Wealth International, Limited

Offshore News Digest for Week of May 19, 2003


Switzerland’s banking secrecy rules are costing the world’s poorest countries billions in lost revenue every year, according to a new campaign. Non-governmental organisations are urging the Swiss government to crackdown on tax evasion and ensure revenue is returned to developing countries.

The campaign, involving 50 charities and NGOs from 20 countries, aims to raise awareness of the wider impact of the existence of “tax havens”. Campaigners accuse banking centers such as Switzerland, Luxembourg and the Channel Islands of managing fortunes that are beyond the reach of the relevant tax authorities.

More on this story here.


The battle against wholesale tax information-sharing between nations garnered further support, when Glenn Hubbard, chairman of the White House Council of Economic Advisers, told a meeting of conservative political groups that the administration would not support the European Union’s information-sharing directive.

The US Treasury Department, focus for pro-exchange views, is non-committal on the issue in public, but its general attitude is clear enough from proposed new regulations it issued a few weeks ago under which interest on bank deposits would be reported to the IRS for nonresident alien individuals who are residents of certain specified countries, including most EU member states.

In its current shape, there is no chance that information-sharing proposals could pass the House. Bill Thomas, Chairman of the House Ways and Means Committee, made this clear in a letter he wrote to Paul O’Neill in August on the subject of the Treasury’s domestic information-sharing regulation.

More on this story here.

But looks toward a liberal ex-congresswoman to fill OECD post.

Former Rep. Connie Morella (R-Maryland) -- who lost her seat in a valiant, uphill reelection bid in a gerrymandered district last fall -- is on the verge on being named the U.S. representative to the OECD, a 30-nation group based in Paris.

Offering a nice consolation prize to a former Republican congresswoman is a worthy goal, but not this post. Morella was always something of an oddity in the GOP caucus in the House as a pro-choice, anti-tax cut, pro-labor-union Republican. At the OECD, though, she will feel right at home. Therein lies the problem.

Over the last few years, the OECD has expended tremendous resources to promote the innocuous-sounding goal of “tax harmonization”. Given that the OECD is largely controlled by high-tax European welfare states, “harmonizing” tax rates generally involves pressuring low-tax countries to empower the taxman. (Ironically, it eschews the taxman for its own employees, as OECD salaries are tax exempt.) Having someone in the OECD slot who does not enthusiastically support free markets and lower taxes is a real danger.

More on this story here.


The Swiss voted the government’s way in Sunday’s ballot, throwing out seven of nine issues, including a ban on nuclear power. The result is a slap in the face for the left. Only the two government-backed reforms -- cutting back the army and civil defence system -- were approved in the biggest voting round for 130 years.

The cabinet had recommended that voters throw out all seven people’s initiatives, and approve only the two referenda.

More on this story here.


The U.K. Treasury said “mistakes were made” by officials from its tax collection arm in selling 600 government buildings to a tax-exempt company based in Bermuda and backed by financier George Soros. Responding to criticisms made by a committee of lawmakers overseeing economic policy, the Treasury said it should have pressed Bermuda-based Mapeley Steps Ltd. to register itself in the U.K. before selling the properties to the company in 2001.

The Treasury’s statement is striking because it is rare for a Whitehall department to say that government bodies have failed to do what they should.

More on this story here and here.


Bahamas PM Perry Christie was in Florida last week to address a group of local businesses people on the benefits of investing in the jurisdiction, according to a Nassau Guardian report. “Investors should be confident that The Bahamas is open for business and my government is friendly to business,” he said.

More on this story here.


Diligence has been the operative word since the mid-1980’s as the Cayman Islands Government has consistently stepped up their efforts to combat money laundering and regulate their tax-free financial services. After Switzerland, Cayman was the first country to enter into a Mutual Legal Assistance Treaty (MLAT) with the United States way back in 1986, which basically allowed for the exchange of information for investigation and prosecution of crimes. A number of other regulations followed into the 90’s, including the Confidential Relationships (Preservation) Law Revision of 1995, the Creation of the Cayman Islands Monetary Authority in 1997, the Drug Trafficking (International Cooperation Law) in 1998 and the Cross-border supervision in 1999.

While it is applauded that the government has committed to monitor financial activity in these islands, there is still lingering concern that these draconian laws are leading to a drop in company registrations and other financial services in the Cayman. The new microscopic approach, while a great way to flush out criminal activity, is also preventing the country from attracting future investment. These laws have become a serious red-tape that is stifling and will eventually choke the life-blood out of our economy.

More of this editorial here.

Three member Caymans delegation to attend UN decolonization seminar.

According to UN documents, the purpose of the seminar is to “assess the situation in the non-self governing territories, in particular their constitutional evolution towards self determination, in order to facilitate the development by the special committee of a constructive programme of work on a case-by-case basis.”

As delegation leader, Leader of Government Business, the Hon. McKeeva Bush, said that though he felt it was very important for Cayman to be represented, he wanted to make it clear that “this is not about independence” for Cayman: “My Government has no mandate for independence but we must be clear that self-determination doesn’t have to mean independence.”

More on this story here.


Many hedge funds would move offshore if the Securities and Exchange Commission increased its regulation of them, executives said at a public meeting last week. “The most portable asset in the world is cash,” said Robert K. Steel, the vice chairman of Goldman Sachs, who said during a two-day meeting on the subject in Washington that many funds would not put up with excessive regulation in the United States. The meeting was held by the S.E.C.

William H. Donaldson, the S.E.C. chairman, asked whether the industry could afford the increased administrative expenses that might result from heightened regulation. Nonetheless, Mr. Donaldson called on the commission’s staff to prepare recommendations on whether the industry needed tighter scrutiny, and on whether new rules should be imposed by the commission or by Congress.

More on this story here.


Barbados has hired an American company, Ruder Finn Creative, to lead a turnaround of its international business sector. Following a number of major challenges including the OECD tax haven initiative, loss of Foreign Sales Corporation revenues, and pressure from United States lawmakers the island has launched a multimillion dollar advertising campaign.

Ruder Finn is the agency credited with turning around the Barbados Tourism Authority’s fortunes in the US market.

More on this story here.


SANTO DOMINGO, Dominican Republic: An investigation found that embezzlement led to the failure of the Dominican Republic’s second-largest commercial bank, Banco Intercontinental S.A., commonly known as Baninter, in what an official called the biggest bank fraud in the Caribbean nation’s history.

Central Bank investigators determined funds were embezzled by a group of shareholders and top employees. The results of a one-month investigation were handed over to prosecutors for possible charges. The government will honor deposits and is asking U.S. authorities to help track down tainted funds and assets.

More on this story here.


Tonga’s leading democracy campaigner, ‘Akilisi Pohiva has been acquitted of sedition and forgery charges over claims of money “hidden” by King Taufa’ahau Tupou. The Member of Parliament, his son and a fellow MP faced court on 11 charges.

A jury in the Tongan High Court acquitted the three of all charges.

More on this story here.


Senator Ensign’s amendment, which was co-sponsored by Senators George Allen (R-Virginia), Barbara Boxer (D-California), and Gordon Smith (R-Oregon), lowers the tax rate on profits repatriated by companies to the United States from 35% to 5.25%, in a move designed to attract hundreds of billions of dollars back to the US economy.

The Senate must now resolve its differences over the tax cutting package with the House of Representatives, which has approved a bill that is very different in many respects.

More on this story here and here (subscribers only).


The Senate voted 51-49 for the Jobs and Growth Reconciliation Act of 2003, which includes ending the income tax exemption U.S. expatriates currently enjoy on the first $80,000 they make abroad -- a provision U.S. lawmakers say is worth $35 billion a year, the largest single revenue generator in the 11-year bill.

The American Chamber of Commerce in Moscow has lobbied heavily against ending the exclusion, which it says will hurt the competitiveness of U.S. citizens on the international job market while simultaneously encouraging tax delinquency.

Chamber president Andrew Somers said that eliminating the exclusion would also have a disproportionate effect on low-wage earners. “It will hit the teachers and the guys on the oil rigs much worse than the executives,” he said.

Bill Henry, director of tax at Ernst & Young in Moscow, said that “This amendment will make U.S. companies less competitive in the global market. It will discourage U.S. citizens from foreign assignments. It will encourage tax evasion. ... And it is illustrative of how unmanageable U.S. tax policy has become due to the complexities of the U.S. tax code relative to the technical comprehension of members of Congress.”

More on this story here.


Thirty-four international companies will be accused in a New York court on Monday of supporting South Africa’s former apartheid regime and allowing it to commit human rights abuses against black people. The case is being brought by a team of lawyers headed by Ed Fagan, a US lawyer, and John Ngcebetsha, a South African attorney, for tens of thousands of victims of the apartheid regime. Mr. Fagan won a $1.25 billion settlement last year from Swiss banks for families of victims of the Holocaust.

The suit, brought under the US Alien Tort Claims Act, accuses the companies of “aiding and abetting” apartheid. They are accused of financing and profiting from the apartheid regime by providing high-interest loans, in some cases in violation of international sanctions.

More on this story here.


In the past couple of years, with the world’s main stockmarkets falling by up to 50% from their peaks in 2000, art lovers’ spending power has declined dramatically. So art dealers were holding their breath ahead of the flagship sales of Impressionist paintings in New York earlier this month. The $40 million purchase of the top lots in both the Christie’s and Sotheby’s auctions by Stephen Wynn, an American billionaire, reassured dealers that despite the war in Iraq, the SARS outbreak and the general economic malaise, there is still demand at the very top end of the market. But these and other highlights should not obscure the frailty of the market. During the early 1990s, the art market’s nadir came well after economies had turned down. Might something similar happen this time?

Both works snapped up by Mr Wynn were rarities; even so, he only had to pay just above the modest price estimates. The market for Impressionists has never regained the peaks of the late 1980s, when Japanese collectors bought up western paintings and property as the yen and the Nikkei were riding high.

More on this story here.


The Inland Revenue has lost its appeal in the so-called Eversden case, a development which could allow many families to save thousands of pounds in inheritance tax by using trust funds to transfer ownership of property.

In the case of IRC v Eversden, Margaret Greenstock created a defeasible life interest trust which divvied the interest in their house 95% to her husband and 5% to Mrs. Greenstock. After her husband’s death, the trust allowed Mrs Greenstock to continue to live in the house, which on her death was sold, and the profit put into an investment bond.

Previous to the original High Court ruling last year, tax rules did not allow an individual to gain exemption from taxation by giving away an asset as a gift whilst still benefiting from that asset, as appeared to be the situation in the Eversden case. This was the basis of the Inland Revenue’s argument, although it was ultimately rejected by the panel of judges in the Court of Appeal. The panel also failed to grant the Revenue leave to appeal to the UK’s highest law court, the House of Lords.

Chancellor Gordon Brown may decide to close the loophole by tacking an amendment to the Finance Bill currently traveling through Parliament.

More on this story here.


DUBAI: A group of Iraqi national investors announced here the setting up a $100 million offshore company in JAFZ with the objective of playing a key role in the reconstruction and modernization of the war-ravaged country.

According to one of the company’s promoters, one of the immediate tasks by the company is to start supply services to ensure availability of essential goods and products. “We have already started the process of identifying several projects and made contacts with international companies and suppliers interested in taking part in the massive reconstruction and development effort.”

More on this story here.


“The Men in Black” came for Gerry Weber last week. Weber -- who is not an alien but who dabbles in a concept totally alien to the Bush regime, liberty -- was giving a speech at Georgia Tech when guys in shades and dark suits grabbed him and hauled him off. No explanation, no reading him his rights, no phone call to a lawyer, no public record of his detention -- just a vanishing act.

Was it the books Weber checked out at the library that did him in? Was it that he marched in a demonstration that disrupted traffic? Or did the government have no reason -- other than that it did not like Weber?

OK, it was only a little theater, starring the legal director of the Georgia ACLU and intended to illustrate the civil libertarians’ warnings that our rights are threatened. It is a clear and present danger. And it is not Osama bin Laden and Saddam Hussein who have our liberties in their gun sights; it is George Bush and John Ashcroft.

Weber came back. But rights and people are disappearing in America. They might never return. And hardly anyone is noticing. Or, they are afraid to say what they see.

Long before Mohammed Atta and his colleagues flew jetliners into the twin towers, the government had drafted its draconian assault on civil liberties. That is not a disputed fact, although it is neglected in most reporting of what has been egregiously misnamed the USA Patriot Act.

More on this story here.

Patriot Act forces companies to play informant on customers.

We all know homeland security is an expensive proposition. Assault-weaponed forces standing guard in front of all the bridge and tunnel entrances in New York City do not come cheap. And the cost for airport inspectors from the Transportation Security Administration to fill barrels full of confiscated cuticle scissors at the nation’s airports runs upwards of $5.8 billion annually.

But what you may not have realized is just how much of the expense of our antiterrorism efforts is being borne by private industry. The USA Patriot Act, well known as a law that sacrificed civil liberties in the name of national security, may also be one of the largest unfunded mandates on private business since Social Security.

Section upon section of the law imposes new obligations on businesses to produce the personal records of their customers, or to spy and snitch on their customers as a condition of operating. Million-dollar fines and criminal liability are punishment for noncompliance.

More on this story here.


Foreign visitors arriving with visas at U.S. airports or seaports next year will have their travel documents scanned, their fingerprints and photos taken and their identification checked against terrorist watch lists.

More on this story here.


Police and other government officials are making around a million requests for access to data held by net and telephone companies each year, according to figures compiled from the government, legal experts and the internet industry. The findings were announced at a public debate into government proposals to widen powers for internet snooping held in London this week.

But a Home Office spokesman disputed the figures, telling BBC News Online it estimated that the number of requests were half that suggested.

Despite the number of requests already made for communication data, the government is keen to extend the number of public authorities that have access to such information.

More on this story here.


There has been considerable talk of the tax benefits of using offshore corporations to exploit intangible assets. The idea is to have a corporation located in a low-tax, or no-tax, country acquire intangible assets, and to earn fee income from use of these assets. The intangibles can include patents, copyrights to software or music, mailing lists, etc. The company can earn income from actively selling products based on the intangibles (for instance, selling software), or by receiving royalties from licensing these assets to others.

The goal is to earn fees and royalties taxable only in the low-tax or no-tax country. The tax benefits of this arrangement are great, but so are the hurdles to making it work. This two-part article briefly looks at the benefits and pitfalls of exploiting offshore intangibles.

More on this story here.

Passive Foreign Investment Company (PFIC) primer.

A foreign corporation with one or more U.S. shareholders is a PFIC if 75% or more of its income is passive income or if at least 50% of its assets would be invested in instruments which produce interest, dividends and/or capital gains. Unlike a controlled foreign corporation or a foreign personal holding company , there is no minimum percentage ownership by U.S. shareholder to trigger application of the PFIC rules.

If a foreign corporation has a high enough percentage of passive income or assets, it is a PFIC as regards any U.S. shareholder no matter how small their ownership percentage of the foreign corporation and regardless of whether the U.S. shareholders, individually or in the aggregate, have the ability to control the business or investments of the foreign corporation.

The consequences to a U.S. resident or citizen of owning stock in a PFIC are rather severe.

More on this story here.

Bearer Shares - Asset Protection Scam.

“I’ll use bearer shares which nobody owns to own my corporation.” -- The use of bearer shares by a U.S. citizen to obfuscate corporate ownership, where the corporation is receiving income, making investments, etc., is tax evasion, and anyone who tells you differently is probably lying. Unfortunately, the IRS has been wise to this technique for about the last 30 years.

How will the IRS ever find out? There are a zillion possible ways for the IRS to find out about your offshore corporation, and they only need one. So just don’t use them, period.

More on this story here.


The Revenue has a list of countries where British businesses can own subsidiaries which are taxed by the local authorities and do not attract attention from the UK. All other countries not specified are unapproved tax havens and subsidiaries there are taxed at UK rates.

Last week Ireland was removed from the approved list because Ireland has negotiated with the EU that it can reduce its corporation tax level to 12.5%. “It is an extraordinary step for the Revenue to take to call Ireland a tax haven despite the change being agreed by all the countries in Europe,” said one accountant.

More on this story here.


The Isle of Man received a ringing endorsement from the international fund industry recently, picking up awards in nine out of fourteen categories at the International Investment and Offshore Fund and Product awards, held last week in London. One of the categories topped by the jurisdiction was Best International Financial Centre, with individual island-based firms receiving the other eight awards.

More on this story here.


Jersey Bankers Association representative and Barclays director Martin Scriven has warned that whether the island opts for a withholding tax or exchange of information, the burden of rewriting systems will be very costly, and he fears it will ultimately have to be borne by the client. He also fears that getting systems up and running in time for implementation of new Know Your Customer rules in January 2004 will be “hugely challenging, if not quite impossible”.

More on this story here.


As Republican chairman of the House of Representative’s tax-writing committee from 1995 to 2001, Bill Archer wrote several provisions that allowed US multinational companies to shelter billions of dollars in offshore profits from US taxes. Now, as chief tax lobbyist for PwC in Washington, he heads a coalition of pharmaceutical and high-technology companies poised to win a tax holiday that would bring that money back home.

Last week, the Senate, with broad Democratic backing, passed an amendment to the big tax bill moving through Congress that would, for a single year, cut the US corporate tax on repatriated profits from 35% to 5.25%.

Mr Archer’s role in generating this windfall for his clients is a telling example of how in Washington, skillful lobbying and personal connections can produce seemingly improbable results.

More on this story here.

Setting the Story Straight: The Truth About Corporate Inversions.

Several Members of Congress have recently proposed offsetting the tax cuts in the Bush Economic Growth Package with something they are referring to as “revenue raisers”. Unfortunately, despite the rosy image that these Members have attempted to create, the revenue raisers are, in fact, nothing more than a list of unjustifiable and unethical tax increases. One of the intended targets of the new legislation is the practice of corporate inversion. However, few Members seem to fully comprehend the issue of inversion, and media coverage of the topic has only further skewed its understanding. The confusion could have dangerous consequences if left uncontested, so it will be critical in the weeks and months ahead to raise public awareness by clarifying the truly negative effect of the tax increase proposal for corporate inversion.

Any logical businessman would view the decision to re-incorporate in a low-tax jurisdiction as a prudent and responsible reaction to a tax code that severely hinders the ability of U.S.-chartered firms to compete in world markets. However, critics accuse these firms of being unpatriotic, and have asserted that such companies may be engaged in a questionable form of tax evasion. An in-depth analysis demonstrates the error of that view.

More on this story here.


It is not often one can say France’s tax policy make more sense than ours. After all, in 2000, the average Frenchman paid 54% of his income in state and federal taxes, while the average American paid 42%. That, of course, is one reason why the U.S. economy is so much more robust than France’s.

But there is one advantage to France’s system: If a highly skilled, well-paid employee makes the sensible decision to leave France to work in the United States, he leaves his high income-tax rate behind. France taxes only those who work inside its borders. Not so with the United States. Americans abroad still must pay U.S. income taxes, in addition to the income taxes of the country they are working in.

For now, these Americans enjoy at least some relief from the IRS. Under a tax-code provision known as Section 911, they are not subject to income tax on the first $80,000 they earn in another country. While that may seem like a large exemption, consider that every penny earned over that amount is taxed twice. Talk about unfair.

Unfortunately, the Senate recently passed a tax bill that would repeal Section 911, meaning any income earned by Americans abroad would be subject to U.S. taxes, just as if it had been earned in this country.

More on this story here.

Terror, taxes threaten U.S. workers abroad.

Mounting terrorist threats and the possible end of a tax benefit for U.S. workers living overseas are conspiring to make life abroad more difficult for U.S. citizens working overseas, and could also make more and more U.S. companies replace Americans with local hires, a trend that has already begun in many industries.

The recent terrorist attacks in Saudi Arabia where nine Americans were killed, along with the outbreak of the SARS virus, have made many Americans who have considered working overseas nervous about the prospect, and some who are already working abroad more than a little wary.

More on this story here.


A fugitive contractor named in the racketeering case against former U.S. Representative James A. Traficant, Jr. was arrested on a plane in Panama City, Panama. Robert Bucci, 57, of Youngstown, Ohio was returning to his home in Cuba when U.S. marshals arrested him Sunday night before takeoff, U.S. Marshal Peter Elliott said.

Elliott said his agency learned early Sunday that Bucci was in Panama, which has an extradition policy with the United States. Cuba does not.

More on this story here.


The exchange-control amnesty that is becoming the subject of so much media interest and dinner table conversation was conceived with a far broader scope than just squeezing more taxes out of middle-class South Africans. Its rationale, says Keith Engel, director of legislative oversight and policy co-ordination at the national treasury, is in line with international objectives of targeting money-laundering operations and tax havens.

Foreign assets held offshore would not only be a contravention of the exchange-control regulations, but would also trigger tax violations, meaning the SA Revenue Service (SARS) had more discretion to impose heavy penalties and interest.

The treasury decided to give the amnesty at a “price” to free peoples’ money offshore. “We set the levies,” Engel said. These include a 5% levy for assets repatriated to South Africa and a 10% levy for assets that will continue to be held offshore, less the unused R750000 allowance. Engel says that to date no one had complained about the rates. The treasury had still to gauge what the economic effect would be.

More on this story here.


The OECD says Vanuatu been removed from a list of states deemed to have been uncooperative in international efforts to stamp out tax evasion and money laundering. The OECD says Vanuatu will now be invited to join its members and other participating countries to discuss the design of standards related to its commitment. An OECD list of uncooperative countries was drawn up in June, 2000 and among those remaining include Marshall Islands and Nauru.

More on this story here.


The annual publication of our Tax Misery Index and other measures of the state’s burden establishes a benchmark for companies and individuals weighing siting alternatives in competing countries. Of course, tax is not the sole factor in choosing a corporate or personal location, but when equally attractive options are on the shortlist, the tie-breaker for enterprising people is generally tax. These comparisons provide the tools to make that pick.

The news this year is good -- the marginal rates continue to decrease. The Misery Index is lower in 9 of the original 26 countries this year; only 4 increased tax misery slightly, and half the original countries are at the same level. Also new for 2003 is the addition to the Misery Index of 24 more countries or locations.

More on this story here.


BCCI, run from offices in the City of London, fell under the supervision of authorities in Luxembourg. It was accepted as far back as 1987 that Luxembourg was “incapable” of carrying out its task, yet the Bank refused to take responsibility, it was claimed. BCCI finally closed to business in 1991.

The accusations were levelled during the second day of a case management hearing in which BCCI’s liquidators, Deloitte & Touche, are seeking to increase the number of witnesses called. Deloitte is suing the Bank for about £800 million, alleging that officials were guilty of “acts of misfeasance” in their dealings with BCCI.

More on this story here.


“Know your client,” regulators demanded of the world’s wealth managers in the wake of the September 11 terrorist attacks, as a global drive to track down dubious money shifted into higher gear. Though rules requiring a better paper trail of customers’ funds have imposed new burdens on bankers, it turns out that knowing your client makes good business sense as well.

Though private banking conjures up images of exclusivity and intimate service in mahogany-paneled office suites, experts say many bankers know far less than they should about the people sitting across the desk from them. During the bull market years, that mattered less -- both to clients and their bankers. Portfolios were growing at double-digit rates, keeping customers happy, and IPO millionaires were walking through the door every other day, satisfying bankers.

Now those new customers have turned scarce, forcing banks to compete against each other just to retain existing customers. Meanwhile, falling markets and cost cuts at banks have made clients far more conscious of the level of service they are getting or, in some cases, not getting.

More on this story here.


A Merrill Lynch survey of fund managers this month showed that, for the first time, more respondents believed the euro was overvalued than undervalued. But more than half said the euro was their favourite currency with long-euro, short-dollar trades the most popular.

The euro’s gains have been based on a shift in investors’ focus since the late 1990s, when the Wall Street boom sparked dollar-buying from investors and eurozone groups such as Vivendi and Daimler, which bought US companies. Now, those companies do not have the will or the spare cash to invest overseas; nor do eurozone investors who are nursing heavy losses after three years of falling equities.

The result is a drying up of capital flows to the US from the eurozone. In deficit until last year, the eurozone current account now runs a surplus that gives confidence to investors assessing the currency risk of eurozone assets. The US deficit by contrast is seen as a risk for the dollar’s value, leading greater numbers of investors to hedge against the risk by buying forward contracts - sending the dollar lower still.

[Note: A good case could have been and was made against the dollar years ago. Fundamentals can help support an investment case, but often provide lousy material for predictive purposes.]

More on this story here.


SILVER SPRING, Maryland: Bid4Assets, Inc., a leading online auction site for high-end assets from government, non-profits and private industry, today announced that it will auction more than 2.2 acres of commercial land and 2.5 acres of residential land in McDonough, Georgia, forfeited to the U.S. Marshals Service. The online auctions will be held May 27 - 29 on the Bid4Assets Web site, http://www.bid4assets.com/USMS. Bid4Assets has been conducting online sales for the U.S. Marshals Service since December 1999 to include residential and commercial real estate, luxury vehicles, aircraft, boats, jewelry, timeshares and financial instruments.

Since 1984, the U.S. Marshals Service (http://www.usdoj.gov/marshals/) has taken custody of more than $8.6 billion in assets in criminal activity cases such as money laundering, drug dealing, organized crime and fraud.

More on this story here.


The Pentagon is about to embark on a stunningly ambitious research project designed to gather every conceivable bit of information about a person’s life, index all the information and make it searchable. What national security experts and civil libertarians want to know is, why would the Defense Department want to do such a thing?

The embryonic LifeLog program would dump everything an individual does into a giant database: every e-mail sent or received, every picture taken, every Web page surfed, every phone call made, every TV show watched, every magazine read.

All of this -- and more -- would combine with information gleaned from a variety of sources: a GPS transmitter to keep tabs on where that person went, audio-visual sensors to capture what he or she sees or says, and biomedical monitors to keep track of the individual’s health.

On the surface, the project seems like the latest in a long line of DARPA’s “blue sky” research efforts, most of which never make it out of the lab. But DARPA is currently asking businesses and universities for research proposals to begin moving LifeLog forward. And some people, such as Steven Aftergood, a defense analyst with the Federation of American Scientists, are worried.

More on this story here.

Pentagon defends surveillance program.

The Pentagon assured Congress that its planned anti-terror surveillance system will only analyze legally acquired information and changed the name of the project to help allay privacy concerns that prompted congressional restrictions.

The Total Information Awareness program now under development by the Defense Advanced Research Projects Agency, or DARPA, will henceforth be named the Terrorism Information Awareness program. In report ordered by Congress 90 days ago, DARPA said the old name “created in some minds the impression that TIA was a system to be used for developing dossiers on U.S. citizens. That is not DoD’s (Department of Defense’s) intent in pursuing this program.”

More on this story here.


From books you check out to credit card purchases, money transfers to medications, your activities are now subject to federal surveillance. Uncle Sam now has a blank check to search and pry -- all in the name of security.

Last October, then House Majority Leader Dick Armey branded our own Justice Department “the biggest threat to personal liberty in the country.” And while that characterization of a Republican Justice Department makes many conservatives cringe, the DOJ has been working overtime to expand its power -- and the biggest danger may be yet to come.

The Patriot Act was rushed into law before any effort was made to understand why the feds failed to stop the 9/11 attacks. The government could have done a better job of tracking the terrorist suspects, but the feds had all the relevant information to detect and block the conspiracy to hijack four airplanes. The Joint House-Senate Intelligence Committee observed that the FBI’s negligence “contributed to the United States becoming, in effect, a sanctuary for radical terrorists.”

The success of the 9/11 hijackers was due far more to a lack of government competence than to a shortfall in government power, but the administration rewarded failure by the FBI and intelligence agencies with bigger budgets, more power, and presidential commendations. The Bush administration has successfully suppressed investigations and revelations of federal failures, thereby permitting Ashcroft and others to portray new government powers as the key to national safety.

Proposed additional powers are embodied in a draft version the Domestic Security Enhancement Act -- quickly dubbed Patriot II. Portrayed as a benign sequel, it is anything but.

Three months after 9/11, Ashcroft announced, “To those who scare peace-loving people with phantoms of lost liberty, my message is this, your tactics only aid terrorists for they erode our national unity and ... give ammunition to American’s enemies.” Ashcroft is wrong to portray any criticism of Bush administration civil liberties policies as aiding and abetting terrorism. America is overdue for a searching examination of the powers the Bush administration has seized and the powers it is seeking.

More on this story here.


The increasing volume of offers to help one protect one’s assets and even one’s person offshore, in recent years, raises several very serious questions. If so many companies are getting into this very specialized business, what does that say about how many of America’s wealthy are leaving? What will happen to our tax base, as they leave? What will happen to the jobs that their wealth supported, after they and their investment capital are gone?

I could easily argue the unconstitutionality of several of the laws and regulations that will be discussed here, such as the USA Patriot Act (PDF copy of law here) and Homeland Security Act (HSA) (PDF copy of law here). But many highly qualified legal analysts have already proven that point much better than I could. Yet, many conservatives still seem indisposed to criticize the lawmakers who passed those laws and regulations, since those lawmakers are, for the most part, Republican. So, rather than rehash the unconstitutionality of these actions, I will concentrate on their outcome, in the hope that when conservatives and even liberals see how their own pocketbooks will be affected, they will wake up.

The growth of the offshore investment market is only the symptom of a much deeper and very insidious problem facing America. The problem is that increasingly, the wealthy perceive, whether correctly or incorrectly, that they are under attack by their own government and they are taking the only rational option left open to them. They are taking their wealth and leaving.

More on this story here.

Legislative attacks upon the wealthiest 1% of Americans could soon wreck our economy.

The top-earning 1% of taxpayers earned 20.8% of the income reported on 1980 tax returns. The top-earning 1% of taxpayers accounted for one third (37.4%) of the total individual income tax collected that year, vs. 1990, when it was 25.1%. Since 2000, more oppressive legislation, aimed squarely at the top-earning 1% has made matters even worse. This is presenting a serious problem for the top-earning 1%. It is their legitimate and justified response to that problem that is a ticking time bomb that presents an even more serious threat to the remaining 99% of taxpayers (if you make less than $313,469, then that’s you).

More on this story here.

1986-2000 IRS collections data by income category summarized here.


s part of the final negotiations over a 10-year, $350 billion package of tax cuts, the Senate backed off its plan to repeal a tax break enjoyed by expatriates. Republican aides said President Bush told GOP leaders to drop the idea.

The reversal followed a public campaign by the group Americans Abroad and other business officials based overseas, and a less visible effort by some of the nation’s largest companies -- those that pay the tab, and often much of the excess tax, for their overseas employees.

The Americans abroad say the tax exclusion is only fair. They do not receive U.S. services. They have to pay taxes where they live. Many face high expenses. Without the U.S. tax break, Miller says, most would come home, to be replaced by foreign nationals.

For many, the biggest surprise was that Republicans, rather than Democrats, had targeted them. “Republicans traditionally have been our champions,’ said Andy Sundberg, a consultant based in Geneva. “So this one is baffling.”

More on this story here, here, and here.


In the end, Mr. Bush was successful not only at winning the third-largest tax cut in US history, but also at forcing the more reticent tax-cutters in his party to embrace a dividend tax reduction that few really thought was an effective way of stimulating the economy.

The hasty, last-minute march to the president’s tax-cut tune also came at a price. The lowering of the tax on dividends and capital gains to 15%, which accounted for about $150 billion of the total $350 billion tax plan, gave Democrats significant fodder for their case that the tax cuts were tilted unduly towards the wealthy. Studies suggest 80% of the benefits of the dividend tax reduction would flow to wealthy individuals.

With federal deficits expected to surge past $300 billion this year for the first time, many lawmakers were eager to avoid the question of how the nation would ultimately pay for the future cost of the tax cuts.

More on this story here.


Irish Minister for Enterprise, Trade and Employment Mary Harney recently announced that she would oppose any proposal by the European Convention on the Future of Europe to harmonise the EU’s taxation regimes.

In recent years, Ireland has significantly lowered its business taxes, leading to substantial economic growth in the 1990’s, which earnt it a reputation as “the Celtic Tiger”. These measures were successful in attracting large multinationals to Ireland, particularly in the field of IT. Harney also pointed out how the low tax regime had boosted employment, and criticised other EU states for failing to boost jobs by not cutting labor taxes.

More on this story here.


Representatives from the Isle of Man, Jersey and Guernsey met last week to discuss the implications of the EU Savings Tax Directive. It was decided that the three jurisdictions should present an united front on any official communication with the EU regarding the issue.

Isle of Man Chief Minister Richard Corkill stressed that the three jurisdictions' responses would not necessarily be the same, and that the Isle of Man has yet to make its official announcement regarding the withholding tax/exchange of information option.

More on this story here.


The demand and prospects for expatriate workers in top investment regions such as the Czech Republic, Hungary and Poland have shifted since the heady early and mid-1990s, and one of the reasons for it is European Union accession. The newly joining countries continue to offer opportunities to ambitious expatriates.

More on this story here.


In a recent statement, Antigua and Barbuda High Commissioner Ronald Sanders has issued a warning about a fraudulent website, URL www.diplomaticsecondpassport.com, which claims to sell passports and economic citizenship to the Caribbean nation.

More on this story here.


Choosing wisely is a tough problem for savers in investment funds in general. It is harder on those in the offshore world. Regulatory oversight of funds tends to be more lax, and disclosure by fund management companies is less open, too.

One way to choose wisely is to concentrate on a fund’s rating. This is a letter or number given by a credit rating agency which purports to capture in a nutshell the fund’s quality. Performance, riskiness, quality of management -- all are factored in to the final rating.

It is also worth looking behind the scenes at what fund ratings actually do, and what they can actually tell you. Before you trustingly buy a fund rating agency’s recommendation, you should be aware of what they can really tell you and what they cannot.

A problem in using rating as a measure of quality is that past performance can be a bad guide to the future. Some say it is virtually worthless. Research has shown that in the long term, investment funds do little better than chance.

More on this story here.


The Financial Services Authority has announced the most dramatic shake-up in its rules on collective investment schemes in more than 10 years. The regulator is proposing to cut the rules on collective investment schemes by 40%, reducing constraints on the fund management industry. Fund managers will be able to charge performance fees, retail investors will be able to put money into authorised property funds and some investors will gain access to hedge fund strategies for the first time.

The FSA is consulting on its plans to introduce a new class of authorised funds that can use hedge-fund strategies, such as borrowing, derivatives and commodities. These funds would be made available to institutions and expert private investors.

More on this story here.


The cabinet is approaching agreement on a “route map” for future British entry into the euro. Euro enthusiasts emerged from a cabinet meeting encouraged that some of their more sceptical colleagues were prepared to agree steps that could improve the chances of the UK’s entering the single currency.

Their hopes will be strengthened by the likelihood that Britain will win its campaign to remove the word “federal” from the draft new European Union constitution. Tony Blair this week warned Valéry Giscard d’Estaing, president of the European Convention, that the word whipped British eurosceptics into a frenzy.

More on this story here.


A class action lawsuit against credit card firms alleging that merchants are unfairly left to shoulder the burden of credit card fraud has begun in the US. According to the suit, the “Defendants breached their contract, their implied covenant of good faith and fair dealing, duty of care and fiduciary duty as a banking institution by failing to take appropriate measures in addressing fraud and theft in the Internet, telephone and mail order industry.”

The complaint further alleges that Visa and MasterCard failed to disclose certain transactional and penalty fees to merchants and forced retailers to pay such these fees using an “abuse of their monopolistic powers”.

As a result of the “unlawful acts”, according to the complaint, merchants have been forced the bear the burden of credit card fraud while credit cards firms and banks made millions of dollars from their transactional and penalty fees.

More on this story here.


In the most detailed public accounting of how it had used its expanded powers to fight terrorism, the Justice Department released information showing that federal agents had conducted hundreds of bugging and surveillance operations and visited numerous libraries and mosques using new law enforcement tools.

The report provided dozens of pieces of previously undisclosed data on a variety of activities including the use of hundreds of secret search warrants and the fact that some 50 people had been detained without charges as material witnesses.

The department portrayed its use of its new powers as judicious and restrained, but officials are still refusing to divulge certain data publicly because they said it would compromise classified areas. Civil liberties advocates said the vagueness in these areas buttressed their concerns about how the department’s powers were being used.

More on this story here.

Anti-Terror laws invoked against crimes unrelated to terror, report says.

The report cites a case in which prosecutors were able to use the Patriot Act to seize stolen funds that a fugitive lawyer had stashed in bank accounts in Belize. Similar tactics have been used in cases involving drugs, credit card fraud, theft from a bank account and kidnapping, the report shows.

Tim Edgar, legislative counsel for the American Civil Liberties Union, said the report confirms fears that Justice and the FBI would abuse some of their new powers. “Many of these terrorism powers were actually being asked for as a way of increasing the government’s authority in other areas”q Edgar said.

More on this story here.

US anti-terror law used against hackers, thieves.

The enhanced search and surveillance powers Congress gave the Justice Department in the USA-PATRIOT Act have not just been used in the war on terror: it turns out they are helpful in everything from spying on credit cards fraudsters to tracking down computer hackers.

One particularly versatile provision of the Act allows the FBI to use Carnivore-like tools to determine what Web sites an Internet user visits and with whom they correspond via e-mail. According to the Justice Department’s answers, this variety of Internet surveillance has been used in terrorism investigations, including the FBI’s probe into the murder of journalist Daniel Pearl. But it has also been invoked in cases involving a drug distributor and thieves who stole a victim’s bank account information and used it to plunder the account.

More on this story here.


Government officials typically respond to terrorist attacks by proposing and enacting “antiterrorism” legislation. To assuage the wide-spread anxiety of the populace, policymakers make the dubious claim that they can prevent terrorism by curtailing the privacy and civil liberties of the people. Because everyone wants to be safe and secure, such legislation is usually very popular and passes the legislative chambers of Congress with lopsided majorities. Many people indulge in the assumption that they are now safe, since the police, with their newly acquired powers, will somehow be able to foil the terrorists before they can kill again. The plain truth, however, is that it is only a matter of time before the next attack.

This cycle of terrorist attack followed by government curtailment of civil liberties must be broken -- or our society will eventually lose the key attribute that has made it great: freedom. The American people can accept the reality that the president and Congress are simply not capable of preventing terrorist attacks from occurring. Policymakers should stop pretending otherwise and focus their attention on combating terrorism within the framework of a free society.

More on this story here.

Full text of policy analysis here (PDF file).


The painless procedure barely lasted 15 minutes. In his South Florida office, Dr. Harvey Kleiner applied a local anesthetic above the tricep of my right arm, then he inserted a thick needle deep under the skin.

Theoretically, this VeriChip will allow doctors to call up my medical records even if I am too badly hurt to answer questions. It is also supposed to allow me to get money from an automatic teller machine by flashing my arm instead of punching in my PIN number. Or reassure airport security that I am a journalist, not a terrorist.

Critics see surveillance technology like the VeriChip as a growing threat, giving potentially dangerous new power to businesses and government alike. In a report issued in January by the American Civil Liberties Union, Jay Stanley and Barry Steinhardt warned that an explosion of technology has already created a “surveillance monster”.

VeriChip manufacturer Applied Digital Solutions wants to build a chip that can store loads of information, or act as the key to a central database that stores information about the user. Ultimately, the company hopes to be able to track the movement of people with chips worldwide using global positioning satellites [see next story].

More on this story here.

GPS implant prototype makes debut.

Applied Digital Solutions said it has created and successfully field-tested a prototype of a GPS implant for humans. The dimensions of this initial “personal location device” are said to be 2.5 inches in diameter by 0.5 inches in depth, roughly the size of a pacemaker. Once inserted into a human, the device can be tracked by Global Positioning Satellite technology and the information relayed wirelessly to the Internet, where an individual’s location, movements and vital signs can be stored in a database for future reference.

More on this story here.


UK newspapers are reporting that Minister of the Interior David Blunkett will introduce compulsory identity cards this autumn and citizens will have to pay for the privilege. The card will also include biometric information, and every citizen will have to register to join the scheme. The cards will cost £25 apiece, and will be called “entitlement cards”. The reports do not say what will happen to individuals who refuse to register for the cards.

The scheme will be administered by the British Passport Office, which reports today that its server was down yesterday.

Don’t worry, your data is safe in their hands...

More on this story here.


The European Central Bank (ECB) is considering embedding tiny radio tags into euro notes in a bid to combat counterfeiters and money launderers, a report today notes.

Sadly, we fear that what the ECB’s new technology will actually demonstrate is huge concentrations of euro under subsidised farmers’ mattresses and in bank shareholders’ wallets. Still, you can always dream...

More on this story here and here.
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