LIECHTENSTEIN: GERMAN ATTACK CALLS INTO QUESTION BANK CONFIDENTIALITY

by Cathy Odgers

2008-03

Two of the most common questions that are asked in the offshore industry are “how safe is my banking information” and “can anyone have access to that information?”

These questions were answered again recently by a man (formerly) of the name of Heinrich Kieber. His conduct and that of his sponsor – the German Government – said “bank confidentiality definitely doesn't exist as a guarantee.”

Especially, when bank employees steal the information and sell the same to the German Government.

Mr. Kieber worked for the LGT Group, specifically at LGT Treuhand AG, until 2002. A man of questionable background with allegedly an international arrest warrant issued in 1997 from a fraudulent real estate deal, he left Liechtenstein in November 2002 but not before stealing confidential data from his employer LGT and making copies on a DVD. Reports suggested German authorities then paid Kieber €5 million for the data. The data, containing apparently in total 1,400 "client relationships", 600 of those from Germany was quite a bounty for the German authorities. However, Germany apparently also sold or distributed the information to the Governments of Britain, France, Italy, Spain, Norway, Ireland, Netherlands, Sweden, Canada, the USA, Australia and New Zealand.

Reports allege that Kieber had access in 2001 and 2002 to these records because he was digitizing its paper archives. Any structures created after this date or files from other parts of the LGT Group, the impacted unit that sets up foundations, remain unaffected according to the LGT Group.

The furor created since is unfolding right now across the world as Kieber currently in witness protection is public enemy number one in the Principality of Liechtenstein. LGT is presided by the Liechtenstein's billionaire royal family. The entire financial services sector has a share of 30% of the Liechtenstein gross domestic product. 14.3% of all people employed in the Principality of Liechtenstein work in the financial services sector. Banking secrecy and its refusal to share information has been one of Liechtenstein's largest selling points. Liechtenstein and the principalities of Monaco and Andorra have been cited by the OECD for failing to comply with its information-sharing rules. This case has shone the spotlight back on the issue of a nation's Sovereignty and banking confidentiality.

While most Governments have been happy to pay to receive stolen information, Denmark is the notable exception and took a stand when the tax minister, Kristian Jensen, described the affair as an "advanced form of handling stolen goods". He goes on "I think it's a moral problem to reward a criminal for some information that he stole". "I don't like this and I don't think this ethic is the best way to ensure that taxes are paid correctly".

Germany on the other hand has threatened to extend its campaign to Switzerland, Luxembourg and Austria - all of which claim some form of banking confidentiality.

Of course there are two sides to every story and LGT and Liechtenstein itself have good claim to the theory that other Governments and LGT's competition are using mis-information to scare people off the jurisdiction and indeed the bank. Governments around the world seem to be creating a "surrender now" campaign when in effect they miss that it is quite legitimate to want to set up confidential bank accounts for broader reasons
than that of the criminal nature.

Indeed most of us like to believe that our bank accounts are private information, when in essence even at a friendly local branch of Bank of America there could be a Kieber working overtime in the copy room ready to sell your client data to the highest bidder, whether it be gangs, criminals or, given some of the recent conduct, arguably the biggest criminal gang of them all - Governments.

This case doesn't stop at Liechtenstein or LGT. Once again, all banking confidentiality is once again put into question.