Austria Gives Up Bank Secrecy

Austria Gives Up Bank Secrecy

For a little while there, it looked as if little Austria would be the mouse that roared.

As I previously reported, on July 9, Austria's Parliament failed to approve a resolution relaxing the country's strict banking secrecy laws as the OECD demands.

But yesterday, September 1, the parliament approved a law to ease banking secrecy in the last EU country on the Organization for Economic Co-operation and Development's (OECD) "gray list" of tax havens. It was a challenge to assemble a two-thirds majority necessary to weaken the law, but Austria's leaders persuaded legislators of the importance of Austria getting off the OECD's odious list.

Under current law, Austrian authorities will only release account data to foreign authorities if a criminal proceeding is underway in that country against a named individual. In addition, authorities must convince an Austrian court to order the data to be released.

This simple and common sense system will be replaced with a network of new tax treaties and tax information exchange agreements…

The agreements will call for Austria to release information on financial accounts held by a foreign investor at the request of foreign tax authorities. The request may be in regard to any tax inquiry – civil, criminal, or administrative. However – and this is very important – the inquiry must be about a specific investor. Austria is under no obligation to comply with wholesale "fishing expeditions," such as the infamous "John Doe subpoenas" invoked by the U.S. Internal Revenue Service against banking giant UBS.

Even so, this is a significant setback for banking secrecy.

Nearly a decade ago, the OECD's bastard stepchild, the Financial Action Task Force (FATF), issued a "money-laundering blacklist." The countries on this list, in the FATF's opinion, weren't doing enough to prevent their financial system from being used by money launderers. Among other requirements, the FATF demanded that these countries (Austria among them) eliminate all opportunities for anonymity in the banking system.

However, the new anti-laundering rules mainly inconvenience legitimate customers. Money launderers long ago began using less traceable methods to move money. It's almost certain the OECD's new rules for greater transparency in tax investigations will have the same effect, driving the criminals further out of reach at the expense of personal liberty and financial privacy.

Yours truly,

Mark Nestmann, Wealth Protection & Privacy Consultant