Liechtenstein's Gold in More Diligent Hands
Liechtenstein's almost surreptitiously adds bullion to the scope of money laundering regulation – to the unexpected relief of vaults, clients, and banks.
In April, Liechtenstein quietly closed a loophole in its due
diligence requirements by including third-party bullion assets. Although the
step barely registered in Swiss finance circles, Liechtenstein's precious
metals dealers, vaults, and duty-free warehouses now look to the future more
optimistically.
The step is seen as a way of adapting the country's
anti-money laundering laws to European standards despite the additional due
diligence required to store gold, silver and other precious metals under
Liechtenstein Financial Market Authority's (FMA) supervision.
Fully Regulated for the First Time
The new rules are an opportunity for the different precious
metals players, and banks, as both Switzerland and Liechtenstein now have fully
regulated markets for gold and precious metals for the first time.
Service providers such as OZL, better known as
Liechtenstein's Fort Knox, are counting on rising revenues as result, Axel Paul
Diegelmann He assumes the demand for precious metals storage will increase
strongly.
A fully regulated environment makes life easier,
particularly for institutional investors, as it provides full transparency and
reliability», says the precious metals expert.
The Swiss-Liechtenstein Advantage
Diegelmann commands a Swiss-Liechtenstein «gold empire» that
includes trade and storage. Besides the OLZ, the group also owns the Trisuna
warehouse and Rheingold Edelmetall in Triesen. Precious metals trading is
located in Appenzell's Teufen (Switzerland). According to Diegelmann, with the
stronger regulation, Swiss-Liechtenstein has a meaningful advantage worldwide.
The expanded scope is also positive for banks. Previously,
internal compliance supervision and transaction monitoring of precious metals
trades stopped whenever third party storage providers came into play.
Gold and precious metals were taken out of financial market
circulation as soon as they disappeared into a Liechtenstein vault. Now that
the duty-free warehouses and vaults are regulated as stringently as banks, gold
will remain «bankable» within both jurisdictions, meaning it can be put back
into circulation at any time.
And, indeed, Swiss banks have been losing market share in
recent years to gold and precious metals traders, and on-line sellers.
Germans Favor Liechtenstein
That has something to do with a growing lack of confidence
in the financial and monetary system but it also has compliance reasons given
the processing of vault and security deposit boxes has become increasingly
difficult.
It is not known how many thousands of tons of gold and
silver are in Liechtenstein's vaults. Germans strongly favor the principality
and it has become a serious competitor to customs-free warehouses.
The security of the Liechtenstein «Fort Knox» is not even
key. Clients are simply trying to avoid an asset from falling into government
hands, something that would not be guaranteed in Swiss bank vaults in extremis.
Duty-free warehouses are anonymous and it is simply not
known how much gold or other physical assets are there. Estimates are in the
hundreds of billions in customs-free warehouses worldwide.
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