Tax dodgers and money launderers will find it more difficult to stash away their illicit proceeds after one of the world’s most infamous tax havens, Luxembourg, has said it will drop its long-defended bank secrecy rules.

After years of being pilloried as a country that aides and abets tax evaders, Luxembourg on Tuesday agreed to end its secrecy on bank account holders in the country.

At a meeting of EU finance ministers in Luxembourg, the Grand Duchy’s finance minister, Pierre Gramegna, said his country would sign up to an international standard aimed at fighting tax evasion.

Last year, the Organization for Economic Development and Cooperation (OECD) published a document which foresaw an annual exchange of bank information between governments starting in 2017.

“We do this with the understanding that all are committed to a single global standard,” Gramegna told his EU counterparts.

Luxembourg’s banks are suspected of holding deposits worth more than ten times the nation’s annual economic output. Its strict bank secrecy rules, however, also invited criminals from around the world, including some of the worst dictators as well as organized crime leaders and ordinary tax dodgers, to hide money.

The move follows mounting pressure from the United States and German tax authorities for Luxembourg to release the names of people evading taxes in the two countries.

Italy’s Economics Minister Pier Carlo Padoan, whose country currently holds the EU’s rotating presidency, hailed the decision as a “milestone” in the campaign against tax evasion.

More tax havens to be dried out

After Luxembourg’s decision, Austria is the only country in the bloc that allows an EU citizen to open a bank account in another EU member state without the tax authority in the person’s country of origin being informed.

However, the Austrian finance minister Hans Jörg Schelling said that his country was also willing to sign up to the new standard. But Austria would need an extra year, until 2018, to complete technical preparations, he said, and pointed out that non-EU members Switzerland and Liechtenstein were also given until 2018 to make their data available. Nevertheless, he promised to make “the best efforts” to ensure that the standard would be implemented earlier.

EU governments have estimated that they lose 1 trillion euros ($1.3 trillion) in annual revenues as a result of tax fraud.

Reuters, dpa