Liechtenstein has signed a landmark deal with the United States today that paves the way for the exchange of bank data with Washington in certain cases of tax evasion.
The agreement will allow Washington to chase tax dodgers into Liechtenstein under specific circumstances while allowing the tiny principality's banks to continue to hold and trade US securities on behalf of their US clients.
"We have again confirmed our good and long-lasting relationship with the USA with the agreement signed today. Through the agreement, we have also created a solid basis for future cooperation with the newly elected US administration," Liechenstein's Prime Minister Otmar Hasler said in a statement.
The deal may put pressure on neighbouring offshore giant Switzerland, which still makes a distinction between tax evasion and tax fraud, and whose largest bank, UBS, is at the centre of a US probe into whether it helped wealthy Americans to hide untaxed money in Swiss bank accounts, experts say.
"The milestone in this agreement is that you'll no longer have the principle of double criminality as a required element," Max Hohenberg, a spokesman for Liechtenstein's government, said. "For the purpose of this agreement there is no distinction between tax fraud and tax evasion."
Liechtenstein's banks administer assets worth around 200 billion Swiss francs ($165.2 billion), a fraction of the 4.5 trillion francs of assets administered by Swiss banks.
Under the terms of the agreement, the result of two years of negotiations, there will be no automatic exchange of information but Liechtenstein may lift its strict bank secrecy code to assist the United States in specific tax investigations.
"We will have a clear legal framework even if this means that a US citizen under investigation in the United States with undeclared assets in Liechtenstein may have his data exchanged," Mr Hohenberg said.
Previously, the US had to prove a deliberate tax fraud - a standard so high it made bank accounts in the small country impenetrable to outsiders.
Reuters