Offshore News Digest for Week of April 2, 2001

COSTA RICA GOVERNMENT PROPOSES NEW BILL GOVERNING PRIVATE AND STATE-OWNED BANKS

According to Costa Rica's local press, the government plans to introduce a new bill that will make it easier for private banks to operate in the country by allowing them to offer their services regardless of whether or not they have physically established a Costa Rican branch.

There will also be a government guarantee on all small savings balances up to ¢2.5 million (US$7,700) for private as well as state banks - currently the government only reimburses depositors' savings in state banks in the event of their collapse.

The proposal includes provisions to make life easier for the country's state banks as well. It will provide them with more flexible powers in decisions involving the hiring and firing of personnel, salary levels and purchasing equipment.

The bill, which was sent to Congress last week, will also 'de-politicize' the Costa Rican Central Bank, by removing the Finance Minister from the bank's board of directors and abolish his voting powers, although he will still be a part of the bank's decision-making processes.

OZ WANTS NET GAMBLING BAN

Australia's conservative government said on Tuesday it will seek to prohibit betting on the Internet, acknowledging the country has a gambling problem.

"Australia's status as one of the world's leading problem gambling nations demands that we take decisive action to protect the most vulnerable in our community," Communications Minister Richard Alston said in a statement.

Alston said laws would soon be introduced to bar gaming and wagering services, including electronic poker machines, casino games, sport betting and lotteries, that are offered commercially over the Internet.

The legislation would also seek to prohibit gambling via interactive television and mobile phones.

But casino operators said a worldwide proliferation of interactive sites virtually guaranteed access to Australian bettors.

"The simple fact is that Australians will still have access to hundreds of overseas sites that do not have the (same) high standards of customer protection in place as do Australian regulated sites," Australian Casino Association Executive Director Chris Downy said.

Official reports show that 80 percent of Australians gamble at least once a year, with 40 percent betting regularly.

The nation of 19 million people is home to 20 percent of the world's poker machines.

The opposition Labor Party said trying to impose a ban would make Australia look technologically inept.

"The message the (government) is sending to the world is that we are ... an IT backwater, prohibiting content because the government has no idea how to implement a workable policy that protects those most at risk without encumbering Internet development," Shadow Youth Affairs Minister Kate Lundy said.

A government-backed 12-month freeze on new Internet gaming services is due to end on May 19.

A legislative ban would not stop Australian firms from offering interactive gaming services overseas, Alston said.

HONG KONG’S LEGAL COMMUNITY REJECTS PROPOSED ANTI-MONEY LAUNDERING BILL

Hong Kong's legal community has been almost unanimous in its decision to reject a provision proposed in Hong Kong's Drug Trafficking and Organised Crimes (Amendment) Bill which calls for money laundering to be an offence based on 'reasonable grounds' of suspicion.

Currently anyone wishing to report a suspicious transaction must actually know that it took place or have proper reason to believe that it took place but this has done little in curbing the vast amount of money-laundering activity that takes place in the jurisdiction.

But legislator Eric Li Ka-Cheung told the South China Morning Post that 'there is not a single legislator supporting the bill now ... the administration has been asked to rethink the bill.' This is for the simple reason says Mr Li that people were afraid they could be unaware that they were dealing with 'dirty' money and still be convicted of money laundering and face the maximum HK$1 million fine and five years in jail.

Mr Li explained people could be found guilty of making a bad judgment call or because they were 'not intelligent enough to be able to interpret it'. He said: 'As it stands we have come to a stalemate. I'm very pleased to see it. I was fighting a lonely battle.'

The legal community is standing firm despite warnings from the Commissioner for Narcotics Clarie Lo Ku Ka-Lee who told a Bills Committee meeting last month that 3000 investigations into money-laundering activities over the past four years has resulted in a mere 49 convictions. She claimed that Hong Kong must improve its financial services laws to avoid the threat of sanctions from international anti-money laundering agencies: 'If we do not imporve 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,' she said.

U.S. GROUP ATTACKS QUALIFIED INTERMEDIARY RULES

US lobbying organisation The Centre For Freedom And Prosperity, which has been prominent in defending offshore jurisdictions against the depredations of the OECD, is also taking up the cudgels against the IRS's new Qualified Intermediary regime, which imposes reporting and withholding requirements on banks and other financial institutions worldwide.

The CFP says that far from achieving their intended result of reducing tax evasion by Americans who place wealth offshore, the result of the new regulations will be 'capital flight out of the U.S. market, less future foreign investment in the US, a loss of privacy, a reduction in national sovereignty, a reduction in international commerce, and a discriminatory burden against medium- and small-sized businesses.'

The CFP also worries that if the US insists on imposing its laws on the rest of the world, then how will it be able to resist calls for the reverse situation, when foreign countries want to impose their tax collection rules on the US?

It's true that the QI regulations are burdensome, bureaucratic and imperialistic. Also they act in a contrary direction to the tendency towards 'territorial' taxation which many liberals think will be the result of globalisation and the development of the Internet. In a territorial taxation system, countries tax only income sourced on their territory or remitted to it - if applied world-wide the result would evidently be a highly competitive international fight for capital which would enormously benefit people and would tend to shrink the power of states. That's why the outgoing administration was so opposed to the idea, and why they introduced draconian, centralising legislation like the QI rules.

The CFP says that the administration has failed to perform legally-required impact assessments of the results of the QI rules: 'It appears that the IRS, so far, has published no studies analyzing the risks associated with the QI regulations. More specifically, it appears that the cost/benefit analysis required by the Administrative Procedures Act has not been completed.' The CFP thinks that such a study would show how damaging the new rules will be.

The CFP's commentary on the Qualified Intermediary rules can be found here and here.

COOK ISLANDS CONSIDERS THREAT OF OECD SANCTIONS

Discussions are taking place in the Cook Islands over the impact of sanctions imposed by the OECD and how much the country may have to endure. According to reports from the Islands' press sanctions could bring some Cook Islands businesses - particularly those based on the American dollar - to their knees in under four months.

The Westpac bank and the Cook Islands Chamber of Commerce have publicly acknowledged that the enforcement of sanctions would be disastrous for the Cook Islands economy. Westpac says they will have a 'dramatic' effect and the Chamber describes the impact of sanctions as 'severe'.

However, according to Westpac manager, Terry Smith, it is unlikely that the OECD will act against the Cook Islands. Mr Smith cites Niue as an example which has been rumoured to have been embargoed against using US dollars by the Chase Manhattan Bank and the Bank of New York. This is according to reliable sources such as Agence France Presse and Reuters but Chase Manhattan, which is a correspondant bank for Westpac, says it has not been requested by the US authorities to cease transactions with Niue nor any other South Pacific countries.

ANTIGUA AMBASSADOR CALLS FOR MEASURES TO OFFSET OECD DEMANDS

During a meeting with Antigua's Chamber of Commerce and Industry this week the High Commissioner to London, Sir Ronald Sanders, proposed two ways in which Antigua could tackle the demands of the OECD.

According to a report by the Antigua Sun Sir Ronald suggested that the Antigua government could convert offshore institutions into onshore entities with the power to operate on a local basis and he proposed that a public relations campaign be launched to counter the OECD's “propaganda”.

Sir Ronald, who is senior ambassador with ministerial rank and Antigua and Barbuda's representative on the Working Group concerned with the OECD initiative on Harmful Tax Competition, described the OECD threat to impose sanctions on Antigua & Barbuda if the jurisdiction did not comply with the organisation's demands as without basis and accused it of adopting the premise “might is right.” He said: “The OECD is an international grouping of 30 of the world’s richest countries. It is not an international organization and has no legal authority to speak for the world, or to establish any rules, norms, or standards for any state other than their own members.”

He continued: 'Nonetheless it is now dictating terms on what could be described as cross-border tax matters. It has said quite categorically that if targeted territories do not submit to their terms, damaging sanctions will be opposed against them.'

Sir Ronald also commented on the OECD's concerns over international money laundering and financial crime saying, “the OECD is attempting to dictate the tax policies and systems of other countries to the benefit of their own states. If they are successful in imposing their way in these matters they will be emboldened to do more. They have targeted 41 small states in the Pacific and the Caribbean whom they have branded as harbouring tax cheats, and secure havens for tax dodgers.”

He added that the OECD member countries have 'some of the biggest offshore and tax havens globally and their media playing hand and glove with them, have taken up the mantle of deception that the concern is over money laundering and financial crime. What they are really after is unrestricted access on a global basis for their goods and services, to the detriment of the regions they are targeting. And what they want is to be able to have access to any financial information, offshore or onshore, regardless of privacy, or the right of a nation’s courts to examine the request in checking out its validity.'

He said a level playing field was necessary for all countries regardless of whether or not they were affected by the OECD but when the idea was presented to them Sir Ronald said they refused to accept it. He explained: “We have agreed to accept some of their demands if they would agree to live by those same demands. Their response was to cut off all talks and demand that their conditions be met by July of this year.”

ALL YOUR DATA (AND BUSINESS PLANS) BELONG TO MICROSOFT

With Microsoft’s HailStorm .NET initiative hinging on the company’s very own PassPort service, you would think Redmond would be bending over backwards to stress the confidentially of user information.

Well, if that is the case, it has not started yet.

The current Passport Terms of Use agreement not only fails to guarantee confidentially, but actually gives Microsoft and its business partners the right to own your information, and do pretty much what they want with it. That encompasses all your Hotmail and MSN Messenger communications today.

As the Terms state:

“By posting messages, uploading files, inputting data, submitting any feedback or suggestions, or engaging in any other form of communication with or through the Passport Web Site ... you are granting Microsoft and its affiliated companies permission to:

“1. Use, modify, copy, distribute, transmit, publicly display, publicly perform, reproduce, publish, sublicense, create derivative works from, transfer, or sell any such communication.

“2. Sublicense to third parties the unrestricted right to exercise any of the foregoing rights granted with respect to the communication.

“3. Publish your name in connection with any such communication.”

And it does not stop there. Are you emailing a contact about a hot idea or business plan of your own? Hand that over, too:

“The foregoing grants shall include the right to exploit any proprietary rights in such communication, including but not limited to rights under copyright, trademark, service mark or patent laws under any relevant jurisdiction. No compensation will be paid with respect to Microsoft’s use of the materials contained within such communication.”

After the eFront debacle, we are baffled why anyone would want to trust confidential communications to any of the big IM services, let alone MSN Messenger.

Apple originally launched its iDisk service with a similar landgrab, but was quickly forced to retreat.

As reader Ken points out, “All Your Data Belong To Us”. He is not kidding.

BUSHWHACKED: WE CAN ONLY HOPE!

According to a Financial Times columnist: "For those who expected a cautious start to the era of Mr. Bush Jr... [it appears] the new administration will be more radically conservative, more unilateralist and more assertive in its relations with both friends and foes than many had predicted." Let's hope that goes for the OECD, FATF and their phony anti-haven blacklist campaigns.

BAHAMAS USED FOR U.S. VISA FRAUD

A Bahamian businessman testifies he was middleman for hundreds of thousands of dollars wired through an offshore bank for a firm whose principals are on trial for US visa fraud.

NAURU PRESIDENT DUMPED

The president of Nauru was ousted Friday in a parliamentary vote of no confidence, reportedly for failing to comply with a Russian request for information about money laundering using specific Nauru bank accounts.

ST VINCENT GOVERNMENT CHANGE

KINGSTOWN, St. Vincent. The opposition got a landslide victory in elections in St. Vincent and the Grenadines last week, taking 12 of 15 seats in parliament. An offshore bank scandal and alleged bribes were campaign issues.

SWISS BLOCK MORE ACCOUNTS

ZURICH. Switzerland blocks more bank accounts allegedly linked to the ex-head of Peru’s secret services, Vladimiro Montesinos.

EU MAY KILL LAWYER-CLIENT PRIVILEGE

BRUSSELS. The European parliament may adopt changes to EU money laundering rules that could destroying lawyer-client privilege.

SECRET SERVICE RAIDS E-GOLD DEALER

In what may be the start of an attack on anonymous online currencies that protect users' privacy, the US Secret Service raided a New York e-gold exchanger, seizing computers, files and documents.

CHASING U.S. TAX CHEATS?

The US National Taxpayers Union sees many flaws in a new book that attacks so-called "tax cheats." NTU says: "Instead of talking about the real problem and real solutions, the authors handpick a few of the very worst cases of tax abuse and use scare tactics to push for new laws and an army of IRS enforcers."

Attacking wealthy "tax cheats" is nothing new. FORBES magazine does it regularly. For an example, see here.

Pres. Bush's new Deputy Treasury Secretary says he too will chase tax cheats.

LAWSUIT HAPPY AMERICA

Along with creditors and shareholders, a third group is developing significant ownership claims on American companies: litigants.

OFFSHORE TAX INFORMATION

PricewaterhouseCoopers International gives you information on the taxation of foreign nationals living or working in 66 countries.

Ernst & Young provides similar tax information for 140 nations.

ANNUAL MONEY LAUNDERING CONFAB

Money Laundering Alert's 6th annual conference in Miami drew about 1,000 participants from more than 40 countries.

U.K. SPY MONEY ZOOMS

LONDON. British taxpayers are forced to spend more on spies now than during the height of the Cold War, much of it going to chase alleged money laundering.

SOUTH AFRICA CONFISCATES PLATINUM MINES

JOHANNESBURG. South Africa's richest tribe charges the black majority ANC government's plan to seize mineral rights is comparable to land seizures by former white apartheid rulers.

And major capital flight from South Africa continues.

ROTHSCHILDS GOES ON-LINE

ROTHSCHILD & Sons (C.I.) Ltd in Guernsey, part of the N M Rothschild private banking group, launches an online wealth management service for high net worth investors with a minimum of £100,000 of assets.

FEW USE ENCRYPTION

Despite privacy fears, few people use the encryption programs available.

OECD OPPOSITION ON THE RISE

The WALL STREET JOURNAL (Europe) says the OECD is "full of hot air" and called on Pres. Bush to deflate their phony high tax balloon.

The UK's EUROPEAN POLICY FORUM condemns the OECD's 'harmful tax competition' offensive as unfair and "backdoor pseudo law making."

NATIONAL REVIEW says "an international sanctions regime against tax havens will not succeed" without US support and calls on US Treas. Sec. O'Neill to make clear US does not back the OECD.

BLOOMBERG News reports how US Senators and Congressmen, Right and Left, have formed an unusual bipartisan, anti-OECD coalition.

CANADA’s leading economic think tank, the FRAZIER INSTITUTE, blasts the OECD.

KINGSTON, Jamaica. CARIBBEAN governments meet to enlist Latin American governments in a concerted major anti-OECD campaign.

Sir Ronald SANDERS, ANTIGUA representative in London, articulate OECD opponent from the start, speaks again. Latest remarks,

VADUZ, Liechtenstein. Rich, powerful countries are trying to impose a 'worldwide tax cartel' that will damage smaller nations, ruling Prince HANS ADAM II charges.

MORE BAHAMAS BANK TURMOIL

NASSAU, The Bahamas. The Suisse Security Bank and Trust (SSBT) challenges the Central Bank governor's decision to suspend its license, charging the recently enacted Bank and Trust Companies Regulations Act violates the nation's constitution.

Meanwhile, Bahamas PM Hubert INGRAHAM continues saying everything is OK, but admits a quarter of all existing 400+ Bahamian bank licenses also may be revoked.

AN END TO SWISS ISOLATION?

The Financial Times explains why Switzerland's secure financial position in the world may be under threat from the global economy.

TOP 10 TAX HAVENS FOR ADVENTURE

With US Tax Day looming near, recreation and adventure travel web site http://www.gorp.com, tongue in cheek, releases its list of top 10 tax havens for adventurers who want to opt out on the IRS.

NEW GUERNSEY FIDUCIARY LAW

ST. PETER PORT, Guernsey. This Channel Island has a comprehensive new fiduciary regulatory law as of April 1st.

KPMG CAYMANS EXPANDS

GEORGE TOWN, Cayman Islands. The CI's oldest accounting firm hires extra staff to explain all the restrictive new financial laws recently imposed here.

RUSSIAN FREEDOM DIMINISHES

Pres. Vladimir PUTIN promises liberty while silencing opposition.

AMERICAN TAX SCAMS UNDER ATTACK

As US tax scams proliferate, "client" victims start to feel heat and learn bad tax advice can be dangerous to your wealth.

Tax scam victims testified before the US Senate on Thursday.

ALMOST HALF OF I.R.S. ANSWERS WRONG

US Treasury Dept. investigators posing as taxpayers found IRS workers gave incorrect information almost half the time.

GRAMM SAYS 'NO' TO LEVIN

WASHINGTON. Sen. Carl LEVIN (D-Mich), keeps up his anti-offshore public relations smear campaign, but Senate Banking chairman Phil GRAMM (R-Tex) says an emphatic "no"!

PAUL BILL KILLS W/H TAXES

Rep. Ron Paul (R-Tex) wants to eliminate withholding income taxes so taxpayers can see the full size of the government's annual bite.

LOONIE SINKS AGAIN

Canada's currency reaches record lows against the US dollar.

BRITS LAX ON MONEY LAUNDERING?

LONDON. A House of Commons Committee blast Blair's government for loose anti-money laundering policies.

SOUTH AFRICAN BRAIN DRAIN

CAPE TOWN. RSA stats; since black rule in 1994, 1.6 million people in skilled, professional and managerial occupations have left.