Praetorian Trust

The article is unfortunately one of the few objective ones out there. Read for an other take on how the world really looks like.

http://www.economist.com/PrinterFriendly.cfm?story_id=13382279

Almost exactly a year ago we reported in our March 2008 Newsletter the various negative press reports about Liechtenstein due to the publication of stolen data from the LGT Trust Company here in Vaduz. The German press in particular resorted to sensationalism and many other international journals were not far behind.

In the meantime the world has moved forward and the global melt down of international finance caused by irresponsible investment banking and the ensuing business recession has made the subject of tax collection a convenient theme to distract attention from certain nations’ disastrous policies during the last decade. Such countries have accrued no reserves during the biblical seven good years and are quite unprepared for the stormy times ahead. Therefore, it is not surprising that the G 20 Meeting to be held in London as of the 2 April includes on the agenda discussions on unfair taxation, tax havens and a “black list” of measures to be undertaken against such countries. A draft list dated early March lists the original 44 countries listed by the FATF in 2000. The threat of a re-listing has led to new initiatives being undertaken by potential candidates. Liechtenstein has been very diligent in moving forward and a catalogue of ideas resulted in the “Liechtenstein Declaration” issued 12th March 2009. This is attached in full herewith. The press conference at which this was announced was attended by HSH Hereditary Prince Alois of Liechtenstein, Otmar Hasler and Klaus Tschütscher the designated Prime Minister. The international press coverage was enormous. It was also announced that negotiations would commence with Germany and the UK. The UK HMRC published on their website a press release simultaneously to the Liechtenstein Press Conference titled “HMRC Welcomes Important First Steps by Liechtenstein on the Path to Transparency”. This is also attached. The HMRC release was very welcome and most unusual and the negotiations between both countries as sovereign states will commence in Bern, Switzerland, varying between the British Embassy and the Liechtenstein Embassy there as of April 2009.

Liechtenstein’s actions provoked also a rush of activity from nations in a similar position. Austria and Luxembourg followed with a similar declaration only preceded by Andorra who followed Liechtenstein. A day later Switzerland followed on.

So does this mean an end to bank secrecy? The answer is clearly no. It has been unobserved that between EU/EEA members the “principle of trust” and not questioning the content of applications between EU/EEA nations via legal assistance and national courts is already long in force. Such applications are always garnished with the implication of money laundering etc.

The Liechtenstein position is that they are prepared to offer in bilateral DTA’s or TIEAs similar conditions to those negotiated with the USA. One of the important aspects of the US - TIEA is the obligation to respond only to substantiated enquiries and so-called fishing expeditions or “John Doe” enquiries are explicitly excluded.

The US Liechtenstein TIEA needs to be validated by the Liechtenstein Parliament and of course the modus operandi of implementation needs to be quantified. There will be a form of legal defence against such applications for information, but the previous possibility by appealing through various court levels and delaying enquiries for several years as in the past will be strictly limited.

The now published reform of the foundation law in Liechtenstein had nothing to do with tax evasion. Then, as now, reforms were already underway when the allegations were made. The reforms 1996 – 2001 and ensuing regulations produced regulatory and supervisory standards, which can match any in Europe in the fight against money laundering and terrorism. The latest due diligence regulations are up to the highest standards. It is conveniently forgotten or ignored that international fraud is due to the lack of supervision in the US and the UK or other EU states. The collapse of Northern Rock in the UK was due to the incompetence of the FSA.

The Stanford bank insolvency was due to a lack of SEC regulation and of course the same applies to the Madoff “Ponzi scheme”.

The first banks in Germany to require state help were those regulated by the state. The Hypo Real Estate in Munich in common with IKB and other banks were well equipped with politicians and trade unionists of all walks of life on their supervisory boards and traded unhindered by them. How much more convenient it is to point the finger elsewhere.

Indeed, it was the vigilance of the Liechtenstein authorities that not long ago alerted the German authorities to large scale illegal financial transactions by a German multinational company via Liechtenstein. Top management and Board members of Siemens, the company involved were forced to resign and many are being prosecuted. It is important to note that it was the Liechtenstein procedures that led to the discovery not the often well vaunted German regulations.

Article provided by Alex Jeeves our Liechtenstein Trustee

Bloomberg reports that Switzerland is considering concessions to the G-20 after Liechtenstein and Andorra agreed to demands from the OECD to amend laws protecting client confidentiality.

“This clearly puts more pressure on Switzerland,” said a professor at the Graduate Institute in Geneva and a former economist at the Federal Reserve Bank of New York. “Business as usual a couple months from now is not an option.”

Liechtenstein has agreed to share information with the U.S. that undercuts the concept of bank secrecy. Henceforth requests from the U.S., Liechtenstein will lift bank secrecy when the U.S. requests evidence of tax evasion, as well as money laundering or tax fraud. Until this agreement, tax evasion in Liechtenstein was a civil and not a criminal offense. The U.S. must provide evidence to authorities in Liechtenstein prior to the release of client confidential information and will not allow so called fishing expeditions by the U.S.

According to Bloomberg reports the Swiss Finance Minister has said he’s willing to collect taxes on offshore accounts for the U.S. Justice Minister offered cooperation on some cases of tax evasion.  In addition, Swiss politicians in the largest Swiss political party, the Swiss People’s Party, are fighting to preserve Swiss bank secrecy from the long reach of the U.S. justice system.

“Liechtenstein should not be an example for us,” said Fehr, who represents the canton of Zurich. “We are putting pressure on the Swiss government to stay steadfast on the issue of banking secrecy” and “anchor” secrecy in the constitution.

According to estimates produced in Senate hearings in the U.S by Michigan Senator Carl Levin the U.S. losses about $100 billion in taxes annually.

The  OECD has prepared a list of countries that do not  meet its standards of information disclosure on tax matters, including Austria, Luxembourg and Switzerland.  Howevere, according to one expert following the debate between Switzerland and the OECD :

“The threat is the very great pressure being put on Switzerland in the context of the G-20 meeting… “Switzerland isn’t technically a tax haven, and even if France and Germany want it to be on the official list of the OECD, that will be difficult given that Switzerland is a member.”

The Group of 20 leading developed and emerging economies are preparing to take on Tax havens during their meeting in early April. According the the French newspaper La Tribune, the OECD has added Switzerland, Luxembourg, Austria, Singapore, and Hong Kong to their list of uncooperative tax havens which already includes Andorra, Liechtenstein and Monaco.

The French and German governments wish to keep the taxation issue high on the G-20 agenda to keep pressure on Switzerland and Luxembourg to “crack the code” and eliminate bank secrecy once and for all. These countries see the issue as a way to get back lost revenues and are using the exposure to bolster political ratings in their home countries during this severe economic downturn.

The OECD has provided a list of countries to the G-20 but denies that this is a “blacklist”, although a spokesman for the OECD that it the list is intended to increase the pressure on Switzerland and others to cooperate further on tax and bank secrecy issues. The OECD official said that Singapore, Jersey and the Isle of Man where taking steps to conform to the European norms for cooperation and disclosure.

A French official, speaking off the record about Switzerland and Luxembourg, said, “The heat is on them, that’s for sure.” The official added: “The desire from Europe is to send a very strong signal. We don’t want to regulate how every country operates and sets tax, but banking secrecy is not acceptable.”

Banking secrecy became Swiss law in the 1930s. Last month the largest Swiss bank, UBS, agreed to pay a fine of $780 million and disclose the identity of some  American clients to the authorities in the United States.

For now, the Swiss government determined not to compromise with the G-20 on bank secrecy. Last week, from the Swiss capital in  Bern government officials said that it “resolutely rejected” criticism of its banking secrecy.

The Swiss Bankers Association released a survey on Wednesday demonstrating that banking secrecy is supported by almost four-fifths of the Swiss population, which wants to preserve client confidentiality.