Liechtenstein Discretion Privilege

(* the following description about Liechtenstein Discretion Privilege is from publication of Alexander T. Skreiner - "The Advantages of Liechtenstein Annuities and Life Insurance")

Discretion has also become a key client requirement, and international studies have shown that whereas secrecy protection should apply to the legitimate interests of the individual, they must not disregard the equally legitimate interests of the general public, such as measures designed to combat money laundering, action against terrorism, and organized crime. In this area, the discretionary regulations of Liechtenstein bank and insurance secrecy should also be understood as data protection and not as protection against actions.

The insurance secrecy rules in Article 44 of the law on insurance supervision were based on the proven practice of bank secrecy and protect the legitimate private sphere of the insurance client, but not criminal practices. Thus insurance secrecy is lifted in cases of criminal prosecution, with the exception of violations of non-national tax regulations.The legal regulations make explicit provision for lifting insurance secrecy when the relevant information is indispensable for pursuing domestic or foreign criminal proceedings. In the case of foreign proceedings, the question of whether and to what degree such information is made available will depend on the provisions of the law on legal assistance. Although this procedure has now been made more rigorous, policy holders retain sufficient legal protection. However, this strict insurance secrecy can be lifted when there is justified suspicion of money laundering on the basis of the transactions carried out.

Another aspect of the discretion privilege is the fact that life assurance companies are economically entitled to the assets they hold in the cover stock (irrespective of whether this is an individual or a joint cover stock). In the case of shares, for example, this means that the life assurance company rather than the policy holder whose policy contains these shares becomes a shareholder and must be recorded in a share register.

The resulting discretion with regard to the depositary bank must not be confused with anonymity or anonymous accounts. All Liechtenstein insurance companies are, like the banks, subject to the regulations of the due diligence legislation. At the conclusion of an insurance contract, therefore, the life insurance companies must check the identity of the policy holder (the contractual partner) and the insured person and must check or credibly show economic entitlement to the assets as well as their origin. The identity of the beneficiary and his or her economic entitlement must also be determined and recorded at the time of payout. With the implementation of rigorous due diligence legislation in 2000 (revised in 2008), Liechtenstein decided to pursue a policy of quality and cooperation with international efforts to combat money laundering.


Return from Discretion Privilege to Life Insurance Advantages