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Hiding Assets Abroad? Beware Of Unforseen Risks!

By David Beker

In a follow up to the most recent blog entry by B.Wayne Creel on February 25th entitled "Germany Vows To Investigate European Tax Havens," it now appears that individuals throughout the world who were "hiding" assets at Lichtenstein's LGT Bank are now at risk of civil and criminal penalties as a result of a risk that they probably never thought about- information breach.  As more fully described in an article in the Wall Street Journal on Wednesday, February 27, 2008 entitled "U.S., Others Join Tax Probe" A4, several countries including the United States, Canada, Sweden, Australia, Italy and France are currently investigating dozens of their citizens who were allegedly "hiding" assets at LGT Bank. 

This situation began to unfold after the theft of data describing roughly 1,400 "client relationships" by a data thief who allegedly sold the information to the German government.

Per the article, the fallout so far is as follows:

1. The IRS is looking into about 100 Americans who allegedly kept funds at LGT Bank.  In fact, the article reports that the US has already taken civil action against some taxpayers.  As the article points out, under U.S. law, the U.S. can also bring criminal cases because the failure to disclose a foreign bank account can be a felony offense. 

2. The German government has already announced that tens of millions of dollars have been stashed in Liechtenstein by hundreds of wealthy Germans.  German prosecutors have alleged that 163 suspects have admitted they failed to declare income from Liechtenstein trust assets and 27.8 million Euros in back taxes have already been paid back to the German government and the investigation appears to be expanding.  Klaus Zumwinkel, Chief Executive of Deutsche Post AG, has already resigned his position with Deutsche Post AG and has been detained by German police on suspicion of tax evasion.

3.The French government has received a list of a few hundred names of LGT clients which they are apparently looking into.

4.  Sweden is looking into approximately 100 Swedes who were on the list.

5.  Canada is investigating about 100 Canadians.

6.  Australia has 20 cases open.

This story is continuing to develop and, given the popularity of Liechtenstein as an asset protection haven, it is likely that hundreds of additional individuals will have a lot more heartburn before this situation is resolved.  However, the lesson here is simple, those that engage in sophisticated "asset protection" or outright hiding of assets can plan for all of the risks that they know about but there are always unknown risks.  Getting around the the plans that people make to circumvent the known risks, and opportunistically taking advantage of the unknown risks are what international asset recovery experts do to recover assets which were thought to be "protected" or "hidden."

Full post as published by International Asset Recovery Law Blog on February 28, 2008 (boomark / email).