Russia sanctions trigger European trust fund crisis
At the center of the crisis are so-called 'zombie' trusts; funds that are legally recognized but remain frozen after fiduciaries (asset managers acting on others' behalf) and board directors resigned en masse to avoid falling foul of US restrictions.
'We are talking about multibillion-dollar floating zombie trusts. And there is no solution yet. I have never seen anything like it,' said a Vaduz-based lawyer whose clients include several of the frozen entities.
The Alpine microstate – a key hub for Europe's ultra-wealthy, long prized for its favorable tax and legal frameworks – adopted EU sanctions against Moscow following the escalation of the Ukraine conflict in 2022. However, US measures imposed in 2024 on Liechtenstein-based entities linked to Russian nationals have pushed the principality's vast trust industry into turmoil.
Trusts hold anything from $5 million in cash to yachts, planes, family offices, and luxury real estate. According to the report, many of the affected assets belong to non-sanctioned Russians living in France, Italy, or the UAE.
Last year, Washington warned Liechtenstein and other European states it could impose secondary sanctions on institutions working with certain Russian clients – even if they're not individually sanctioned.
In September 2024 Liechtenstein's financial regulator advised that cutting ties with exposed clients was 'the only appropriate' way to mitigate legal and reputational risk. At least 350 entities are currently in limbo, with 85 of them orphaned. Officials and legal experts warn as many as 800 trusts could ultimately be affected.
The government has launched an emergency task force to tackle the problem, the FT wrote. Justice official Martin Alge confirmed the search for new board members and liquidators is ongoing but difficult.
Another concern, lawyers warn, is potential pressure from Moscow. 'There is a risk from the US but also from Russia now... an unprecedented and unparalleled risk from the other side that is equally powerful,' said Johannes Gasser, partner at Gasser Partner. Moscow has condemned the 'illegal' Western sanctions, warning of tit-for-tat measures and saying Western states are damaging their own economies.
Bankers and lawyers say the crisis could spill into Liechtenstein's broader financial sector – including major banks – and threaten the country's standing as a trusted global wealth hub, known for its legal protections and insulation from geopolitical fallout.
'This is starting to be problematic for the Liechtenstein financial center,' warned MP Thomas Vogt.
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