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Sunday 23 January 2000
Liechtenstein 'a magnet for money launderers'
By Philip Sherwell, Foreign Affairs Correspondent
BANKERS, politicians, judges and police officers have conspired with international criminals to turn the principality of Liechtenstein into the world's biggest money laundering centre, according to a report by the German Federal Intelligence Service. The placid Alpine statelet has long been famous for the secretive brass-plate operations, negligible taxes and lax regulatory oversights that attracted the likes of Robert Maxwell. But the leaked German dossier paints a startlingly damning picture of the country. The report alleges that Russian underworld chiefs, Italian Mafia bosses and Latin American drug barons - including Pablo Escobar, the former chief of the Medellin cocaine cartel - have all been targeted by a network of senior Liechtenstein figures and enticed to hide their illicit fortunes there.
The document was compiled by the so-called "cyber-spies" of the Federal Intelligence Service, the Bundesnachrichtendienst (BND), using surveillance in Bavaria to tap into satellite and telephone communications in Liechtenstein. Germany's authorities have long had neighbouring Liechtenstein in their sights as the favoured tax haven for those who want a relatively simple way to avoid paying tax in Germany.
The leaking of the report comes as Germany steps up its campaign for tax harmonisation in Europe. The embarrassing dossier may give Berlin the ammunition to increase its efforts to stop Germans investing funds in Liechtenstein, a non-EU member. It also comes at a time when the Germans are campaigning to impose a minimum 20 per cent withholding tax on savings anywhere in the EU to discourage investing abroad.
Although the report was leaked only recently, it was submitted to the Berlin government last year, several months before the current slush fund furore erupted around the former Chancellor, Helmut Kohl. That scandal has further tarnished Liechtenstein's name after it emerged that several secret payments were channelled through the principality to Mr Kohl's Christian Democrats, including alleged bribes from Elf Aquitaine, the French oil company.
Even Switzerland, which is not known for its fiscal transparency, is urging its neighbour to put its house in order. Bernard Bertossa, the chief prosecutor of Geneva, complained of a lack of assistance from Liechtenstein in pursuing investigations and described the principality as "a very bad pupil" when it came to learning the merits of international co-operation.
The controversy deepened last week when the monarch, Prince Hans Adam II, revealed that an anonymous letter sent to the castle three years ago, naming senior Liechtenstein officials allegedly involved in serious financial crimes, was only passed on to him a month ago. The prince has also backed an investigation into the allegations. But he was "extremely upset" by the claims. His government says the report's contents have been misrepresented and exaggerated.
Following the leak, Der Spiegel, the German news magazine, remarked: "The secret document reads like the worst nightmare: an entire country, in the middle of Europe, appears to be in the service of criminals from all round the world. The findings destroy once and for all what was left of Liechtenstein's battered reputation."
Liechtenstein consists of 62 square miles of mountains, valleys and timber chalets. Its capital, Vaduz, is dominated by the prince's medieval castle. Little of its income is generated from outside the financial world. The country's population of 32,000 is a close-knit and affluent community whose wealth is grounded on watertight secrecy laws covering banking, taxation and financial affairs. Laws have been comprehensively abused through hundreds of anonymous trusts and foundations, according to the BND.
Leading Liechtenstein financiers deny the claims. Prof Herbert Batliner, one of the country's most important trustees, insists that he avoids problems by accepting no customers from the former Soviet Union and none who turn up with briefcases full of cash. "They don't get past the front door," said Prof Batliner, whose name was on German front pages last week in connection with the Kohl affair.
The BND lists individuals and foundations allegedly involved in money laundering. One former government politician, for example, is said to have organised meetings with the "financial managers of South American drug clans" for many years. The report describes "a network of relationships between high-ranking officials, judges, politicians, bank managers and investment advisers who assist each other with illegal financial transactions on behalf of international criminals".
Even the principality's courts have proved obstructive. When Germany applied for the extradition of two Liechtenstein-based Swiss financiers it was turned down by the Supreme Court in Vaduz. The court ruled that extradition would have been a breach of the European Convention on Human Rights as the men's children would have been deprived of their fathers.
-- snooze button (email@example.com), January 23, 2000
Lichtenstein has long been a tax/asset haven. The attack is part of an orchestrated attack on havens world-wide. The Channel (British-French) Islands (Jersey, Guernsey, Sark), the Isle of Man, Bermuda, and others have also come under renewed recent attack to "reform" their privacy- and wealth-protecting policies.
-- A (A@AisA.com), January 23, 2000.