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In 2008 Liechtenstein experienced a row with Germany over Liechtenstein's banking and tax secrecy, after a former bank employee sold the information of hundreds of clients to investigators in Germany, the UK and the US for $4 million. On top of that, US President Barack Obama has started a crackdown on tax havens around the world, with Liechtenstein gaining the full attention of the US....

In 2008 Liechtenstein experienced a row with Germany over Liechtenstein's banking and tax secrecy, after a former bank employee sold the information of hundreds of clients to investigators in Germany, the UK and the US for $4 million. On top of that, US President Barack Obama has started a crackdown on tax havens around the world, with Liechtenstein gaining the full attention of the US.

The events were especially embarrassing for Prince Max, the younger brother of the acting head of state. He is chief executive of LGT, Liechtenstein's biggest bank, which is rumoured to be the hiding place of billions of euros of tax money.

In March 2009 the Liechtenstein government agreed to make its financial sector more transparent and to exchange more tax data with other countries. If tax authorities have serious concerns they can request banks release their clients' account details. "Is this the beginning of the end? Not at all, since it must be a reasonable request," says one senior lawyer. "It must be very precise and concrete. People can still safely hide their money here."

Some lawyers even think it is good for the market. "I don't think it will have a negative impact at all. It will create additional demand," says a senior partner. "The new situation needs to be explained, this will create more work for a certain period of time."

In the meantime, negotiations on information exchange have started with Germany and Britain. Such agreements will be modelled on a landmark deal it reached with the US in December 2008. "We do not accept US clients anymore," says one senior partner. "There is an agreement between the US and Liechtenstein, and unexplainable money from the US is just too risky nowadays."

However, the government released a statement recently stating Liechtenstein will maintain its "modern and solid" banking secrecy laws, fearing billions will be pumped out of the country.

As a reaction to this, Germany declared in March 2009 that it will not grant judicial aid to Liechtenstein in the prosecution of a 2008 whistleblower. It was one of the first times in history Germany ignored the European Mutual Legal Assistance Agreement, with Germany claiming that "public order and interest" prevailed over the prosecution.

"Am I nervous about the market? Well, you never know if you're going to lose," says one partner. "Clients have become more cautious, you can tell by their behaviour on the market."

Liechtenstein's legal community can not do anything else than to hold its breath and wait for the changes to slowly take effect. "Now we have one or two criminal proceedings a year against a trustee – twenty years ago that was unimaginable," says one partner.