Wealth International, Limited

Offshore News Digest for Week of January 6, 2003


What are TIEAs, and where U.S. TIEAs exist.

List of US Tax Information Exchange Agreements here (asterisked countries are those with a TIEA in effect).

IRS Manuals governing information exchange procedures here and here.

US-Foreign (Bilateral) Tax Treaties (distinct from TIEAs) here.


The director of the Carr Center at Harvard’s Kennedy School of Government weighs in on the subject, much discussed of late. President Bush claims not, but what other word adequately describes what America is becoming? If Americans have an empire, they have acquired it in a state of deep denial. But 9/11 was an awakening, a moment of reckoning with the extent of American power and the avenging hatreds it arouses. Extensive analysis of the causes and consequences of the situation.

More on this story here.

A “British Empire and Commonwealth Museum” has opened in the western city of Bristol. Its display has been well received as a balanced interpretation of the good and the bad of the empire, and of the mixed welcome given to immigrants from the former colonies when they arrived in Britain.

More on this story here.


The Australian Tax Office tax office plans to launch negotiations with dozens of international tax havens in an effort to uncover secret funds held by Australians. The ATO will sign bilateral deals to share information about what accounts Australians hold and how much money they contain. Transactions involving tax havens have tripled in value in the past six years partially because of the easy availability of foreign bank accounts over the internet - a simple search shows hundreds of companies vying to administer Australian money, no questions asked.

More on this story here.

The Australian Taxation Office has revealed that at least A$5 billion flowed to foreign tax havens in 2001-02, over half of that to Bermuda. While big companies and high-wealth individuals had exploited offshore tax loopholes for years, the ATO’s own analysis had confirmed a trend by small businesses and other “lower dollar value” taxpayers to send money offshore.

More on this story here.

Australian tax office accused of violating citizens rights. The Commonwealth Ombudsman has challenged the Australian Taxation Office (ATO) over its treatment of investors in mass-marketed tax avoidance schemes. The plans, popular in the early 1990s, earned investors large tax deductions for small investments in areas such as farming, forestry, and film production. When the ATO disallowed the deductions provided by the schemes, it also forced many investors to sign away their rights under the Freedom of Information Act in return for slightly more favourable tax settlement conditions. Ombudsman Ron McLeod launched a scathing attack on the tax authority, arguing that: “Access to information under the FOI legislation is an important right of our citizenship”.

More on this story here.


According to reports, thirty mainland companies have so far announced their intention to launch IPOs in Hong Kong over the coming year, an announcement which is likely to cement the jurisdiction’s reputation as a major regional funding center. Mostly financial services and real estate ventures, they will join the 176 other mainland companies (as of October 2002) which have so far opted to go public via Hong Kong.

More on this story here.


New Year’s celebrations in the Bahraini capital of Manama turned into a riot as hundreds of youths, reportedly Muslim Shi’ites, stormed through the city’s main street Exhibition Avenue, ravaging cars, stores, hotels and fast food restaurants and assaulted expatriate passers-by. These acts of vandalism will deal a blow to Bahrain’s tourism industry and hit the country’s reputation, the Frsan Hotel General manager told the Gulf Daily News.

More on this story here.


The new law introduces compulsory capital and/or property monitoring in case of transactions whose one party-or both-whether private persons or corporate entities, are suspected of involvement in, or connection with extremist activities, said the head of the Federation Council financial market committee.

More on this story here.


Spain continues to implement Brussels process measures without Gibraltar’s consent.

More on this story here.

Many descendants of Swiss emigrants to Argentina, desperate to flee their country’s economic crisis, are applying for Swiss citizenship - but the door is only open to applicants under the age of 32. There are an estimated 100,000 people of Swiss descent living in Argentina.

More on this story here.

Guernsey unhappy with Forbes tax haven list given in their article entitled “Buried Treasure: Where to hide your ill-gotten gains”. Part of the response reads “The island is not a place to park ‘ill-gotten gains’. The US Internal Revenue Service has approved Guernsey’s know-your-customer procedures.”

More on this story here and here.

Malta’s Minister of Finance urged businesses and investors located in the United Arab Emirates to take advantage of the tax benefits offered by Malta’s increasingly close relationship with European Union member states.

More on this story here.


GEORGE TOWN: The Chairman of the United Democratic Party, Mr. William “Billy” Reid, is appealing to the United Kingdom’s sense of fair play in relation to he EU’s Draft Directive on the Taxation of Savings Income. In an interview he noted that the people of Cayman gave overwhelming support and an extremely generous donation was sent off to the UK during the Falklands War, but “Now our Mother Country is bent on forcing onerous legislation on us in the form of the European Union Draft Directive on the Taxation of Savings Income that would harm and possibly destroy our financial industry.” In contrast, Bermuda has been “let off the hook”.

He continued, “We really have to resist it with all of the means at our disposal. This is our biggest challenge in 2003, and indeed our most important challenge and I just hope we can succeed with what we are trying to do because otherwise the fallout would be extremely serious.”

More on this story here.


International accounting firm, KPMG has been ordered to turn over to a US federal court documents relating to tax shelter arrangements, despite the company’s claim that to do so would violate client confidentiality. The court will review them and decide whether the IRS should be permitted access to the paperwork.

More on this story here.


Lynn Meredith has made $millions marketing the gospel of tax avoidance, the IRS says. Her message, as detailed in her best-selling (100,000 copies) book “Vultures in Eagles’ Clothing”: You don’t have to pay federal income taxes, ever. Authorities say Meredith is particularly troublesome because she has helped move tax evasion from the fringe to the mainstream. In contrast with other tax rebels, her manner is more real estate agent than revolutionary. Federal authorities arrested her and six colleagues on charges of operating a worldwide tax scam last April 15 (the date is just coincidence, they say), and is scheduled to stand trial in June. Prosecutors said Meredith convinced tens of thousands of people to evade federal income taxes, mostly by selling them “pure trusts”. Meredith, who has pleaded not guilty to the charges, says that her trusts are legal and that the government is persecuting her for exposing the basic unfairness of the tax system.

“The IRS has no authority for what they do,” Meredith tells the audience at one of her seminars. “The IRS works by intimidating you. It’s your own fear that makes you comply. If we refuse to be fearful, they will have lost all power over us.” As one client put it: “At first, you think she’s a crackpot. Then you get interested in it because of greed. Then, when you start looking into it more, you get real sick in the stomach. It’s like the carpet of innocence has been pulled out from under you.”

The IRS contends that Meredith has made at least $6 million from her anti-tax activities. Meredith declined to discuss her income but said her business was successful. She owns a fleet of vintage cars, including a 1973 Corvette Stingray with the vanity plate “TAXREBL”. “The IRS gets really upset about all my cars,” she said.

Federal prosecutors have not filed charges against any buyers of Meredith’s trusts - some are scheduled to testify for the prosecution. To outsiders, it might seem as if Meredith has met her match. But die-hard followers advise against counting her out. “Let me tell you, the government’s going to be sorry they messed with her,” said one.

More on this story here.


There is no shortage of them. Phony home-based businesses, trust schemes, “taxes are voluntary” arguments, paying tax on the prize “you already have won”, etc.

More on this story here.


The American Bankers Association (ABA) issued a very strong letter denouncing the IRS’s proposed regulation requiring deposit interest reporting to nonresident aliens at the end of December, prompted by news that staffers in the Treasury Department has been telling Congressional offices that there is no opposition from the financial services industry to the revised regulation. As the ABA has made clear in previous letters, they are concerned about the potential impact the proposed regulations will have on global competitiveness within the financial services market.

More on this story here.


With US estate tax future uncertain, estate planning falters. Anything might happen after 2010. But people should not allow the uncertainty to stop them. Insurance policies that can be altered without additional cost if Congress changes the rules again and generation-skipping trusts - once used only by the ultra-rich but now being employed by those with $1 million to $5 million in assets - can help handle the uncertainty. The basics that apply no matter what: A will (70% of Americans do not have one), insurance, trusts, and giving while you are living.

More on this story here.

Low interest rates lead to renewed interest in charitable lead annuity trusts.

More on this story here. (Free registration required.)


The Bush administration and Bill Thomas, the chairman of the House ways and means committee, are determined for the first time since 1986 to overhaul laws that they believe impede US companies from competing in an increasingly global economy. But almost any proposal is likely to face some significant corporate opposition. The US Treasury deputy secretary said recently that US companies had no choice but to accept that some would win and others would lose from international tax reform - a recipe for fierce political battles.

More on this story here.


Analysts at credit-rating outfits predict that roughly 1 in every 13 companies with noninvestment-grade debt will default and declare bankruptcy in the next 12 months. While that is about the same ratio as in 2002, it is double the average over the past 20 years. Telecom, cable, textiles, software, and unregulated electricity are predicted to be among hardest hit areas.

More on this story here.


Paul Craig Roberts, an architect (as assistant secretary of the Treasury) of the Reagan tax-cut revolution and now a syndicated columnist and chairman of the Institute for Political Economy says “The left is right: America is an unjust society.” The problem, he says, is this: “Americans are no longer secure in law - the justice system no longer seeks truth and prosecutors are untroubled by wrongful convictions.” Historic due process rights, many enumerated in the Bill of Rights, have been eroded. “They can seize anyone, and any property, at any time.” We recently coauthored The Tyranny of Good Intentions: How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice with Lawrence M. Stratton, a lawyer.

Asset forfeiture, aimed at drug dealers when radically extended by Congress in 1984 but now covering 140 other offenses, allows seizure on “probable cause” - i.e., at the discretion of police and prosecutors. Proceeds go to the seizing agency, creating a corrupting motive. Civil cases are now often criminalized, through “novel theories” of the law invented by prosecutors to target specific defendants - very much like a bill of attainder (explicitly forbidden in the Constitution). Exxon faced cleanup costs and civil tort damages after the Exxon Valdez oil spill, but it was also indicted for intentionally killing migratory birds without a hunting license and dumping refuse without a permit. This “novel theory” allowed the Bush Administration Justice Department to bring criminal charges, which carry massively higher penalties. “Despite the absurdity of the charges,” notes Roberts, “Exxon lacked the confidence in our crumbling justice system to go to trial.” It settled for a $125 million fine.

Michigan Supreme Court Justice Stephen J. Markman similarly lays the blame at the source: “The ultimate responsibility lies with Congress and its penchant for overly broad criminal statutes.” With sweeping criminal laws the prosecutor can find some technical charge to hang on just about anybody.

More on this story here.


WASHINGTON: The Defense Advanced Research Projects Agency (DARPA), which oversees the Total Information Awareness System (TIA) - the Pentagon research program that aims to gather and analyze a vast array of information on Americans, has hired at least eight private companies to work on the effort. Congress, which exercises oversight of the executive branch and the military, has not held a single public hearing on TIA and sources on the Hill suggested that members know little about it. Dozens of universities within and without the United States have also worked on the program’s components for years.

Critics of the program, including Fortune magazine, which dubbed the program the “Worst Technology of 2002”, and The New York Times editorial board, which said the program should be closed pending an investigation, oppose the dragnet approach to hunting terrorists. “This type of profiling has been the goal of direct marketing for years,” according to Chris Hoofnagle, legislative counsel for the Electronic Privacy Information Center (EPIC). “If you get a 2 to 3 percent response from direct mail, that’s considered a victory. That’s how inaccurate the system is. With junk mail, you can just throw it away; we’re talking about people’s civil liberties being invaded here.”

“If terrorist organizations are going to plan and execute attacks against the United States, their people must engage in transactions, and they will leave signatures in this information space,” says project head John Poindexter. Privacy advocates counter that giving the government access to such data could subject innocent citizens to scrutiny and that, in the wrong hands, the information could be used to intimidate political foes -- much as J. Edgar Hoover’s FBI exploited the gathering of intelligence to harass critics of the Nixon administration.

More on this story here and here.


The encryption software’s latest edition, PGP 8, is out and available here. The $39 PGP Personal edition includes PGPdisk, which creates an encrypted, password-protected area on your disk drive. PGP 8 runs on Windows 98 or newer Microsoft operating systems, as well as Mac OS X 10.2. Older versions of the software for other operating systems at can be found here. An open-source, PGP-compatible program called Gnu Privacy Guard is available for Windows, Linux, Mac OS X and several other operating systems and is free for personal and commercial use. (Gnu Privacy Guard needs additional software to become easily usable.)

More on this story here.


The next phase of registering foreign visitors now under way. Initially for visitors from Iran, Iraq, Libya, Sudan and Syria, the second phase of the program registers male visitors from 13 more nations, who must appear for fingerprinting at INS offices by Friday, January 10. Some who show up with lapsed visas are getting arrested, even if an application to extend the stay is in process. Enforcement has been inconsistent across INS offices. A lawyer with of the Center for Human Rights and Constitutional Law has filed a class-action lawsuit on behalf of those who have immigration applications pending - and who fear they will be arrested if they show up for registration. The suit seeks to put an end to the detentions of such immigrants when they come in to an INS office to register.

More on this story here.

Americans traveling abroad would have to give the government detailed personal information before leaving or returning under an antiterrorism rule that the INS proposed today. The rule would force airlines and shipping companies to collect and submit to the government the name, birth date, sex, passport number, home country and address of every passenger and crew member. The proposed rule would make it mandatory for carriers to supply the information for both American citizens and noncitizens.

More on this story here.


A foreign trust will protect your wealth only if it is established before a financial crisis, such as a lawsuit or bankruptcy, is encountered. With rare exceptions, a foreign trust cannot save US income taxes, claims of numerous Internet sham trust promoters notwithstanding.

IRS “Abusive Trust Schemes” page, including significant case summaries here.

More coverage of significant cases, including the Anderson case, commented on in “Trust Myths”, link here.


Daniel J. Mitchell, Heritage Foundation Senior Fellow, reflects on the events of 2002 and the prospects for 2003. Some significant victories in 2002 will have to be defended. There is heartening evidence that the Bush Administration wants to reform the tax code. Most importantly, time is an ally. Competition is forcing governments to lower tax rates and reform tax codes – continuing a process begun under Margaret Thatcher and Ronald Reagan. Politicians usually do not like having to respond to this competitive pressure, which is why they want the OECD and EU to create tax cartels, but will be forced to make additional pro-growth reforms if the battle to protect tax competition is successful. He goes on the outline the prognonis of the likely 2003 battles, mostly optimistically.

More on this story here.


Sir Ronald Sanders of Antigua launched another stinging attack on the OECD, accusing the multilateral body of practicing “a form of neo-colonialism” throughout its Harmful Tax Competition Initiative, arguing that the OECD has attempted to dictate the tax systems of other nations for the benefit of its own member states. He also cited the powerful role played by the media in demonising the territories named on the “blacklist”, despite the fact that many Western countries have tax regimes which could be viewed as equally harmful under the criteria laid out by the organisation, and questioned the non-inclusion of certain prominent low tax jurisdictions.

“It is noteworthy, for instance, that Hong Kong was never named as a tax haven, yet by every criteria that the OECD established, Hong Kong should have been a prime target. Was Hong Kong’s omission an indication that the OECD did not want to offend the Peoples Republic of China?” he asked (rhetorically).

More on this story here.

A Caymans view of the OECD and its “hidden agenda”.

More on this story here. (Reasonably unintrusive registration required.)


As the tax office tries to crack down on the use of overseas tax havens, Qantas is running advertisements for the havens in its in-flight magazine. Labor assistant treasury spokesman David Cox was among those condemning Qantas for promoting the schemes. “They will be and should be embarrassed by the fact they’ve done it,” he said.

More on this story here.


Bermuda has been branded a tax haven in reports in Australian news sites about alleged tax avoidance practices. The Australia Tax Office responded yesterday that only a fraction of the quoted total amount flowing to havens of A$5.01 billion (of which A$2.5 billion went to Bermuda) was actual lost tax revenue, saying much of the money flowing to tax havens is used for legitimate purposes such as shipping and insurance.

Responding to the reports, Bermuda Ministry of Finance officials yesterday commented that there was no substance to the allegations : “Once again, it appears that Bermuda’s good name is being cast about rather loosely.” said Financial Secretary, Donald Scott. “Bermuda is not a tax haven,” he continued, “Bermuda’s taxation system is not designed to attract mobile capital from other countries. Highly reputable companies come to Bermuda to conduct legitimate business because of our reputation as a ‘blue chip’ jurisdiction for international business.”

More on this story here.


In its annual report on Bermuda, Moody’s Investors Service said the country’s Aa1 foreign currency country ceilings, Aaa domestic currency government bond rating, and stable outlook reflect the island’s prudent macroeconomic policies, favorable external position, and low debt and debt-service ratios. A long-standing policy of keeping government debt at less than 10% of GDP is in place. Another 9/11 magnitude blow to the insurance sector could hurt the overall economy.

More on this story here and here.


Tax advantaged residence, lump sum taxation and the use of pre-immigration trusts.

More on this story here. (Reasonably unintrusive registration required.)


Effective January 6, all persons and entities are required to report the importing and exporting of currency and monetary instruments of $10,000 or more to the Canada Customs and Revenue Agency. There are no restrictions on the amount of currency or monetary instruments that may be imported into or exported from Canada. Failure to report currency and monetary instruments may result in seizure or the assessment of a penalty ranging from $250 to $5000. The CCRA will send all completed reports to the Financial Transactions and Reports Analysis Centre of Canada for assessment and analysis.

More on this story here.


The price of gold is near a 6 year high. The yellow metal seems to have regained some of its haven status thanks, in part, to weak stockmarkets and an impending war with Iraq. But its prospects are not so bright. Or so says The Economist.

More on this story here.


The Spanish government and a US sea salvage company, Sub Sea Research, are fighting over what could be the most valuable shipwreck ever, with a cargo of gold bullion, gems, coins and silver that is worth an estimated $3 billion. The Spanish position refers to the terms of a 1902 treaty with the US based on the fact that the shipwreck could contain the remains of the Spanish soldiers. The claim is also likely to note that the cargo belonged to the Spanish Government. The US State Department said the company needed Spain’s permission to recover the treasure. About 250 Spanish ships which sunk in the 17th and 18th centuries are thought to have taken with them treasure worth billions of dollars.

More on this story here.


NEW DELHI: This week, the Indian government is set to announce sweeping changes in the country’s citizenship laws which will allow nearly 20 million people of Indian origin who live abroad to claim dual citizenship. Experts estimate that nearly 800,000 Canadian residents born in India could be eligible for dual citizenship. The change is designed to encourage emigrées to invest financially in their birth nation.

More on this story here.


OTTAWA: The Canadian National Post reports that over a dozen public servants lost their jobs over the past three years for using the national police database to carry out their own detective work – from spying on neighbors to keeping track of former boyfriends. The offenders (some of whom ended up in jail) sold the confidential data to private investigators, gave it to friends, and in one instance, used it “to meet persons of the opposite sex”.

Established in 1972, the database stores information ranging from criminal records to vehicle registrations to most-wanted lists. It is operated by the Mounties, but nearly 1,300 police departments and government agencies have access to it. Civil servants, including secretaries and 911 dispatchers, can tap into the system.

More on this story here.


Web sites have plastered John Poindexter’s personal info on the Web. They put his e-mail address and home phone number on dozens of Web sites, forcing him to block all incoming calls, and posted satellite images of his suburban Washington house and maps showing how to get there. They have created online forms to collect even more personal data on him: “When and if you see Mr. Poindexter purchase something, travel somewhere or do, well, anything -- send us a tip describing your observations. We will display the information received right here on this Web site,” reads a site titled “The John Poindexter Awareness Office”.

“My goal is to simply let them know what they are doing affects other people and they should think about the consequences [of the Total Information Awareness project]”, said the site’s creator. The editor of the mailing list for Politech, which focuses on politics and technology, said the TIA has sparked far more outrage than previous projects with privacy implications, such as the FBI’s “Carnivore” Internet surveillance software.

More on this story here.


A bevy of the most solid Republican conservatives are sounding some of the harshest criticism against the president’s tactics in fighting the war on terrorism. As one critic points out, many of the post-9/11 initiatives would have been fought hard if they had come from Clinton. “Over the last several years,” wrote Phil Gold, an ex-Marine and long a right-wing stalwart, “I’ve become sadly convinced that American conservatism has grown, for lack of a better word, malign.” That movement to which he has given most of his life, he says, “has gained the government, trashed its soul, and now bestrides the planet.” He continues: “We no longer have a commitment to limited government. I no longer recognize the movement. What I started out with isn’t there anymore.”

“Both Ashcroft and President Bush have departed from their earlier emphasis on protecting privacy and have really become statists, who want to impose the power of the state on us to surveil us and also to prevent any dissent,” says Barry Steinhardt, director of the ACLU’s technology and liberty program. “They’re certainly not conservatives when it comes to wielding the powers of the state.” In fact, says Steinhardt, the ACLU are now the real conservatives. “We’re dedicated to preserving the values of an 18th century document.”

More on this story here.


Starting in September, the Venerable Bede Church of England Aided School is to use the technology on school kids withdrawing books from its library or obtaining meals at the school canteen. The headteacher of the 900-pupil school told the BBC that retinal scan technology is cheaper and more cost effective than card swipe systems. Privacy International has warned that tens of thousands of UK school children are being fingerprinted by schools, often without the knowledge or consent of their parents, condemning the practice as “dangerous, illegal and unnecessary” - a criticism that can also be leveled at the retinal scanning scheme.

More on this story here.


Most Americans are willing to accept increased use of biometric technologies by private sector firms, providing proper privacy safeguards are applied, according to a study funded by the US Bureau of Justice Statistics and developed by lobbyists Privacy & American Business. The survey, conducted via phone last August, shows a strong link between public concerns over identity fraud and support for the uses of biometrics by both the public and private sectors. The vast majority of those questioned agreed that a number of privacy safeguards need to be put in place if biometrics systems are to be used.

More on this story here.


The Bush administration has pared back the number of government initiatives on computer security in revised plans for the newly created Department of Homeland Security. Gone are proposals to provide government guidance for US companies on improving security. Government should instead focus on getting its own house on in order first, the new thinking suggests. Meanwhile, the Defence Department is given explicit permission to strike back in kind if the US if ever attacked in cyberspace. Earlier proposals to consult regularly with privacy experts on the civil liberties ramification of security plans have been dropped. Instead, the department will include a privacy officer charged with balancing “privacy and civil liberties concerns” in developing security plans.

More on this story here.


In the next few months a significant bill will be under discussion in the US Senate and House of Representatives. The proposal is that US government authorises $50 million in 2003 and 2004 for the “funding for a new Office of Global Internet Freedom to counter Internet jamming and blocking by repressive regimes”. (Full proposal available here in PDF format.) Among the criticisms leveled is that the U.S. is being blatantly hypocritical, because it is trying hard to increase its surveillance and logging of Internet activity in order to protect its own domestic interests, but the proposed bill is intent on removing the capability of other countries to perform similar functions to protect their domestic interests.

This bill seems to be yet another attempt by the USA to exert their jurisdiction right across the Internet, regardless of the sovereignty of other countries and the norms of other cultures. If this proposal is approved then it could well mean the end of the Internet as we know it, conceivably leading to various countries or groups of countries creating “private” Internets of their own, as has been proposed by other -- predominantly European -- commentators. It could be a serious impediment to international trade and relations but it might be the only way for countries to exert control over the Internet in the manner that they see fit and not have their authority undermined by another country.

More on this story here.


WASHINGTON: Democrat Richard Neal said that the first bill he will file in the new congress will be legislation dubbed the “Bermuda Bill”, which would prevent US corporate inversions offshore. “The practice of reincorporating in a foreign country to avoid paying US income tax is inconsistent with American corporate citizenship,” Neal said last month.

Incoming Republican leader of the Senate Finance Committee, Charles Grassley, also is expected to attach legislation barring so-called corporate inversions to President Bush’s tax cut bills, which will include the removal of income tax on dividends. (US companies move offshore largely because the US tax code requires US corporations to pay taxes on its world-wide income. They therefore commonly undertake corporate inversions so that their foreign operations will not be subject to US tax on the income in addition to the tax imposed by the country where the operations are located.) Opponents of corporate anti-inversion bills say that the US tax code remains widely out of step with other OECD countries.

More on this story here.


NASSAU: President of the Bahamian Chamber of Commerce, Raymond Winder, warned that if the jurisdiction does not look closely at the issues which negatively affected the growth of its economy and financial services sector last year, it will continue to face them in 2003. He suggested that, relatively speaking, the Bahamas has become an expensive place in which to do business, and that the recent outperformance of the Caymans indicates that the Bahamas’ problems are not just 9/11-related.

More on this story here.


SAN JOSÉ: The online gambling industry was rocked by the decisions by U.S.-based Visa, MasterCard and PayPal not to process further betting transactions. Some 200 industry leaders from Israel, South Africa, Canada, the United States, Australia, Britain, Belgium and Germany are in San José looking into alternatives. “They are leaving an enormous void and will cause money to be laundered,” said the conference organizer.

Asked about the industry summit, the head of the National Association of Public and Private Employees, Albino Vargas, warned of the potential for Costa Rica to become a money-laundering center. He urged the legislature to investigate the industry “in the interest of the moral well-being of the republic”, and stated that “Political parties have fallen short, have been irresponsibly naive and looked the other way” as the online gambling operations, banned in the United States and many other countries, took root and grew.

More on this story here.


BASSETERRE, St. Kitts and Nevis: US Rep. Maxine Waters (D-California) warned Caribbean leaders that the US Patriot Act may have a strong impact on the region’s offshore finance industry [making her an early nominee for the 2003 Sherlock award]. She predicted that the measures designed to prevent US banks and financial institutions from maintaining correspondent accounts with offshore banks with no physical presence in another country are likely to affect the region most significantly.

More on this story here.


RAROTONGA, Cook Islands: Pacific tax haven struggles to keep up with OECD, FATF, anti-terror demands.

More on this story here. (Subscribers only.)

NAURU: A new president is said to have assumed office after a vote of no confidence was passed by parliament, amid unrest over the government’s decision to accept 1,000 mainly Afghan asylum seekers in return for cash. The 21 square km. island of 10,000 has also been dogged by controversy over allowing money laundering, and is running out of money due to a depleting phosphate mine. A government official there told The Australian that former president Rene Harris had been “voted out in a peaceful coup”. “It’s business as usual here, but we’re not sure who’s in charge,” he said.

More on this story here and here.

VANUATU: The FBI froze the accounts of the New York-based Vanuatu Maritime Services recently, following the arrest of prominent expatriate businessman Robert Bond, a citizen of Vanuatu who has been implicated in an alleged international money laundering scam. Vanuatu’s government has approached the FBI to release the funds, claiming they belong to the country and not Mr Bond.

More on this story here and here.


NEW DELHI: Referring to the recently-signed double tax avoidance treaty, the Mauritius Prime Mininster said “both the countries are in a win-win situation on account of the treaty. We have strong regulations for money laundering and strict investigations have revealed that there was no evidence of money laundering in Mauritius.”

More on this story here.


NICOSIA: Measures taken by Cyprus to give equality of treatment to domestic and foreign companies, as required by the European Union and the OECD, include a uniform corporation tax rate of 10% applying to all companies. The old 4.5% rate of corporation tax for established offshore companies (IBCs) will be phased out by the end of 2005. The Cypriot Finance Minister said in his October budget speech that the reduction to 10% for both local and international businesses would be likely to boost the economy and enhance the jurisdiction’s attractiveness as a location for overseas businesses.

More on this story here.


ST. HELIER, Jersey. Jersey and Ireland are on the verge of signing a tax information exchange agreement, allowing the sharing of specific information between the two countries with regard to civil tax investigations.

More on this story here.

DOUGLAS. The Isle Of Man broadens the scope of its asset tracing laws. “It is ... envisaged that the enforcement of foreign judgements will become wider in scope in terms of the type of judgements and the countries of origin which will be recognised,” according to a local legal professional, and that this sends the message that “the Isle of Man is not a safe place to hide assets and that those who are guilty of wrongdoing will be brought to justice.”

More on this story here.


Spain has officially asked the EC to prohibit the implementation of planned business tax reforms in Gibraltar, arguing that they are “illegal”, and “incompatible with the European Common market”. Rock-based Iberia News service this week condemned the Spanish suggestion that Gibraltar represents the “only tax haven existing in the European Union”.

More on this story here.


PRAGUE: The accounts, which date to the 19th century, are now being eliminated as required by the EU, which the country hopes to join in 2004. Under communism, it was virtually the only tool for saving money in a bank. The possibility that the accounts could be used for money laundering or terrorist activities put pressure on the Czech government last year to abolish them.

One by one, passbook holders started coming into their local branches. One man brought in 46 books, a woman wanted to register her passbook in the name of her pet and a number of customers came in who had accounts dating to the 1950s. “I had three [passbooks] as well,” said the director of the sales management section at the bank which managed virtually all of the country’s anonymous savings accounts. “It’s not a big financial advantage but it has deep roots. It is something tangible.” Though an average of 11,000 to 13,000 account holders converted their accounts each day, the peak was December 30, when 34,000 visited branches around the country.

More on this story here.


Most other nations do not tax dividends.

More on this story here. (Subscribers only.)

Online calculator of what the tax cut may mean for you here.


With all the uncertainty about the federal estate tax, Catherine Keating of JP Morgan’s Private Bank sees a new focus on income tax strategies that eliminate or defer capital gains tax on appreciated assets. Different instruments and strategies for accomplishing this are outlined, including the intriguingly named “intentionally defective grantor trust”.

More on this story here.


Gothic gates and silk-draped parlors are clear echoes of the Russian aristocratic country estate, known as “usadby”, an institution still deeply embedded in the Russian consciousness, though swept away by the 1917 revolution. The highly publicized restoration of the 18th-century Konstantinovsky Palace in St. Petersburg as an official presidential residence, at a cost of nearly $200 million, has helped promote the notion of palaces as national icons, and has accelerated the boom in new usadby.

For all their eager opulence, the new estates are shrouded in secrecy. A visit to one last month was handled like a KGB operation, with a furtive meeting at a bus stop and passage through a checkpoint at a guarded gate. In Russia, where business has often been associated with corruption and tax evasion, homeowners are reluctant to reveal the full extent of their wealth. Glossy shelter magazines devote endless spreads to usadby, showing architects and elaborate interiors, but they never show or identify the inhabitants.

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Two women at a Miami export company were each sentenced to nearly six years in prison for accepting large payments of questionable cash and depositing them in amounts under $10,000 to avoid federal reporting. “It seems to me this case was in reality a case about structuring [deposits],” not money laundering, the U.S. District Judge told a hearing where he imposed the minimum prison time based on the jury verdict.

The IRS touted the case as a victory in cracking a sophisticated drug money-laundering scheme that includes legitimate exports from Florida to Colombia. Colombia’s guerrillas, classified as terrorists, are known to deal drugs to finance their activities. The prosecutor rejected claims that the case might chill trade. “Exporters now can better compete in legitimate business, because they don’t have to compete against others laundering funds.”

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SPOKANE, Washington: Two women accused of growing marijuana in their homes made so much money they bought three neighboring houses so they could grow more plants, prosecutors allege. Investigators learned of their activities last summer when a bank teller called police to say that the women’s cash deposits smelled like marijuana. The women, both 59, agreed last week to plead guilty to money laundering. They face up to six years in prison, instead of the mandatory 10-year federal prison term.

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BANGKOK: Anti-money laundering authorities have frozen $11.6 million in assets that a convicted Thai drug trafficker has stashed away in four countries, an official said Wednesday. After a five-year probe, assets and bank accounts linked to Prasert Laonapharung were frozen in Thailand, Singapore, Luxembourg and Switzerland.

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A federal appeals court handed the Bush administration a major legal victory in ruling that a wartime president can indefinitely detain a United States citizen captured as an enemy combatant on the battlefield and deny that person access to a lawyer. The ruling may be the most far-reaching yet in a host of court cases brought on by the administration’s efforts in the war on terrorism. The opinion from the three-judge panel said that “The safeguards that all Americans have come to expect in criminal prosecutions do not translate neatly to the arena of armed conflict. In fact if deference is not exercised with respect to military judgments in the field, it is difficult to see where deference would ever obtain.”

Elisa Massimino, a director of the Lawyers Committee for Human Rights, said: “The court seems to be saying that it has no role whatsoever in overseeing the administration’s conduct of the war on terrorism. That is particularly disturbing in the context of a potentially open-ended, as-yet-undeclared war, the beginning and end of which is left solely to the president’s discretion.”

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The biggest problem with the criticism of the Total Information Awareness (TIA) system is that it is too shortsighted, focusing on what the Poindexters of the world can do today with current database and information-mining technology. That includes weaving together strands of data from various sources - such as travel, credit card, bank, electronic toll and driver’s license databases - with the stated purpose of identifying terrorists before they strike.

But what could Poindexter and the Bush administration devise in five or 10 years, if they had the money, the power and the will? What could a corrupt FBI, Secret Service or Homeland Security police force do with advanced technology by the end of the decade? That is the real question, and therein lies the true threat. For a hint at what the future might bring, it is worth reviewing some of the projects already under way at the Defense Advanced Research Projects Agency (DARPA), which is the parent agency for Poindexter’s Information Awareness Office. Microcameras at every street corner, ubiquitous spybots flying overhead, location tracking devices in cars, and, of course, implantible chips. Short of fleeing to the wilderness or living our lives entirely online, our only option is to fight the Poindexterization of modern life before it becomes too late.

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The legal community is battling a plan that would require lawyers to alert regulators if a corporate client is about to inflict financial harm, such as inflating profit. Under current ethics rules, lawyers would not be obligated to blow the whistle on their business clients. But the Securities and Exchange Commission has proposed a rule that would require lawyers to tell the SEC about problems that companies refuse to fix.

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Over 160 journalists in Latin America were threatened or attacked in some way because they were investigating corruption during 2002, according to their representative body. In Panama, 90 of the country’s 200 active journalists have faced recent defamation suits, half of them filed by offended Panama government officials.

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If a country can change for the worse, it can also change for the better. That will depend on the younger generation, and there are already signs among the best of them that they realize that decadence and self-indulgence are not the formula for happiness. He believes the new generation will salvage the country and return it to basic values. After all, it is not they but the current generation who have created the present mess by, among other things, persisting in what John Adams said in his day was the root of all the country’s trouble - ignorance of money, credit and banking.

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