Black money abroad and other investment risks

The fair tax and white west fairy tale in private banking


“My son, be fond of business by day, but do only such business that we may sleep soundly by night.” (Thomas Mann’s, Buddenbrooks)


Tax fairness: “Inflation is eating away at assets and my retirement savings!”

The “perceived inflation” of real everyday expenses is 5 to 9 percent p.a. – while the safe capital market interest rate fluctuates around 3 to 4 percent, before taxes of course. The government is getting out of debt through demonetization. In the 1990s, for capital income, probably over 90 percent of all tax returns were incorrect. Heirs are legally obligated to correct such errors – it is tempting to suppress this.


Wealth management: “Even stray costs reduce fixed assets”

Hidden costs, fees and kick-backs also put savings at risk. Examples include funds of funds, certificates and insurance wrappers. In addition, the investment risks are usually disguised in the “small print” – for example in the case of money market funds that are allowed to invest in high-risk “subprime loans”. In the same way, Argentina bonds, for example, were sold to the bank customer as completely risk-free. Asset losses are the consequences of such misadvice.


Private financial planning: “All built on sand?”

Asset managers and banks charge four- to five-figure fees for a financial plan: the worthlessness is written all over the paper: Often the hedging of basic risks and the scenario technique for looking into the future of assets are missing.


40 billion in investment losses annually: “We advise you into the ground!”

In the brokerage of closed-end investments, even major banks fail to effectively avoid key risks for customers: The scandals with media funds showed that embellished returns and tax traps are overlooked: Customers later lose write-offs and still have to pay tax on fictitious profits.


Liechtenstein: “High commission payments for sales lies”.

For asset protection, German private bankers are allegedly offering bankruptcy-proof life insurance wrappers for fund investments. The broker does not want to have known anything about total loss risks and shame periods according to the bankruptcy code or the insolvency law – simple solutions off the peg can be brought to the man better in good faith. Effective asset protection requires individual designs, above all a well-founded examination of product providers, advertising promises and model contract designs.


Anonymous foreign foundations: “Many criminal tips from bankers and consultants”

Anonymous foreign foundations also serve to hide the true beneficial owner, i.e. to create assets on the side: This can be used to disadvantage spouses in the event of divorce (gain, maintenance) and to effectively deprive disagreeable relatives of their compulsory share. One temptation is to allow illegal assets to disappear in such a construct. In contrast, legal foundations are transparent, often non-profit, and established and managed by qualified advisors in agreement with the tax authorities.


30 billion in tax evasion: “shell companies and messenger services”

As recently as the 1980s, for example, bankers cashed cashier’s checks without any account activity – the customer could deposit the money right across the street at an insurance company’s teller window: After 12 years, the proceeds were tax-free – and the evasion was time-barred. German-speaking bankers and consultants still offer unchallenged, even assistance with discreet cash or money transfers to the tax haven. Even reputable addresses hardly explain the risks of letterbox companies and dubious trustees. The financial authorities have been collecting their addresses for decades for their tracing examiners.


Country risk: “Total loss risk due to legal practice and lack of supervision”.

Until recently, German-speaking asset managers used so-called omnibus accounts and omnibus deposits – potentially a haven for money laundering and black money investments. Supervisory authorities sometimes carried out sloppy checks – without being liable to the investor. If such delicacies are later swept under the carpet, even many a financial intermediary operating “in the travelling trade” will remain unchallenged. Occasionally, such intermediaries marry in order to continue collecting funds under a new name. Such intermediaries and their administrators can only be strongly warned against.


Banking secrecy and data protection: “Repeated indiscretions!”

Time and again, customer data on CD-ROM has found its way out of trust companies and banks. But there were also indiscretions by regulators. Credit institutions sell mortgage receivables against their own customers to collection companies, for balance sheet embellishment. Some banks also keep customer data on foreign assets neatly filed away for the tax inspector to pick up.


Bank protection vaccination: “Many providers – little quality ?”

Poor product knowledge and sales pressure on the part of the advisor seem to be the norm when offering “comprehensive investment advice”. About 300 German tax laws together with 70,000 ordinances are certainly no longer mastered by a single financial advisor. A well-founded expert appraisal will be able to protect the investor there.


Professional asset management: “Capital investment needs risk management!”

Every year hundreds of thousands of citizens fall for apparent “all-round carefree packages” from the financial world. A lack of risk protection, also in the tax and contractual area, often ends in the destruction of assets. Professional asset management requires legal solutions to protect clients from avoidable disappointment. This is precisely where many customers are left out in the cold.


by Dr. Johannes Fiala

by courtesy of (published in Die Tabakzeitung 11.2008, page 9)

and ( published on 26.02.2008 )

and (published Feb 18, 2008)

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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