The U.S. has asked Liechtenstein to hand over data on foundations that may have been used to hide untaxed American money from the Internal Revenue Service, a step that may threaten Swiss banks.
The U.S. wants to know the number of foundations set up by fiduciaries -- lawyers, accountants, financial advisers and asset managers -- for American taxpayers, according to a letter sent by the Department of Justice to authorities in the Alpine principality. A “formal request” to fiduciaries will follow, the DOJ said.
“Seeking documents from the Liechtenstein fiduciaries is an important investigative step,” which will shed light on “the roles of banks, of bankers outside of Liechtenstein,” the Justice Department wrote in the letter, adding that it looked forward to receiving the data by March 29.
* * * *
“It’s a further evolution of the Department of Justice using third-party fiduciaries to gather more information on these structures and the banks involved,” said Milan Patel, a former IRS trial attorney who is now a partner at Zurich-based law firm Anaford AG. “This could be bad news for Switzerland, as the information could be used against more Swiss banks.”
* * * *
Liechtenstein amended a tax law last year to allow the country of 36,000 people to comply with a U.S. request for account data on American clients of the principality’s oldest bank, Liechtensteinische Landesbank AG (LLB). The bank known as LLB had 49.9 billion Swiss francs ($53 billion) of assets under management at the end of 2012 and is one of the firms being probed by the DOJ.
Liechtenstein started to unwind secrecy after data stolen from LGT Group, the bank owned by the country’s princely family, was used by Germany to prosecute tax evaders in 2008. Former Deutsche Post AG (DPW) Chief Executive Officer Klaus Zumwinkel was convicted of tax evasion and received a two-year suspended prison sentence plus a penalty of 1 million euros ($1.3 million).
Under pressure from the U.S., Germany and France, Liechtenstein said in March 2009 that it would conform with tax standards set out by the Organization for Economic Cooperation and Development to avoid being blacklisted as a tax haven.Addendum on 3/28/13:
According to an article in Tax Notes, Jaime Arora, Seeking Tax Evaders, U.S. Requests Liechtenstein Data, 2013 TNT 58-3 (3/26/13):
- The request to Liechtenstein was made in an "undated informal letter" written by Daniel W. Levy, an |AUSA SDNY who has been prominent in the offshore account prosecution intiatitive.
- The letter is described as asking "for information about Liechtenstein fiduciaries, including the number of foundations and establishments in existence on or after January 1, 2008, for which either the settlor or at least one beneficiary is a U.S. taxpayer." The purpose "is to winnow a coming formal document request to fiduciaries who either had a high number of transactions or who refused to provide information."
- According to a tax practitioner, although the foundations are organized in Liechtenstein, most have Swiss bank accounts.
- The letter requests responses by March 29, 2013, just over one month before a window closes under a TIEA and amendment to Liechtenstein law permitting the U.S. to make John Doe requests for information.