities (UCITSA);
Investment Undertakings Act, (IUA);
Law on Alternative Investment Fund Managers (AIFMA)
Law Governing the Disclosure of Information Relating to Issuers of Securities (Disclosure Act, DA);
Securities Prospectus Act (SPA);
Law Against Market Abuse in the Trading of Financial Instruments (Market Abuse Act, MAA);
Law Governing Takeover Offers (Takeover Act, TOA);
Act on the Recovery and Resolution of Banks and Securities Firms (Bank Recovery and Resolution Law; BRRA);
Persons and Companies Act (PCA).
The following discusses several developments of relevance from the perspective of regulating financial markets and related pertinent legal bases which, during the past financial year, have been revised, enacted or are likely to be of relevance in the future.
General Data Protection Regulation (GDPR)
With its Regulation 2016/679, the EU intends to harmonise data protection in the processing of data of natural persons Europe-wide. In particular, the obligations to inform and make disclosure will be reinforced as well as new comprehensive documentation obligations introduced. The processers are to provide evidence at any time to the authorities, upon demand, that the existing guidelines are being complied with (processing lists, system and process descriptions). The powers of authority of the supervisory authorities are broadened and the threat of sanctions massively increased. The GDPR was implemented in Liechtenstein within the framework of the complete revision of the Law on Data Protection set out in LGBl. 2018 Nr. 272 (published on 7 December 2018) and took effect on 1 January 2019.
Deposit Guarantee Schemes Directive
With the Deposit Guarantee Schemes Directive, clients should gain improved access to deposit-guarantee systems thereby reinforcing their confidence in the financial stability of the European Economic Area (EEA). The Directive concerns particularly the Deposit Guarantee and Investor Compensation Foundation PCC (EAS Liechtenstein). The new prescriptions demand a more comprehensive and more precisely defined cover as well as shorter reimbursement deadlines. A significant expansion of the operations of EAS is foreseeable.
From the perspective of the bank, an information sheet with details of the deposit guarantee is to be made available to the clients annually. Also, account statements for the accounts concerned are to contain informational note disclosures thereon.
The recently created Deposit Guarantee and Investor Compensation Act (DGIA) on this subject will most probably enter into law in May 2019.
The previous Payment Services Directive 2007/64/EG (PSD) was repealed and replaced by the EU Directive 2015/2366 on payment services in the internal market (Payment Services Directive, PSD 2).
In comparison to the previous PSD, PSD 2 broadens the scope of application to include payments with non-EU countries as well as in foreign currencies and introduces increased obligations of transparency and informational requirements. Also, consumer protection and security requirements are to be reinforced. In addition, the rules provide for the creation of two further types of payment service providers and third-party providers: payment initiator service providers as well as account information service providers. If need be, banks must grant access by the latter to client accounts using special interfaces.
PSD 2 is still in the process of being transposed into EEA law. In Liechtenstein, in view of the passport required for payment service providers from the EU, it should be implemented by means of the prior transposition into law at the national level and through the enactment of a new, totally revised Act on Payment Services (PSA) which in all probability will become law on 1 October 2019.
Payment Accounts Directive
On 23 July 2014, the EU issued the Directive 2014/92/EU (Payment Accounts Directive). This Directive encompasses essentially the following points:
The right to a payment account with basic features (so-called “basic account”) in order to guarantee access to a payment account (keyword “financial inclusion”) by all legitimate consumers;
Transparency and comparability of fees for payment accounts (fee information and fee overview as well as a website with comparative details);
Provision of payment account exchange services by banks.
The EU Directive is still in the process of being transposed into EEA law. It should be implemented in Liechtenstein through the creation of a new Law on Payment Accounts (PAL).
Blockchain Act (RTA)
In mid-November 2018, the consultation process concerning the “Creation of a Law concerning Transaction Systems based upon Reliable Technologies (RT) (Blockchain Act; RT Act; RTA)” was concluded.
The law is designed to clarify the requirements to be applied for important activities on blockchain systems in order to enhance the protection of customers, on the one hand, and to reduce possible reputational risks for Liechtenstein, on the other.
With the RTA, Liechtenstein is one of the first countries to attempt to create a regulatory framework for blockchain applications. The date of implementation is still open.
Mortgage Credit Directive (MCD)
The Mortgage Credit Directive (RL 2014/17/EU; “MCD”) took effect in the EU on 20 March 2014 and complements the existing guidelines on consumer protection, misleading and comparative advertising as well as unfair business practices in the area of residential real-estate loans. The directive is designed to enhance information for consumers on mortgage and similar credit products and aims to establish a single market for residential real-estate loans.
The MCD has not yet been incorporated into the EEA Agreement and is in the course of being transposed. In order to enable implementation in Liechtenstein on a timely basis, it is planned to undertake a public consultation process for the implementation of the MCD (creation of a Law on Mortgage and Housing Loans, MHLA), in all probability at the beginning of 2019. The date on which the MHLA will enter into force is scheduled for 1 January 2020.
European Market Infrastructure Regulation (EMIR)
In September 2009, the G20 countries agreed that all standardised OTC derivatives contracts are to be processed via a central counterparty and derivatives contracts are to be reported to a transaction register. The EU Commission gave recognition to this desire by issuing Regulation (EU) No. 648/2012 of 4 July 2012 concerning OTC derivatives, central counterparties and a transaction register (European Market Infrastructure Regulation, EMIR). The obligations under EMIR are already in force in the EU.
The main regulation (EMIR) was transposed into the EEA Agreement as of 1 July 2017. Based on the resolutions passed by the EEA Joint Committee on 31 May 2018 concerning the transposition, the legal bases of EMIR became largely applicable as of 1 June 2018. Following the expiry of various transitional deadlines, the various duties imposed by EMIR are, from now on, to be complied with in all EEA countries. The date on which the collateral-exchange obligations are to be adopted in the EEA Agreement (Delegated Regulation 2016/2251) is still open.
Shareholders’ Directive II and Implementing Ordinance
On 3 September 2018, the EU issued the Implementing Ordinance 2018/1212 laying down minimum requirements in implementation of the Directive on shareholders’ rights 2007/36/EG, the provisions of which were most recently amended on 17 May 2017. This Implementing Ordinance encompasses principally the following matters:
Standardised formats for the transmission of information by intermediaries and issuers as well as the application for disclosure of information on the identity of shareholders; and
Facilitation of the exercise of shareholders’ rights with regard to Annual General Meetings as well as communications as to business events to the intermediary or shareholder.
The implementation needs as well as the timetable are still being investigated.
Law on the Register of Beneficial Owners of Domestic Legal Entities (RBODLEA)
In order to ensure on-going compliance with guidelines and to guarantee access to international markets, the Law on the Register of Beneficial Owners of Domestic Legal Entities (RBODLEA) has been established (LGBl. 2019 Nr. 8) in implementation of Art. 30 and 31 of the 4th Money-Laundering Directive (RL 2015/849/EU).
The register which shall contain details of the beneficial owner(s) of domestic companies or other legal entities as well as trust companies within the meaning of Art. 31 of the 4th Money-Laundering Directive, is to be maintained by the Office of Justice. In addition, the law sets out the duties of domestic legal entities and those subject to due diligence requirements as well as provisions on data protection (data processing and disclosure of data). The entry into force will coincide with the incorporation of Directive (EU) 2015/849 into the EEA agreement.
Amendment of the Penal Code (PC) and Code of Criminal Procedure (CCP)
The amendment of the Penal Code and Code of Criminal Procedure was dealt with in first reading in the Liechtenstein Parliament (“Landtag”) on 5 December 2018 (Reports and Motions 102/2018). This draft bill is designed to counter the shortcomings regarding effectiveness raised in the 2014 Moneyval country review. The draft encompasses in particular the broadening of the list of predicate offences to include all offences which are punishable by terms of imprisonment of at least 1 year, the increase of the range of penalties in the case of qualified offences and the extension of the list of money-laundering offences to include saved expenses. Furthermore, amendments in the code of criminal procedure are designed to enable a final hearing before the criminal court and sentencing even in the absence of the defendant.
Act on Due Diligence (DDA) and the Due Diligence Ordinance (DDO)
The 5th Money-Laundering Directive is to be implemented in 2020 on a European level. Thus provides, inter alia, for an extension of the list of persons or entities covered by the legislation as well as the scope of application of the Directive and defines enhanced duties of due diligence in relation to high-risk countries and lays down increased powers of central financial intelligence units. Centralised registers or electronic data retrieval systems are to be established which enable the timely determination of all individuals or legal entities which hold or control payment accounts or safety deposit boxes with credit institutions in an EU/EEA country. Liechtenstein, as a member of the European Economic Area (EEA), must ensure the implementation of all minimum requirements provided for in the Directive.
Market Abuse Regulation (MAR)
The Market Abuse Regulation (Regulation No. 596/2014; Market Abuse Regulation/”MAR”) was published in the Official Journal of the European Union in 2014 and has been in force in EU countries since 2016. The underlying objective of this provision is the creation of a common legal framework regarding insider transactions, the disclosure of insider information and market manipulation as well as the taking of measures to prevent market abuse. In this manner, the integrity of the market and the protection of investors should be reinforced. In Liechtenstein, the MAR will become law following incorporation into the EEA Agreement most probably in 2019 together its implementation at a national level. The current Law on Market Abuse will be repealed. VP Bank has adapted its systems and processes in order to fulfil the requirements and will further optimise the measures taken.
Automatic Exchange of Information
On 1 January 2016, Liechtenstein has introduced the automatic exchange of information (AEOI). The initial AEOI reporting for the 2016 reporting period took place in 2017 and then continued accordingly in subsequent years.
As from 1 January 2019, the relevant data will be exchanged with 108 AEOI partner countries.
Important links to legislation and the Liechtenstein financial centre