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Liechtenstein to Ease Banking Secrecy Rules

The government of Liechtenstein has said that it will ease its strict banking secrecy rules and exchange information with foreign governments to combat tax fraud and evasion.

Vaduz castle in Liechtenstein

Liechtenstein says its banking sector will become more transparent

In a statement issued on Thursday, the Alpine principality said it has agreed to make its financial sector more transparent and work better on tax issues with other countries. Leaders said they would begin negotiations on information exchanges wtih Germany tomorrow, and with Britain next month.

"Liechtenstein commits to and will implement the global standards of transparency and exchange of information as developed by the OECD," read the statement, referring to the Organization for Economic Cooperation and Development.

Lichtenstein would also "go beyond these standards in order to better meet the concerns and tax claims of other jurisdictions."

It would however maintain its "modern and solid" banking secrecy laws.

The principality said it would be ready to negotiate with the EU and others on anti-fraud agreements and taxation deals. Such agreements would be modeled on a landmark deal reached with the United States in December, and which will come into force at the start of 2010.

Brushing up its image

"With the new agreements, the partner state concerned will receive more efficient tax application with respect to foreign assts; the clients of the Liechtenstein financial center will receive a sustainable legal framework for meeting their tax obligations," said prime-minister elect Klaus Tschuetscher.

The announcement represents a major step by the tiny principality to improve its image after it was among three countries put on an OECD blacklist of "non-cooperative" tax havens. The others were Andorra and Monaco.

LGT bank in Vaduz

The LGT bank was at the heart of German tax evasion scandal last year

It comes a year after a major tax evasion scandal in Germany put the spotlight on its secretive banking sector. German investigators launched a major probe into clients of the LGT banking group, which is controlled by Liechtenstein's royal family.

LGT bank claimed that German tax inspectors were basing their investigation on a stolen list with the names of 1,400 clients -- 600 of whom were German nationals.

Caving to international pressure

International pressure to clamp down on tax havens has been growing in recent weeks with a summit of the G20 group of economic powers in London on April 2 due to discuss the blacklist.

Liechtenstein's de facto head of state, Prince Alois, said there is a "fundamental and rapid change at the global level in the direction of stronger cross-border cooperation and international regulation."

"With today's declaration, the Liechtenstein government is sending a signal that it is participating actively in the regulatory dialogue of financial centers without giving up Liechtenstein's identity or the advantages of a reliable and well-regulated small state," he said.

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