Bank LLB secret accounts hit by blackmail

ZURICH, Feb 11 (Reuters) - Liechtenstein-based bank LLB (LLB.S: Quote, Profile, Research) has been the target of a blackmail campaign since 2003 after an employee threatened to publish the secret account details of German clients, LLB said in a statement on Monday.

"A former employee blackmailed the bank with used, internal documents concerning German bank clients," said LLB, or Liechtensteinische Landesbank. "He threatened to circulate the documents."

LLB said the employee was arrested and sentenced in 2004 -- and still remains in prison -- but that an accomplice continued the blackmail campaign. One person was arrested in September and remains in investigative custody in Germany, LLB said.

The statement follows an article in German magazine Der Spiegel that said LLB had paid out 9 million euros ($13.11 million) as part of the blackmail affair, which affected hundreds of German clients who stashed savings in secret accounts in the tiny Alpine enclave.

"We cannot comment beyond the statement. This is an ongoing investigation," said an LLB spokesman.

Sandwiched between Austria and Switzerland, the principality of Liechtenstein is home to three mid-sized private banks -- Swiss-listed LLB and VP Bank (VPB.S: Quote, Profile, Research) and the unlisted LGT Bank in Liechtenstein -- and scores of small wealth managers who boast discreet banking services for international clients.

Liechtenstein's bank secrecy laws are considered even more strict than those in Switzerland, the world's largest offshore banking centre.

"The bank clients who have been affected have been informed," LLB said. (Reporting by Thomas Atkins; editing by Sue Thomas)