Bank secrecy has a high priority in Liechtenstein Law and is guaranteed through civil as well as penal laws. Stringent and wide-reaching laws require the Liechtenstein banks to observe the utmost discretion.
THE FAR REACHING NET OF BANK SECRECY
When opening an account the identity of the holder or beneficiary thereof must be revealed to the bank which is nevertheless obliged to maintain such information absolutely confidential. Any information whatsoever which the bank acquires in the course of its client contacts is privileged. According to the Banking Law in effect since January 1, 1993, employees of a bank or a finance company are bound by the duty of non-disclosure. Moreover, civil servants who, in the course of their duties have access to information which is subject to bank secrecy, are required to maintain such data confidential.
Any person, who through his or her affiliation with a bank or finance company has any type of access to banking information is, at the same time, automatically subject to a professional duty of non-disclosure.
The nature and the scope of the information which is to be kept confidential is likewise very comprehensive. Any information whatsoever which the bank acquires in the course of its client contacts is privileged. This includes not only information which the bank acquires as a result of its own research as well as any inferences which can be drawn as a result of the disclosure which has been made to the bank, but also information which the banker learns from clients outside of the business concerning private or personal matters. The object of the law is to protect the private sphere of the client, which protection is all-encompassing and unlimited in time. Bank secrecy is so comprehensive that third parties also benefit. Details made accessible to the bank concerning business partners, relatives or associates of the banking client are also privileged.
HOLDING COMPANIES PROVIDE AN ADDITIONAL SAFETY VALVE
It may be contrary to the interests or the desire for discretion of investors if they are required to reveal their identity to the bank. In such cases the due diligence agreement, which the Liechtenstein banks have signed with the Princely Government, provides for the interposition of a professional who is subject to a duty of non-disclosure. Such are Liechtenstein lawyers, fiduciaries and portfolio managers who, based upon the instructions from their clients, incorporate and manage companies as investment vehicles. In this way the investors may maintain anonymity towards the bank. Only the identity of the company executive is known to the bank.
According to established banking practice, a special due diligence declaration must be signed by the fiduciary or portfolio manager upon the opening of a corporate account. The fiduciary declares that he is at all times aware of the identity of the persons beneficially entitled to the assets to be deposited with the bank, that by the exercise of all reasonable diligence he is not aware of any circumstance which would be indicative of improper recourse to bank secrecy by the client or beneficial owner, in particular the criminal acquisition of the assets in question, that he will supervise the transactions to be performed on the basis of the declaration and will inform the bank immediately in the event of changes in the situation upon which the declaration is based.
THE BANK'S DUTY OF DUE DILIGENCE ON THE BASIS OF A PRINCIPAL AND AGENCY RELATIONSHIP
In addition to the obligations imposed upon it by the banking law, the bank has a fiduciary duty arising from its contract with the client. The contract with the client is a principle and agency relationship which implies a duty to maintain confidentiality. Even in those cases in which the nature of the relationship contains principal and agency elements, the duty to maintain confidentiality is implied as part of the general contractual conditions.
Furthermore the Liechtenstein Persons and Companies Law guarantees each individual the right to privacy which includes matters concerning his financial affairs. A breach of the contractual or civil law obligations of the bank can give rise to a claim for damages on behalf of the aggrieved parties.
In addition to the civil law liability to pay damages and other legal consequences in the event of a violation of bank secrecy, the banking law provides for up to six months imprisonment or a fine in the event of a breach of the bank's duty of non-disclosure. Liechtenstein is thus, like Switzerland, one of the few countries which has elevated the banker's duty of non-disclosure to a public law enactment.
EXCEPTIONS TO BANK SECRECY
Although bank secrecy is broadly defined, there are few exceptions existing in the administration of justice in which it may be abrogated. In respect of private inquiries the duty of non-disclosure may only be abrogated with the express consent of those persons whose interests may be affected thereby. A bank is generally speaking not entitled to pass along any information upon inquiries from public authorities. In civil proceeding the bank must exercise its right to claim privilege should it otherwise be forced to reveal bank secrets.
A complete abrogation of bank privilege may occur in the course of a criminal prosecution. The disclosure of the client's contacts, the nature of the transactions, the amount of the assets and all private information may be demanded by the court.
Liechtenstein has been a member of the European Convention concerning Mutual Assistance in Criminal Matters since 1969. Bank secrets may be revealed to foreign authorities within the framework of an application made pursuant to this convention. Matters of a fiscal nature, including monetary and customs matters as well as military misdemeanours or political crimes, are excluded from the ambit of such applications. The decision as to whether an application concerns a fiscal issue or not, is made solely by the Liechtenstein authorities. Moreover, the Liechtenstein authorities condition the release of information within the framework of an application upon the express guarantee to be given by the applying state, that the information revealed by the Principality, insofar as it touches upon fiscal matters, will not be used.
BANK SECRECY IN THE INTEREST OF CLIENTS
In concluding it may be said that the legal duty of non-disclosure provides the necessary framework which permits the bank to meet the individual needs of their clients and to demonstrate the loyalty towards their clientele, which is essential to the Liechtenstein economy.
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