Wealth International, Limited

Offshore News Digest for Week of February 19, 2001


HONG KONG OFFICIAL CALLS FOR MORE EFFICIENT ANTI-MONEY LAUNDERING LAWS TO AVOID FATF BLACKLIST

Over the last four years almost 3000 investigations into money- laundering have resulted in a mere 49 convictions. Hong Kong must face up to the danger of being blacklisted by the Financial Action Task Force (FATF) if it does not tighten up its current laws that have allowed many money-launderers to get away with their criminal activities.

This warning came from Hong Kong's commissioner for narcotics, Clarie Lo Ku Ka-Lee, who told a Bills Committee meeting on a new money-laundering law last week that Hong Kong must improve its financial services laws to avoid the threat of sanctions from the FATF's parent organisation, the Organisation for Economic Cooperation and Development (OECD).

Mrs Lo argued: 'If we do not improve ourselves, there is a possibility we could be blacklisted some time in the future. Hong Kong is an international financial centre, the reason we can maintain our status must be based on the fact that we can combat money-laundering.'

More on this story here.

CAYMAN ISLANDS GOVERNMENT IS CONFIDENT OF FATF BLACKLIST REMOVAL

Last week Tax-news reported on the FATF meeting recently held in Paris to discuss the progress of the jurisdictions it had identified as non-cooperative in the global fight against money laundering. The FATF did not remove any of the 15 worst-offending jurisdictions from its blacklist but said that it welcomed the 'significant additional progress' they had made.

However, there is light at the end of the tunnel for 7 of the jurisdictions that have fulfilled most of the legislative criteria demanded by the FATF. They have been requested by the organisation to submit implementation plans for the remainder of the legislation and if agreed by the FATF this will be a major step - if not the final step - closer to being removed from the blacklist.

At the time the FATF commented: 'A number of the 15 non- cooperative countries have taken impressive strides towards improving their counter- money laundering regimes [7 of the jurisdictions] have enacted most, if not all legislation needed to remedy the deficiencies identified in June 2000.' The 7 are: the Bahamas, the Cayman Islands, the Cook Islands, Israel, Liechtenstein, the Marshall Islands, and Panama.

More on this story here.

TOTAL WEB ANONYMITY FOR YOU, AND THE CIA

A software package which can keep the CIA's legions of snoops safe from detection as they trawl the Net in search of international evildoers ought to be good enough for your daily dogtrot through cyberspace. That's the pitch for SafeWeb's soon-to-be-released product Triangle Boy, which it is claimed will make it possible for one to surf the Web without leaving a trace.

SafeWeb already offers a free browsing gateway which uses 128-bit SSL, disables cookies and scripts and hides the surfer's IP, for pretty good on-line anonymity.

But according to an article in Monday's Wall Street Journal, the Agency is eager to involve itself in the more fully-featured Triangle Boy through its business development and capital investment arm In-Q-Tel.

Its motives, reportedly, are simply to carry out normal Internet surveillance tasks anonymously, but some suggest that the real reason is to figure out how to crack the program so it can spy on people using it.

More on this story here.

OECD TO REMOVE ISLE OF MAN FROM BLACKLIST

The Isle of Man online news service reported earlier this week that the jurisdiction has received official confirmation that it will be one of the first tax havens to be removed from the OECD's harmful tax competition blacklist when it is reviewed in July.

However, although clearly relieved at finally coming off the OECD blacklist, the Isle of Man, and other jurisdictions no doubt, will not thank the multilateral for it as most have been outraged from the beginning since their inclusion on the blacklist.

At the recent forum in Paris hosted by the FATF, an organisation set up by the OECD, the Isle of Man's Chief Minister, Donald Gelling, attacked the multilaterals saying: 'We seem to have witnessed a period of unprecedented international suspicion about the nature of business transacted in small financial centres. On the tax front we have had to contend with the OECD harmful tax competition report and the various European Union tax initiatives. The prejudice in some quarters has been palpable. Having been on the receiving end of more international scrutiny and ill-informed comment than I can ever recall, I relish this opportunity of responding.'

He said the Isle of Man's removal from the blacklist marked a new beginning for the Island's financial services sector and his government would overlook what could be considered as the OECD's prejudice and threats to make a commitment to building on the new consultative process which. He stated: 'We are prepared to give the new process a chance to get it right.'

In a letter addressed to Chief Secretary Fred Kissack, Bruno Gibert, co-chairman of the OECD's Forum on Harmful Tax Practices, stated: 'We look forward to the Isle of Manís participation in the upcoming Global Forum meeting on March 12 and 13.' - where only unlisted countries will get a seat at the table.

More on this story here.

OECD SHOULD DROP THREATS OF SANCTIONS

If we were engaged in constructive engagement in the middle of these counter-measures, we would not be able to ignore it and its implications.

The counter-measures Owen Arthur, Barbadosí Prime Minister, had in mind were the tough financial sanctions which the Organisation for Economic Cooperation and Development (OECD), is threatening to impose on dozens of Caribbean and Pacific nations and territories in July.

He had every reason to complain not only about the threat of sanctions but the deadline as well. As the co-chairman of the nine-nation working party set up in Barbados in early January to try to resolve the dispute between the OECD and countries on the rich nationsí blacklist, he had just completed presiding over a three-day meeting in London of countries which included Ireland, Antigua, Britain, Cook Islands and the Netherlands to Vanuatu, Malaysia, Malta, Barbados, Australia and the British Virgin Islands.

While they were searching for a solution, the sanctions were hanging over the heads of the small countries. And the OECD wasnít budging when asked to lift the threat.

As a sign of good faith, the OECD should drop the deadline and remove the threat. After all, the organisation has already admitted that it made serious mistakes in the way it went about preparing its list of tax havens that would be penalised if they donít fall into line.

Commonsense should prevail. If the OECD admits that its process was flawed from the get-go, then all of the things which flowed from it, the sanctions, the rules and regulations it wants the islands to follow and the Memorandum of Understanding it was to force the various offshore financial jurisdictions to sign, must also be flawed.

Itís about time that it comes to term with its folly, high-handedness and double standards.

Tony Hinton, Australiaís ambassador to the OECD and co-chairman of the working Party, admitted in London that the organisation had blundered when it failed to discuss the issue of harmful tax practices with the various countries before the proposed rules and the threats were made.

We could have handled better the consultation and dialogue on the OECD. That was something we recognised after Barbados, was the way Hinton put it in London a few days ago.

About three weeks ago, Gabriel Makhlouf, chairman of the OECDís Global Forum on Taxation and one of Britainís top tax experts, had used the meeting in Barbados to make a somewhat similar statement and to apologise to the smaller countries for the organisationís approach.

But why is the OECD holding out?

A possible explanation is arrogance. The OECD feels it can push around smaller nations and donít have to worry about the consequences. After all, what can the Cayman Islands, the Bahamas, Dominica, St. Vincent. St. Lucia, Grenada, Tonga or Barbados, either acting individually or together do to the United States, Japan, Italy, New Zealand, France or Sweden?

Answer: precious little.

Another reason for the hard-line and unreasonable attitude is that the OECD has found itself in the embarrassing position of having to defend itself against charges that its approach was riddled with hypocrisy; meaning that while it was telling the world that the small countries were sanctuaries which gave money launderers free rein to operate, the United States, Britain, Switzerland and France were being classified as the worldís leading centres for the cleaning of illegal money. Yet the rich countries were never blacklisted or threatened with penalties.

After smearing so many small countries, the OECD obviously feels it canít lift the deadline and the threat of sanctions because it would give the blacklisted victims bragging rights. It would allow them to say that it was a case of David slaying Goliath.

But this is not about bragging rights or stories about the small defeating the large. Instead, itís about the economic development of the blacklisted states.

St. Luciaís Prime Minister, Dr. Kenny Anthony, and his counterpart in St. Kitts-Nevis, Dr. Desmond Douglas, have insisted all along that the OECD action wasnít motivated by a desire to end money laundering as the then United States Treasury Secretary, Larry Summers, and Britainís Chancellor of the Exchequer, Gordon Brown, had claimed.

Instead, it was simply to shut down the competition, which the industrialised nations were facing from the islands.

As they are probably saying among themselves, climbing down by backing off the sanctions and the deadline would be more than the United States, Britain, Japan, the Netherlands and the other industrialised country can take.

This is where the new Bush administration can show that it really means business by turning over a new policy leaf. The top economic advisor in the White House, Larry Lindsey, and the Secretary of the Treasury, Paul OíNeil, can put a fresh stamp on tax policy in the United States, by ending the Clinton administrationís effort to dictate tax policy to sovereign nations in the Caribbean and the Pacific.

This entire dispute is about raising taxes and about competition in financial services and itís about time that the OECD admits it.

More on this story here.

O.E.C.D. MEET TARGETS PACIFIC HAVENS

TOKYO, Japan. (Feb. 20) Pacific tax havens threatened with sanctions demand that an artificial OECD deadline be withdrawn or postponed.

More on this story here and here.

The OECD met in Tokyo over the weekend with reps from the Cook Islands, Marshall Islands, Nauru, Niue, Samoa, Tonga and Vanuatu, all blacklisted by OECD and/or FATF. More on Pacific havens' status here and here and here.


CARICOM MAPS ANTI-OECD LEGAL ACTION

BRIDGETOWN, Barbados. The Caribbean Community and Common Market (CARICOM) approves a plan including legal action before the WTO to combat OECD pressures on offshore "harmful tax practices."

More on this story here.

LIECHTENSTEIN WANTS OFF

VADUZ. The tiny principality of Liechtenstein exudes optimism about being removed from the FATF blacklist list by the end of June.

More on this story here.

SWISS PREZ IN E.U. TALKS

The Swiss president, Moritz Leuenberger, discusses Switzerland's supposed desire for closer ties with the European Union.

More on this story here.

LUGANO. A Swiss court sentences an Irish money launderer to 6 years.

More on this story here.

The nervous investment arm of Switzerlandís largest bank, UBS, has withdrawn a speaking invitation to ex-US president, Bill CLINTON.

More on this story here.

CHANGE IN HONG KONG

Our correspondent in HK notes that financial sec. Donald TSANG is the new head of civil service, No. 2 behind the chief exec Tung Chee-Hwa. New financial sec. is Antony LEUNG, considered pro-Bejing, but no Communist and until now, head of Asia-Pacific area for Chase-JP Morgan.

More on this story here and here and here.

AUSTRALIAN PASSPORT SCANDAL

HONG KONG. A $20 million racket in which emigrants paid bribes for Australian passports is smashed with 29 arrests here.

More on this story here.

DOMINICA REVOKES BANK LICENSE

ROSEAU, Dominica. The government revokes the license of a major offshore bank operating in the country, the British Trade and Commerce Bank (BTCB).

More on this story here.

HILLARY'S MISTAKE

Red faces in the Caribbean over that infamous non-letter.

More on this story here.

CAN WE TRUST BERMUDA TRUSTS?

HAMILTON. This island is known for it highly private trusts currently protected by law from disclosing information without a Supreme Court order. Now, continuing the sell out to London and OECD demands, trusts must surrender "all relevant information." The government will decide what's relevant.

More on this story here.

GREEN WITH TAX ENVY

DUBLIN. Ireland has the strongest economy among EU member states, so of course its high tax neighbors are outraged at Irish tax cuts. Unhappy EU tax bureaucrats demand Ireland kill pending tax cuts allowed by the nation's pro-business polices and resulting budget surplus. So now we see the tax Hell the EU and OECD wants to impose on the world. Fortunately, Irish leaders are resisting the attack on their sovereignty.

More on this story here and here.

VIRTUAL GOLD MONEY:

GoldMoney is an online payment system that combines the world's oldest money, gold, with Internet technology to provide a safe, easy and inexpensive way to transact business 24 hours a day.

More on this story here.

PERTH, Australia. Gold demand by the world's 27 major markets was 11% higher in the last quarter of 2000, says the World Gold Council.

More on this story here.

THOSE GUILTY SUPER RICH AMERICANS

If you're a billionaire, you can afford the US estate taxes, but what about everybody else?

More on this story here and here.

TENOR'S TAXES: $11 MILLION NOT ENOUGH

MONTE CARLO, Monaco. Italian tax authorities are dunning Luciano Pavoratti again, despite his agreement to pay $11 million last year.

More on this story here.

CANADA'S TOUGH ANTI-M.L. RULES

TORONTO. Under new anti-money laundering rules announced Monday business must stop "suspicious transactions" or face $2 million fines and 5 years in jail.

More on this story here.

I.R.S. AUDITS DOWN, PROTESTS UP

Chances of a US taxpayer being audited by the IRS dropped to less than 1 in 200 last year. Reasons; smaller staff and new limits on IRS power.

More on this story here and here.

400 US tax protesters meet to plan anti-IRS strategy.

More on this story here.

An interactive guide to filing US income taxes, with calculators, step-by-step instructions and deduction checklists.

More on this story here.

SWISS BANKERS OPPOSE E.U. MEMBERSHIP

ZURICH. The Swiss Bankers Association (SBA) urges a 'no' vote in the March 4 referendum on Swiss joining the E.U. They're worried about financial privacy.

More on this story here.

MANX TAX CUTS

DOUGLAS, Isle of Man. Big corporate and individual tax cuts planned.

More on this story here.

RUSSIAN OFFSHORE ACCOUNTS

The Moscow Times says the government may allow citizens to have legal offshore bank accounts.

More on this story here.

But they better hurry, before Russians disappear entirely.

More on this story here.

RESISTANCE AT TOKYO TO O.E.C.D. DEMANDS

The Center for Freedom & Prosperity reports on Pacific haven resistance at the OECD regional conference, Feb. 15-16.

More on this story here.

GIBRALTAR says it will appease the OECD, but wont yet tell how.

More on this story here.

PANAMA SAYS 'NO' TO O.E.C.D.

PANAMA CITY, Panama. A government official insists Panama will not sign any "blank check" agreements with the OECD.

More on this story here.

And Panama rightfully fears loss of its statutory financial privacy laws if it appeases OECD demands.

More on this story here.

LORD ASHCROFT STILL A TAX EXILE

LONDON. Lord Ashcroft, the Conservative Party treasurer, is charged with still being a tax exile, months after he was said to be back from BELIZE (and Florida) to live and pay taxes in Britain.

More on this story here.

U.S.-U.K. OFFSHORE INVESTMENT REPORTING

We reported on Feb. 2 that a last minute Clinton-IRS proposal to require reporting of foreign citizens' US interest earnings to their home governments would scare away badly needed investors. Now it appears the UK Inland Revenue issued a similar reporting proposal on Feb. 16 covering foreign investors in Britain. Not a coincidence!

More on this story here.

E.U. TAX CONFUSION

Luxembourg and Belgium banks are issuing eurobonds with issue dates before March 1st, as confusion reigns over whether EU nations will impose retrospective taxes on cross border investments.

More on this story here and here.

STERLING vs. EURO

An in-depth examination of what Britain may do about submerging the pound sterling into the faltering euro.

More on this story here.

SWISS MAD OVER WILD FRENCH M.L. CHARGES

PARIS. French parliamentary Socialists, having attacked Monaco and Liechtenstein with wild charges of alleged money laundering, now charge Switzerland's considerable anti-ML efforts are all a sham. The Swiss react angrily.

More on this story here, here, here, and here.

ISRAEL WORRIED OVER BLACKLIST

JERUSALEM. In spite of a new anti-money laundering law passed by the Knesset in August 2000, Israelis worry about FATF blacklisting.

More on this story here.

MONEY LAUNDERING PANIC

It is a measure of the unreasoning panic in certain offshore countries that mere allegations can cause such havoc. This week ARGENTINA's central bank chief fought to keep his job because the report's charged money laundering in the financial system he regulates.

More on this story here and here.

In DOMINICA, unproved charges in the Senate staff report have tarred several banks and led to demands for anti-ML law changes there.

More on this story here and here.

In the highly nervous Bahamas, the Central Bank has reportedly suspended the licenses of two offshore banks also named in the report.

More on this story here.

And the Bahamas Finance Minister says he will close down any banks he thinks are questionable. What about due process?

More on this story here.

CANADA NOT READY FOR NEW ANTI-ML LAW

TORONTO. A survey of Canadian financial organizations shows only 43% have procedures to comply with the new Proceeds of Crime Act.

More on this story here.
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