Liechtensteinische Landesbank Records to Be Revealed to U.S. Investigators
New York, NY (PRWEB) June 11, 2012
The Tax Administration of the Principality of Liechtenstein, by letter dated May 30, has notified U.S. persons connected with accounts at Liechtenstein Landesbank (LLB) that LLB has turned over bank documents for further transmission to the IRS. This disclosure is pursuant to a “Request for Administrative Assistance in Tax Matters” dated May 11 from the U.S. Department of Justice (DOJ) to the Liechtenstein Tax Administration, for documents related to all accounts at LLB since January 2004, valued in excess of $500,000, with U.S. beneficial owners. According to the May 30 letter from the Liechtenstein Tax Administration, DOJ seeks information on whether “U.S. persons violated criminal laws of the United States by . . . not declaring their non-declared accounts to the IRS and failing to pay taxes on income gained on such accounts.”
LLB now follows UBS in providing once-secret bank account details to the U.S. government for use in investigations and prosecutions of U.S. taxpayers. According to public record and court dockets, there have been approximately fifty such criminal cases since 2009, involving accounts in Switzerland, Liechtenstein, Jersey, Isle of Man and other former “tax havens”.
The Liechtenstein Tax Administration acted pursuant to the 2008 "Agreement Between the Government of the U.S.A. and the Government of the Principality of Liechtenstein on Tax Cooperation and the Exchange of Information Relating to Taxes." The treaty originally disallowed IRS “fishing expeditions” - - broad requests for information on a class of unknown U.S. taxpayers. Under the 2008 treaty, Liechtenstein was only to provide information if asked about a specific, known taxpayer identified by name.
However, according to the Liechtenstein professional trustees and a Liechtenstein attorney, under U.S. pressure, and without any publicity, Liechtenstein on March 21, 2012, quietly amended the 2008 treaty and the Liechtenstein Parliament passed an internal law, the result of which is that “fishing expeditions” are now allowed. According to Asher Rubinstein, a U.S. tax compliance attorney in New York whose clients include Americans with accounts in Liechtenstein, "similar DOJ requests regarding other Liechtenstein banks are expected to follow."
Per the May 30 letter from the Liechtenstein Tax Administration, LLB account holders have until June 14 to challenge the release of the documents in Liechtenstein courts. According to Asher Rubinstein, "It is expected that a legal challenge in Liechtenstein may buy some time, but ultimately, the account data will be revealed to the IRS."
According to Rubinstein, offshore banking secrecy, already weakened in recent years by new tax treaties, changing laws, IRS investigations and legal challenges, is now virtually non-existent. According to Rubinstein, Liechtenstein was once the most secretive of tax havens, but has moved from complete banking secrecy to now allowing broad IRS “fishing expeditions” for banking information.
"If the U.S. pressured Liechtenstein to allow for “fishing expeditions”, then other foreign governments will likely follow," states Rubinstein. "DOJ will not have to issue subpoenas or “John Doe Summonses”, as it did with great success against UBS in 2008, and against HSBC in India in 2011. Now, DOJ can avoid going to court, and requests for broad banking information can now, occur government-to-government."
Against this background of tax investigation and criminal prosecution, the IRS re-opened its Offshore Voluntary Disclosure Initiative (OVDI) in January 2012 to encourage owners of undeclared foreign accounts to become tax compliant and avoid criminal prosecution. Back taxes and penalties will be due, but the penalties would be far lower than the civil and criminal penalties that would ensue if the IRS learns of the account from other sources.
Owners of accounts at LLB have a very short window to apply for the OVDI. In light of the ongoing erosion of foreign banking secrecy, the inability of foreign governments to withstand U.S. pressure and the willingness of former tax havens to cooperate with the IRS, U.S. taxpayers with non-compliant accounts should take steps to bring their accounts into compliance.
# # #
For more information,
Asher Rubinstein, Esq.
Rubinstein & Rubinstein, LLP
18 East 48th Street
New York, New York 10017
(212) 888-6600 / Arubinstein(at)AssetLawyer(dot)com