Wednesday, August 12, 2009

Britain and Liechtenstein: more odd things

We've just blogged on the innovative but flawed UK-Liechtenstein agreement, and a couple of extra things have been drawn our attention. It's an important one because it contains many new elements, so forgive us for banging on about it a bit.

First, we should re-iterate (it got a bit buried in the last blog) the massive flaw in the agreement - that there is a five-year time lag in the reporting procedures. This gives the criminals more than enough time to ship their accounts to another jurisdiction. Amongst the clique of private bankers, they tend to scratch each others' backs even while competiting with each other, so referrals to other institutions are likely to be taking place. Transferring may be easier for the wealthiest of those criminally evading tax, as they typically will have close access to the circles in which the most elite and "discreet" (that is, secretive) institutions operate.

Now look at the Memorandum of Understanding. Under "Audit procedure (page 21) we see this, related to the audit process, which is potentially the most important part of the agreement:

"The Panel (or such other institution(s) or person(s) as the Government of Liechtenstein may decide) will gather the audit reports from the auditors, combine the statistics, and submit the consolidated summary not more often than once a year to HMRC."

In other words, the auditors don't just send the information to the UK authorities. No, they sumbit this to a panel (that is, "a panel or other review board that may be established and
operated by the Government of Liechtenstein") which only then submits the information to Britain, once a year. This is odd. Why can the auditors not just sumbit this information directly to Britain? Clearly, this puts power into Liechtenstein's hands to strip out important information. And why do they have to submit a "consolidated summary" and not all the information. It is very odd.

Next, the auditors must submit to the panel

"the number of auditors and the level of compliance in a way which is statistically significant and anonymous."

This is incredibly vague. Why does it need to submit the number of auditors? And what does "level of compliance" mean? Does this mean that Liechtenstein, a notorious provider of criminal services, will decide how good the audits will be?

Very odd indeed. Please see our previous blog for more detailed comment.


Blogger Demetrius said...

The Wikileaks on Kaupthing may indicate that when it comes to being on the edge of legality, London has a lot to answer for. And it is London that had done the Lichtenstein deal.

3:31 am  
Blogger Alex said...

The simpler explanation is probably that Liechtenstein auditors are not permitted to disclose the details of their banking audits to third parties, but may disclose them to government authorities who can pass on details as they see fit.

The purpose of the audit is to verify that there are no UK resident clients who have not satisfied the UK tax filing requirements.

4:06 am  

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