Wealth International, Limited

Offshore News Digest for Week of March 17, 2003


Don Johnson is being investigated by German Customs officials after he was stopped with documents relating to money worth £5 billion in a routine vehicle check last November. Johnson, 53, threatened to sue German tabloid newspapers who linked him to money laundering. He told CNN’s Larry King: “They perpetuated this story of money laundering based on no evidence.” Johnson said he had thought nothing of the search until the allegations were made.

German authorities said they were investigating the documents, but a customs spokesman said it was not a criminal investigation and there had been no indication of any wrong-doing. Johnson said last week his reputation had been damaged already by the affair. Two of his bank accounts had been closed, but added: “I don’t know that I will ever be able to clear my reputation and regain my credibility.”

More on this story here, here, and here.


Whatever the truth about what went on in the Miami Vice star Don Johnson incident, Europe is currently facing its worst-ever levels of international money-laundering. Across the world, money-laundering accounts for between 2% and 5% of the world’s total economic output, according to the Financial Action Task Force on Money Laundering - a 31-member inter-governmental organisation under the auspices of the Organisation for Economic Co-operation and Development. In the UK the situation is even worse, with the cost of money-laundering running to around 10% of the nation’s GDP, or £100 billion a year.

Nigel Morris-Cotterill, editor of the World Money Laundering Report, says it is almost impossible to get on top of the fight against money-laundering - which is essential to every criminal organisation on earth, from Glasgow gangs to al-Qaeda.

A new report explains in precise detail exactly how money-launderers go about their business. It contains stories of gold bullion deals, diamond-trading, prostitution, massive drug-running cartels, huge frauds and gangland violence. But it also shows that today even the most ingenious of money-launderers finds it hard to escape the law. Arrayed as they are against computer cross-checking systems and bank staff trained to spot erratic transactions, criminals are constantly having to come up with new methods of washing their ill-gotten gains.

As one of Scotland Yard’s most seasoned financial investigators puts it: “For each one of the millions of ways that criminals make their money, there is a ruse designed to help them launder that cash. It’s a straight tug of war between them and us over who gets their hands on the money.”

More on this story here.


For decades, the Swiss economy has thrived by catering to the demands of the global elite for quality goods and discreet financial services. Now that pre-eminence is cracking. Not only are other nations luring deposits that once flowed to Swiss banks, but the rest of the Swiss economy is struggling to reinvent itself after being battered by American-style corporate excess. Over the last two years, Swissair declared insolvency, while management shake-ups hit companies like Credit Suisse, the No. 2 Swiss bank; Swiss Life, a leading insurer; and the machinery company ABB.

Switzerland’s problems have set off a highly public debate, with some business and banking leaders clinging to their tightknit secrecy-is-golden ways, while others call for greater openness.

More on this story here.

Bank Leumi, Israel’s second-largest bank, faces a growing number of lawsuits from disgruntled wealthy clients of its Swiss private banking unit, who are seeking full compensation following the alleged embezzlement of as much as SFr300 million ($220 million) between 1989 and 2001.

More on this story here.


Leading Swiss diplomat, Pierre Monod visited Antigua and Barbuda at the weekend to discuss the likely impact of the EU’s savings tax agreement on small offshore financial centers. The Antigua Sun revealed that Prime Minister Bird: “called on the Swiss government to speak up on behalf of the smaller jurisdictions, which have a right to offer financial services so long as they are well regulated”.

More on this story here.


VADUZ: One of Europe’s most bizarre and bitter electoral campaigns ended in victory Sunday for Prince Hans Adam II of Liechtenstein, after 64.3% of his subjects bowed to his will and voted to grant him sweeping powers over the tiny alpine kingdom. The prince, whose family has ruled the wealthy micro-state at the heart of Europe for almost 300 years, had threatened to abandon his rambling medieval mountaintop castle (which is “dank and not really very nice”, according to a local resident political scientist) and move to Austria unless the nation's 33,000 citizens gave him his way.

More on this story here and here.


Irish residents holding accounts with the offshore division of BoI will have their accounts closed and money returned at the end of this month. The offshore banking subsidiary, based in the Isle of Man, has decided that since most of its business is with expats worldwide, and predominantly sterling-based, it would stop offering offshore accounts to Irish residents.

More on this story here.

Ireland is earning a reputation as a retirement tax haven for Canadians. A Canadian emigrating to Ireland upon retirement can pay little Irish or Canadian income tax on pension income. A non-domiciled resident of Ireland would pay tax on Irish source income. But you would only pay Irish tax on Canadian source income if and when it is remitted to Ireland.

Because of recent favourable tax rules changes, Ireland is now known as the “Celtic Tiger”.

More on this story here.


MANAMA: The banking sector in Bahrain, the Gulf’s biggest financial center, saw a decline in offshore bank assets to $58.8 billion by the end of December 2002 from $89.2 billion in September, the Bahrain central bank said in its quarterly report. This weakness in the offshore sector was due primarily to “precautionary measures taken by Citibank to transfer some of its assets outside the (Gulf) region due to the risk of war” in Iraq, according to the report. Commercial and investment banks, including Islamic banks, by contrast saw a $300 million boost in their assets during the final quarter of 2002.

More on this story here and here.


The FATF said it would not introduce sanctions against the Philippines for failing to tackle money laundering. The decision came less than a week after President Gloria Macapagal-Arroyo signed into law tough new legislation to tackle suspect transactions. “The new legislation addresses the main legal deficiencies in the Philippine anti-money laundering regime previously identified by the FATF,” the Paris-based task force said in a statement.

More on this story here.


NASSAU: The Bahamian Coalition of Private Sector Organisations believes that the economy is not in a healthy state. Some 64% of respondents saw the economy as weak, with 9% rating it as very weak. Asked on their outlook for the next six months, 52% were pessimistic, while 47% saw little or no change occurring. Only 1% were optimistic. Worryingly, four out of ten firms reported a net loss last year, a statistic which has doubled from the previous year. Two out of three firms also reported a drop in sales in 2002.

The survey results seemed to contradict a more optimistic assessment of the economy made by Central Bank Governor Julian Francis earlier last week in an interview on a local talk show.

More on this story here and here.


The Caymanian authorities have launched legal proceedings in the EU’s Court of First Instance in order to challenge the European Union’s decision not to allow the consultation process over its savings tax directive requested by the jurisdiction last October to go ahead.

“As I have said ever so often, we will lose jobs and revenue if we have to put in place the tax on savings directive. We are determined not to do so,” Cayman Net News quoted Leader of Government Business, the Hon. McKeeva Bush, as announcing.

More on this story here.

David Ballantyne, the attorney general to the Cayman Islands, who has been at the center of a political crisis for weeks, has resigned after pressure from the island’s legislature. He is the second British-appointed official to resign from his post after the sensational collapse of a £15 million money laundering trial, involving tales of wiretapping, M16 agents and a top-secret plot called the “London Plan”. Islanders hope that his resignation will soothe relations between the overseas territory and Britain.

More on this story here.


Although Barbados has been successful in avoiding the blacklists of organisations such as the OECD, the country has not escaped the blacklists of nations such as Argentina, Brazil, Lithuania, Mexico, Poland, Spain and the Ukraine. In a speach, Langer noted that an effective way for Barbados to be removed from these blacklists would be to seek tax treaties with these countries.

More on this story here.


Large numbers of Europeans are profiting from a destination that has largely been a secret for Americans. Naturally beautiful with a perfect balance of stunning beaches and towering forested mountains, steeped in history, boasting the first European city founded in the Americas, the island is breathtaking. And the real estate is reasonably priced.

More on this story here.


Advice for people thinking of moving abroad focuses on the foreignness of the new surroundings - the legal aspects, medical, schooling and work-permits. You are encouraged to contact ex-pats who live in the area and ask them detailed questions. That is the extent of advice regarding ex-pats. They are useful people. They speak your language. They have made all the mistakes that you wish to avoid. They are a wealth of useful information. All this is true, but what you may not realise is that you are making contact with an extremely complex social group and making sense of the information they give you may require a PhD in anthropology.

More on this story here.


Lawmakers will try again to pass a bill granting soldiers and astronauts special tax relief, including a provision that would let four Houston-area companies and others continue to avoid U.S. taxes by using overseas addresses. The bill got yanked from the floor last week because of objections to special interest add-ons for a variety of businesses. House GOP leadership aides said those provisions were stripped to avoid another partisan debacle. But a provision eliminating so-called tax havens will remain.

More on this story here and here.


Congress and the IRS have expended considerable effort in recent months in targeting overseas tax havens. Too many Americans are evading their fair share of the national tax burden, D.C. insiders say, by hiding money in offshore bank accounts and transferring their businesses to low-tax Bermuda. “There’s tremendous unity in the House that dodging American taxes is un-American,” huffed Rep. Nancy L. Johnson of Connecticut.

The European Union shares American concerns about tax havens. Oddly, though, one of the offending tax havens targeted by the EU is the U.S. How’s that? Isn’t the U.S. government dedicated to battling outlaw nations which ally themselves with tax evaders? Well, it turns out that “tax havens” are in the eye of the beholder.

Were American politicians to give in to European demands and snitch about money invested in the relatively low-tax environment offered by the U.S., they’d be surrendering the country’s “tax haven” status - and the significant flow of investment capital that accompanies that outlaw appellation. The Cato Institute’s Veronique de Rugy estimates that the EU’s financial information scheme would drive at least $1 trillion out of the U.S., were it to be adopted.

More on this story here.

Tax havens | Going, going, gone? As the long arms of the IRS, the OECD and other organizations cast shadows on many sunny places (and some chilly but hitherto welcoming ones), some accountants and lawyers maintain that offshore accounts are becoming more trouble than they are worth to most law-abiding citizens - and even to those who had hoped to stretch the rules. Either offshore banks will fall into line with international standards - while remaining more expensive and less convenient than domestic banks - or they will risk being cut off, and their account holders with them.

More on this story here.


WASHINGTON: The Justice Department and IRS filed petitions in seven federal courts seeking records from MasterCard accounts at the Leadenhall Bank & Trust Co. in Nassau, Bahamas. The actions were taken because the 10 individuals involved refused to produce records sought by earlier court summonses. The IRS already has obtained thousands of Visa, MasterCard and American Express records involving accounts at dozens of banks in tax haven countries. But this move was the first time since the initiative began in October 2000 that individual Americans have been targeted.

More on this story here and here.

Shasta Lake, California: A Shasta Lake couple may be ordered to turn over bank records and credit card statements to the IRS court documents show. Gunnar A. Nelson and his wife, Sally, are named in a petition filed in federal court by the U.S. Department of Justice seeking records from their MasterCard accounts at the Leadenhall Bank & Trust Co. in Nassau, Bahamas.

Nelson, who is president of Cobblestone Estate Services Inc., and his wife, a teacher, are among those being investigated by the IRS for possibly using offshore credit cards to hide their income, the documents show. According to a court document filed with U.S. District Court in Sacramento, the IRS investigation was based on information gathered in the agency’s Offshore Credit Card Project, an ongoing effort to identify those who hide taxable income by transferring funds to offshore jurisdictions. They then use payment cards to access the funds in the United States.

The documents say that while the couple responded to summonses from the IRS, they refused to produce records, books and other documents and asserted their Fifth Amendment right against self-incrimination to all questions beyond confirming their names and addresses.

More on this story here.

The IRS wants a peek at the finances of Robert Plath, a Northwest Airlines pilot turned luggage-manufacturer exec, and his wife to determine if they are hiding income in offshore accounts to evade taxes. The Plaths were among 10 individuals named in petitions filed Thursday in seven federal courts in six states by the Justice Department and the IRS. The agencies want court orders requiring the 10 to turn over records from MasterCard accounts at the Leadenhall Bank & Trust Co. in Nassau, Bahamas.

More on this story here. IRS filing here (PDF file).


Irwin Schiff, who for years dared the government to come after him for teaching people how to stop paying income taxes has had his wish fulfilled. The Justice Department asked a Federal District Court judge in Las Vegas to prohibit interference with the tax laws by Irwin Schiff, author of The Federal Mafia and other books that argue that income taxes are voluntary.

Mr. Schiff, 75, who has twice gone to prison for tax violations, said yesterday that the government had no authority to enforce the payment of taxes. He said the request for an injunction against him, his girlfriend, Cindy Nuen, and one of his employees showed that the federal government is “a criminal organization” in which “all the judges are corrupt.” “The income tax was repealed in 1954,” he said, and paying it “is voluntary.”

The IRS has identified 3,100 people who filed returns in 1999 through 2001 showing zero income and seeking the return of taxes withheld by their employers, court papers in Las Vegas showed. These same papers hint at a wider effect, as many clients simply stopped filing once they had turned in a few years of such “zero returns”.

More on this story here and here.


Pressure is mounting in Washington on the US administration to force the IRS to withdraw its plans for the reporting of bank interest paid to foreigners from sixteen countries, including most member states of the European Union.

More than 40 members of Congress have written publicly against the proposals; now, nine members of the Senate Banking Committee, in a bipartisan letter, have called on Treasury Secretary John Snow to withdraw the Clinton-era IRS regulation that would force banks to put foreign tax law above US tax law. The Senators state that “This new proposal is not needed to enforce any US tax law, and we are concerned that it will put our financial markets at a competitive disadvantage and harm our economy by driving much needed capital elsewhere.”

More on this story here.


A new form for reporting suspicious financial activities to the IRS could unfairly target minorities and low-income families who need cash advances or other money services they cannot get from banks, argues the chief of a local tax clinic. Zullie Franco, coordinator of the Low Income Taxpayer Clinic of Nevada Legal Services, said illegal immigrants, regardless of their nationality, often work to send money to their native countries and probably have no idea information they supply for the exchange could be reported to the government.

The new form, known as the 90-22.56 or Suspicious Activity Report by Money Services Business, is a product of the Patriot Act. The act went into effect shortly after the terrorist attacks of September 11, 2001. Money service businesses other than banks are required to provide the IRS detailed reports about money exchanges of $2,000 or more. The forms also offer businesses guidelines in case they wish to report suspicious transactions that might not reach the $2,000 threshold. Banks report suspicious activity as well but have their own forms for doing so.

The reports ask for serial numbers of money orders and travelers checks as well as other customer information, including occupations, Social Security numbers, bank account numbers and vehicle license plate numbers. The form also instructs the business to submit descriptions of the conduct that raised suspicion and to try to obtain an explanation of the transaction from the customer. Businesses are asked to indicate whether the customer is a foreign national and to provide any available information from the person’s passport, visa or other identification document.

Allen Lichtenstein, a lawyer for the American Civil Liberties Union of Nevada, said the form is “so unfocused, vague and open-ended that it won’t be particularly effective in dealing with terrorists or others who might be conducting illegal business. It’s one more step in an ever-growing trend to have government scrutinize everyday activities of our everyday lives.”

More on this story here.


In the bureaucratic reshuffling over domestic security, Attorney General John Ashcroft came out a winner. Mr. Ashcroft grabbed control of the Bureau of Alcohol, Tobacco and Firearms and with it an issue dear to his conservative agenda, guns. And he shucked responsibility for two areas of law enforcement that had brought ridicule to the Justice Department, the color-coded threat alert system and immigration.

In recent months, Mr. Ashcroft, once regarded as a peripheral, even clumsy, player in the Bush administration, has not only honed his skills as a bureaucratic infighter, he has also patched his tenuous relations with President Bush, who told Mr. Ashcroft last month that he was doing “a fabulous job”.

With the addition of nearly 5,000 law enforcement officials from the firearms bureau, Mr. Ashcroft has again expanded the policing authority of the Justice Department, a hallmark of his tenure as attorney general. And with the fight against terrorism as his soapbox, he has pushed the powers of federal law enforcement in directions few thought possible before the September 11 attacks. Despite a years-long effort as a senator from Missouri to shrink government, Mr. Ashcroft has significantly broadened the reach of the attorney general, legal scholars and law enforcement officials agree.

Nancy Baker, a professor at New Mexico State University who wrote a history of the attorney general’s office: “The current attorney general sees himself and the Justice Department as engaged in a systemwide struggle between good and evil, and that therefore requires very aggressive and comprehensive countermeasures.”

“He is certainly the first attorney general in the United States in the last half-century with any kind of enthusiasm for executions,” said Franklin E. Zimring, a law professor at the University of California in Berkeley who specializes in law enforcement issues. “He has an affirmative belief in them.”

More on this story here.


Criticism of an electronic airline passenger-screening network took on a new edge yesterday as the Senate Commerce Committee endorsed a plan to require the Transportation Security Administration to disclose how the system will work, including its impact on personal privacy. A growing number of critics believe the system will be overly intrusive and used by other law enforcement agencies.

“This is really the beginning of a debate of how our country can fight [terrorism] ferociously, without gutting civil liberties,” Sen. Ron Wyden (D-Ore.) said after the committee accepted his amendment yesterday. It also would require the TSA to report how it will mitigate errors and enable appeals from passengers who believe they were incorrectly identified as potential threats.

More on this story here.

When Palo Alto resident Bill Scannell learned that Delta Airlines was the first in the nation to demonstrate a government system to screen passengers by checking their credit and criminal histories, he was horrified. Called CAPPS II, the system is undergoing a 90-day trial at Delta checkpoints at San Jose International and two undisclosed airports. A computer double-checks the information against a terrorist watch list, automatically ranks the riskiness of passengers and labels them red, yellow or green. Federal screeners then stop “red” passengers from boarding planes and require “yellow” passengers to go through extra screening.

“It is an invasion of people’s privacy that appalls me to the core,” said Scannell, who works at a Silicon Valley company. “I’m a U.S. Army veteran. I did not sign up for this. It is wrong. This is the beginning of (George Orwell’s) 1984. This is evil.”

He created a Web site and posted a Massachusetts Institute of Technology study that mathematically showed that terrorists had a better chance of beating CAPPS II than random searches alone. Scannell called for a boycott of Delta and an end to CAPPS II before it got off the ground. The response was electronic wildfire.

More on this story here.

The Electronic Frontier Foundation (EFF) warned that plans for the US Department of Transportation to exempt Aviation Security Screening Records (ASSR), part of CAPPS II, from privacy laws will result in the creation of secret files on citizens and foreign travelers, which may be used to stop people from traveling and for unnamed other purposes. The problem as the EFF sees it is that because travelers cannot review or correct the information, they might find themselves barred from travel, with no method of redressing the situation.

More on this story here.


The Justice Department has identified about 3,000 criminal cases that could have been affected by flawed science and skewed testimony at the FBI laboratory before 1997, and is letting prosecutors who handled those cases decide whether defendants should be notified. A Justice Department internal investigation concluded in 1997 that 13 lab technicians made scientific errors in cases or slanted testimony to help prosecutors. Several were reprimanded, but none was fired or prosecuted.

More on this story here.

FBI increases airborne surveillance, eavesdropping. The FBI has a fleet of aircraft, some equipped with night surveillance and eavesdropping equipment, flying America’s skies to track and collect intelligence on suspected terrorists and other criminals. The FBI will not provide exact figures on the planes and helicopters, but more than 80 are in the skies. Several planes known as “Nightstalkers” are equipped with infrared devices that allow agents to track people and vehicles in the dark.

“The cop on the beat now has Superman’s X-ray eyes,” said Barry Steinhardt, director of the technology and liberty program at the American Civil Liberties Union. “We need to fundamentally rethink what is a reasonable expectation of privacy.”

More on this story here.


Beware any e-mail, however professional in tone, that asks for personal account information. Internet users continue to be flooded with legitimate-looking e-mails that ask recipients to enter account numbers, passwords, and other data. A new con aimed at Discover Card holders is just the latest in a long line of scam e-mails sent by con artists trying to hijack accounts at AOL, PayPal, eBay and other online firms.

More on this story here.


Over the past few weeks there has been an epidemic of epiphanies. A long list of pundits who previously supported the Bush administration’s policy on Iraq have publicly changed their minds. None of them quarrel with the goal; who would not want to see Saddam Hussein overthrown? But they are finally realizing that Bush is the wrong man to do the job. And more people than you would think - including a fair number of people in the Treasury Department, the State Department and, yes, the Pentagon - do not just question the competence of Bush and his inner circle; they believe that America’s leadership has lost touch with reality.

More on this story here.


Asia-Pacific hedge fund managers continue to battle difficult regional market conditions, according to research published by Bank of Bermuda and Asia Hedge in London. All strategies underperformed the leading market indices in February 2003, although this was predictably described as “in these purportedly flat but actually very volatile markets”.

More on this story here.


LONDON: Offshore private bank accounts, traditionally seen as a bolt-hole from the taxman, are growing despite the bear markets and pressures on banking secrecy, U.S. credit rating agency Moody’s said in a recent report. Moody’s said that Europe’s private banking industry, whch has seen big job cuts and consolidation in the downturn, grew by 15% during 1999-2001 with client assets under management reaching $8.4 trillion. That is just under a third of the global private banking assets estimated at some $27 trillion.

Despite the chilly climate for offshore private banking amidst a global crackdown on tax evasion, the European Union’s tax harmonisation efforts, and attacks on banking secrecy, Moody’s said offshore business was proving resilient. “Moody’s expects the leading offshore private banks to continue to prosper,” said the report. “Indeed, despite decreasing fiscal incentives to place wealth offshore, Moody’s believes that - as long as banking secrecy is maintained - offshore private banking will remain attractive.”

More on this story here.


Pravda: Natural non-resident persons cashed almost $10 billion at Russian banks last year. It is impossible to trace that money afterwards. An intriguinging little report from Moscow.

More on this story here.


The chief executive of the Guernsey Promotional Association, John Bridle, has warned that the impact of the European Savings directive will mean many companies having to rethink the way they conduct their business. “It will make a substantial change to the way businesses operate in Guernsey. It will impact both on the way they order their relationship with their clients and the way the island operates in terms of taxation.”

More on this story here.


In the preliminary hearing of the Conseil d’Etat v de Lasteyrie du Saillant case, the ECJ’s Advocate General decided that the French government had violated the freedom of establishment provisions contained within EU law by levying a punitive residential exit tax on an individual who wanted to transfer his tax residence out of France.

A London Times report suggested that the ruling is likely to reignite fierce debate over the harmonisation of tax law, which has been strongly opposed by several EU member states. More worrying to certain EU member countries, however, are the potential implications of the ECJ ruling for companies wishing to relocate.

PricewaterhouseCoopers tax partner Peter Cussons confirmed that certain EU governments will likely be adversely affected by the case, telling the Times that: “If the ECJ decision, which is expected in the summer, also rules in favour of the taxpayer - as I strongly believe it will - the de Lasteyrie du Saillant case will lay the ground for possible further significant taxation claims from EU businesses in relation to corporate emigration exit charges.”

More on this story here.


Earning, say, $50,000 a year may not make you rich by New York standards, but it could make you liable for a federal income tax burden once meant only for the wealthy. With their high real estate, state and local taxes, New York State residents are particularly vulnerable to falling into the alternative minimum tax category. That is because under the AMT rules, you cannot take these and other deductions, and that will likely push up your taxable income. Though the number of those paying the more costly AMT is small overall, it is growing here and nationally every year because the AMT’s thresholds are not indexed for inflation, and salaries have risen over the years

Politicians, including President George W. Bush, have floated proposals to adjust or even eliminate the tax, but they have gone nowhere.

More on this story here.

IRS voluntary compliance ends April 15th - see your tax lawyer first. IRS officials reminded people on Monday that time is running short for those who have used offshore payment cards or other offshore financial arrangements to avoid U.S. taxes and who want to take advantage of the Offshore Voluntary Compliance Initiative (OVCI). Individuals need to apply directly to OVCI to receive the initiative’s penalty relief.

More on this story here.

KPMG, Ernst & Young, et al Made clients’ taxes vanish, then the IRS appeared. Many wealthy individuals made the mistake of investing in so-called basis-shifting tax shelters marketed by U.S. accounting firms in the late 1990s. The firms promoted the idea - later discredited by the IRS - that they had found ways for one investor to count another investor’s costs, or basis, as his own to create capital losses. Accounting firms often charged as much as $1 million just to explain a tax shelter strategy under a confidentiality agreement and millions more to execute it.

Now New York lawyer Blair Fensterstock is suing Ernst & Young LLP on behalf of four Indianapolis-based business partners who say they paid $1 million to learn about a shelter and total fees of $7 million to the firm, their banks and lawyers. Fensterstock’s suit claims the tax shelter was “unlawful and unregistered”.

More on this story here.


Two Southern California men have been sentenced for their participation in a “prime bank” scheme that cost more than 30 victims approximately $3.45 million. John M. Thomas, 58, a Laguna Hills resident who was the mastermind of the scheme, was sentenced late Tuesday to 46 months in federal prison. Cenobio Herrera Lanz, 68, of Downey, who purported to be a licensed escrow officer safeguarding the victims’ money, was also sentenced yesterday to 33 months in prison.

The scheme involved an investment program called Circle Foundation Investment Trust (CFIT), which purported to be a prime bank note program or “roll” program in which investor funds would be leveraged several times and then traded among the world’s top banks. Prime bank programs and roll programs are not legitimate investment programs and were a common investment scam in the 1990s. They are on the rise again today.

More on this story here.

The FBI said Monday it had broken up a “cult-like” investment-fraud and money-laundering ring headquartered in San Diego that may have cheated investors from coast-to-coast out of more than $50 million. Eight people, including alleged ringleader John Franklin Harrell, were arrested early Monday on federal charges of fraud, money laundering and conspiracy in the year-old “Operation Good Samaritan” investigation. Search warrants were executed in San Diego, Las Vegas, and Dallas.

Harrell claimed to be in charge of an offshore trust created by Joseph Smith, the founder of the Mormon Church, worth $1.6 trillion, according to the FBI. Investors were told that money would be available to them if they gave him enough seed money to start an insurance company called Good Samaritan.

More on this story here.

Brits attracted to phony offshore Internet scams.

More on this story here (Subscribers only).

Andrew Warren, a former partner in the London firm Talbott Creggy and Co, faces a series of charges including fraud, false accounting and corruption after being extradited to America. The charges arise out of an investigation into a $17 million investment fraud involving lawyers, a West African diplomat and American “financiers”. Mr. Warren is accused of using his experience as a solicitor to help facilitate the fraud via “dummy” off-shore companies.

More on this story here.

Doha, QUATAR: Authorities in the Philippines have launched a massive crackdown on persons and agencies operating the pyramid-type financial scams, officials at the Philippine embassy in Doha said. The Philippines’s Senate Committee on Trade and Commerce was also conducting inquiries into the “so-called get-rich-quick” schemes, they added. Some local Filipino expatriates are believed to have fallen prey to such scams offered by companies based in the Philippines.

More on this story here.


PARIS: A massive system of government-supported corruption at the formerly state-owned oil company Elf will be exposed when one of the biggest criminal trials ever in modern France opens in Paris Monday. After eight years of investigations and the accumulation of 250 thick files of evidence, the court will hear the case against 37 suspects accused of benefiting from hundreds of millions of euros embezzled from the now-privatised firm in the early 1990s.

Three leading men - who are being tried under the catch-all charge of “abuse of company assets” - are alleged to have enriched themselves to the tune of billions of francs by creaming off the commissions that were systematically paid out by Elf at the time to influential middlemen and foreign leaders.

More on this story here.


The funds’ large profits and the managers’ personal wealth have sparked the inquiry by the Inland Revenue’s special compliance office.

More on this story here.


In a strong message to the profession, Bob Ainsworth told a seminar convened for lawyers that new money laundering provisions under the Proceeds of Crime Act will be harder on the profession, which should have safeguards in place and should report more suspicions: “The number of suspicious transactions [notified by] the legal profession is very low indeed. It simply cannot be a reflection of the genuine occasions that exist. We do expect to see that there will be a substantial increase in suspicious transaction reports from the legal profession.”

More on this story here.


“If you can stop money laundering, you can stop crime,” says a former money laundering courier turned financial crime consultant. A bold statement, but that is the thinking behind renewed federal efforts to stop money laundering and terrorist financing. And it is the thinking that has strapped the banking industry with potentially more paperwork, obligations and record-keeping burdens than at perhaps any time in its history.

“Burdensome?” pondered one banking executive who requested anonymity. “I would use the word, ‘thorough.’ But the bottom line is that it’s a pain in the you-know-what.”

More on this story here.


A report released last week estimates that the U.S. brokerage industry will spend as much as $700 million through 2005 on technology and outsourcing services in order to comply with the antiterrorism and anti-money-laundering regulations of the USA Patriot Act. The report also indicates that some large brokerages expect to spend up to $30 million each. But after that, budgeting for compliance initiatives drops off sharply.

More on this story here.


Some conservative groups are finding common ground with organizations such as the American Civil Liberties Union and the Bill of Rights Defense Committee, expressing concerns about the effect that the USA Patriot Act and a possible follow-up law, the Domestic Security Enhancement Act, could have on civil liberties.

More than 60 towns, cities and counties around the country have passed resolutions criticizing the act, some going so far as to instruct municipal employees - including police - not to assist federal agents in investigations that they believe violate the Constitution. Now, right-leaning groups such as the American Conservative Union, the Eagle Forum and Gun Owners of America say they are concerned that American citizens could also be victimized by what they say are unconstitutional law enforcement powers allowed by the Patriot and the potential enhancement act.

The heart of the issue, according to conservatives, liberals and constitutional scholars, is the effect that USA Patriot has already had on issues of probable cause and due process, and that both of those concepts would be further eroded if the so-called Patriot II were adopted as it appears in the draft form.

More on this story here.


Along with the usual reminders to hold the noise down and pay overdue fines, library patrons in Santa Cruz, California are seeing a new type of sign these days: a warning that records of the books they borrow may wind up in the hands of federal agents. The signs, posted in the 10 county branches last week and on the library’s Web site, also inform the reader that the USA Patriot Act “prohibits library workers from informing you if federal agents have obtained records about you. Questions about this policy,” patrons are told, “should be directed to Attorney General John Ashcroft, Department of Justice, Washington, D.C. 20530.”

The Justice Department says libraries have become a logical target of surveillance in light of evidence that some Sept. 11 hijackers used library computers to communicate with each other. But the signs ordered by the Santa Cruz library board - a more elaborate version of warnings posted in several libraries around the nation - are adding to the heat now being generated by a once-obscure provision of the Patriot Act.

For some, more monitoring would be fine. “I don’t have a problem with (government surveillance). I don’t have anything to hide,” said a 28 year old from Monterey, California. “I wish there was more government monitoring. I want to know if somebody on my block is reading a book on how to build a bomb or if there is anyone reading Catcher in the Rye. They say there’s a link between that book and many serial killers.”

More on this story here and here.


Until recently, police conducting wiretaps on services such as mMode from AT&T Wireless and PCS Vision from Sprint PCS could intercept only phone conversations. Millions of instant messages or photos were off limits to crime fighters’ wiretaps because the necessary eavesdropping technology did not exist. Not any more.

More on this story here.


Coming up with a reasonable and livable stance against the threat of terrorism. Start with information: facts about the kind of threats the government says may be out there; the damage each can wreak; relevant policies and guidelines; and the myriad things people can do, buy, learn or talk about, should they choose to plan for a terrorist event.

As for the threat of any of these things actually coming to pass, well, nobody really knows. An extensive set of articles on the subject.

More on this story here.


Since 1968, the Whole Earth Catalog has been a valuable sourcebook for freethinkers, do-it-yourselfers, and back-to-the-landers. Its most recent full-fledged catalog, published in 1994, opened by noting that the price of computing “has dropped so far since the first Whole Earth Catalog that we have entered the era of desktop everything: desktop publishing, desktop audio, desktop video. Book publishing, radio and television production, and music distribution used to require buildings full of heavy machinery. Communications capabilities once reserved for government or corporate elites now reside in tens of millions of citizens’ desktops.”

It is a sign of how quickly technology can evolve that those desktops, once the sign of individual liberation, now seem somewhat clunky themselves. Less than a decade after the catalog’s then-editor wrote those words, the equivalent computing power can be found not just on desks but in people’s pockets. The social implications of that revolution are discussed in Smart Mobs: The Next Social Revolution (Perseus, 2002), the most recent book by the man who described the desktop revolution in 1994: Howard Rheingold.

In Smart Mobs, Rheingold observes people communicating via cell phones, pagers, and hand-held computers, explores the new forms of social interaction he sees emerging, and asks what will happen when those technologies become ubiquitous. The book also describes the ongoing effort to add computing power to our environment - the buildings we occupy, the objects we buy, even the clothes we wear - and speculates about what will happen as electronically equipped people interact with this electronically equipped terrain.

More on this story here.


At the very end of the Clinton administration, a group of Treasury bureaucrats proposed an “interest reporting regulation” that would require those in the U.S. who pay interest to foreign persons to report it to their governments, even though no U.S. tax liability is due. The regulation was proposed at the request of the European Union, led by France and Germany. It would hurt the United States by driving out foreign capital and increasing costs on our businesses. It would put the civil liberties of those reported on at risk by having such information passed to corrupt governments or those with a history of leaking information to dishonest individuals and governments, including terrorists states.

Every group that has testified or submitted comments on the proposed regulation has strongly opposed it (including public policy, banking, industry, small business and civil liberties organizations). In addition, dozens of members of Congress have written in opposition to this proposal, both because it is bad economic and regulatory policy, and also because it clearly is an attempt to undermine the will of Congress. Given the depth and breath of opposition and evidence against this dreadful proposal, one can only surmise that those bureaucrats still pushing it do so out of arrogance, ignorance, naivete or disloyalty to the U.S. - but I understate. Some of these Treasury bureaucrats even had the gall to claim we could trust the French with sensitive information despite their long history of leaks to groups and countries hostile to the U.S.

The new Treasury secretary could give the French and Germans the diplomatic equivalent of a chiffon pie in the face by withdrawing the regulation proposal in a very public way.

More on this story here.

The Center for Freedom and Prosperity home page (of sorts) in their campaign against the IRS regulation here.

Dr. Marshall Langer re the proposed IRS regulation here (PDF file).

National Center For Policy Analysis summarizes its case against the regulation: It is an abuse of the regulatory process, it flouts the law, capital will flee American banks, U.S. banks will be less competitive, the banks’ paperwork burden will increase, the rule is bad tax policy, and more. [Other than those objections, they have no problem with the proposal.]

More on this story here.


NASSAU: William Jennings, Managing director of Leadenhall Bank & Trust Company said Monday that it is the responsibility of the firm’s customers to disclose certain information to the U.S. IRS, and not that of the offshore bank. Mr. Jennings was refuting reports that the Justice Department and the IRS had filed petitions in seven federal courts seeking records from MasterCard accounts from Leadenhall.

“The IRS is pressing our clients to do that,” Mr. Jennings told The Guardian on Monday. “Our clients always sign a waiver of bank secrecy and we strongly recommend that they get their own legal advice.” He acknowledged, however, that the situation would change in 2006, when the provisions of a proposed Bahamas/US tax information agreement take effect.

More on this story here.


Butterfield Asset Management (BAM) have just been recognised for the sixth year in a row by the annual Standard & Poor’s awards. Two of their offshore funds, the Overall Group of Butterfield Funds and the Butterfield Capital Appreciation Bond Fund won first prizes for five year perfromance.

BAM managing director, Ian Coulman, said that a key element of BAM’s successful fixed income strategy had been their insistence on diversity and quality for the portfolio, adding that the award-winning funds were not judged simply on performance, but also for avoiding volatility. Mr. Coulman said BAM has found one particular sector of the fixed income market less volatile than the corporate debt market: asset-backed and mortgage-backed securities have not suffered credit downgrades to the same degree as the corporate debt market. [If an asset price deflation hits in the future this strategy will be sorely tested.]

More on this story here.


Standard & Poor’s ratings agency has downgraded Panama’s public bond rating from BB with a stable outlook to BB with a negative outlook. The culprit is the growing government budget deficit.

More on this story here.


n March 1998, Mexican legislation took effect allowing Mexican-born citizens of other countries to reclaim rights that had been automatically renounced when they took on their new citizenship. The law also applied to anyone born outside Mexico, but whose mother or father was born in Mexico.

That law was good only for five years. A proposal to make the legislation permanent is being considered by Mexico’s Congress but, just in case this is their last opportunity, Mexican-Americans across the country have rushed to turn in documents proving their heritage.

More on this story here.


Pravda reports in its disarmingly frank style:

Cyprus, Russia’s favorite place for money laundering has sprung a leak. An information exchange agreement between the Federal Commission for the Securities Market and Cyprus’s Central Bank was concluded last year; however, even now Russian officials categorically refuse to specify what kind of information is mentioned in the agreement. As it is clear now, in accordance with the agreement, information about actual holders of Cyprus offshore bank accounts is available to the Russian Federation authorities.

Experts say that within the past year up to 30% of Russian companies have abandoned Cyprus just to be on the safe side. It is highly likely that the rest will immediately leave as well. And the reason for it is quite understandable. It is not a problem that foreign special services know about your dirty money, and it is quite another matter that this information is available to special services of your native country. As is known, it is really very difficult to get rid of their persecutions.

More on this story here.


Today, China is seen by many as an incredibly lucrative market, even more so than it was four hundred years ago, when the British first began to make a determined effort to trade with China. With a population of 1.3 billion (and over a billion more sitting in India not so far away) the East and Indian Peninsula contain over a third of the world’s population, the vast majority of which do not possess many of the conveniences modern technology has made common in the US and Europe. As China continues its rapid drive towards modernization and the amount of trade between it and the West increases, Chinese markets could be incredibly lucrative for almost any Western firm, but in particular for IT firms, as both IT people and equipment are in high demand.

There is nothing wrong with trading with China, and all trade negotiations are give and take, but IT firms who choose to dance with the dragon should be aware that their chosen partner is an ambitious, proud, and determined country which viewed itself as a center of civilization surrounded by barbarians for thousands of years. This attitude still persists in some ways and could make China a very strong adversary/competitor.

More on this story here.


The old warning to investors not to keep all their eggs in one basket applies particularly to those living in the Middle East. In 1990, when Saddam Hussein marched into Kuwait, he seized and froze all assets leaving those without access to funds outside the country financially paralysed.

The majority of expatriates living in the Middle East will have money offshore. This does not necessarily mean a bank account. Some expatriates prefer to invest in an offshore money market fund instead, or hold a Visa or American Express card that can be used almost anywhere.

More on this story here.


As U.S. military forces gear up to destroy Saddam Hussein’s army, another U.S. government strike force is about to target something he may hold more dear: his money. A team of U.S. financial investigators first went after Saddam’s funds during the first Persian Gulf War 12 years ago. But much like Iraq’s purported stockpile of chemical and biological weapons, U.S. officials believe that hundreds of millions, if not billions, of assets controlled by Saddam, his son Uday and his closest cronies went undetected at the time and are now concealed around the globe in secret bank accounts and dummy companies.

As a result, Newsweek has learned, U.S. agencies in the next few days are poised to unveil a new effort to trace the assets of Saddam and his inner circle using existing economic sanctions and new powers granted to the administration under the USA Patriot Act passed by Congress in the wake of the September 11 terror attacks.

More on this story here.


BRUSSELS: European Union finance ministers failed once again to reach agreement on two sticky and long-lingering issues: fighting tax evasion on interest income and a revised Europe-wide energy tax. At stake on the tax evasion issue is cross-border evasion on paying taxes on income earned through interest - a practice that has reached epic proportions in the European Union.

Although the finance ministers reached a tentative accord earlier this year, the ambitious plan must still be brought down to concrete details. Among the hurdles is getting Switzerland, Europe’s most important financial center, to cooperate in the crackdown. Italian demands, ranging from tax breaks for truckers’ fuel to a special tax regime for milk producers, have prevented the EU from sealing a deal with Switzerland and to start taxing energy products to fight pollution.

More on this story here and here.


Does Jersey comply with the requests of EU governments that it impose a withholding tax on the interest paid on customers’ saving accounts or take the alternative course of disclosing to the tax authorities of the 15 EU countries which of their citizens received how much interest on any offshore accounts they hold? Most expect Jersey to opt for the exchange of information, but it will still be a momentous decision. Secrecy and discretion have long been considered essential features of an offshore financial center.

Accepting the EU “code of conduct” - although Jersey is not in the EU - will, in addition, require sweeping changes both politically and in the way the financial sector positions itself for the future. On the fiscal and political side it will blow a large hole in the island’s tax base, a hole that can probably only be plugged by putting up taxes for the residents.

More on this story here.

The largest offshore law firm in the Channel Islands has been created out of the merger of Carey Langlois and Olsens. The combined firm, to be called Carey Olsen, will include 120 lawyers based in Jersey, Guernsey and London.

More on this story here.


PARIS: Former Elf executives have told a court they regularly paid millions of dollars in bribes to African leaders to secure contracts, and said top oil firms continued to do likewise. The bribes were paid to offshore bank accounts to oil [sic] the wheels of business - with the full knowledge of the French state - three disgraced Elf executives told the trial judge on Wednesday.

“I granted bonuses, pre-financing deals and fees to heads of state,” Loik Le Floch-Prigent, 59, Elf head from 1989 to 1993, told the court. “If the French Republic has something against me, it only has to say. But that’s what I did, just like my predecessors. My successors have done exactly the same,” said Le Floch-Prigent, who is serving 18 months for earlier Elf-related convictions

More on this story here.


A $80,000 annual deduction is available to US persons living and working offshore.

More on this story here (PDF file).


Mark Everson, the president’s nominee to run the IRS, vowed Tuesday to pursue tax evaders, including the companies that market tax avoidance schemes. “Attorneys and accountants should be pillars of our system of taxation, not the architects of its circumvention,” Everson told the Senate Finance Committee.

The committee's top Democrat, Max Baucus of Montana, called the agency’s collection record “troubling”. “Honest taxpayers should not have to wonder whether the tax collector can keep up with tax cheats,” he said.

Retired IRS chief Charles Rossotti reported last year that the agency does not go after 75% of the taxpayers who do not file a return, or 60% of identified tax debts.

More on this story here.


Bulgaria is ranked third in the world in producing counterfeit US dollars, according to a recent report by the United States Secret Service. According to the report, Colombia is ranked first in the world followed by Chile, Bulgaria, the UK, Poland and Guinea. [Of course the real leader, by a wide margin, is the Federal Reserve.]

More on this story here.


Can you answer “yes” to the following two questions: 1.) Does my estate plan transfer all - every dollar - of my wealth to my heirs, all taxes, if any, paid in full? and 2.) Can I control all of my assets - including my business - for as long as I live? If you do not get a clear “yes” to both questions, get a second opinion.

One of the column’s readers is sure glad he did.

More on this story here.


The Financial Services Commission of Montserrat has advised the Office of the Comptroller of the Currency that LionHeart Bank and Trust Company Limited is not registered in Montserrat. The regulatory authorities of Montserrat have not issued any type of license to an entity with that name. Also, the regulatory authorities of Florida have not authorized LionHeart Bank and Trust to conduct banking business in that state. Please be guided accordingly.

More on this story here.


Investors keen to own their very own “lifestyle” estates with either a wine, agricultural or guesthouse component are flocking to the Boland & Overberg region of the Western Cape, reports Dr Andrew Golding, Chief Executive of the Pam Golding Property (PGP) group, South Africa’s largest independent real estate company.

Glyn Bricknell, Managing Director of PGP’s Boland & Overberg region, which over the past year has been experiencing a surge in demand for residential properties in general, reports a high demand for residential golf estates, wine estates and agricultural farms, from both local and overseas buyers.

Pam Golding Properties, South Africa’s largest retail property group, has concluded sales worth over R1.0-billion to foreign investors from 48 different countries over the past 11 months. “Since 9/11 increasing global instability has resulted in a growing number of tourists and investors flowing into South Africa, and this trend continues to increase,” he commented.

More on this story here and here.


The failure of the United Nations to take action against Iraq, combined with President Bush’s strong condemnation of the Security Council, has left the international body with little authority and in need of reform, according to several policy experts.

“The United Nations had a final shot of redemption on the Iraq question and they didn’t take it,” said Nile Gardiner, an Anglo-American policy expert at the conservative Heritage Foundation. “I believe we are going to see increasing disengagement from the U.N. process by the United States. The United Nations is dying a slow death as a political organization.”

More on this story here.


Most Americans rightfully resent the arrogant attitude toward our national sovereignty that an invasion of Iraq magically becomes legitimate only when UN bureaucrats grant their blessing, and do not care what the UN thinks about our war plans. Only the most ardent war hawks connected with the administration have begun to discuss complete withdrawal from the UN. Rep. Paul has advocated this position for twenty years, and has introduced legislation to that effect.

Our current situation in Iraq shows that we cannot allow U.S. national security to become a matter of international consensus. We do not need UN permission to go to war; only Congress can declare war under the Constitution. The Constitution does not permit the delegation of congressional duties to international bodies. It is bad enough when Congress relinquishes its warmaking authority to the President, but disastrous if we relinquish it to international bureaucrats who don’t care about America.

Those bureaucrats are not satisfied by meddling only in international disputes, however. The UN increasingly wants to influence our domestic environmental, trade, labor, tax, and gun laws. Its global planners fully intend to expand the UN into a true world government, complete with taxes, courts, and a standing army. This is not an alarmist statement; these facts are readily promoted on the UN’s own website. UN planners do not care about national sovereignty; in fact they are actively hostile to it. They correctly view it as an obstacle to their plans. They simply aren’t interested in our Constitution and republican form of government.

More on this story here.


We all want our government to protect us - from criminals and foreign invaders. However, far too often the government oversteps its basic responsibilities by a mile. It seeks to protect us not just from outsiders, but “from ourselves” as well. Backed by a dangerous constituency of moral crusaders our government has instituted laws and legal restrictions against drinking, recreational drug use, smoking, and even some forms of sex.

Now, in the name of national security, the government is actively targeting gambling. Anti-gambling zealots now fill the halls of Congress like fruit flies swirling around a rotten apple. They are entrenched in governors’ mansions from coast to coast. They dominate nearly every state legislature in America (Nevada being the notable exception). Contrary to public opinion showing that the overwhelmingly majority of people support most forms of gambling in many areas, elected officials at virtually every level of government, from lowly city council member up to the President, pride themselves in being opposed to gambling. Right now, under your nose and behind your back these forces are going after gambling with a vengeance under the guise of “protecting” citizens.

More on this story here.


For several years, members of the corporate defense bar have been bellyaching about an erosion of attorney-client privilege. Now, as a result of the Bush administration’s aggressive stance on corporate crime, consternation has reached a fevered pitch. Defense attorneys are concerned that their ability to adequately represent their clients will be compromised by allowing government investigators access to confidential material. Moreover, waiving attorney-client privilege arms plaintiffs’ lawyers with potentially damaging evidence to use against companies in civil litigation.

More on this story here.


According to a January report by J.P. Freeman, a security market-research firm, 26 million surveillance cameras have already been installed worldwide, with more than 11 million of them in the United States. In heavily monitored London, England, Hull University criminologist Clive Norris has estimated, the average person is filmed by more than 300 cameras each day.

The $150 million-a-year remote digital-surveillance-camera market will grow, according to Freeman, at an annual clip of 40 to 50% for the next 10 years. But astonishingly, other, nonvideo forms of monitoring will increase even faster. In a process that mirrors the unplanned growth of the Internet itself, thousands of personal, commercial, medical, police, and government databases and monitoring systems will intersect and entwine. Ultimately, surveillance will become so ubiquitous, networked, and searchable that unmonitored public space will effectively cease to exist.

More on this story here.
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