Wealth International, Limited

Offshore News Digest for Week of May 26, 2003


Canada’s top banking regulator plans to introduce new rules requiring financial institutions to lift the veil of secrecy on accounts opened in a company name. As part of an international crackdown on secrecy havens, Canadian banks will be required to know the end beneficiaries of an account -- those with a financial interest in it -- rather than just the names of the corporate entity fronting the transactions.

The Office of the Superintendent of Financial Institutions (OSFI) will unveil its new “guidance” for banks following recommendations from the Financial Action Task Force on Money Laundering, a Paris-based agency backed by most of the world’s industrialized nations, including Canada. The FATF plans to unveil 40 recommendations next month, including measures to determine the true identity of account holders, that all 29 member countries should adopt.

More on this story here and here.


Britain welcomed news that the draft European constitution would not propose making the different tax regimes in the European Union more similar. Valéry Giscard d’Estaing, president of the convention on the future of Europe, told the BBC’s Breakfast with Frost: “We will not propose any harmonisation of tax.”

Mr Giscard d’Estaing also said Britain was approaching the moment when it would have to make a fundamental decision about its future in Europe. “You never made up your mind,” he said. “Britain never considers Europe the full option. They wanted to be in Europe but to have other options, the special relationship with the US and the Commonwealth.”

More on this story here.

Blueprint for new EU published.

Controversial plans for changing the way the European Union works -- including proposals for an elected European president -- have been published. The draft constitution, prepared by former French president Valery Giscard d’Estaing, includes plans for an elected foreign minister and a common foreign policy.

It is also said to address British taxation worries and concerns over the use of the word “federal”. Member states will spend the next few months examining the draft and trying to hammer out a final agreement.

More on this story here.


Members of the Cayman delegation at a United Nations decolonisation seminar in Anguilla said that while they want to see a greater degree of self-government, they are not seeking complete independence from the United Kingdom. The British administered territories attending include Anguilla, Montserrat, the Turks and Caicos Islands, the Cayman Islands, along with St. Helena and the Pitcairn Islands. Absent were the governments of Bermuda, which was represented by an non-governmental organization, the British Virgin Islands, Gibraltar and the Falklands.

The Hon. McKeeva Bush, Cayman’s Leader of Government Business, said that the administering power had the duty to promote the economic development of its territories. In the Cayman Islands, the reality was that its economy was being treated “at best as a pawn” in the efforts by the European Union to strengthen its own financial services markets, and in efforts by the United Kingdom to protect its bond market.

More on this story here.


ANTO DOMINGO: In the heyday of Banco Intercontinental, Ramón Baez Figueroa’s influence touched down even in the most remote corners of the Dominican Republic. Ads for his since-collapsed bank blanketed the capital and filled the airwaves, which he also owned, to the tune of 70 radio stations and three TV channels on top of his four newspapers.

But if Baez dominated Dominican life before, the flamboyant financier’s spectacular fall has positively monopolized political life here since his May 13 detention on fraud charges connected to the $2.2 billion failure of Banco Intercontinental (Baninter).

The economic impact of the bank losses will be harsh. Economists expect the economy to grind to a standstill or shrink this year, after setting Latin American records in economic growth in the late 1990s.

But the scandal has also revealed a level of corruption in Dominican political and business life that had been whispered about and tolerated but never aired in public.

More on this story here.


The Exchange Control Amnesty Bill which aims to encourage the repatriation of many millions of investments surreptitiously placed in offshore funds. The Bill exempts investors and their advisors from civil or criminal prosecution when they bring their offshore investments back to South Africa, though a 5% tax will be levied on repatriated monies.

More on this story here.


JOHANNESBURG: The two most important issues surrounding cyberlaw are its potential to affect an individual’s right to privacy, and the difficulty in enforcing such laws, says lawyer Lisa Thornton, delivering the keynote address at the South African Non-Governmental Organisation Network forum on cyberlaw and Internet rights.

“Many of the issues that are considered illegal in SA, such as hate speech and child pornography, are freely available on the Internet, but originate in other countries, making it virtually impossible to prosecute the offenders. It is this inability to effect legal action against the majority of offenders that really differentiates cyberlaw from standard legal practice.”

More on this story here.


I love Monaco. And yet I hate the place as well. And I think that there are many people in Formula 1 who suffer the same confusions when they arrive each year in the principality. There is something eminently sordid about it and yet it is magnificent. The town and the race.

More on this story here.


US expats were celebrating after the controversial plan to remove the tax break enjoyed by Americans working abroad was dropped. Or was it? The fight is not necessarily over yet. For now, an unexpectedly strong onslaught of lobbying by business groups in Washington seems to have persuaded lawmakers to retain the income-tax perk for Americans working abroad, though the final outcome will not be known until at least the end of May.

Richard Weisman, a tax lawyer and partner with Baker & McKenzie in Hong Kong says that “The US is the only developed country in the world that continues to impose world-wide income tax on its citizens that are working overseas.” The tax exclusion is not so much a perk, he argues, as an effort “to place Americans [working abroad] on an even footing with citizens from other countries.”

News that the proposal had been dropped came as a great relief to many US citizens based in Bermuda, some of whom said they would have considered renouncing their citizenship if the proposal went through.

More on this story here and here.


Figures released by the Bermuda Monetary Authority recently have revealed the healthy condition of the island’s insurance industry, which grew by one third in 2001, when the value of net premiums earned in Bermuda amounted to $41.6 billion. Gross premiums before factoring in reinsurance stood at $49 billion. As of December 31, 2001, capital and surplus equalled $65.8 billion with total assets hitting a record level of $172.6 billion. Also, some $26.6 billion in new assets were accumulated during 2001.

When compared to other important international insurance centers, such as Lloyds of London, Bermuda’s insurance market stands up well.

More on this story here.


IRKUK, Iraq: U.S. troops seized a truck laden with suspected gold bars worth up to $100 million at a checkpoint in northern Iraq, the second such find in four days. Major Kevin Petit said on Monday that soldiers found 999 bars under a tarpaulin in an old Mercedes on Sunday during a search near the oil city of Kirkuk and questioned the truck’s three occupants. The driver had said he had been paid $300 to carry what he said were copper bars from Baghdad to north Iraq.

On Thursday, U.S. forces found some 2,000 bars believed to be gold worth as much as $500 million during a random search of a truck near the Syrian border. That driver also said he was being paid $300 for the work.

More on this story here.


A confidential informant for whom defendant Roman Mesina had offered to provide “offshore banking services” tipped off investigators to the scheme. The informant worked for the government and set up several money-laundering transactions with sums of up to $50,000. In November, the informant told Mesina he wanted to start laundering large sums for a Colombian drug lord. It was at that point that Mesina recruited co-defendant John Taylor.

Mesina told the informant he would set up numerous bank accounts and transfer the money between them to launder the cash. Investigators uncovered transactions labeled “software purchases” that were, in fact, transfers of the government money used in the sting. The money went through several banks and dummy corporations, including one account listed as Jewish Fellowship Inc. Deposits to the account were listed as loans and contributions, Assistant U.S. Attorney Mark Johnson said.

More on this story here.


INDIANAPOLIS, Indiana: Open since December 2001, the Lead Development Center is designed to free special agents to pursue cases in the field while analysts search public records and financial databases from their computers.

A person, for example, might call the IRS to report that his neighbor runs a car business out of his garage, drives a Cadillac and owns an expensive vacation home. But the neighbor apparently does not include that information in his tax returns. Searching property and vehicle records, the analysts can find out whether the allegations are true.

Years ago, an IRS agent would have to do his own research before pursuing cases in the field. The Lead Development Centers have reduced the number of “agent hours” by 28%, according to the IRS. There are 12 centers in cities such as Portland, Oregon; Tampa, Florida; and Atlanta.

More on this story here.


E-mail scammers have recently launched two nearly identical campaigns to dupe users into divulging their bank account information and other personal data, and they are meeting with some success. The two scams, both of which started in the past two weeks, take the form of e-mail messages that tell recipients that there is a problem with their online banking account. The messages include links to Web sites where the recipient is asked to enter either his online banking user name and password or some other sensitive information.

In the most recent instance, customers and noncustomers alike receive an e-mail that appears to come from the Bank of America customer support department. There are several misspellings and grammatical errors, however, that make it easy to identify the message as a fake. The message arrives from custommersupport@ bankofamerica.com with a subject line reading: “Security Server Update”.

More on this story here.

Latest Internet scam goes after the good-hearted.

Many Internet scams rely on victims’ avarice to draw them in. The new scam depends instead on people’s ignorance of obscure banking rules and their desire to return money that is not theirs.

The hardest hit was the 38-year-old Shawnee, Missouri man, stung after he posted a car for sale on the Internet for $17,500. Someone agreed to buy the car and sent what appeared to be a $92,000 cashier’s check to the man’s credit union, according to a police report. Then the con artist told the seller that his secretary had sent the wrong check and asked him to send the extra $74,500 back. The story sounded fishy to the Shawnee man, so he said he would wire the money back to the buyer’s account in the United Kingdom, but only after the cashier’s check had cleared.

The victim said CommunityAmerica Credit Union told him the check cleared by April 29, so he wired the money out of his account. On May 8 the credit union told the Shawnee man the cashier’s check had turned out to be a worthless counterfeit. He was on the hook for more than $74,000.

The scam, which officials first noticed last summer, takes advantage of a federal rule requiring financial institutions to make money available within days, even for transactions that have not officially cleared. The Federal Deposit Insurance Corp. requires banks to make money from cashier’s, certified or teller’s checks available in one to five days. But a well-made counterfeit check can bounce around the financial system for two weeks before anyone realizes it is worthless.

More on this story here.


Mizuho Financial Group, which is the world’s largest bank in terms of assets, has recorded the largest loss in Japan’s corporate history -- 2.4 trillion yen, or just over US$20 billion and more than double what it lost last year. Like its rivals, it has been writing off massive stock losses and bad loans.

Japan’s second-largest bank Sumitomo Mitsui Financial Group posted a loss of 465 billion yen or nearly US$4 billion. The country’s third largest bank, Mitsubishi Tokyo Financial Group, fared a little better, with its loss rising only slightly to 161 billion yen or US$1.4 billion. And UFJ, the smallest of the megabanks, halved its net loss from a year ago or to 608 billion yen or US$5 billion.

Plunging Tokyo stock prices and a weak economy have undermined their earnings. With these big write offs now out the way, all these banks hope to be back in the black by the end of the current fiscal year.

More on this story here.


Riggs National Corp., the parent company of Washington’s largest independent bank, said federal bank regulators would likely take regulatory action against the bank over problems regarding the tracking of suspicious transactions.

More on this story here.


The grand jury is perhaps the most mysterious institution in the American criminal justice system. While most people are generally familiar with the function of the police officer, the prosecutor, the defense lawyer, the judge, and the trial jury, few have any idea about what the grand jury is supposed to do and its day-to-day operation. That ignorance largely explains how some over-reaching prosecutors have been able to pervert the grand jury, whose original purpose was to check prosecutorial power, into an inquisitorial bulldozer that enhances the power of government and now runs roughshod over the constitutional rights of citizens.

Like its more famous relative, the trial jury, the grand jury consists of laypeople who are summoned to the courthouse to fulfill a civic duty. However, the work of the grand jury takes place well before any trial. The primary function of the grand jury is to inquire into the commission of crimes within its jurisdiction and then determine whether an indictment should issue against any particular person. But, in sharp contrast to the trial setting, the jurors hear only one side of the story and there is no judge overseeing the process. With no judge or opposing counsel in the room, grand jurors naturally defer to the prosecutor since he is the most knowledgeable official on the scene. Indeed, the single most important fact to appreciate about the grand jury system is that it is the prosecutor who calls the shots and dominates the entire process. The grand jurors have become little more than window dressing.

At present, Congress seems to be interested only in proposals that will further expand the powers of the grand jury. Recent “anti-terrorism” proposals, for example, have sought to remove critical limitations on the dissemination of grand jury material. Because the grand jury can easily function as a stalking horse for prosecutors to bypass the constitutional rights of individuals and organizations, it is imperative that its powers be scaled back, not unleashed.

Story here. Full text of policy analysis here (PDF file).


As the trial of accused Colombian drug kingpin Fabio Ochoa continues in federal court in Miami, Ochoa’s attorneys, Roy Black and appellate counsel G. Richard Strafer, have asked the 11th Circuit to put an end to a court docketing practice in the Southern District of Florida that has concealed entire civil and criminal cases from public view. They contend the hiding of information by the government and the court has hampered their ability to defend their client. They want the appeals court to unseal all remaining documents related to the case.

Black and Strafer argue their client has been victimized by an improper collaboration between prosecutors and the judiciary. They claim that prosecutors and judges have choked off the flow of government information to which Ochoa is rightfully entitled to defend himself.

In particular, they say, the government is hiding scandalous evidence of a U.S.-backed scheme in the 1990s to extort millions of dollars from South American drug traffickers by selling them “sentence reductions” in advance of their surrender to authorities.

More on this story here.


The federal government’s ground rules for military trials of foreign terrorist suspects detained on and off the battlefield are just out, and they are sending chills through veteran civilian defense lawyers.

The new rules spell out 33 crimes of war to be prosecuted and procedures for imposing sentences that include death. In addition, the U.S. Department of Defense’s set of eight “military commission instructions” imposes conditions of service on civilian defense counsel that some lawyers say will make it extraordinarily difficult to win acquittal for clients -- and will impose financial hardships that will discourage involvement by skilled and successful private attorneys.

“A competent attorney will face incredible obstacles in simply presenting a meaningful defense,” said Georgetown University law school professor David Cole.

To be eligible to participate, civilian attorneys must swear an oath that includes the following: “I understand that my communications with my client, even if traditionally covered by the attorney-client privilege, may be subject to monitoring or review by government officials using any available means, for security and intelligence purposes.”

More on this story here.


New electronic surveillance powers enacted in the aftermath of the Sept. 11 terrorist attacks have been used widely by law enforcement agents, but not solely in pursuit of terrorism; some new powers bestowed by the USA PATRIOT Act allegedly have been used in cases involving drug violations and credit card fraud.

Charging that the USA PATRIOT Act was rushed into law without thoughtful consideration, Rep. Jerrold Nadler, D-N.Y., said its enactment was a “shameful procedure” driven by vague threats from the Bush administration that lives could be lost if Congress did not hurry. “With this kind of hysteria, the bill was passed almost sight unseen by this House,” Nadler said during a hearing of the House Judiciary Committee. “It is now time for a sober second look.”

More on this story here.


A leading security expert has thrown his weight behind the privacy groups and activists campaigning against the nationwide roll-out of biometric ID cards announced by U.K. Home Secretary David Blunkett.

Peter Dorrington, head of fraud at private software company SAS Institute, has warned the government may be getting ahead of itself when it announced plans to introduce the scheme by 2005. Dorrington believes such cards will not be reliable for at least another 10 years. Dorrington expressed concerns that verification performed by biometric ID cards is not error free and also raised fears about the potential to duplicate cards and the allure of such a practice to organized crime.

“A bank can revoke your credit card or your PIN number but they can’t revoke your thumb print or your iris,” he added. “We have to be absolutely 100 per cent convinced that it won’t go wrong before we roll out this scheme.”

More on this story here.


As part of the homeland security initiative, the State Department will soon share its database of 50 million visa applications with the FBI. The confidential Consular Consolidated Database contains personal information such as name, date of birth and nationality. It also holds about 20 million photographs. (Visa records are currently shared with the INS at ports of entry for verification purposes.)

Access to the database will help the FBI check visa records as it investigates potential terrorism suspects. The bureau has been chastised, especially since Sept. 11, for its out-of-date computer systems that make it difficult for agents to do even the most basic file searches.

More on this story here.


The Pentagon is developing a radar-based device that can identify people by the way they walk, for use in a new antiterrorist surveillance system. Operating on the theory that an individual’s walk is as unique as a signature, the Pentagon has financed a research project at the Georgia Institute of Technology that has been 80 to 95% successful in identifying people.

If the Defense Advanced Research Projects Agency, or DARPA, orders a prototype, the individual “gait signatures” of people could become part of the data to be linked together in a vast surveillance system the Pentagon agency calls Total Information Awareness. That system already has raised privacy alarms on both ends of the political spectrum, and Congress in February barred its use against American citizens without further congressional review.

Nevertheless, government documents reviewed by The Associated Press show that scores of major defense contractors and prominent universities applied last year for the first research contracts to design and build the surveillance and analysis system.

More on this story here.


Thousands of passports could be falling into the hands of terrorists and criminal gangs because of poor postal security, it has emerged. Almost 3,000 passports went missing in the post after the passport agency dispatched them last year, according to newly released government figures.

Passports are still sent by first-class post, which leaves no record of their movement if they go astray. Special delivery is available, but only for an additional fee. The figures show that 2,359 passports went missing in 1999, 3,851 the following year, 2,541 in 2001 and 2,982 last year.

More on this story here.


The State Department has ordered Foreign Service officers in many nations to begin face-to-face interviews with millions of visa applicants who previously have not merited such scrutiny, a step that will result in months-long backlogs, according to officials and documents.

The rules have prompted strong objections from business, education and tourism groups. The groups say that longer delays in obtaining visas will discourage foreign nationals from visiting the United States at a time when the economy is still struggling.

The heightened scrutiny will be applied to about 90% of visa applicants from countries in the Middle East, Asia and Latin America, with general exceptions for diplomats and people 16 and younger or 60 and older. The rules will not affect citizens of Canada and 27 other countries -- most of them in Europe -- who are not required to obtain U.S. business or tourist visas, and who make up about half of the 35 million people who visit the United States each year.

More on this story here.


“These are the times that try men’s souls.” So wrote the noted American patriot Thomas Paine in urging his countrymen to fight King George the Third. Well now we have another George, who is not a king, but increasingly seems to act like one. And this George also threatens Americans’ freedoms.

When the American revolutionaries made their case for independence from Britain, they believed that a decent respect for “the Opinions of Mankind” required that they give their reasons. Let me, like them, say why we would be better off with Mr. Bush out of office and retired to Crawford, Texas for a much-needed rest.

It is time to end the madness. There are many ways to skin a cat and I offer one such way. My modest proposal is that Republican Congressman Ron Paul of Texas run for the Republican nomination for President. I have no illusion that Dr. Paul would win, delightful as that result would be. What Ron Paul could do is similar to what Senator Eugene McCarthy did to Lyndon Johnson’s ambitions in 1968, that is, destroy them.

I could go on and on about Ron Paul and the depth, sincerity, and wisdom he has that he brings to all the issues he faces. He clearly outshines not only Mr. Bush, but also all of the Democratic contenders for the nomination. Dr. Paul is likely to get not only a lot of votes from Republicans, but also crossover votes from Democrats and independents who are disgusted by the failure of the Democratic party to yield an unabashedly anti-war candidate. This, in fact, is what happened in Congressman Paul’s latest election, where, even though the Texas Republicans tried to redistrict him out of a seat, he won 68% of the vote with crossovers.

More on this story here.

Past articles by Congressman Ron Paul here.


Dave Hartnett, deputy chairman of the Inland Revenue, has described the current position between accountants and the Revenue as a “war” where accountants “angrily reject any criticism of their behaviour and lay the blame for avoidance on the Revenue and the shortcomings in the tax system”. He added: “It is not an illegal occupation but some of the schemes we have seen are improper and are immoral.

“Those who are peddling very contrived, very artificial schemes that bear no relation whatsoever to the transaction of business that is happening should question the ethics of what they are doing. If advisers were not so busy developing and promoting avoidance, avoidance would not be such a problem.”

Mr. Hartnett’s comments come just days after the Treasury said there had been “clear failings” in the Revenue’s own handling of the £220 million sale and leaseback of 600 properties to Mapeley, which were then transferred to its sister company registered in the tax haven of Bermuda.

John Whiting, tax partner at PricewaterhouseCoopers and a former president of the Chartered Institute of Taxation, said: “We have all got to sing off the same hymn sheet. They are trying to raise the moral standard, but that is all very well if you are Mother Theresa. We in this country operate on the basis that you pay your taxes according to what the law says, and we are all allowed to plan our way to a lower tax bill. There are some schemes that are beyond the pale. But to suggest that all taxpayers should stop trying to reduce bills -- I’m sorry that’s not how things operate.”

More on this story here and here.


The British charity claims that the practices of tax havens across the world are costing emerging nations some $50 billion in lost revenues annually, which it says it almost equal to the global development aid budget. Switzerland in particular has been singled out for criticism by the campaign. “The amount held in Swiss banks in untaxed accounts adds up to five times more than the money Switzerland spends each year on development aid,” said Andreas Missbach of the Berne Delegation.

Former economic advisor to the Channel Islands, John Christiansen concurs with the NGO’s views, observing: “Tax evasion has reached almost crisis levels in many parts of world such as Africa, southeast Asia and especially in Latin America, where tax avoidance is endemic through virtually every economy.”

More on this story here.


The annual flat tax (in place of corporation or income tax) paid by companies and foundations has been raised from $150 to $250. Law No. 61 of 2002 further increases the fine for late payment of the tax from $30 to $50. A company that fails to pay the tax on time will not have competence to enter into legal agreements until the tax and any associated fine is paid.

More on this story here.


Tax practitioners say that taxpayers need to assess the pros and cons of the amnesty, taking into account new trends in international tax administration and where the South African Revenue Service will be in five years.

“There is increasing co-operation between financial intelligence centers around the world. There is also information sharing, such as the exchange of information in terms of tax treaties,” says Charles de Wet, a tax partner at PricewaterhouseCoopers. Rhodes University professor Matthew Lester says that the problem facing administrators is that most SA money in the tax havens is grey, and they have no idea as to its origin something that could get them into serious trouble if things go wrong in the future.

More on this story here.


GCC states are considering imposing restrictions against foreign investment companies offering ostensibly attractive packages to local investors who are tempted by quick profits and dissuaded by fewer and less attractive choices native to region.

The Six GCC chambers of commerce sent a letter to the GCC Secretariat that warned that billions of dollars have already been siphoned out of the region by foreign investment funds and companies, which it said are targeting low and medium income investors seeking high earnings.

But the letter also blamed what it described as the slow pace of reforms in the region, narrow investment opportunities, failure of GCC stock markets to attract large funds, and a tendency by some investors to shun banks for religious reasons.

More on this story here.

How different is the Jebel Ali Offshore Centre from Dubai International Financial Centre?

The Offshore Company Regulations issued by the Jebel Ali Free Zone Authority last week make the Jebel Ali Offshore Centre quite distinct from the proposed DIFC or even the technology and media free zone, which has simultaneously been brought under a new legal framework.

DIFC and Jebel Ali Offshore differ in their basic characteristic itself, with DIFC positioning itself as a global financial center and not as an offshore business location. DIFC is, in fact, taking great pains to ensure that it does not attract the offshore tag while the new Jebel Ali facility is conceived first and foremost as an offshore center meant for overseas companies to set up their registered offices for mainly tax benefits.

More on this story here.


Now that the Indian Supreme Court has gone into its summer recess, there is no chance of an immediate end to the long-running saga of the Indian-Mauritian Double Tax Avoidance Convention (DTAC). The Court is hearing an appeal by the Indian Government against a High Court ruling that supported attacks by income tax inspectors against companies they said were abusing the Convention by claiming to be resident in Mauritius when in fact they were based in India.

More on this story here.


When the Group of Seven industrialised nations meets this weekend for its annual economic summit in Evian, France, should we expect Iraq-related tensions to spill over into economic relationships? Absolutely.

In fact, we may be seeing the beginning of the end of G7 heads-of-state gatherings. And this may not be such a bad thing. If the G7 had operated effectively in the past, or if it had appeared capable of reforming itself, it would be ill-advised or reckless for the US to undermine the institution. But this high-level group now looks as if it is beyond repair.

More on this story here.


The EU, which will grow from 15 to 25 members next year, cannot continue under a creaking institutional framework that was originally designed for a much smaller number of participants. After the interminable rows that marred the EU summit in Nice in 2000, it was realised that the expanding Union needed a written constitution. This would include new voting arrangements to avoid constant gridlock due to one or other member exercising its veto, and would lay out clearly the areas in which the EU will and will not have sway over member countries. A 105-strong European Convention was created, chaired by Valéry Giscard d’Estaing, a former French president, and made up of representatives from the current and future EU countries. Their task: to write a draft of the constitution, which is to be discussed at a summit of ministers in Greece on June 20th-21st.

The idea was that, since the convention would thrash out all the most controversial issues, the ministerial summit would reach a final agreement smoothly and quickly, without any punch-ups. That is not the way things look so far.

More on this story here.


Companies which have moved offshore to avoid paying US taxes are making a billion dollars a year from US government contracts, an Associated Press investigation has found. The biggest beneficiary of government largesse in the 2002 financial year was Bermuda-based consulting firm Accenture, a spinoff of the former Chicago accounting firm Arthur Andersen, which received $662 million in contracts between Oct. 1, 2001, and Sept. 30, 2002, mostly from the Transportation Security Administration.

Democrats in the US Senate have twice tried to stop such companies from getting contracts with the new Department of Homeland Security, but each time their amendments to budget bills have been blocked by Republicans.

More on this story here and here.


US firms with substantial overseas sales were dealt a blow last week as a measure that would have slashed corporate tax on repatriated earnings was dropped from the main tax cut bill. The proposal would have cut the rate of tax on overseas revenue to 5.25%, down from the current rate of 35%. Estimates vary widely as to exactly how much the tax cut would have benefited the domestic economy.

More on this story here.


Although his tax victory is impressive, it comes at a cost. At best, the new bill is a Rube Goldberg contraption; at worst, a deceitful mishmash. Lawmakers tried to cram most of what the President wanted into a tax cut less than half the size he asked for. To do that, they cut all sorts of taxes temporarily.

Since it is so much easier to cut taxes than to raise them, Democrats and Republicans alike suspect Congress will find a way to make these latest cuts permanent. Democrats have an additional theory about what is going on: Bush does not mind mucking up the tax code because it gives Congress an incentive to do what he really wants -- to blow up the system altogether and replace the income tax with a tax on consumption.

More on this story here.


The euro hit another record high against the dollar on Tuesday at $1.1932 as demand for higher-yielding euro-denominated assets overshadowed solid U.S. economic data.

“What the FX market would want in order to buy dollars are data to suggest within a reasonable time that the Fed is going to raise interest rates in light of a stronger economy,” said Steven Englander, chief North American foreign exchange strategist at Barclays Capital in New York, who said these data were not going to change anyone’s view that the dollar will remain weak.

More on this story here.


Argentina will fund six additional tax enforcement courts as President Nestor Kirchner moves to pay for more social spending through a crackdown on tax evaders, a pledge he made in his inaugural address on Sunday.

Kirchner said he will create jobs with government programs to build homes and roads, and said a clamp down on tax evasion will generate the money to pay for it. In his inaugural speech, Kirchner promised “prison uniforms” for tax evaders.

Argentina loses about 30 billion pesos per year to tax evasion, or about half its 2003 budget, according to government estimates.

More on this story here.


You are an expat and have worked in several countries -- how will your multiple pension schemes keep up with you?

More on this story here.


Already struggling with premiums that have surged by up to 500%, businesses are reporting enormous increases in the amounts they must stump up [the deductible] before insurance companies start to pay out on claims. Rather than accept the higher costs, firms are setting up their own insurance companies at a record rate.

Many companies are going to offshore tax havens to set up their own insurance vehicles, called “captives”. According to AM Best, the ratings agency, 462 new captives were established in 2002, up from 316 the year before and 245 in 2000.

For many businesses, selfinsuring is much more costeffective than buying cover from traditional insurers. However, industry experts have given warning of the dangers of self-insuring, especially for small and medium-sized companies.

More on this story here.


A war has broken out on American soil, largely below the public radar screen. On May 13 Attorney General John Ashcroft and Secretary of Homeland Security Tom Ridge signed a “Memorandum of Agreement” between the Department of Justice and the Department of Homeland Security (DHS) that gives the Federal Bureau of Investigation (FBI) unprecedented unilateral control of all terrorist-financing investigations and operations. The agreement raises questions about the need for a Department of Homeland Security, if the FBI will be handling all relevant terror investigations.

Several seasoned government agents fear for the nation’s security should the FBI be tackling most terrorism cases, as their ineptitude in preventing terrorism has been established time and time again. Yet, the memorandum between Ashcroft and Ridge places the FBI in an incredibly powerful position over Homeland Security.

The FBI now has the power to create or kill any terrorist-financing investigation it deems appropriate or inappropriate to investigate. This puts the FBI in a position to control too much and is eerily reminiscent of the former Soviet Union’s oppressive intelligence agency, the KGB. Like the KGB, the FBI seeks to run itself with no checks and balances, a necessary hallmark of the American system of government and civil rights.

More on this story here.

FBI to conduct internal probe of disciplinary actions.

The FBI is conducting an internal review of its methods of disciplining employees and investigating allegations of wrongdoing, FBI Director Robert Mueller said. The inquiry, expected to take up to six months, will be led by former Attorney General Griffin Bell and Lee Cowell, a former FBI associate director.

More on this story here.


Crimes involving someone else’s identity or forged documents cost the UK more than £1 billion a year. Much of the organized crime and terrorist activity in Britain is carried out by people using false identities and forged documents such as passports, driving licences and birth certificates.

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A new digital fingerprinting system in operation at Swiss border posts since the beginning of the year has been a success, according to officials. Border guards say the new system has enabled them to speed up the identification of people entering Switzerland with a past criminal record.

Of the 3,457 digital fingerprints taken between January and March, the guards were able to identify 1,591 people registered in police files and asylum records. Some 57 asylum seekers who did not have the required documents to enter Switzerland or who tried to enter with forged identity papers were caught and forced to turn back.

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Martin Lloyd was a very clever passport officer (or so I presume -- the blurb coyly states that he “spent 23 years in H M Immigration Service”), and is familiar with all the tricks of the trade. He knows how to find the hidden image in the cross-cut intaglio ornament in a Lithuanian passport; he knows that when the dotted lines in an American passport are placed under a strong magnifying glass, the dots turn out to consist of the letters “USA”. And, of course, he also knows that the more advanced the technology, the more the crooks are motivated to obtain perfectly genuine passports under false pretences.

Martin Lloyd has not only written an interesting account of the modern passport system; he has also explored the history of the passport, showing how significant historical figures were affected by it, and illustrating the changes in the format of the document from examples in his own collection.

The most striking thing to emerge from this survey is what a various, uncertain and unstable thing the concept of a passport really is. What seems the most heavyweight of identity documents is, in international legal terms, virtually weightless; international law has almost nothing to say about passports, except where safe-conducts for diplomats are concerned. And whether a passport confers any rights within the state, such as the right of abode, is purely a matter for the state to decide.

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Wealth divides true relationship banking.

Business strategies developed by banks at the height of the equity bull market, which relied on healthy revenues from portfolio management services, have proved unsustainable. This has led many well-known banking names to drastically rework their way of doing business and even to withdraw from providing such services to all but the very wealthy.

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Research - and pay wisely for the privilege.

The cost of private banking services varies considerably; you could find you are paying more than you expect for the privilege of using these services. Therefore it is important to do a little research about what is on offer before signing up to an expensive service that does not provide what you need.

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Worried your bank might go belly up?

Regulation of savings product providers is a serious issue for offshore investors. Most countries have some sort of bank compensation scheme in place, designed to pay depositors some of their money back should their bank collapse. It has happened a number of times historically, so companies now realize that reassuring depositors pays.

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Getting more for your money.

Wealthy expats looking for something more from their bank should consider using the services of a private bank which offers a wide range of services. The entry level for each of the private banks is distinct and this, as much as the services on offer, could determine which bank you choose.

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Tackling money on a level playing field in Guernsey.

The island is either lynchpin or bete-noire of the European Union, depending on one’s point of view. Its European neighbours’ plans to allow exchange of information between tax authorities on savings is causing considerable concern among Guernsey’s local politicians and its financial institutions. Currently there is fierce local debate on how Guernsey should react to the planned European Savings Tax, aimed at curbing tax evasion in EU member states.

Guernsey is not a member of the EU, although it is under the British Crown. But in common with Jersey and the Isle of Man, it is among the “dependent and associated” territories of EU member states which have been more or less obliged to work with the directive.

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Jersey banks gain as investors switch to deposits.

International investor nervousness is boosting deposits at Jersey banks as customers prefer to keep their funds in cash rather than risk them on the stock market. The next set of Jersey deposit figures is expected to show a healthy rise from the previous £135 billion. Despite this, not all is rosy for the island’s banks and some are trimming staff numbers and moving some activities elsewhere in order to cut costs.

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Profile for Isle of Man.

The main areas of business are banking, mutual funds, investment, treasury, trust, administration, and insurance. The Isle of Man is not part of the EU, but has a special relationship defined by a protocol attached to the UK’s membership in the European Community. The Isle of Man is part of the customs territory of the EU for the purpose of trade in industrial and agricultural products. For the purpose of trade in financial services and products the Isle of Man is outside the EU and directives in this area are not applicable. However, a proposed EU directive on tax harmonization seeks to apply the regulations to dependent territories. The UK opposes the directive in its current form.

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Gibraltar’s sovereignty is likely to be at the top of the agenda of any Anglo-Spanish talks, especially from a Spanish perspective with fresh questions arising in the light of the European Constitution agreement currently under discussion.

However, given the recent tensions in the Middle East and the heightened state of alert around the world generally, Gibraltar has now taken on a wider strategic significance, and its military value has brought the United States into the picture in any future discussions of the Rock’s sovereignty.

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European Union membership is just the first step in a long process to bring Malta into line with the taxation standards in more developed nations, Finance Minister John Dalli told the Maltese Institute of Taxation recently. Dalli warned that more must be done to ensure that differences in taxation do not open up gaps between member states and cause investors to favour one state over another. He said it is therefore vital to make improvements in Maltese taxation standards so that they compare favourably with international practices.

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The funds were withdrawn at the end of 2002 because of political uncertainty in the Gulf region.

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In the latest attack on “unpatriotic” US corporations, a bill recently passed in the state of Connecticut’s House of Representatives will prohibit state agencies from signing contracts with publicly traded companies who have incorporated offshore.

The legislation has sparked debate on whether such action by the state is compatible with the constitution, and opponents argue an individual state does not have the right to discriminate against companies on the grounds of place of incorporation.

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Ingersoll-Rand to get shareholder heat on Bermuda.

When shareholders of Ingersoll-Rand Ltd. met in late 2001 to vote on a legal move to Bermuda, about 89% voted in favor. At this year’s annual meeting, however, a proposal on the agenda asks Ingersoll-Rand to reincorporate back in the United States. Supporters claim Bermuda law does not provide shareholders with the same protections as U.S. law, and many of the tax advantages in Bermuda are under attack by federal, state and local governments.

Resolution sponsors claim Ingersoll-Rand has been stonewalling them on the issue. Ingersoll-Rand, in its proxy statement, said the move to Bermuda has boosted its growth and cash flow, reduced its worldwide effective tax rate and “improved its ability to compete in an increasingly globalized economy”.

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According to calculations made by the Tax Foundation, Tax Freedom Day for the average American taxpayer fell on April 19th in 2003, the same day as in 2002. What this basically means is that Americans spent the first 109 days of the year working for the government to pay off federal, state and local tax demands. Tax Freedom Day hit a peak of April 30th in 2000, but has dropped back quite sharply since as depressed economic activity and tax cuts began to sap the Treasury Department’s revenue stream.

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The Bush administration has shelved a report commissioned by the Treasury that shows the US currently faces a future of chronic federal budget deficits totaling at least $44.2 trillion in current US dollars. The study, the most comprehensive assessment of how the US government is at risk of being overwhelmed by the “baby boom” generation’s future healthcare and retirement costs, was commissioned by then-Treasury secretary Paul O’Neill.

But the Bush administration chose to keep the findings out of the annual budget report for fiscal year 2004, published in February, as the White House campaigned for a tax-cut package that critics claim will expand future deficits.

The study asserts that sharp tax increases, massive spending cuts or a painful mix of both are unavoidable if the US is to meet benefit promises to future generations. It estimates that closing the gap would require the equivalent of an immediate and permanent 66% across-the-board income tax increase.

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The federal government recently served notice on the real estate industry that it might soon have to start taking a more active role in ferreting out money laundering. So far, real estate professionals have not been required to comply with the Patriot Act. Last month, however, the Financial Crimes Enforcement Network, known as FinCEN, sought opinions as to how terrorists and other criminals could be prevented from buying real estate with money that comes from -- or is intended to support -- illegal activity.

This “advance notice of proposed rulemaking” has drawn protests from many real estate professionals, including lawyers, brokers and title insurance agents, who say the government could wind up imposing costly administrative burdens on them without having demonstrated that a sufficient risk exists to warrant the heightened regulation. Though FinCEN officials said they might end up exempting the industry from the Patriot Act, lawyers and others involved in real estate said they assumed that regulations would be imposed.

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Seven of the world’s largest pharmaceutical companies are to set up their own insurance company to avoid the soaring cost of premiums. The seven formally established Pharmaceutical Insurance Ltd in Bermuda last week after a year of negotiations.

Drug companies have been among the worst affected by rising insurance costs over the past year, with some insurers refusing to cover the first £50 million of losses. The companies regularly face excesses of £20 million on certain risks.

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Once accustomed to all the glamour and glitz, a sharp-eyed visitor to this year’s Cannes Film Festival would have noticed something else: Marketers for American states and cities were all over the place at the confab, which ended on May 25. They chatted up passersbys, attended parties and press events, and offered personal tours to any film moguls willing to consider shooting movies in their states.

These days, American states are increasingly hard-pressed to offset the advantages offered by overseas locations. Hollywood’s average cost to make and market a movie rose 14%, to $89.2 million, last year. The U.S.-based share of such movies seems likely to decline further as producers increasingly outsource to offshore locations -- from Canada and Britain to Eastern Europe and Australia -- in a desperate effort to trim costs. Ironically, this year’s Academy Award-winning film, Chicago, was shot mostly in Toronto.

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The person who calls for the re-establishment of “the” gold standard -- nobody agrees as to exactly what “the” gold standard should be -- begins with an unstated judicial presupposition: “The State has a legitimate legal right to control the issue of money.” This is another way of saying: “Monetary policy is an example of market failure.” More than this, it implies the following: “Because money is the central economic institution in a high division of labor economy, the State has a legal right and a moral obligation to control money, so as to retain influence over every area of the market.”

Kings and governments have long asserted an authority, if not an absolute monopoly, over the coinage. It has to do with control over the images. It has to do with the ability of the state to extract wealth from the public by means of currency debasement: taxation by stealth, whose negative effects can be blamed on private speculators. But, from the standpoint of economic theory, this monopoly over money has to do with a theory of market failure.

“As good as gold” is a phrase that presents gold as the standard of comparison. It usually is applied to something that is not as good as gold. In monetary affairs, it applies to a substitute for gold, or what is called a fiduciary instrument. It is a piece of paper that is offered in lieu of gold. It is easier to counterfeit paper than to counterfeit gold. It is easier to sign a promise to pay gold than to pay gold. All of the defenders of the gold standard believe -- I am not making this up -- that the best way to reduce the practice of counterfeiting is to hand over a legal monopoly over money creation to the most accomplished and universally recognized counterfeiters in history: civil governments.

A gold standard is a promise made by a self-licensed professional counterfeiter that he will always stand ready to redeem his pieces of paper and official digits in exchange for gold at a fixed ratio. As the mid-1950’s comedian George Gobel used to say, “Suuuuuuure he will.”

There are conservatives who still present this 2,700 year-old con job of State-issued honest money as a philosophy of limited government. Whenever I hear this assertion, I always hear the faint sound of a piano playing Scott Joplin’s The Entertainer. My mind becomes clouded by an image of Paul Newman and Robert Redford, arm in arm, walking away with my gold. Fade to black.

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The US-led war on terror is trampling human rights worldwide, Amnesty International warned in its newly-released annual report. The organization accuses several countries, including the US and the UK of exploiting the fear that followed 9/11 and “ignoring, undermining or openly violating fundamental principles of international human rights and humanitarian law.”

“What would have been an outrage in western countries during the cold war -- torture, detention without trial, truncated justice -- is readily accepted,” Amnesty’s Secretary General Irene Khan told a press conference in London.

Ms. Khan criticised the US for “undermining the tools of international justice” with their refusal to support the International Criminal Court, and instead entering into bilateral agreements aimed at protecting US citizens accused of human rights violations. “What we are seeing is the development of a two-tier system of justice -- one for the most powerful country in the world, the other for the rest.”

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