Offshore News Digest for Week of March 26, 2001

HOUSE MAJORITY LEADER WRITES AGAIN TO PAUL O’NEILL AGAINST OECD

Representative Dick Armey, House Majority Leader, who was the first of eight Congressmen to write to Treasury Secretary Paul O'Neill urging him to reverse administration co-operation with the OECD's harmful tax initiative, has written again, as rumours emanate from the Treasury that staffers are fighting back against the Secretary's liberal inclinations.

'Recent reports indicate that you are wisely re-evaluating the United States involvement in the OECD's 'harmful tax competition' initiative,' writes Mr Armey. 'This project, which was supported by the Clinton administration, is fatally flawed and contrary to America's national interests.'

The Congressman warns that career personnel, who try to limit tax evasion, are misguided. 'A global network of tax police is the wrong approach,' he says.

Mr Armey recommends a switch to a territorial basis of taxation by all OECD members (ie that states should tax only income arising in or remitted to their territory). Very few OECD nations use this system, which means that double tax treaties are mostly redundant, but would create intense competition between states, especially if it weere applied to corporations as well as to individuals.

'Economic growth would be enhanced,' writes Mr Armey, 'because a territorial tax system and proper tax treatment of savings and investment would stimulate business activity here at home and attract investment from overseas.'

The letter warns that the OECD's initiative, if it were successful, would be counter-productive and far from reducing money-laundering, one of its supposed aims, would tend to increase it, as small 'persecuted' nations would turn to desperate measures to rescue their damaged economies.

'By every possible criterion,' finishes the Congressman, 'the OECD's effort is misguided. It is designed, in effect, to create a tax cartel for the benefit of a small cartel of high-tax nations. These countries are seeking to impede the flow of global capital, and the US economy, with its comparatively attractive tax system, will suffer if they succeed.'

OECD STEPS UP TAX HAVEN DRIVE

The Organisation for Economic Co-operation and Development has warned tax havens that it will not relent in its campaign to make them reform their financial systems.

The OECD said it aimed to win commitments to greater transparency from 32 offshore financial centres by the end of July.

The plan will disappoint some Caribbean havens, which wanted to set up a global forum to review the status of offshore centres rather than negotiate with the OECD individually.

In an interview with the Financial Times, Seiichi Kondo, OECD deputy secretary-general, said the organisation hoped to build on commitments already made by the Seychelles, the Netherlands Antilles and the Isle of Man.

"The more jurisdictions that sign up, the more pressure will be put on the remaining ones," he said.

The OECD last June published a list of 35 havens that it threatened with economic sanctions unless they agreed by this July to raise levels of financial disclosure and improve co-operation.

Mr Kondo said a working group created in January by the OECD and offshore centres had helped clarify how the havens could implement the OECD's demands. But he warned that the OECD planned to press individual centres for commitments rather than forge a multilateral agreement on reform.

"There is certainly a limit to this multilateral dialogue," he said. "We are getting very close to this limit."

LIBRARIES: FILTER OUT FILTERS

Filtering software is so prone to glitches that it has no place in public libraries, librarians and free speech groups claim in two lawsuits filed Tuesday.

The pair of actions filed in a Philadelphia district court seek to strike down a recent federal law that ties blocking software to public funding of Internet access -- and lets the feds stop writing checks to any library that refuses to comply.

In the lawsuits, the American Library Association and the American Civil Liberties Union say that the secret blacklists used by "nearly all filtering software vendors," coupled with an avalanche of examples of overly broad blocking, prove that the technology is inappropriate for public libraries.

"The law is unconstitutional because it's requiring public libraries to use blocking software that will result in constitutionally protected material being blocked," says Theresa Chmara, an ALA attorney at the Jenner and Block law firm. "There is no filter that can just block out obscenity, child pornography and harmful-to-minors material. These commercial software companies can't make these definitions."

Chmara is talking about the portion of the Children's Internet Protection Act that says there will be "no funds made available under this act for a library" that does not use a "technology protection measure" to block access to such images.

After months of tense negotiations ending last December, Congress approved CIPA as part of a spending bill, the third time the legislature has tried to appease conservatives by taking a stand against erotic material online.

The ACLU successfuly fought Congress' previous attempts -- the Communciations Decency Act and the Child Online Protection Act -- by arguing, among other points, that any law making it a crime to talk dirty online clearly violates the First Amendment.

WEBSITES FORCED TO REVEAL USER IDENTITY

A High Court judge has told two UK websites to reveal which user was behind defamatory messages placed in discussion groups. Legal action launched by net company Totalise has ended with the financial websites the Motley Fool and Interactive Investor International being forced to hand over the identity of the user who was only known online by a nickname.

The ruling could have implications for any website that lets people post messages anonymously.

Web law experts said the ruling showed that the online world was no longer regarded as a special case and should be subject to offline laws.

The case centred on comments posted on the financial websites by a user that went by the nickname of Zeddust.

Defamatory comments about net service provider Totalise appeared first on the Motley Fool website. The Motley Fool webmasters removed the comments and banned Zeddust when told about their existence, but declined requests to reveal who exactly was posting the messages.

Once banned from the Motley Fool, Zeddust then popped up on Interactive Investor International and posted more defamatory messages about Totalise. When asked, Interactive Investor removed the offending comments, and banned Zeddust from its service. But Interactive Investor also refused to reveal the exact identity of Zeddust.

In a bid to find out who was behind the messages, Totalise launched a legal action, and now a High Court judge has found in its favour.

Ruling in the case, Mr Justice Robert Owen said the messages posted by Zeddust were clearly defamatory and that, unless he ruled for Totalise, people would be able to defame with impunity online.

POLICE IN DNA TEST CRACKDOWN

Scotland - Police in Strathclyde are to carry out DNA tests on everyone they arrest, no matter how minor the charge, to see if they are linked with unsolved crimes.

At present, samples are only demanded from those taken in for the most serious offences such as murder, violence, sex crimes and drug dealing.

Chief Constable Sir John Orr hailed the expansion of the programme, backed by £800,000 from the Scottish Executive, as the way forward for his own force and those throughout the rest of Scotland.

The move will result in an extra 800 individual samples a month being taken from people such as vandals and car thieves.

Sir John said: "DNA offers the police a wonderful opportunity to identify and link people to crimes they commit in a very effective way.

"Ultimately the more samples collected and held on the database, the greater the number of detections.

"It is non-invasive and does not fall foul of any civil liberty or human rights issues. If a person we have taken a sample from is found not guilty or not proven, the sample will be destroyed. There is no doubt that at a cost of £40 per sample, it takes up a large slice of the budget.

"But with the money coming through from the Scottish executive, I expect the other forces to be doing what we are doing in weeks rather than months.

"There will be no hiding place for the criminal."

HONG KONG ISPS SLAM ENCRYPTION DEMANDS

ISPs have warned Hong Kong officials that their plans to crack cybercrime will harm the country's reputation.

The Hong Kong Internet Service Providers Association (HKISPA) has voiced concerns about proposals to give law enforcers access to encryption keys.

"We have to be very careful of controlling or even taking away the right of using encryption," the organisation told the South China Morning Post.

"This will seriously damage the reputation of a democracy government, which Hong Kong is trying hard to achieve." It is also worried about a proposal to force ISPs to store records of their users, including email account details and Web pages accessed, for up to six months.

The concerns are similar to those raised last year over the UK's government's Regulation of Investigatory Powers (RIP) Bill, which tried to force surfers to hand over encryption keys or passwords.

HKISPA has asked for judicial scrutiny if law enforcers are to be given access to encryption keys.

U.S. CONGRESS BLACK CAUCUS DENOUNCES O.E.C.D.

WASHINGTON. 32 members of the US House Congressional Black Caucus, all Democrats, have denounced the OECD's campaign against tax haven nations as an "initiative [that] threatens to undermine the fragile economies of some of our closest neighbors and allies, as well as the U.S. Virgin Islands." The signers all have significant Caribbean immigrant populations in their districts. The move gives a decidedly bipartisan cast to the anti-OECD movement in Congress.

U.S. MONEY LAUNDERING LAWS A TRAP

American anti-money laundering laws can snare the unwary or uneducated, says Denis KLEINFELD, noted asset protection attorney and Sovereign Society Advisory Board member. A very educational read, here.

The Finance Minister of CYPRUS refutes charges that his island nation is a center for money laundering.

ALPINE ANTI-MONEY LAUNDERING CONFERENCE

A mini-summit, held in Sicily and hosted by Italy was attended by Switzerland, France, Germany, Austria and Liechtenstein.

BANK OF ENGLAND SUED

LONDON. The Bank of England is being sued for £1billion (US$1.4 bn) by the liquidators of the collapsed Bank of Credit and Commerce International (BCCI).

OFFSHORE HAVENS ANNUAL SURVEY

The annual survey of changes and trends in offshore haven nations from the pages of Offshore Investment magazine.

SINGAPORE, CHANGING ISLAND

Interesting perspectives on where this free market nation has been and where it may be going.

CLAMPING DOWN ON KLEPTOCRATS

Governments and financial institutions must work together to recover the looted wealth of dictators, say this commentator.

The PHILIPPINES formally requests SWISS help in investigating funds allegedly belonging to the late dictator, Ferdinand MARCOS.

I.M.F. EYES GRENADA FINANCES

ST. GEORGE'S, Grenada. The IMF is investigating scandal plagued Grenada's financial status in an annual review.

CUSTOMS GRABS RICH’S CASH

GATWICK, U.K. Customs officers seized nearly $2 million (£1.4 million) in cash Monday after it was flown into Britain on behalf of Marc Rich, the fugitive billionaire pardoned by Ex-Pres. Bill Clinton.

FREE BORDER SCHENGEN STATES EXPAND

Switzerland looks on as Norway and Iceland join the Schengen states that allow free international cross border passage.

IDENTITY THEFT FASTEST GROWING CRIME

Stolen IDs are costing millions in the US.

MUTUAL FUNDS UNSAFE?

Hans F. Sennholz gives a detailed explanation for mutual fund investors of how such funds operate and their relative degree of security.

SOUTH AFRICAN C.G. TAX DEBATE

JOHANNESBURG. Business argues a proposed capital gains tax will hurt employment and drive away investment.

U.S. CAPTIVE INSURANCE GROWS

South Carolina has joined a growing number of US states trying to encourage captive insurance companies to form domiciles onshore.

PRISON AMERICA

A record number of people in US prisons increased to 1,932,000 inmates last year and will surpass 2 million late this year.

The Cato Institute comments on Jail House America and what can be done.

REPARATIONS FOR SLAVERY?

Even as the G-7 and the OECD attempt to enslave haven nations, reparations are being demanded for past colonial enslavement.

FREEDOM QUOTES Directory

1,000 quotes regarding freedom, free markets and defending liberty, here.

O.E.C.D. FOOT IN MOUTH DISEASE

In Investors Business Daily, Daniel J. Mitchell of the CFP, explains how the OECD shoots itself in the foot before inserting same in its ample mouth.

Left and Right unite in the US Congress against the OECD.

ANTIGUA AMBASSADOR SLAMS O.E.C.D.

Sir Ronald SANDERS strips away OECD hypocrisy and exposes its fraud.

COOK ISLANDS FEARS SANCTIONS

RAROTONGA, C.I. Westpac Bank fears OECD sanctions.

“OFFSHORE” FOR THE MASSES

MIAMI. The Herald discovers “tax havens” and breathlessly tries to explain what goes on in the sinister “offshore world”.

AN ASIAN VIEW OF TAX HAVENS

HONG KONG. The Far Eastern Review finds tax havens have a role to play.

MOODY’S REPORTS ON OFFSHORE BANKS

Moodys says offshore banks may lose business from the wealthy because of THE OECD controversy. One of the strongest offshore banks rated; Dexia Banque Internationale à Luxemborg.

But a major BERMUDA bank disagrees with Moody's gloomy conclusions.

TAX FACTS FOR AMERICAN EXPATS

Forbes magazine explains how Americans living abroad can save a bunch on income taxes. As much as $76,000 a year is tax exempt.

For more about this offshore tax break for US persons, go here.

I.R.S. DRIVES AWAY INVESTMENT IN U.S.

Marshall J. LANGER says IRS rules requiring US banks to report interest paid to nonresident aliens may cause an outflow of millions from US financial markets.

More IRS-caused capital flight from the US and less future foreign investment due to those damnable "Qualified Intermediary" rules.

ST. VINCENT-U.S. INSURANCE SCAM

The US state of Alabama exposes a St. Vincent based insurance fraud.

MONEY LAUNDERING

LONDON. British solicitors fear Tony Blair's latest anti-ML legislation might put them all in jail, and seriously compromise attorney-client privilege.

MOSCOW. The prosecutor general wants tough new controls over hard currency transactions and offshore banking by Russian companies and individuals.

HAMILTON, Bermuda. All island financial institutions are being trained to boost forfeiture of assets and combat criminal money laundering.

WASHINGTON. US officials grill a resentful Finance Minister Takis Clerides of CYPRUS on alleged money laundering in his island nation.

ATHENS, Greece. The central bank steps up counter money laundering activity after concern about Greek banks' role in handling funds for Yugoslav ex-president Milosevic.

HONG KONG. The legal community unanimously rejects a broad proposed law calling for money laundering to be a crime based only on "reasonable grounds" of suspicion.

Hong Kong is a world leader in total direct foreign investment.

MANILA, The Philippines. Contrary to strict privacy laws here, the Bankers Assoc. says it will require foreign nationals to sign a waiver to allow government access to their foreign currency deposits records.