The nation’s trust business -- which amounts to 70 percent of revenue for Liechtenstein’s financial services industry -- has shrunk by 30 to 35 percent since 2008, according to Clemens Laternser, managing director of the Liechtenstein Association of Professional Trustees.
Liechtenstein, whose 36,000 residents enjoy the world’s second-highest per-capita income, after Monaco’s, was unaccustomed to such a downturn.
“There were some years in which the financial industry in Liechtenstein didn’t really know where they were heading to,” Laternser said in a telephone interview from his office in Vaduz. “This insecurity made people leave.”
Stolen Data
Tethered to the Swiss currency and boasting stable banking and judicial systems, Liechtenstein allows for the rapid creation of foundations and trusts that are controlled by boards and professional trustees and are owned by unidentified individuals or families.
Liechtenstein was further encouraged to change its stance on client secrecy after data was stolen from its largest bank, LGT Group, which is owned by the principality’s ruling family. The data was used by Germany to prosecute tax evaders in 2008. Former Deutsche Post AG Chief Executive Officer Klaus Zumwinkel was convicted of tax evasion and received a two-year suspended prison sentence and a penalty of 1 million euros ($1.25 million).
Sharing Information
Liechtenstein agreed in March 2009 to meet international standards to avoid being branded again as an uncooperative tax haven by the OECD. In the same year, the country signed a five- year tax disclosure agreement with the U.K. that allows British citizens with unpaid taxes linked to investments or assets in Liechtenstein to settle their obligations under a special transitional arrangement that exempts them from prosecution in the U.K. for noncriminal acts. It now has 35 information sharing agreements with other nations.
Gey likened the country’s new openness to builders in the 1970s who had used asbestos and were castigated for spreading a health risk.
“You might lose some business in the short-term, but if you don’t adapt to the new rules, you will not be competitive anymore,” she said in an interview in her Vaduz office.