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By John Burgess
Washington Post Staff Writer
Friday, June 16, 2000; Page E04

Austria yesterday sidestepped a new diplomatic confrontation, this time over secret bank accounts. An international body combating money laundering withdrew threats to kick Austria out of the group, saying the country was moving to attach names to close to 24 million anonymous accounts.

Austria is under pressure from the European Union for allowing in its government politicians whom the union views as neo-Nazis. But long before that became an issue, Austria was sparring with other industrialized countries over its sparbuch accounts, a banking tradition dating to the Austro-Hungarian empire of World War I days.

Switzerland has done away with much of its famous banking secrecy. In Austria, however, such secrecy continues to thrive, with close to $100 billion on deposit anonymously, U.S. officials say. Anyone can open accounts there without giving a name. Money is deposited or withdrawn on presentation of a passbook and a secret number, or through automated teller machines.

U.S. officials contend that this can provide impenetrable cover for the laundering of foreign crime money. The fact that 24 million accounts exist in a country of 8 million people is taken as evidence: "Unless every man woman and child has three of them . . . a lot of people outside Austria are finding these attractive," said Stuart Eizenstat, deputy U.S. Treasury secretary.

The Financial Action Task Force, a grouping of 26 countries that is trying to establish world standards for financial openness, threatened to expel Austria by June 30 unless there was action to change the sparbuch system.

A bill moving through the Austrian parliament to dismantle the system and require disclosure of names addresses the concerns, the group announced yesterday. "Austrian banks will have to make fundamental changes in how they do business," said Eizenstat.

The accounts are touted on numerous Internet financial sites. "The world's only true secret bank account," says one site that offers to set them up for clients, although similar accounts are available in Hungary, the Czech Republic and Slovakia. "Not even your bank knows who you are. . . . A great way to bypass the taxman."

Still, no one knows just how often the accounts aid crime. Based on passbooks and cash, the accounts are simply too cumbersome for hiding significant amounts of money, said Austrian Embassy spokesman Martin Weiss. "Money laundering is done in more modern ways."

Weiss said the vast majority of the accounts contain only small amounts of money--probably only 6,000 to 7,000 contain more than $300,000 each.

Austrians are accustomed to having anonymous accounts, so there was some political resistance to changing the law. People are "afraid of the Big Brother scenario . . . that's a natural reluctance that you don't want the government sitting on your shoulder all the time," he said.

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