Frank Arndt heads the International Law Department at Stowe Family Law. He is a qualified lawyer in two European countries, a qualified judge in Germany and a registered European lawyer with the Law Society in England. An expert in cross-border family law, he regularly advises on cases involving families and assets scattered across continents.

Over the past decade, efforts to conceal assets and avoid tax have become more sophisticated. This is why our team here at Stowe Family Law LLP includes two forensic accountants, who work to ensure that our clients are not caught out by offshore scheming.

Elsewhere, the proliferation of such schemes has led to drastic action. Earlier this year the German government took its pursuit of tax dodgers to a new level, when it paid for stolen data with which to hunt the evaders down. German spies paid around £3.2 million for around 1,400 names.

The move sparked a new discussion about fruit of the poisonous tree. This is a legal metaphor, drawn from a Biblical passage, used to describe evidence gathered with the aid of illegally-obtained information.

Not to be outdone, last week the American Internal Revenue Service won backing from a federal court to track down customers suspected of evading US taxes, by accessing accounts held with the Swiss bank UBS.

The UK government is also thought to have paid for similar information about suspected tax dodgers. Their source is believed to be the same as the Germans’. The Sunday Times reported in February that HM Revenue & Customs had paid £100,000 for details of 100 overseas accounts.

This data was stolen in 2002 from the LGT Group, a bank owned by Liechtenstein’s royal family. The theft has triggered probes in 14 countries. It has led to the resignation of the chief executive of German postal giant Deutsche Post AG, after it was alleged that his name was on the list of tax evaders.

Such cases are keenly watched by international lawyers who, like myself, are only too familiar with spouses who attempt to conceal their true financial worth with off-shore bank accounts and other asset protection schemes.

However, the recent chain of events has placed the secret banking systems of Liechtenstein and Switzerland under unprecedented scrutiny. For spouses who try to hide their assets, this is bad news.

British courts have long battled with those who shift their assets around foreign bank accounts, particularly when such actions are used to reduce individuals’ “financial worth” during divorce proceedings. When Mr Justice Coleridge had to decide in the 2004 case of J v V  (1 FLR 1042), which involved a number of sophisticated offshore structures, he said of them: “They neither impress, intimidate, nor fool any-one and the Courts have lived with them for years.”

He went on to note that those engaged in such “ducking and weaving…cannot expect much sympathy when it comes to the question of paying the costs of the enquiry.”

Indeed, it would appear that courts around the world are taking a tougher line. The judge in the American case surprised many legal observers when he ordered UBS to supply details of American taxpayers with accounts in Switzerland. It has been estimated that collectively, these accounts contain around $20 billion in assets – and unpaid taxes amounting to some $300 million.

Switzerland is now under pressure from the EC to bring its taxation arrangements into line with arrangements elsewhere in Europe. Such changes would mean that Swiss banks had to disclose information about account-holders. Unsurprisingly, Switzerland wishes to preserve the status quo. Its stance is shared by Luxembourg, and the Swiss Finance Minister and the Luxembourgian Prime Minister met in May  to discuss the situation. The Swiss minister emphasised that although his country supports the European Union in its reform projects in the financial sector, there is no legal obligation for Switzerland to enter into talks with Europe on a revision of the agreement on the taxation of savings income before 2013.

While Swiss law still prohibits banks from disclosing confidential information – which, it argues, includes the names of account holders – without client approval, it is clear that the law is moving to tackle this long-standing problem. In doing so, it will deal a major blow to those who seek to deny their partners fair divorce settlements by stashing away their assets in offshore havens.

Unscrupulous spouses: you have been warned!

Related Posts

Here is a list of other related blog posts that you may be interested in:

• Tax havens and the G-20 Summit – by guest blogger Frank Arndt
• Letters of request: will other countries co-operate? By guest blogger Robin Charrot
• Divorce: how to calculate “reasonable needs” – by guest blogger Rachel Roberts
• International divorce and child abduction – by guest blogger Andrea Essen
• Brian Myerson’s Credit Crunch Divorce – by guest blogger Robin Charrot
• Don’t Separate In March! By Guest Blogger Nick White.
• Why get married? UK divorce statistics and the “11-year itch” – by guest blogger Julian Hawkhead
• Divorce and children: how “conciliation hearings” can heal disagreements – by guest blogger Stephen Hopwood
• Scandal and Divorce in the 18th Century – by guest blogger Julian Hawkhead
• Any Questions? By guest blogger Robin Charrot.