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Liechtenstein bank pays millions to settle US tax dispute

Liechtenstein’s oldest bank said Tuesday it would pay nearly $25 million to settle a dispute with US tax authorities over its suspected role in helping clients dodge US taxes.

“Liechtensteinische Landesbank AG, Vaduz, (LLB Vaduz) has reached a definitive solution to the US taxation dispute,” the bank said in a statement.

After months of negotiations, it said it had agreed to hand over $23.8 million (18 million euros) to US authorities, which in turn will refrain from any legal actions against the bank, it said.

The amount was meanwhile less than half the $47.2 million the bank said it had put aside in its 2012 and 2013 interim books aimed at settling the drawn-out row.

The US Justice Department and a New York District Attorney’s office have been probing whether LLB Vaduz had used Liechtenstein’s banking secrecy practices to help US clients violate US tax and security laws.

In addition to dropping their investigation, the US authorities had agreed not to impose any fines or criminal penalties on the bank, it said.

LLB Vaduz said it would pay back the $16.3 million gross profit it had made on transactions with undeclared assets held by US clients between 2001 and 2012 — nearly all of it to US tax authorities, with only $400,000 going to their Liechtenstein counterparts.

And it would pay another $7.5 million to Washington to compensate for lost tax revenues during the same period, the bank said.

The United States would meanwhile acknowledge that Liechtenstein’s second largest bank had voluntarily taken measures before the investigation began to root out US clients with hidden funds, the statement said.

“Since the end of 2008 … LLB has only accepted as its clients US persons who disclose their assets to the US tax authorities,” it stressed.

The bank said the agreement would have no impact on its income statement, and that it had also set aside provisions for further negotiations over a separate dispute between Washington and its Swiss wing.

Liechtenstein and Switzerland have traditionally been prime destinations for undeclared funds due to their long sacrosanct banking secrecy practices.

However, as a weak global economy takes its toll, other countries, and the United States especially, have been putting their feet to the fire with demands of accountability for tax dodgers and the banks that help them.