Wealth International, Limited

Offshore News Digest for Week of March 3, 2003


Earlier this month, it leaked out that the Justice Department was considering a broad expansion of its investigative authority, including the creation of new criminal offenses, ostensibly to assist in the fight against terrorism. Many of the proposals contained in the “Domestic Security Enhancement Act of 2003” [aka “Patriot II”] had nothing to do with fighting terrorism, but would substantially increase penalties for such mundane offenses as wire fraud or claiming too many deductions on a federal tax return.

One such proposal - which has been floated out many times before - is the idea of making a new crime out of using encryption in during the course of commission of a different and unrelated crime. The language would create a new offense which would punish anyone who “during the commission of a felony under Federal law, knowingly and willfully encrypts any incriminating communication or information relating to that felony.”

But this is a bad proposal. For one thing, it is hopelessly overbroad. Even if it was limited to “terrorist offenses” it would be overbroad, since the government ultimately gets to determine what kinds of offenses are so defined.

In any event, the proposal is not limited to encryption related to terrorism, but to encryption related to any federal crime. Sure, if you never do anything illegal, you have nothing to worry about - or do you? If you take too many deductions on your tax return (or fail to declare those frequent-flier miles as income), and then e-file over a Web site that uses SSL, this becomes an additional five-year felony.

The new legislative proposal would be counterproductive. It could stigmatize encryption as a criminal tool. People will grow wary of using crypto, consequently vendors will become wary of building it in to products, and ultimately the nation will become less secure.

Opinion here.

150 BRITS X 419 FRAUD = £8.4 MILLION

You would like to think that after all the publicity generated around the Nigerian 419 advance fee fraud, the boys from Lagos would be pretty well out of business. Sadly not. According to figures from the UK’s National Criminal Intelligence Service (NCIS) no less than 150 Britons got burned last year alone for a total of £8.4 million. That is a sobering average of £56,675 per victim.

More on this story here.


Donald Johnston, the Canadian general secretary of the OECD, likes to compare the OECD to a big ship drifting at sea in search of a harbour. “For the past five years we have been remodelling, improving the design, the mechanics and the engine of the ship. That work continues but now I believe it is time to concentrate on our destination,” he says. Three problems risk overturning the ship: the geographical scope of an enlarged organisation, its decision-making process and working methods and its budgetary constraints.

More on this story here.

The Heritage Foundation’s Dan Mitchell on why the OECD should be resisted: The Paris-based bureaucracy clearly wants to exploit the recent terror attacks, and is bullying jurisdictions to surrender their fiscal sovereignty. Before making any rash decisions, public sector and private sector leaders of persecuted jurisdictions should consider a couple of key points.

More on this story here.


Stolen and forged New Zealand passports are fetching about $60,000 on an international black market for criminals eager to assume new identities. “Indications are that they are being used for transnational crime,” said a senior police source in Wellington. “They use stolen identities for people-smuggling, drug-smuggling and immigration fraud.”

More on this story here.


The American border will soon close to Canadian residents from 50 Commonwealth countries unless they get a U.S. visa, a process officials say could take as long as three months. Starting March 17, landed immigrants from Commonwealth nations including India, Pakistan, South Africa, and Caribbean countries like Jamaica will need a visa to enter the United States, even for a day.

“I don’t think people have a clue just what they’re in for,” said Paul Ramacieri, an immigration lawyer who practises in Ontario and New York. “It’s going to be a shock. You’ve got people who’ve been living here for 30 years who are used to driving into the U.S. as they want. Now, they’ll be refused admission at the border, told to go home, apply for a visa, and wait.”

More on this story here.


Reasonably comprehensive background piece on money laundering: what it is, how it is done, recent developments, the FATF, how a financial institution can combat it, etc.

More on this story here.


BALTIMORE: Brian D. and Elizabeth G. Weese, former owners of the now-defunct, Baltimore-area Bibelot bookstore chain, have reached a $13 million settlement with creditors who had accused the couple of fraudulently transferring nearly $20 million to an offshore trust fund. The money will be paid out of the Alex Grass Trust, controlled by Grass, who is Elizabeth Weese’s father and the founder of Rite Aid Corp.

In light of the settlement creditor attorney Irving Walker has asked the bankruptcy court to dismiss the Weeses’ personal bankruptcy case. A trial in that case set for June had been scheduled after Walker filed a lawsuit asking the court to order millions of dollars of the Weeses’ assets returned to the United States.

The settlement effectively ends other creditor lawsuits in Baltimore County and in the Cook Islands in the South Pacific. Those suits claimed that the Weeses had set up an offshore account - the Book Worm II Trust - intending to defraud creditors before the bookstore chain filed for bankruptcy in March 2001 and went out of business. Court records show that Elizabeth Weese set up the trust in 2000 under Cook Islands laws, then over a period of three months transferred assets worth more than $19.5 million.

The $13 million settlement amount “exceeds what we believe was left in the Cook Islands trust,” Walker said.

More on this story here.


When you run a nation on the verge of bankruptcy, you can expect a few strange proposals for financial salvation. But even Nauru’s president, Bernard Dowiyogo, found this an eye-opener: a plan advanced by an Australian-based team to virtually take over the running of the country’s ailing financial system. And of one of those involved is Nick Petroulias, the former Australian Tax Office investigator enmeshed in a long and bitter court case over fraud allegations.

The draft spells out the intricacies of the radical scheme, which involves setting up an administrative financial center, effectively run off-shore, which would be granted an exclusive 10-year licence to attract international investment, issue banking licences, maintain a shipping registrar, oversee casino operations and regulate travel documents. Profits would be split 50-50 between the people of Nauru and the “administrators”.

More on this story here, here, and here.

VANUATU’s controversial new debit tax has its detractors. The government is introducing the debit tax on all bank account withdrawals to replace the former cheque duty. Vila town council of chiefs chairperson and former head of state Jean-Marie Leye Lenelgau described the tax as an act of “daylight robbery” on the poor and needy people of the country.

More on this story here.


DOUGLAS: Alan Bell agrees with the label, but says the deal must be accepted: “It is a very confused situation and what we have ended up with is totally illogical,” he observed. “There is no fairness and only a nominal tilt towards a level playing field, but it is a set of circumstances we have got to live with. It is not what we would have wished but we have to accept it.”

More on this story here.


Calpers -the California Public Employees’ Retirement System - the largest US pension fund, and several other pensions stepped up their publicity campaign against Tyco International Ltd.’s Bermuda address with a full-page ad in the Wall Street Journal. “A nice place for a vacation ... But should US companies take legal refuge there?” the ad copy reads. But the “Come Home To America” campaign - which has been given a deliberately patriotic flavor as the US heads towards war in Iraq - is also aimed more broadly at other companies, incorporated in Panama and Barbados, and at politicians.

Calpers and others say offshore incorporations such as Bermuda weaken shareholder protections. Former Tyco chairman Dennis Kozlowski and ex-finance chief Mark Swartz are accused of looting Tyco out of $600 million through unauthorised pay and fraudulent stock sales. Some investors argue that a move back to the United States would raise Tyco’s taxes, hurt earnings and undermine the health of a company strapped with heavy debt.

More on this story here and here.


The government of Antigua and Barbuda has announced that it will be taking the US government before the Grievance Committee of the World Trade Organisation for restraining and interfering with the jurisdiction’s once burgeoning online gaming and sports book industry.

Speaking to the local media last week, Prime Minister Lester Bird’s said “America is the largest gambling country in the world so how can they then be so unctuously self-righteous, to use their power to destroy the niches that we are having, trying to develop some kind of diversification in our economy. It is unfair and therefore we are going to take them before the WTO.”

More on this story here.


Zurich remained the world’s best city for expatriates because of Swiss political and social stability, housing, restaurants and banking services, a study showed. Vancouver, Vienna and Geneva followed closely behind. Eight of the top 10 cities for quality of life are in Western Europe, according to the report by Mercer Human Resource Consulting. San Francisco, the highest-placed U.S. city in the annual rankings, slipped two rungs to 20th place out of 215.

More on this story here.


The U.S. Treasury said it will require more disclosure by taxpayers, as well as tax advisors and tax shelter promoters, as a way to fight tax evasion. “We are putting the promoters that sell questionable transactions and the taxpayers that participate in them on notice,” said Pam Olson, Treasury’s assistant secretary for tax policy.

More on this story here.


A report from the National Audit Office says “The number of prosecutions ordered is low and mainly concentrated on higher-value cases ... The Revenue, subject to resource availability, should seek to increase the numbers of tax fraud prosecutions, including some in lower-value cases, to ensure deterrence is maintained across the spectrum of taxpayers.”

More on this story here.


Call your credit card company and let it know where you are going. Although at this point the advice falls into the realm of “extra precautions”, and credit card issuers differ in just how much they are encouraging a deluge of phone calls, some companies are advising customers to take this extra step before a trip to be sure that an unusual spending pattern does not trigger a fraud alert.

While the chances of this happening are relatively remote, the computer systems that banks and credit card networks use to detect fraud occasionally cause inconveniences for legitimate cardholders who make purchases that deviate from their normal spending patterns. For those who are traveling when such a fraud alert occurs - particularly overseas, and especially in areas with a high incidence of credit card fraud - resolving the matter can get more complicated. In the most extreme scenario, the credit card might be temporarily suspended until the bank verifies it has not been stolen.

More on this story here.

Globetrotting business travelers expect their companies to repay all their expenses, but many reimbursements are falling short because employees are not accounting for the currency-conversion fees that most credit cards add to overseas transactions. The problem lies in part with the way expenses are typically handled. Most people put them on their credit cards, then quickly submit their receipts, hoping that their employers’ repayments arrive before the bills.

But international travelers often do not include their cards’ conversion fees, generally 1 to 4%, when they ask for their money, so they may be inadvertently paying those fees out of pocket. Often, the fees are easy to miss: few banks break them down in their monthly statements, choosing instead to fold them into each credit transaction.

There are ways to help ensure proper reimbursement, or at least something close to it. Currency conversion Web sites, like Oanda.com and Xe.com, can help. Their foreign exchange calculators provide the option of adding a conversion fee.

More on this story here.


Counterfeit cashier’s checks are used to buy merchandise sold on the Internet. The checks are so skillfully counterfeited that they have fooled many banks in the United States. The amount of the check is greater than the asking price, and you are asked to wire the difference back to the alleged purchaser. (If you send them the goods too that is a bonus.)

More on this story here and here.


The world used to be divided starkly into right and left. On the right were people who believed in the protection of property rights, in the virtues of free markets and in the dangers of government interference. On the left were those who believed markets did not work and that governments had to step in to substitute for them, as well as to redress the wrongs of the past by redistributing wealth.

The rich, fearing expropriation, mostly sided with the right. The poor, hoping to gain some of the crumbs from redistribution, mostly sided with the left. Hence, throughout the world, pro-market parties became the parties of the rich and anti-market parties the parties of the poor. The fall of communism has allowed us to make finer distinctions. People are recognizing that there is a difference between being for free markets and being for the elite that has benefited from them. This distinction seems to escape today’s US administration.

The elite that derives its positions from its abilities is spurred by competition to try harder, to the benefit of all. But those whose positions derive only from past accomplishments or inheritance have a reason to oppose truly competitive markets, the single most important tool of capitalism. Once these distinctions are recognised, old mantras of the right need to be questioned.

More on this story here.


Flight information from all airline passengers, including financial data, can be collected and analyzed under a little-seen regulation proposed by the Transportation Security Administration (TSA) to track potential terrorists. The federal government wants to keep information for 50 years on passengers it believes pose threats to national security, while information on other passengers would be stored in a database for the duration of their travel and eliminated after their return trips.

Privacy advocates criticize the TSA proposal as a national database open to abuse, similar to concerns about the Pentagon’s Total Information Awareness project, which Congress has put on indefinite hold. “This is something that ought to be particularly worrisome to the public” said former Rep. Bob Barr, Georgia Republican. “The public focus has been on TIA, while the TSA has been quietly putting together a program that is as potentially just as intrusive.”

“We may be creating a massive surveillance system without public discussion,” said Barry Steinhardt, an American Civil Liberties Union director. Transportation officials say CAPPS II - Computer Assisted Passenger Prescreening System - will use databases that already operate in line with privacy laws and won’t profile based on race, religion or ethnicity.

Paul Hudson, executive director of the Aviation Consumer Action Project, which advocates airline safety and security, is skeptical the system will work. “The whole track record of profiling is a very poor to mixed one,” Hudson said, noting incorrect profiles of the Unabomber and the Washington-area snipers. Nine to 11 of the 19 hijackers on September 11 were flagged by the original CAPPS, but weren’t searched because the system gave a pass to passengers who didn’t check their bags, Hudson said. People without checked bags are now included.

More on this story here, here, and here.

The Cato Institute writes on the proliferation of personal databases and privacy loss: Look at the back of a dollar bill, and you will see the Great Seal of the United States: the 13-block pyramid (think 13 original colonies) topped by the Eye of God. The original carries the phrase (translated from Latin) “A New Order of the Ages”, reflecting a principled view of individual freedom. How National symbols change: In the Pentagon’s Information Awareness Office version, the “eye” is no longer God’s, but the federal government’s, surveying the entire globe in a single glance. The new slogan? “Knowledge is Power”.

We would be wise to look at surveillance through the lens of what the entire society and individuals need to accomplish. The Total Information Awareness project is worrisome in terms of its potential impacts on (1) Fourth Amendment protections (2) E-commerce (3) and security itself. [This January position piece was, of course, written before Congress defunded the TIA project. Much of the reasoning applies to the TSA proposal.]

It is one thing to give up privacy for security if there is no other choice. With TIA we may be sacrificing privacy for no security benefit at all.

More on this story here.


Michael Bloomberg, Ross Perot, Fidelity Investments founder Edward (Ned) Johnson III are among the members of the Forbes list of billionaires who have homes on Bermuda.

More on this story here.


Nauru’s new President has agreed not to renew offshore banking licenses or issue any more “investor passports” following intense pressure from the United States. Following the discovery that several members of a group considered by the US authorities to be a terrorist organisation held Nauru investor passports, the US authorities stepped up the pressure on the tiny jurisiction, warning of the imposition of “retaliatory measures” if it did not comply with requests to dismantle its offshore banking regime.

More on this story here.


Australia’s economy is one of the best performers in the industrialised world and is notably resilient to shocks, the OECD said in a report extolling the country’s “exceptional economic performance”. However, the OECD warned against complacency and highlighted the need for improvements in pensions, education and taxation. Income growth is brisk, employment is expanding, inflation is under control, and public finances are healthy. But this is no time for complacency.

More on this story here.

But most families would not agree with the OECD report. Labor leader Simon Crean says it leaves out the current account deficit which has risen by 40%. “That’s a report written by people in Paris looking at Australia," he said. “I’ll tell you what Australian families think, ‘if the economy is going so well, why am I finding it harder to live, harder to survive, why am I being taxed more, why am I being charged more?’”

More on this story here.


Singapore’s aspiration of becoming the Switzerland of Asia for managing private wealth has taken a step closer to reality, courtesy of last Friday’s Budget. Tax incentives were announced that will make it easier and more attractive for more Singapore-based trust companies to market their services to offshore clients, say industry players. Many of the Budget’s financial-sector initiatives involved ways to woo such foreign trusts so that they use a Singapore-based trustee or trust administrator.

More on this story here.


Proposed changes to the country’s anti-money laundering law were endorsed by the FATF and the country will be able to avoid threatened sanctions, legislators reported late on Monday. Senate President Franklin Drilon said the planned amendments to the law have been accepted with some minor changes to the wording on suspicious transactions.

Drilon said the officials agreed that the Philippine requirement for a court order to probe a bank account was in accordance with international standards and could remain. They also agreed an order would be needed to freeze funds in a suspicious account. The proposed scrapping of court orders to probe suspicious accounts had been resisted by some members of the Senate, who argued it removed a citizen’s recourse to the law and could be subject to abuse. (Critics of the recalcitrant legislators say arguments about legal recourse merely disguise a desire to keep their own financial dealings from prying eyes.)

More on this story here.


Less than six months after Switzerland joined the United Nations, the world body is facing one of its biggest crises over Iraq. For Switzerland’s ambassador to the UN, Jenö Staehelin, it has meant a roller-coaster ride of diplomatic talks. Staehelin says the past few months have been “very busy” for him and his 25 staff since Switzerland took its seat in the UN General Assembly last September.

More on this story here.


Alan Bell said there was a great deal of uncertainty in the air which would remain for the next two or three years. However, that was not to say the Island was in any way faltering. With five-and-one-half percent growth, full employment, and growing government revenues he is not going to panic just yet.

More on this story here.


From his desk at the EU’s office in Warsaw, Bruno Dethomas has been gloomily monitoring the decline of his native French within the European Union. “When I left Brussels in 1995,” he remarks (in perfect English), “70% of the documents crossing my desk were written in French. Nowadays 70% are in English.”

The rise of English as the EU’s dominant working language was given a decisive push by the Union’s last expansion, in 1995, when Austria, Finland and Sweden joined the club. Officials from all three countries, especially the two Nordic ones, are much more likely to be fluent in English than French. The Union’s public voice is increasingly anglophone. A recent study by the EU’s statistical arm showed that over 92% of secondary-school students in the EU’s non-English-speaking countries are studying English.

The French elite are alarmed, but the more realistic French officials acknowledge that however much cash and energy are put into the promotion of French within the Union and elsewhere, it is a losing battle.

More on this story here.


Contrary to the conventional wisdom that prevails in Washington, history did not begin on September 11 2001 - certainly not the history of western attempts to put Iraq right. Wherever US forces will tread, the British have already been there. Whatever reforms American and other well-meaning advisers will endeavour to implement in a post-Saddam Iraq have already been tried by an earlier generation of British colonial administrators. Iraq’s calamitous and brutal political history does not foretell the future - but it should offer a cautionary tale for those who believe that whoever is installed in Saddam Hussein’s bloody wake must improve upon his legacy, or that it is in Washington’s power or interest to make certain that he does so.

More on this story here.


Gas lines, food shortages and political repression are making life tougher than ever for ordinary Zimbabweans. So why are regional leaders softening their stance on Robert Mugabe? He is off indulging in $300 truffle dinners in Paris, while the on the home front people stuggle to survive.

More on this story here.


Expatriate executives trying to act on company goals away from head office can find it a frustrating, often confusing experience. Management tools and techniques honed in their home countries often fall flat in foreign lands. Management and communication styles vary greatly between Western and Asian countries. Communication in the West is “content-based”, emphasising shared decision-making and straightforward discussion. In many Asian countries, however, the focus is on “context-based” communications, where the emphasis is on relationships, hierarchy and careful consultation.

Smaller nuances like humour that can take newcomers by surprise. Direct, biting British wit can be off-putting for foreigners, as is the frequent use of British understatement to make a point. Americans do not always understand the point being made since the understatement is too indirect.

More on this story here.


New figures from the OECD show New Zealand is in the top third of highly-taxed states. In a household with one earner and two children, Denmark topped the list with the average production worker having a household tax burden in 2002 of 30.5% of gross earnings. New Zealand’s figure was 18.2%, putting it seventh on the list behind Germany, while Australia was a little better off with a net tax burden of 14.7%.

More on this story here.


Prosecutions for tax evasion are set to soar following a set of hard-hitting recommendations by the National Audit Office (NAO). The NAO’s latest report has called on the Inland Revenue (IR) to extend the number and coverage of its prosecutions and use increased fear of detection to frighten offenders into paying their tax. The report also urges action to be taken against British taxpayers who transfer their funds to offshore bank accounts. In one case, the IR discovered that 500 individuals had committed a £90 million tax fraud by concealing savings abroad.

More on this story here.


The South African Revenue Services expects a big take-up of the amnesty for illegal offshore funds announced by Finance Minister Trevor Manuel during his Budget last week. The minister announced that individual tax payers filing for forex control amnesty would be required to pay a 5% exchange control charge of funds repatriated to South Africa or a 10% charge on any foreign assets remaining offshore.

More on this story here.


A Financial Times investigation revealed that west African organised crime cells operating in the UK are infiltrating banks to commit fraud with increasing regularity. It also found that banks were reluctant to report to police instances in which they had been defrauded for fear of damaging their reputations. UK banks have stepped up efforts to root out money laundering since the September 11 attacks. However, police and some bank investigators have said that bank managements do not take the related issue of fraud seriously enough.

More on this story here.


The new Executive Office for Terrorist Financing and Financial Crimes, announced in a statement Monday, is being set up to respond to a management void created by the recent loss of key enforcement agencies at the Treasury Department. The office will work closely with other offices within Treasury and throughout the government on matters dealing with terrorist financiers and financial crimes in general.

More on this story here.


With America’s budget deficits set to soar, and European governments getting cold feet about budget discpline, fiscal prudence is slipping down the economic agenda. Do deficits no longer matter?

President Bush’s relaxed attitude to large fiscal deficits is matched by a similar lack of concern about America’s giant current-account deficit. At around 5% of GDP, this is now, in the opinion of many economists, unsustainably large. The issue for them is not whether it comes down but whether it does so gradually or suddenly. A sudden fall in the value of the dollar, the usual way such deficits are reduced or eliminated, could rattle economies around the world.

The Bush administration has tended to argue that the current-account deficit is not so important as long as foreign investors are willing to provide the large capital inflows that fund the shortfall. Many economists believe that America is still the best haven for investors. That could change over time, though - and so large are the capital inflows needed that even a slowdown rather than a reversal would push the dollar’s value down.

More on this story here.


Banks and brokerage firms are considered primary conduits for money laundering, the process of moving and legitimizing illegal money. The USA Patriot Act of 2001 cracked down on those institutions, but the Treasury Department also is wrestling with how to apply money-laundering rules to thousands of other businesses under the new law.

The department is writing rules for pawnshops, travel agents, jewel and precious metal dealers, certain dealers of cars, boats and airplanes, and the real estate sector, which includes lawyers, agents, title companies and more. Money laundering experts say the rules could be burdensome and costly but probably will not work.

“The Patriot Act is doing a good job in financial institutions,” said John Zdanowicz, a money-laundering expert at Florida International University in Miami. “It is closing down the front door of money laundering and it is leaving the back door totally wide open. ... It’s going to stay wide open.”

If if all the regulations get passed, who will examine all the paperwork for compliance?

More on this story here.


In early February, the Center for Public Integrity disclosed a leaked draft of the Bush Administration’s next round in the war on terrorism - the Domestic Security Enhancement Act (DSEA). The draft legislation, stamped “Confidential” and dated January 9, 2003, appears to be in final form but has not yet been introduced in Congress. Presumably the Administration had determined that the timing would be more propitious for passage - meaning less propitious for reasoned debate - after we go to war with Iraq. But it is one thing to play politics with the timing of a farm bill; it is another matter to do so with a bill that would radically alter our rights and freedoms.

The bill would authorize secret arrests, a practice common in totalitarian regimes but never before authorized in the United States. It would terminate court orders barring illegal police spying entered before September 11, 2001, without regard to the need for judicial supervision. It would allow secret government wiretaps and searches without even a warrant from the supersecret Foreign Intelligence Surveillance Court when Congress has authorized the use of force.

But the trajectory of the war on terrorism is probably best illustrated by an obscure provision that would eliminate the distinction between domestic terrorism and international terrorism for a host of investigatory purposes. With the DSEA the Administration seeks to transgress both the alien-citizen line, by turning citizens into aliens for their political ties, and the domestic-international line, extending to wholly domestic criminal-law-enforcement tools that were previously reserved for international terrorism investigations.

The tactic of protecting citizens’ rights while ignoring those of foreign nationals is untenable, not only on moral grounds but because if the Administration gets its way, we are all potentially “aliens”.

More on this story here.


In the wake of September 11, current Attorney General John Ashcroft carried out the most sweeping roundup of aliens since the Palmer Raids carried out during the Woodrow Wilson administration. Between 1,100 and 2,000 people were arrested and detained. The exact number is unknown because the Department of Justice, after criticism grew, stopped announcing a running total. The last published figure, in November 2001, was 1,147. As of September 2002, only four detainees had been charged with crimes related to terrorism.

In the atmosphere of fear after 9-11 and Ashcroft’s orders to use sweeping measures against possible terrorists, INS and FBI agents inevitably made mistakes - at a high human price. Muslims, citizens as well as aliens, were picked out for treatment that was often harsh and humiliating. But because of the pervasive secrecy, only occasionally did these episodes come to public attention.

Given the identity of the 9-11 attackers, it was not surprising that U.S. authorities have kept a more careful watch on visitors from Arab and Muslim countries. But the peremptory handling of foreigners by the Justice Department, their extended detention in many cases and the sweeping together of the plainly innocent with legitimate suspects were not only offensive to American values but likely to intensify anti-American feelings.

More on this story here.


In the old days, tapping a phone was as easy as one-two-three. All calls ran over Ma Bell’s copper wires. To listen in, law-enforcement agents simply requested that the phone company isolate the suspect’s wire and record any calls made or received. One phone company. One network. One flip of a switch. The new world of telecommunications has made it much harder for the FBI to thwart evildoers - and for privacy advocates to ensure that the agency does not overstep its bounds.

More on this story here.

Are the Feds reading your e-mail? Senators from both parties are accusing the FBI of excessive secrecy and demanding details of how federal agents use antiterrorist laws to spy on people’s Internet activity. The Domestic Surveillance Oversight Act is called “the first comprehensive, public FBI oversight effort in decades” by cosponsor Patrick Leahy, D-Vermont. He is teaming with Republican Senators Charles Grassley of Iowa and Arlen Specter of Pennsylvania to force greater accountability by investigative agencies. All three are members of the Senate Judiciary Committee.

More on this story here.

US uses dirty spy tricks to win UN vote on Iraq war resolution. The United States is conducting a secret “dirty tricks” campaign against UN Security Council delegations in New York as part of its battle to win votes in favour of war against Iraq. Details of the aggressive surveillance operation, which involves interception of the home and office telephones and the emails of UN delegates in New York, are revealed in a document leaked to The Observer.

While many diplomats at the UN assume they are being bugged, the memo reveals for the first time the scope and scale of US communications intercepts targeted against the New York-based missions.

More on this story here.

E-mail tracking helps nab al-Qaeda “chief”. The arrest in Pakistan of alleged terror mastermind Khalid Sheikh Mohammed came after a series of near misses, US and Pakistani intelligence officials say. US satellite tracking of suspects’ communications is believed to have played a key role in Sheikh Mohammed’s capture. The man arrested in the south-western city of Quetta was later identified as Mohammed Omar Abdel Rahman, the son of a blind Egyptian cleric jailed for his role in planning the 1993 bombing of the World Trade Center.

More on this story here.


You can keep your duct tape and your flimsy gas masks. Jeff Quante prefers steel. Several thousand pounds of it, actually, with reinforced screws and bullet-resistant glass. It should be big enough for at least two people, protected with high-security locks and attached to an air purification system.

More on this story here.


Bloodied and vexed by previous encounters with the press in Scotland, Sean Connery is usually reticent when it comes to interviews, but today he is determined to have his say. His tax affairs have long been regarded as something public by the Scottish press, he believes, while remaining private for Connery; his business and no-one else’s. But today he is making an unexpected exception.

“I get battered with this living in Marbella, living in the Bahamas, whatever. I moved out of Scotland like millions of other people and I’ll explain under what circumstances I’ll go back which one would adore to do except not until they start to get it right.” He believes he has paid or generated plenty of taxes, thank you, and the Scotland should be the political equal of England.

More on this story here.


Travel books offer two pieces of advice for those planning a trip Grand Cayman: Take half as many clothes as you think you will need - and twice as much money. The cost of living is 20% higher in Grand Cayman than in the U.S., and a vacation here is priced accordingly. For snorkeling and diving buffs, the price is worth it.

More on this story here.


BRUSSELS: After apparently clinching a long-awaited deal to harmonise savings tax, the European Union was facing a new headache on Thursday with Italy threatening to torpedo the deal. On the eve of a meeting of EU finance ministers, Rome made its support for the savings tax deal conditional on concessions on diesel prices in an EU-wide energy taxation package. The need for further talks with the Swiss mean the start of the new savings tax regime will have to be pushed back to 2005, prompting a year-long delay for the other deadlines, and now the Italian demands have thrown a new spanner in the works.

More on this story here.


“Un-American” is not a label that any US company wants to wear, even in the best of times. But that is the tag that state treasurers, public pension funds and unions have attached to Tyco and a handful of other companies for daring to maintain their brass-plate headquarters in Bermuda, Barbados and other offshore havens, even as the mainland readies itself for war.

Some of the activist’s arguments fall flat: Incorporating in Delaware would not have made a difference in preventing former executives from looting Tyco, just as it did not with Adelphia, the Delaware-registered cable company that suffered a similar scandal. And as Enron’s abuse of offshore subsidiaries demonstrated, over-creative accountants and bankers can dream up tax avoidance schemes without the parent company having to relocate to a sunny island.

It is possible, some have argued, that a Tyco move back to US could hurt investors even more. With the company already reeling from corporate scandal and heavily in debt, the increased tax burden the firm would face in the US could spell an uncertain future for the company and shareholders alike.

Private investors need convincing that repatriation is feasible and sensible. Tyco should be encouraged to lay out the benefits and costs of returning to the US and let shareholders decide. As for the flag-waving: it is patriotism, not Bermuda, that is the last refuge of the scoundrel, as Samuel Johnson noted.

More on this story here and here.

The Bermuda Acting Finance Minister says Tyco has an office and employees in Bermuda and clearly it is not a mail drop or a “Bermuda address”. He also took issue with the depiction by “certain media” of American firms taking legal refuge in sham overseas mailing addresses: “The handful of companies that left the United States for Bermuda over the last five years did so of their own volition based on their analysis of the tax code. As Mr. David Aufhauser, the General Counsel for the US Department of Treasury has stated ‘the incentives to relocate in Bermuda arise out of our own US Tax Code, - we are at fault and it is not the fault of Bermuda’.”

The Minister’s statement did not answer allegations that the rights and interests of shareholders were in any way undermined by a corporation being based in Bermuda. But according to a local legal source, Bermuda’s company law is based on the UK system and shareholders’ rights are not seriously compromised by US corporations moving there.

More on this story here and here.

Tyco investors reject relocation. Holders of more than 26% of Tyco’s shares voted in favor of a resolution urging the company to reincorporate in Delaware. Proponents had expected to receive less than 20% of the vote. The measure, opposed by Tyco management, still was defeated by a three-quarters majority. Shareholder activists said the vote would create momentum for similar measures pending at other “expatriate” US companies.



In the post-9/11 world, Ottawa is encouraging all people heading out of country to take their passports along. That is even for those heading to countries where Canadian passports are not usually necessary. For Canadian citizens who were born elsewhere, some countries might want more identification, including visas.

More on this story here.


The number of U.S.-based Mexicans seeking to regain their Mexican citizenship under a new law has surged because of an impending deadline. The Mexican government set March 20 as the deadline for those who became citizens of another country to submit paperwork for regaining their Mexican citizenship and thus hold dual citizenship.

Consul Hugo Juárez said that besides protecting U.S.-based immigrants’ ability to own property, run businesses and participate politically in both countries, applicants were also attracted to dual citizenship in order to have the option of traveling as Mexicans in a world displaying increased “anti-gringo sentiments.” “There is no rejection of a Mexican passport. If one has to travel, it’s better to do it with a Mexican passport,” he said.

More on this story here.


A law limiting maximum cash withdrawals from banks in the Czech Republic to 500,000 Czech kuronas ($17,200), or equal-valued foreign currency, will come into force in May 2004. A bill passed recently by the Czech Republic said money exceeding that amount should be transferred through accounts.

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HUNGARY: A total of 373 new offshore companies were registered at the National Tax Office last year, bringing the total number registered to 740. The sudden rush was prompted by an amendment passed at the end of last year that stipulated no new offshore companies, which will lose their favorable tax status in 2005, could be registered after December 31, 2002.

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Malta becomes the first European Union candidate on Saturday to vote on whether to join the wealthy bloc, kicking off a rolling process of referendums that is meant to seal the historic unification of the continent. A “No” verdict in Malta, a Mediterranean island of barely 400,000 people, is hardly likely to influence how Poles, Czechs and Hungarians vote in their own referendums due over the coming months, but it would be a diplomatic embarrassment for the EU. And it would coincide with heightened tensions between many candidate countries and EU founder member France, which has accused the east Europeans of disloyalty to the European ideal for siding strongly with the United States in the Iraq crisis.

Malta is viewed as one of the most euroskeptic of the 10 candidates hoping to join the EU on May 1, 2004, though a recent opinion poll showed 49 percent of voters backing membership and only 22 percent voting “No” in the non-binding referendum.

The Maltese Institute of Directors (IoD) stepped into the debate over EU membership this week claiming that the move will be positive for the island’s economy. Implying that Malta’s economic interests would be damaged by not participating as a full member of the EU, the IoD chairman said: “A small state such as Malta cannot remain outside the EU in a global economy that rests on alliances between states to create significant trading blocks”.

However, many interest groups on the island do not share the IoD’s optimistic view, not least the General Worker’s Union. GWU Secretary general, Tony Zarb, has been very vocal in his anti-European stance. Zarb said of Saturday’s referendum that: “Whatever the result, the GWU will continue to say that the EU is not in your best interest.” He went on to warn that “your choice is irreversible. You have one chance.”

More on this story here and here.


According to figures released by the Bank of Israel this week, recently introduced tax reforms levying taxes on capital gains and savings have led to increased capital flight and decreased foreign investment. It has been suggested that the dramatic reduction in foreign direct investment can be attributed to fears that the new taxes on capital gains will apply to foreign residents as well.

More on this story here.


Confidence in South Africa’s economy rose again in February thanks to the rand, but there is wariness about the impact a war on Iraq and oil prices could have on inflation, a Reuters survey showed. The rand’s recent strength follows four interest rate increases of 100 basis points each last year to stamp out inflationary pressures ignited by the rand’s 37% plunge against the dollar in 2001.

More on this story here.

Within 48 hours of last week’s announcement of a foreign exchange control amnesty, tax consultants had approached South African Revenue Service (SARS) commissioner Pravin Gordhan about the repatriation of R3 billion in illegally held offshore assets. If this was an indication of the future trend, “then there is a lot of money out there”, Gordhan told Parliament’s finance committee yesterday. Estimates of the amount of money taken abroad illegally range from R20 billion to as much as R90 billion. How much of it comes home is important, because government will take a 5% cut, using it to fund other initiatives announced in the budget last week, such as financing new black empowerment enterprises.

More on this story here.

Prominent South African tax lawyer, Daniel Erasmus praised the standards of tax information exchange between the South African Revenue Service (SARS) and the US authorities: “There is an obvious swapping of information. The Americans also hope to receive information in return [for] help with the war against terrorism. Big Brother is truly watching.”

More on this story here.


The long-term capital gains tax exemption for share transactions proposed in the Union Budget is expected to discourage corporates from taking the Mauritius route for undertaking portfolio investments in India. Companies prefer the Mauritius route as it provides a tax haven for entities which operate from there. Short-horizon funds will still have the incentive continue to route their investments through Mauritius.

More on this story here.

The Mauritius Commercial Bank was hit by massive fraud involving the theft of more than Rupees 800 million from accounts at the bank in the name of the National Pension Fund. MCB says that the loss will absorb 60% of this year’s profits, but represents “only” 10% of shareholders’ funds. The financial scandal “will be a big blow to Mauritius as an International Financial Center”, according to one detractor.

More on this story here.


Thus ending an anomaly that has vexed the asset management community and set the territory at odds with other financial centers. This “shows the government is serious about promoting Hong Kong as a major funds management centre. The profits tax had been an impediment," said George Long, chairman of the Hong Kong chapter of the Alternative Investment Management Association.

Hong Kong’s government on Wednesday announced an increase in corporate and personal income taxes to help control its HK$70 billion (US$9.1 billion) budget deficit and said it expected the territory’s economy would grow by 3% this year. Antony Leung, Financial Secretary, announced that the salaries tax rate would rise from 15% to 16% in two phases over the next two years. Corporate profit tax rates are to rise to 17.5% from 16%. Economists and business executives said it was unlikely that the modest increase in taxes would deter investment in the city.

More on this story here and here.


The congressmen were the first to discover it last Monday. There was never a Financial Action Task Force (FATF) requirement that court orders be done away with in lifting bank secrecy. Worse yet, visiting country delegations to the FATF from the US, Hong Kong and Japan agreed with the hardline senators that even the freezing of bank accounts must be done by court order - and from the Court of Appeals no less. The hard-line senators were right to stand their ground. The media and the rest of those who had clamored for total capitulation to what turns out was a nonexistent FATF demand were completely wrong or just lying. The senators showed their critics to be paid hacks of a lobby group with dollars to spend and not enough patriotism to put up a resistance.

More on this story here.


Some economists say the Bush administration barely pays lip service any longer to a strong dollar and in fact has undertaken a stealth devaluation of the currency. The latest push down came from John Snow, the new Treasury secretary. On Tuesday, he said he was “not particularly concerned” about the dollar’s slow depreciation. Since it reached historic highs last year, the dollar has dropped around 21% against the euro and 12% against the yen, hitting a four-year low against European currencies mid-week.

Despite the sell-off, however, the dollar’s outlook is mixed. The prospect of war has done little to boost it as a sanctuary in a turbulent world, and the debt-laden and stagnant US economy has done little to inspire investors. Grim economic conditions in Europe and Japan, however, have left investors with few attractive options. Recovery in the United States could reverse the dollar’s devaluation, though that would in turn intensify a record trade deficit the Bush administration hopes a devalued dollar will erode.

More on this story here.


There is an old adage in political and economic analysis. If you want to understand why people do many of the things they do, then you should “follow the money.” That is, who benefits from a particular policy often tells you a lot about who is advocating it and why.

For all of the post–World War II period the U.S. dollar has served as the reserve currency for international trade. It is estimated that about $3 trillion is in circulation around the world. Almost all oil transactions and numerous other globally traded commodities are bought and sold with dollars. In some cases, dollars are hoarded by the citizens of other countries because of a lack of confidence or trust in their own governments. In Russia, for example, as much as $30 billion is held as cash money by thousands of people instead of rubles.

The world demand for dollars and the worldwide use of the dollar have served as an important cushion to maintain the value of the dollar on foreign-exchange markets, which has enabled the U.S. government to print money and run trade deficits that might otherwise have put downward pressure on the international exchange rate of the greenback. The demand for dollars has also enabled Washington to fund the federal budget deficits of the past because foreigners have used the dollars they own to purchase U.S. Treasury securities.

But a number of European newspapers have pointed out that the world has been slowly shifting into an alternative currency to use for international transactions: the euro. Not long ago, the Iraqi government made it official policy that Iraqi oil, two-thirds of which is purchased by American oil companies, had to be paid for in euros. With the American military serving as the keeper of the oil fields in an occupied Iraq, the first policy change undoubtedly would be that all Iraqi oil sales will be once again exclusively in dollars.

More on this story here.


There is a longstanding myth that war benefits the economy. The argument goes that when a country is at war, jobs are created and the economy grows. This is a myth. Many argue that World War II ended the Great Depression, which is another myth. Unemployment went down because many men were drafted, but national economic output went down during WWII. Inflation and taxes go up, trade is much more difficult. During wartime government expands in size and scope. And after war, the government rarely shrinks to its original size.

“War should always be fought as the very, very last resort. It should never be done casually, but only when absolutely necessary. And when it is, I believe it should be fought to be won. It should be declared. It should not be fought under U.N. resolutions or for U.N. resolutions, but for the sovereignty and the safety and the security of this country. It is explicit in our Constitution that necessary wars be declared by the Congress. And that is something that concerns me a great deal because we have not declared war outright since 1945, and if you look carefully, we have not won very many since then.

“We are lingering in Korea. What a mess! We have been there for 58 years, have spent hundreds of billions of dollars, and we still have achieved nothing – because we went there under U.N. resolutions and we did not fight to victory. The same was true with the first Persian Gulf War. We went into Iraq without a declaration of war. We went there under the U.N., we are still there, and nobody knows how long we will be there. So there are many costs, some hidden and some overt. But the greatest threat, the greatest cost of war is the threat to individual liberty. So I caution my colleagues that we should move much more cautiously and hope and pray for peace.”

More on this story here.

The Financial Services Committee’s Terrible Blueprint for 2004. Supporters of limited, constitutional government and free markets will find little, if anything, to view favorably in the Financial Services Committee’s “Views and Estimates for Fiscal Year 2004,” says Rep. Paul. Almost every policy endorsed in this document is unconstitutional and a threat to the liberty and prosperity of the American people.

For example, this document gives an unqualified endorsement to increased taxpayer support for the Financial Crimes Enforcement Network (FINCEN). The committee shows complete disregard for the American taxpayer and the United Sates Constitution by embracing increases in foreign aid. The committee also expresses unqualified support for programs such as the Export-Import Bank, which use taxpayer dollars to subsidize large multinational corporations that are quite capable of paying the costs of their own export programs! Finally, the committee’s views support expanding the domestic welfare state, particularly in the area of housing.

In conclusion, the “Views and Estimates” presented by the Financial Services Committee endorse increasing the power of the federal police state, as well as increasing both international and corporate welfare, while ignoring the economic problems created by federal intervention into the economy.

More on this story here.


The supply of gold is plentiful. For thousands of years it has been mined and accumulated; very little is consumed or lost. Existing supplies in the form of coins, jewelry, decoration, and plated coating are greater by far than current production. No matter how much gold is produced in South Africa or Russia, current output is rather negligible when compared to the quantities in individual possession throughout the world. This characteristic, in which it differs from all other metals, reduces the risk of sudden changes in quantity and, therefore, sudden changes in its value.

No other currency, national or international, can conceivably take the place of the American dollar. They all suffer seriously from the same ideological malady: they are the creation of political concern and authority. Whatever we may think of gold, it always looms in the background, beckoning to be used as money, as it has been since the dawn of civilization.

More on this story here.


Which last year forcibly converted billions of dollars in savings into pesos. In what could become the most important precedent yet for hundreds of thousands of disgruntled Argentines, the court ruled that $247 million of deposits belonging to one of the country’s provinces should be returned in dollars.

According to Carina López Espiño of Standard and Poor’s Financial Services in Buenos Aires, the ruling in favour of San Luis guarantees a similar outcome for a Supreme Court decision on the wider question of whether the government’s actions were constitutional. “It would send a clear signal that sooner or later the government is going to have to face up to the consequences of having to redollarise the deposits because the banks do not have enough dollars left to do so,” she said.

More on this story here.


Slash premium costs, yet increase life insurance benefits. This article explores “the how to” of new life insurance policies. The trick is to acquire the desired death benefit amount from top-rated insurance companies, but pay substantially less in annual premiums from inception to the day you die. The author claims that one of the strategies described is “the best tax-advantaged opportunity (legally allowed) that I have ever seen or heard of in my forty-plus years as a tax practitioner.”

More on this story here.


Hotmail has become a particular favorite for all spammers because they are able to sign-up anonymously and start spamming within minutes. Similarly Hotmail users are targeted prolifically because of the sheer number of addresses @Hotmail.com - offering rich pickings for software generating random mail addresses.

As with most other e-mail providers, a spokesman admitted Hotmail still has “no way of verifying” the details provided by those using its e-mail service. As such spammers can create as many e-mail accounts as they like, moving on to a new one every time they are shut down. While that is still the case it will remain difficult to track down scammers via the ISP through which they send their mails.

More on this story here.


The board charged with cleaning up the accounting industry recommended yesterday that foreign auditors of companies whose shares are traded in the United States be required to register with U.S. regulators. By proposing to extend its reach overseas, the Public Company Accounting Oversight Board, created by Congress last year, adds to a fierce international debate.

Representatives of the European Union and the governments of Switzerland and other countries have told board members in the past week that foreign auditors must not be made to face conflicting laws and rules.

More on this story here.


Is the Pentagon’s Total Information Awareness program a threat to US constitutional rights, or can it live within the law? “[T]he picture of TIA offered by its most vocal critics is not accurate. Even the legitimate concerns do not warrant the wholesale rejection of TIA’s potential benefits, especially before its capacities are realized. Rather, research and development of TIA can and should continue, guided by the fundamental principle that no information access technology should be implemented in a manner that alters or contravenes existing legal restrictions on the government’s ability to access data about private individuals.”

More on this story here.

The 11 Truths of Tyranny and the Law, including:

... and more. Rest of list here.


Regarding the question of whether the United States should ever resort to torture to pry what could be lifesaving information from suspected terrorists: apparently, more than a few Americans think so. Among them is the lawyer Alan Dershowitz, who would, however, involve the courts. In effect, the government would have to ask a judge for a torture warrant.

Dershowitz, no slouch as a civil libertarian, is a prominent member of the “get real” crowd. They argue that we are in a new kind of war and need new kinds of rules. This is especially the case when faced with the so-called ticking bomb predicament: What if a captured terrorist knew a bomb was about to go off somewhere? Should he be tortured to reveal what he knows?

But torture is not merely an interrogation technique, it is a descent into barbarity. Those who counsel us to “get real” have a heavy obligation to confront a different kind of reality. Torture is a beast with a rapacious appetite.

More on this story here.


The federal government is working on a pilot project that could see permanent residents fingerprinted and the information embedded in their permanent resident cards, the Montreal Gazette has learned. Permanent residents have completed the immigration process, but are not Canadian citizens.

More on this story here.


All travelers leaving Britain may face passport checks in an attempt to establish how many refused asylum seekers fail to leave the country, the Home Office minister Beverley Hughes indicated yesterday.

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Federal agents routinely seize property allegedly used in the commission of a crime, anything from a drug dealer’s car or speedboat to a hacker’s computer. In a series of raids in recent weeks, the Justice Department has extended such grabs to property that might seem esoteric but worry civil libertarians - Internet domain names. In one case, the government took over websites that it said peddled bongs, roach clips, rolling papers and other paraphernalia used in the consumption of illegal drugs.

The trend is alarming online civil liberties groups and legal scholars, who say the government’s new tactic risks depriving people of valuable property - their Internet storefronts and thus their livelihoods - as electronic commerce becomes more common. “If you want to take down a website but simply confiscate the servers, operators can always buy other servers,” said Michael Overly, an attorney specializing in computer law at Foley & Lardner. “But if they take the domain name away, then they’ve put the person out of business.” Critics of the Justice Department’s recent moves also say they fear the government could use the new method to spy on Web surfers who visit confiscated sites.

More on this story here.
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