Germany agrees to share information about secret bank accounts Read more: Germany agrees to share information about secret bank accounts

German has assured finance minister Pranab Mukhejee that it would pass on information about Indian citizens holding secret bank accounts.

The assurance came at a bilateral meeting between Mukherjee and German finance minister Wolfgang Schaeuble on the sidelines of the meeting of the G20 finance ministers and central bank governors that concluded here on Saturday.

Mukherjee appreciated the role of Germany in providing information about Indian citizens having secret bank accounts in the LGT bank of Liechtenstein.

Germany has earlier provided names of some Indians having secret accounts in the Liechtenstein Bank.

"German finance minister ... assured him (Mukherjee) that as and when they have such information, they will pass it on to the Indian government", said a release.

Germany, it added, has also agreed to revise Double Taxation Avoidance Agreement (DTAA) and incorporate clauses to facilitate exchange of information between the law enforcement agencies of the two countries.

The negotiations to amend the DTAA will start soon, the release said, adding Mukherjee has requested for early amendments to the tax treaty.

Under the existing treaty, Germany cannot share information for non tax purposes.

German tax authorities, Mukherjee added, need to share information with India's Enforcement Directorate, a body that deals with offences relating to violation of foreign exchange laws.

Raising similar issues with French minister for economy, industry and employment Christine Lagarde, Mukherjee said there was need to put pressure on tax havens to share information to prevent money laundering.

Mukherjee also recalled the commitment of the French minister to share information on Indian monies in Swiss banks, the release said.

The finance minister asked his French counterpart to initiate early negotiations for amending the DTAA between the two countries.

Lagarde said the French team was working on the amendment proposed by India on the DTAA and the issue of providing information for tax purposes would be discussed shortly with Indian administration.

The two leaders also discussed a number of bilateral and multilateral issues and underlined the need for greater engagement between the two countries in the fields of energy, nuclear power, water treatment etc.

Source: The Times of India

Liechtenstein Implements 3rd Money Laundering Directive

by Ulrika Lomas, Tax-News.com, Brussels


Liechtenstein has set out the goal of applying leading standards in the fight against money laundering and financing of terrorism by implementing the 3rd EU Money Laundering Directive of the EU, according to the jurisdiction's government.

The government revealed in a posting on its website that the adoption of the directive, a recommendation of the IMF, will be transposed into national law by way of a revision of the Due Diligence Act.

"The Liechtenstein financial centre can only assert itself in the tightened international competition among business locations if the highest international standards are followed in the application of the law. The evaluation by the IMF gave Liechtenstein good marks with respect to implementation and application of the international standards for the prevention and suppression of money laundering," the government stated.

The IMF report also issued several recommendations to improve the prevention of criminal acts. For instance, the IMF voiced some doubts whether the scope of the defensive measures is already extensive enough to fully cover the relevant FATF recommendations. In the fight against financing of terrorism, the IMF suggested modifying the definition of the offense, so that it covers all elements set out in the International Convention for the Suppression of the Financing of Terrorism.

However, the Liechtenstein government stated that at the time the IMF assessment was published in autumn 2007, it was already planning the implementation of the 3rd EU Money Laundering Directive and the anti-money-laundering recommendations of the FATF, as well as the FATF Special Recommendations for the suppression of terrorist financing.

A report and draft law by the Liechtenstein government are now available for implementation of the EU directive and the FATF Recommendations into national law. Other recommendations, such as enhancing the efficiency of international legal assistance and introducing the criminal liability of legal persons, will be incorporated into other ongoing legislative projects.

The Due Diligence Act originally entered into force in 2004 as part of implementation of the 2nd EU Money Laundering Directive, but the Government plans to expand due diligence obligations under the new revisions to include not just the core area of the financial sector, but also professions such as statutory auditors, accountants, and tax consultants.

Hitherto, the scope of the act has been limited to the acceptance and safekeeping of third-party assets and the formation of domiciliary companies. Under the revised law, it will be expanded to include relevant activities of natural and legal persons who, within their enterprises, are responsible for the formation of companies, exercise the function of general manager of a company, or make a domicile available.

With this expansion of due diligence, Liechtenstein says that it is confronting the danger that money laundering and terrorist financing may move to non-regulated areas.

The scope of due diligence continues to include banks and investment firms, investment undertakings and life insurances, the post office and exchange offices. The law will henceforth also cover casinos, real estate brokers, auditors, auditing companies, professional trustees, and lawyers, to the extent that they engage in financial transactions. Due diligence also covers persons and companies dealing in goods, if payment is made in cash and the amount exceeds CHF25,000 (EUR15,500).

The Government is also adopting international standards concerning the reporting requirement in the case of suspicion of money laundering and terrorist financing. In future, a reporting requirement under the Due Diligence Act will apply not only in the case of existing business relationships and completed transactions, but also in the case of attempted transactions.

"The Government is convinced that the reporting requirement in the attempt phase will enhance the level of knowledge of the FIU (Financial Intelligence Unit) with respect to critical phenomena in the financial center, thereby strengthening the early-warning system provided by the defensive measures," the government argued.

"Liechtenstein wants to take a leading position in the fight against crime and to meet international obligations. Especially in connection with the current debate concerning the protection of privacy, the Government has made clear that criminals cannot benefit from this protection," it added.

Source: Tax-News

Liechtenstein bank data expose Indian tax evaders

John Samuel Raja D / New Delhi August 18, 2008

The Indian government has received sensitive information from its German counterpart regarding tax evaders, who have channelled money in a tax haven bank in Liechtenstein, a small European country known for hosting such banks, and it is unwilling to make these details public.

It is not known at this point of time whether the information exchanged between the two countries contain details of account holders from India.

It all started in February this year, when a former employee of LGT Bank in Liechtenstein sold data on about 1,400 people to tax authorities across the world. This was followed by investigations by Germany, the US, the UK, Australia, Italy and others. After receiving the stolen data, the German government initiated action against around 600 taxpayers for possible tax evasion. It has reportedly offered to provide data to any country that seeks information.

Subsequently, India’s finance ministry wrote its first letter to German authorities in February 2008 seeking information on Indian account holders and followed it up with another letter in June 2008, the government disclosed in a reply to a Right to Information (RTI) application filed by the Indian-chapter of Transparency International.

When Transparency International asked for copies of correspondence between the two governments and the list of account holders in LGT Bank, the finance ministry replied saying that the exchange of information between India and Germany is covered under Double Taxation Avoidance Agreement (DTAA), which prohibits countries from sharing information.

“It’s not acceptable that the government is not disclosing the correspondence with the German government,” said Anupama Jha, executive director of Transparency International India.

In an e-mail response to a questionnaire sent to them, LGT Group said Indian authorities have not contacted them so far. “Due to client confidentiality laws, we are unable to disclose any client names. Also, with regard to stolen client data, we do not provide any nationality break-downs”, LGT spokesperson Christof Buri said. The German government did not respond to the questionnaire.

If the German government had given details of Indian account holders in LGT Bank, which is owned by the princely house of Liechtenstein, it will help domestic tax authorities to investigate tax evasion for money deposited in tax haven destinations. Tax haven locations thrive mainly because of difference in tax rates, often levying nil or very low taxation. Banks that operate in these locations are alleged to create complex offshore structures that will enable their clients to hide the assets from tax authorities.

This sort of tax evasion, according to a report prepared by the US senate sub-committee last month, had estimated that it cost US taxpayers $100 billion every year. LGT Group was one of the two entities named in the report.

But LGT denied the charges, saying, “Liechtenstein has very strict money laundering and KYC (Know Your Customer) regulations in place, and clients of LGT Group (as of any other Liechtenstein bank) are obliged to disclose the beneficial owner and have to give detailed information regarding the source of their assets”. But it said LGT is neither responsible for nor in control of the tax compliance of its customers.

LGT Group is a wealth and asset management group with or $91.5 billion of assets under its management.

Source: Business Standard

Liechtenstein vulnerable to money-laundering: IMF

Liechtenstein remains vulnerable to money-laundering despite efforts by authorities to tighten regulations, International Monetary Fund and Council of Europe experts said Wednesday.

The tiny Alpine principality, currently at the heart of an international tax evasion scandal, offers "discreet and flexible legal structures, strict bank secrecy and favourable tax arrangements," the IMF said in a report.

Around 90 percent of Liechtenstein's financial services business is provided to non-residents, it noted.

"By it's nature, Liechtenstein's financial sector business creates a particular money laundering risk," the IMF said.

The opaque and complex structure of the financial sector makes it very difficult to identify asset holders and thus "Liechtenstein is vulnerable, mainly in the layering phase of money laundering," the report said.

Liechtenstein recorded 616 economic crimes in 2006, more than half of the total 1,189 recorded crimes in the principality that year.

The IMF did not find any particular vulnerability to terrorist financing although it urged Liechtenstein to bring its legal definition of terrorism finance fully into line with international norms.

The Council of Europe's MONEYVAL committee (which monitors money-laundering and the financing of terrorism) also released its evaluation report Wednesday.

It concurred that Liechtenstein law makes it easier for money-laundering.

"The legal provisions may give excessive discretion to financial institutions when applying (Liechtenstein's) risk-based system," the authors said of client profiling regulations.

"Liechtenstein cannot provide mutual legal assistance relating to facts that are exclusively qualified as fiscal offences under Liechtenstein law.

"Serious organised fiscal fraud should be removed from the fiscal exemption," it concluded.

With just two prosecutions in Liechtenstein for money-laundering and no convictions, the practice of handing investigations over to foreign states where persons or organisations are registered also means Liechtenstein's judiciary lacks experience, the report said.

Liechtenstein's prime minister welcomed the IMF report and said it showed the correct policies were in place to avert abuses.

The IMF report "shows that we are on the right track with our reforms," Otmar Hasler told a press conference here.

"We have followed this path in a coherent manner so far and will continue to do so," he pledged.

Vaduz has been under scrutiny in recent weeks after Germany began investigating 600 of its citizens featuring on a client list of a Liechtenstein bank containing 1,400 names which it then made available to other nations.

The United States, Britain, Australia, Italy, France, Sweden, Canada, New Zealand, Greece and Spain have all said they too are hunting for taxpayers hiding their money in the tiny Alpine state.

http://afp.google.com/article/ALeqM5gcUrz1IqJsQLC657VihcjbxAT5zw

Inside bribery probe of Siemens

IN the spring of 2003, auditors for a bank owned by Liechtenstein's royal family spotted an unusual flurry of money transfers involving a small offshore firm called Martha Overseas.

They discovered that Martha Overseas was controlled by Prodromos Mavridis, a top executive in Greece with Siemens, the German engineering giant. Millions of euros were pouring into the account from another offshore firm controlled by a different Siemens executive based at the company's Munich headquarters.

The bank auditors in the tiny Alpine nation, on the lookout for possible terrorist-financing transactions, had instead stumbled upon one of the largest corporate bribery cases in recent history. Today, prosecutors in the US and around the world are pursuing allegations that Siemens bribed customers to win big infrastructure contracts.

Increased post-9/11 scrutiny is making it tougher for companies to camouflage payments through countries such as Switzerland and Liechtenstein, which have rolled back banking-secrecy laws. Authorities in the two nations played a quiet but central role in uncovering wrongdoing at Siemens.

In October, German prosecutors fined Siemens 201 million euros ($334.72 million) after tracing 12 million euros in bribes to Nigeria, Russia and Libya. In November, Siemens said it had identified 1.3 billion euros in suspicious transactions worldwide between 2000 and 2006.

The scandal became public when German police raided Siemens offices in November 2006. But confidential bank and court documents reviewed by The Wall Street Journal and interviews with law-enforcement officials show how the raid followed more than three years of work in untangling Siemens's money transfers.

The timeline, along with earlier evidence, suggests top Siemens executives knew about allegations of wrongdoing at least two years before they acknowledged illicit transactions.

Siemens declined to comment in detail for this article. The company said it is cooperating fully with authorities and is eager to get to the bottom of any wrongdoing.

Mr Mavridis, who was head of Siemens's telecom-equipment sales in Greece, left the company in April 2006. He is being investigated in at least three European countries, including Greece. As the Journal reported in January, a former Siemens executive, Michael Kutschenreuter, has told German prosecutors he heard from the head of Siemens's Greek unit that the company bribed public-sector officials to win a contract for the 2004 Olympics in Athens and paid off political parties ahead of parliamentary elections the same year.

A lawyer for Mr Mavridis said his client did nothing wrong. Mr Mavridis hasn't been charged with any crime. A lawyer for Mr Kutschenreuter declined to comment.

Liechtenstein was one of 15 countries blacklisted in 2000 by the Group of Seven industrialised nations for "non-cooperation" in the prevention of money laundering. LGT Group, which is Liechtenstein's biggest bank and is owned by the principality's ruling family, was raided the same year as part of a criminal probe into cross-border bank transactions. In 2001, after Liechtenstein bolstered its surveillance, the country was removed from the G-7's blacklist.

In the spring of 2003, according to people familiar with the matter, compliance officials at LGT zeroed in on a flurry of transactions between Martha Overseas, a Panama-based company controlled by Mr Mavridis, and Eagle Invest & Finance SA, a company based in the British Virgin Islands and controlled by a Siemens executive in Germany, Reinhard Siekaczek. They noticed that 1 million euros was paid into a Liechtenstein account before being withdrawn the same day and that half a dozen transactions involving 5 million euros ricocheted through related accounts over a three-week period.

Auditors at LGT grew suspicious because the payments were characterised as commissions paid by Siemens to the two executives, according to people familiar with the case. The auditors wondered why Siemens would pay commissions to senior salaried employees and why the funds would be directed through offshore accounts with no ostensible ties to Siemens.

In November 2004, shortly after LGT filed a suspicious-transactions report to local authorities, Liechtenstein blocked 7.6 million euros in funds that appeared to originate with Siemens. The authorities alerted their Swiss and German counterparts, as well as Siemens. The chief compliance officer at Siemens reported the Liechtenstein case to the company's audit committee in January 2005, according to a court document and a Siemens board member. By that point, senior managers already knew of suspected illicit activity, according to testimony from former Siemens officials.

Robert Wallner, a prosecutor in the Liechtenstein capital of Vaduz, said he asked to interview a member of Siemens's management board in late 2004 but was turned down. Siemens also suggested that he drop the investigation because the company wasn't materially injured by the transactions, according to Mr Wallner.

In March 2005, Swiss prosecutors opened their own investigation after Germany's Dresdner Bank submitted a money-laundering report highlighting a longer string of suspicious payments that flowed through Switzerland and were tied to Siemens's Mr Mavridis. In August, Switzerland froze about 25.5 million euros that appeared to have been funnelled into Mr Mavridis's accounts from Siemens.

In December 2005, Dresdner told Siemens about dozens of transfers to Mr Mavridis between 2001 and August 2005 totaling 37 million euros. Money flowed into his accounts from banks and small firms in Switzerland, Italy, London, Hong Kong and Dubai, among other places. The money also moved out of the accounts to offshore firms with names like Ursula Marketing and Prince Pacific. Around the same time, German prosecutors, spurred by Switzerland and Liechtenstein, opened their own investigation.

The next month, Albrecht Schäfer, then the chief compliance officer at Siemens, forwarded the Dresdner report to Heinz-Joachim Neubürger, then the company's chief financial officer, according to an internal Siemens document. The company's audit committee was informed of the suspicious transactions a few days later. But it would be many months before the public learned of the suspicions.

Prosecutors in Bern, Switzerland, raided the offices of Intercom Telecommunications Systems, a Swiss subsidiary of Siemens, in March 2006. They uncovered further details of dubious invoices tied to Mr Mavridis, and he was questioned in March and June.

Siemens began liquidating Intercom in late May. That heightened Swiss prosecutors' suspicions. They didn't see an economic reason for closing the company, according to a person familiar with the investigation.

In April 2006, Mr Mavridis left Siemens after the company agreed to pay him 300,000 euros in severance, according to a person familiar with the matter. On November 14, one day before its German offices were raided by police, Siemens filed a civil lawsuit against Mr Mavridis in Greece, claiming ownership of 8 million euros that he held in a personal bank account in Athens. Mr Mavridis handed over 7.8 million euros to the company in January of this year. His lawyer says Mr Mavridis never disputed that the money belonged to Siemens.

Mr Siekaczek, the former Siemens manager in Germany who controlled accounts that had funnelled money to Mr Mavridis, was arrested November 15, 2006. Mr Siekaczek told prosecutors that he knew of bribery schemes earlier this decade in more than a dozen countries stretching from Brazil to Egypt. He said the Greek unit enjoyed wide latitude in nearby countries such as Cyprus, Bulgaria and parts of the former Yugoslavia. Mr Mavridis handled bribe payments in some of those countries, according to Mr Siekaczek.

Mr Siekaczek, a longtime executive in the telecom-equipment unit, was indicted in Germany in September on embezzlement charges. Mr Siekaczek's lawyer declined to discuss specifics of the case but said his client is cooperating with prosecutors.

Mr Kutschenreuter, the former chief financial officer of Siemens's telecom-equipment unit, was also detained in late 2006 but later released. He told German prosecutors that Michael Christoforakos, the head of Siemens's Greek unit, had informed him about the bribes to win an Olympic infrastructure contract and gain favour with Greek political parties. Other Siemens executives also have said they were aware of bribes in Greece earlier this decade, according to transcripts of the executives' interviews with German prosecutors.

Earlier this month, Mr. Christoforakos stepped down as chief executive of Siemens's Greek unit. Before his departure, Siemens declined to make him available for an interview, and he couldn't be reached independently. Mr Christoforakos recently began cooperating with outside investigators hired by Siemens after he balked months earlier, said a Siemens board member.

Liechtenstein prosecutors transferred their money-laundering probe involving Siemens's telecom unit to counterparts in Germany and Switzerland earlier this year, but they continue to chase a money-laundering case involving a Siemens power unit. German prosecutors say they won't pursue further penalties against Siemens over the now-dismantled telecom unit but are continuing investigations of individuals and may look into other business units.

Swiss investigators have frozen about 200 million euros in bank accounts they believe are tied to Siemens. More than half the frozen funds haven't been claimed by anyone, after several named beneficiaries denied ownership. In an internal document earlier this year, Siemens said it was trying to reclaim nearly 36 million euros frozen in Switzerland.

Swiss prosecutors say Siemens will have to wait. Said one Swiss investigator, "We can't allow the money to disappear in another slush fund."

Eds note: To view the diagram of suspicious bank transactions prepared by Dresdner Bank, visit The Wall Street Journal (subscription required).

The Wall Street Journal

http://www.australianit.news.com.au/story/0,24897,23001958-24169,00.html

Liechtenstein Now Less Of A Tax Haven

The Alpine principality will start helping other nations claw back missing tax revenues.

Timing is everything these days, especially for a tax haven like Liechtenstein. A day before finance ministers of the Group of 20 were due to meet to discuss new guidelines to stop tax evasion, one of the world’s favored destinations for such shenanigans said it would start helping other nations claw back their missing tax revenues.

The tiny Alpine principality said Thursday that it was dropping its distinction between tax evasion and tax fraud, an issue that has frustrated tax authorities in the United States and Germany because Liechtenstein previously insisted on only handing over data in cases of outright tax fraud.

It now says it has already begun “concrete talks” with other nations and was offering bilateral tax agreements in cases of tax fraud and tax evasion. "We are aware of our responsibility as part of a globally integrated economic area,” Prime Minister Otmar Hasler said. “With today's declaration, we are making our contribution to a joint solution that will make an effective enforcement of foreign tax claims possible.”

International organizations such as the Organization for Economic Cooperation and Development have been lobbying for more transparency from tax havens like Liechtenstein, Switzerland and Luxembourg for many years now. But the crackdown has now reached a critical stage as governments around the world seek to tighten financial regulations to prevent another repeat of the credit crunch while desperately trying find new tax revenues.

France and Germany have already asked the OECD to prepare information on tax havens for the G-20 meeting in London on April 2. On Tuesday, France’s La Tribune reported that the OECD was adding Switzerland, Luxembourg, Austria, Singapore and Hong Kong to its list of noncooperative tax centers, which already included Liechtenstein.

Stephen Platt, chairman of the BakerPlatt Group and specialist in anti-money-laundering, said that Liechtenstein’s move was “essential” to its ongoing survival. "It is simply untenable within this climate and this environment for centers to continue not to criminalize the laundering of the proceeds of foreign tax evasion," he said, adding that in the long term such rules were “unsustainable and not good for your reputation.”

But the international backlash against tax havens by governments and the G-20 may also be too indiscriminate, he said, because of the “very real and distinguishing” differences between them. While Liechtenstein is only now amending its laws on tax evasion, other offshore financial centers like Jersey and Guernsey already did so a decade ago; Switzerland, the Cayman Islands and Singapore have not.

Meanwhile there is the other elephant in the room: banking secrecy. Liechtenstein seems keen to keep its rules in that area unchanged. "Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain,” Hasler said Thursday.

Platt believes that the G-20 nations are looking at tax evasion and banking secrecy as two related but distinctly important issues. “The criminalization of laundering of tax evasion is equally as important, [but] tax havens that do not address bank secrecy need to see it addressed,” he said.

Source: Forbes

Customer Due Diligence Mandatory for the Identification of High-Risk Persons

10.01.2007 - Innovations Softwaretechnologie GmbH, which is headquartered in Immenstaad on Lake Constance (Germany), provides financial institutions with tools for the prevention of money laundering and the financing of terrorism. A large number of banks and insurance companies are currently using software in combination with a worldwide sanction list to identify high-risk persons and politically exposed persons among their customers. Now, the subsidiaries of Swiss Life in Brussels and Luxembourg have announced their decision to implement .

Starting in 2007, financial services providers in the EU will be subject to stricter obligations to combat money laundering, corruption and terrorist financing. Business relationships with persons suspected of involvement in terrorism are prohibited. Additional due diligence measures are required for politically exposed persons (PEPs).

The software solution assists in meeting these requirements by checking customer data against entries in international blacklists at regular intervals.

As many as 500,000 politically exposed persons and high-risk persons with a criminal or terrorist background are included in worldwide sanction lists. The system completes a detailed search (1:1 matching) and a fuzzy analysis when checking all customers and when a business relationship is being established with a customer for the first time. The fuzzy analysis is based on an algorithm that compares parts of names, aliases and additional information such as date of birth, nationality and place of residence. This is a quality aspect that supplements the 1:1 name comparison. The compliance officer initiates clarification when matches are found.

has been in use at the headquarters of Swiss Life for over a year. The company branches in Belgium and Luxembourg are now also using this software system to check their customers electronically. National regulations such as those passed by Commission banquaire, financière et d’ assurances in Belgium can be integrated into .

is available in three languages and is tailored to the needs of internationally active companies. Interested persons can test the functions of the system in a web conference.

Innovations Softwaretechnologie GmbH is a development partner for front-end applications and compliance solutions. The company was founded in 1997 and currently has a staff of 85 highly qualified computer sciences graduates. Its customers include respected companies such as Bank Vontobel, Zürcher Kantonalbank, LGT Bank in Liechtenstein, Schweizerische Post - Post Finance, HypoVereinsbank and the Swiss Life Group. Innovations Softwaretechnologie is one of the leading providers of anti-money-laundering solutions in Switzerland and Liechtenstein with its mlds® system.

http://www.verivox.de/News/ArticleDetails.asp?aid=41644&pm=1