Wealth International, Limited

Offshore News Digest for Week of August 25, 2003


One of the peculiarities about being a citizen of a country is that you never find out about the hell that other people go through to get into it. Recently, one of my friends was invited on a press trip to the US. In the old days, say two years ago, he would just have rolled up at the airport, passport in hand. But these are the new days of increased vigilance, and so he must pay £67 and apply for a visa, a process significantly more detailed than applying for a Visa card. The supplementary form that used to be for “male nonimmigrant visa applicants between the ages of 16 and 45, regardless of nationality and regardless of where they apply” is now for everyone.

Here are the fun things you have to put on the forms: Parents’ full names, spouse’s name -- whether or not you are still married, your last two employers before the current one, whether you have any “significant skills or training including Firearms, Explosives, Nuclear, Biological, or Chemical experience”, whether you have ever lost a passport or had one stolen, list all countries you have entered in the last ten years, list of all organizations to which you have ever belonged or contributed, answer “Have You Ever Been in an Armed Conflict, Either as a Participant or Victim?”, and, of course, answer the question “Have you ever been arrested?” -- even if you were pardoned later.

You must also supply a color photograph taken within the last six months, two inches square, head centered in the frame, to precise sizing and placement specifications in front of a white or light background. “It is preferable,” the instructions say solemnly, “that the ears be exposed.”

As a non-resident American who goes back frequently and loves the place, I find it distressing how many of my friends and acquaintances either cannot or will not visit the US any more. One friend says he will give up traveling entirely rather than give a biometric for a passport. Another declines to answer, “Have you ever been a drug abuser or addict?” although clearly the appropriate response is something along the lines of, “Yes -- so I can run for President”.

More on this story here.


A combination of power black-out and the latest computer worms has spun up the cybersecurity shills again. We are almost two years into a post-9/11 world and according to the pundits, we are wide open to Al Quedaags rampaging through our critical infrastructure.

My question is: What’s taking the CyberJihad so long? After all, the Al-Q people are not stupid. According to various sources, they hide messages in JPG files, run their own floating anonymous web sites for both instructional and propaganda purposes, use e-mail to communicate and pass along money, plus likely use chat rooms. Various rumors and wild tales exist of independent (i.e., non-government) individuals or groups engaging in counter-hacking sympathetic web sites and patriotic Americans infiltrating the latest terrorist chats.

A possible answer is several parts long.

More on this story here.


Federal officials have developed a plan to seize financial assets laundered into the United States by foreign leaders whom they suspect of public corruption, with a jailed former president of Nicaragua as the first target.

The effort reflects an aggressive new strategy to try to trace “dirty” money in the United States to its foreign roots, in part by using expanded powers granted to the government under the USA Patriot Act.

More on this story here.

Europe reacts coolly to Bush’s call to freeze charities’ assets.

Europe has reacted tepidly to President Bush’s call to freeze the assets of four European charities said by the administration to be sending cash to Palestinian militants. That sets the stage for another trans-Atlantic rift over Middle East policy.

Rudolf Gollia, a spokesman for Austria’s Interior Ministry, said the country’s counterterrorism agency had already investigated one of the groups, the Palestinian Association in Austria, and had found no evidence of wrongdoing. “Under Austrian law there were no grounds for punitive action,” Mr. Gollia told the Austria Press Agency late on Friday after Mr. Bush had spoken.

Both French and European Union officials said any decision on freezing assets would probably be made jointly by European foreign ministers over the next few weeks and would require a thorough review of the charities’ activities.

More on this story here.

EU unlikely to follow US curb on Hamas fundraising.

The European Union intends to take no immediate action against Hamas despite a US curb on European charities raising funds for the radical Palestinian group, according to senior EU diplomats. But if terrorist attacks in Israel continue, the EU may be forced to review its policy and adopt measures similar to the US, they added.

The US said on Friday that it would freeze all assets of six top Hamas leaders and five charities accused of supporting Hamas, in response to last week’s suicide bus bombing in Jerusalem.

The US and EU have differed markedly over Hamas, with the US moving alone to shut down charities that are raising funds for the group. Despite Hamas’s responsibility for numerous terrorist acts, the EU has insisted on maintaining ties with the political wing of the group and allowing charitable support for an array of social projects carried out by Hamas in the Palestinian territories.

More on this story here.


BNP Paribas Peregrine Securities says Hong Kong’s economy is now at a major turning point after years of decline, as stimulus packages from the mainland and strong liquidity are likely to spur a recovery next year. The firm said yesterday it expected gross domestic product (GDP) to grow 3.5% or more next year from its forecast of 0.9% growth this year. It said the recent rally in the stock market was a pointer to the turnaround.

More on this story here.

HK businesses in joyful mood.

Eager for fine dining and designer labels, tens of thousands of wealthy mainland Chinese tourists have poured into Hong Kong since Beijing eased travel restrictions last month. Mainland diners are spending up to 600 Hong Kong dollars (US$77) per head, three times more than what locals usually fork out for dinner. Tourists from the mainland say goods sold in Hong Kong are cheaper and of better quality. So they are snapping up luxury items as well as Nike sneakers and cameras.

Tackling the economic woes, mainland and Hong Kong authorities last month announced that residents of four cities in neighboring Guangdong province would be allowed to apply for individual travel permits to this former British colony from July 28. Previously, they were only permitted to come here in tour groups. Although Hong Kong is part of China, tight border controls remain in place since Britain returned the former colony to Beijing six years ago. Mainlanders, who make up around half of the territory’s tourists, still need visas to visit Hong Kong. Since the rules were relaxed, around 30,000 mainland visitors have traveled to Hong Kong, authorities say.

More on this story here.

Offshore yuan trade may fuel currency speculation.

China is considering setting up an offshore yuan market in Hong Kong with the aim of curbing currency speculation, but the move could backfire by giving investors a chance to bet on a widely anticipated appreciation. Experts warn such a market could trigger an outpouring of yuan from the mainland to feed huge demand from overseas firms who need yuan to do business in booming China.

More on this story here.

SG Asset Management eyes HK in offshore funds push.

The unit of France-based financial group Societe Generale, plans to bring 17 offshore funds to Hong Kong next year to capture the rising demand for mutual funds. Managing director Mahendran Nathan said the offshore funds, totaling between US$800 million (HK$6.24 billion) and US$1 billion, had all been authorised by Hong Kong’s regulator. The company may launch the US equities and Greater China funds first, he added.

More on this story here.


Tax experts are stepping up pressure on government’s tax amnesty unit to make full disclosure of how much money is involved in applications received for the tax and foreignexchange control amnesty. They argued that the numbers were meaningless if they did not indicate the progress or success of the process.

A member of the unit said at the weekend that the number of applications was higher than expected, and was growing. However, the unit was not prepared to disclose details of the total involved in applications or the structures and assets held offshore, saying such matters were of a “sensitive nature”.

More on this story here.


enmark ranked first on the list of countries whose citizens readily engage in black market labor, according to business daily Erhvervsbladet. New figures from the Rockwool Foundation Research Unit indicated that 20% of all Danes work at some time or another for unregistered cash. This was considerably more than the number of black market workers in Sweden, Norway, Germany or Britain, whose figures ranged from 8 to 17%.

More on this story here.


As an American, should your loyalty to the United States be supreme and undivided? What if you are a devout Christian, and believe that loyalty to the kingdom of God is your paramount duty? What if you are a citizen both of this country and of another as well -- Mexico or Israel or Greece or wherever -- and feel loyalty to both? What if you aspire to rise above nationalism and be a citizen of the world?

Loyalty offers provoking choices. For some, loyalty is complex, and involves complex choices. They ask themselves: Are those who find loyalty a simple matter, with no choices at all, people to be envied, or people to be feared?

More on this story here.

Belgian expats dual nationality deal.

Belgian expats have welcomed a government proposal to allow for the application of dual nationality without losing Belgian nationality. The Walloon Liberal MR party and Christian Democrats want to make it possible for Belgians to acquire a second passport, without losing that of their country of origin. Currently, if a Belgian opts for a foreign nationality after several years residence in a foreign country, he or she will automatically lose his or her right to Belgian nationality.

More on this story here.

Australian expat fights for home rights.

Anne MacGregor has a reputation for telling it how it is – and when it comes to Australians living abroad, she says it is a case of “out of sight, out of mind”.

“I don’t think there’s a big conspiracy to exclude us, but what I do think is that there are a lot of things governments do at home, in particular when they make law, which do actually impact on us,” says Ms MacGregor, 37, who has become the unofficial voice of expatriate Australians and a needle in the side of politicians of all persuasions in Canberra.

An EC trade and competition lawyer with Linklaters in Brussels, Ms. MacGregor and fellow expatriate John Russell co-founded the Southern Cross Group in 2000 amid a growing realization that the interests of Australians abroad were being all but ignored.

More on this story here.

Private medical insurance increasingly popular with expats.

People living in the UK have peace of mind in knowing that the NHS is there to fall back on if they need medical treatment. While the NHS is far from perfect, it the NHS is undoubtedly a vital safety net. Expatriates, however, often have no such security and may have to rely on medical equipment and services that are far from adequate. When language difficulties and a lack of knowledge of the area are added to this, the situation is likely to be far more stressful than it would be in more familiar surroundings.

For this reason, private medical insurance (PMI) is proving increasingly popular with people living overseas. They want to know that if they do need treatment, they will receive the best care possible. For them, private medical insurance is essential rather than an optional extra.

More on this story here.


The euro fell 2% against the dollar on Thursday to a fresh four-month low, and fell further on Friday. The euro has fallen out of favour amid weak economic growth in the eurozone, and signs that a rebound may finally be under way in the US.

The euro has lost 9% of its value against the dollar since June, partially reversing a sustained 33% increase since early last year. Of the world’s three major currencies, it has suffered most from the exodus from government bond markets led by traders who preferred European debt prior to the Iraq war. Dealers are now increasing worried about weakness in Europe, with four European countries -- including the continent’s economic powerhouse, Germany -- now in recession. [Note: All of which was perfectly evident in June.]

More on this story here.


European companies could lose €5 - €10 billion in equity finance if new rules on bank capital are implemented, Europe’s main private equity association has warned. This latest in a series of attacks on the proposed new rules comes from the submission of the European Private Equity & Venture Capital Association to the so-called Basel committee of central bankers and regulators, which has devised the rules.

The new Basel II rules are intended to match the amount of capital banks are required to hold by regulators more closely with the risks they take in their businesses. However, the EVCA says: “The current Basel II draft could lead to a significant retreat by banks from private equity and venture capital funds due to the proposed changes in risk weightings for assessment of business risk.”

More on this story here.


Investors in fine art have often kidded themselves that they are making better returns -- and getting more pleasure -- from the Van Gogh on the boardroom wall than from the equities in their corporate pension fund. Up to a point this seems to be true. An index of fine-art sales tracked since 1952 shows paintings generally outperforming the S&P 500 index (see chart). But woe betide any investor forced to sell at the wrong time. Prices of fine art fluctuate even more wildly than stocks, and transaction costs can be prohibitive, with combined commissions paid at public auctions by both buyer and seller of some 25%, to say nothing of the spread between bid and offer in a private sale.

Art has not been considered a mainstream asset class because of the opacity of the market, the dearth of financial information and general illiquidity. Moreover art, unlike equities, bonds or property, produces no income. It is also at the mercy of fickle public taste. Will this ever change? Michael Moses at New York University’s Stern School of Business thinks so.

The main attraction of the art market, apart from the pleasure of having the works around, is its low correlation with other financial assets and its diversifying effect on an investment portfolio. Despite the recent collapse of many financial markets, the fine-art market has stayed buoyant over the past three years, though market volumes have fallen. This year some top art even fetched record prices. But prices for top art can fall from great heights too. Van Gogh’s “Portrait of Dr Gachet”, bought by a Japanese businessman in 1990 for $82.5 million at the height of Japan’s stockmarket (and Impressionist-buying) bubble, has since sold for one-eighth of the price.

More on this story here.


A cursory glance at the notes on the book jacket of Rich in America by Jeffrey Maurer may provoke a sense of déjà vu. Rich in America promises to “take you behind the elegant and impenetrable facade of affluent America to reveal the backgrounds, concerns, belief systems, and savings and investment behavior” of wealthy Americans.

Sounds like that classic sociological work The Millionaire Next Door by Thomas Stanley and William Danko doesn’t it? Flip through the pages, however, and it becomes clear very quickly that this is a very different kind of book. Whereas Millionaire can be taken as a primer on how you can reorient your lifestyle (through such surprisingly simple means as frugality and finding the right profession) to become wealthy, Rich in America is suited to the reader who is already wealthy and is likely to need the services of an investment management firm to manage his or her portfolio.

More on this story here.


Bookmakers have made Arnold Schwarzenegger a slim favourite to win the California governor election. America’s Line has made it a 2-7 sure thing that the incumbent governor, Gray Davis, will have to face a new ballot. It has also placed Republican Schwarzenegger as 7-5 to be the state’s next governor.

Benjamin Eckstein, America’s Line president, characterized Schwarzenegger’s advantage over Democratic Lt. Gov. Cruz Bustamante, an 8-5 favourite, as paper thin. Davis, a Democrat, is a 5-2 choice to retain his seat October 7.

More on this story here.

Schwarzenegger is not as daring in investing as in film.

In the typical Arnold Schwarzenegger movie, the star almost always triumphs but not without averting a series of catastrophes. So far, it seems, that is not how Schwarzenegger, the candidate for governor, likes to manage his personal finances.

According to state records and interviews with several investment advisers, Schwarzenegger appears to be decidedly tamer than his on-screen persona would indicate when it comes to his own money, amassing a fortune by cutting movie deals, buying real estate and taxable bonds and hiring money managers to invest his fortune. His investments -- to the degree they were made public by the Fair Political Practices Commission this month -- do not reveal any unusual business sophistication.

“He has always been realistic about what he knows and what he doesn’t know,” said Lou Pitt, the former talent agent who advised Schwarzenegger on his movie career during his heyday in the 1980s and early 1990s.

More on this story here.


Attorney General John Ashcroft is on a publicity tour, promoting the USA PATRIOT Act and preparing the public for a sequel. But just as you cannot always believe an actor who tells you his latest film is sure to be a hit, you have to take what Ashcroft says with a grain of salt. Ashcroft is reacting to bad reviews from critics who say the PATRIOT Act -- given a green light just a month and a half after the September 11 terrorist attacks by members of Congress who had not even read the script -- was rushed into production. The result, they say, was a deeply flawed work in which civil liberties make only a brief appearance.

The defense mounted by Ashcroft’s publicists makes you wonder if they have seen the same law. Take Section 215, which authorizes the FBI to demand “any tangible things” it considers relevant to a terrorism investigation. Anthony Romero, executive director of the American Civil Liberties Union, says this provision gives the FBI “unprecedented access to personal records and other belongings.”

Yet according to the Justice Department’s PATRIOT Act Web site (www.lifeandliberty.gov), Section 215 simply lets the government “ask a federal court (the Foreign Intelligence Surveillance Court) ... to order production of the same type of records available through grand jury subpoenas.” To get a sense of how likely the Foreign Intelligence Surveillance Court is to question that judgment, consider its record with respect to wiretap and electronic surveillance applications, which have to meet a stricter standard. Out of some 15,000 applications since 1978, the secret court has rejected not one, and it has asked for modifications in only five.

More on this story here.

Ashcroft’s Lack Of Credibility.

Attorney General John Ashcroft has launched a publicity campaign to save the USA Patriot Act, a misnamed piece of legislation if ever there was. It should be called the Anti-Bill of Rights Act. Ashcroft is out on the hustings because opposition to the Patriot Act, passed hurriedly in the aftermath of the Sept. 11 attack, is itself coming under attack. More than 134 local governments have passed resolutions denouncing it. The American Civil Liberties Union is challenging a portion of it in federal court.

Ashcroft is denying that the federal government has or will abuse the broad authority the bill grants. If you believe that, you are naive. Let us dispose of the first false argument: The Patriot Act is necessary to prevent another terrorist attack. In the second place, the Patriot Act will not protect America from another terrorist act.

The problem with trusting government not to abuse its power is this: Well-intentioned intellectuals might draft the legislation and issue executive orders, but when actual enforcement comes along, it is done by cops, who, as a rule, are not usually intellectuals or political philosophers or constitutional lawyers. No, just plain cops who, God bless 'em, tend toward tunnel vision and tend to see the world as easily divided into good guys and bad guys. Federal cops in particular have a bad reputation for believing unreliable and dishonest paid informants. They have destroyed many innocent lives because of it.

In Iraq, the American occupational authority is virtually a dictatorship and can do anything it wants to anybody. But has it been able to stop terrorists? No. People who ask you to trade freedom for security are con artists. They will take your freedom away, but they don’t provide you the promised security.

More on this story here.

Congress proposes “The Protecting Rights of Individuals Act”.

The Protecting Rights of Individuals Act (S.1552), which was introduced by Senators Murkowski (R-Arkansas) and Wyden (D-Oregon), and is supported by organizations from across the political spectrum, puts some modest checks and balances on the most troublesome provisions of the USA PATRIOT Act.

More on this story here.


The technology known as biometrics has been developing for years, but largely because of security concerns after the attacks on Sept. 11, its arrival has been greatly accelerated. One deadline looms large -- October 26, 2004. In a little more than a year, the State Department and immigration bureau must begin issuing visas and other documents with the body-identifying technologies to foreign visitors. The change is mandated by border security legislation passed by Congress last May. The federal government has started issuing border-crossing cards for Mexican citizens and green cards that display fingerprints and photos.

By the same deadline, the 27 countries whose citizens can travel to the United States without visas must begin issuing passports with computer chips containing facial recognition data or lose their special status. People from those countries with passports issued before the deadline may still travel to the United States without visas as long as their governments have begun biometric identification programs.

Privacy advocates expressed dismay at what they see as pressure being applied to Europe.

More on this story here.

Starting 1 October 2003 all children will need their own passports to enter the USA.

All family members entering the USA under the visa waiver program will need to have their own passports. This means that children included in a parent’s passport will not be eligible to enter the USA without a visa.

More on this story here and here.


The Republican party is using call centers in Gurgaon and Noida in India to raise funds for itself and for its chieftain, George W. Bush. Young people at the call centers are helping robots to phone American citizens to enlist their support and money for the political party, with plans to extend the scheme if they whip up enough donations. There is a high degree of automation involved in the process, according to Indian newspaper the Business Standard.

More on this story here.


At the conclusion of the fourth Taiwan-Latin American leaders’ summit in Taipei last week, the Presidents of Panama and Taiwan signed a Free Trade Agreement that will see tariffs abolished on many goods from 2004.

More on this story here.


The new Chief Minister of Turks & Caicos has spelled out his vision for the nation’s future during his swearing-in ceremony, promising “transparent and accountable” government and an investor-friendly environment.

More on this story here.


Guernsey’s Income Tax Authority has released figures showing that the Bailiwick’s finance sector industry increased in size in 2002, with total employment rising from 9,900 in 2001 to more than 10,000 at the end of 2002, and the total salary bill rising to £259 million as against £242 million in 2001.

These figures give the lie to continual downbeat announcements and surveys emanating from various quarters about the jurisdiction’s supposedly declining finance industry. Indeed, statistics provided by the Financial Services Commission also tell a more cheerful story.

More on this story here.


Where previously expatriates were greeted with enthusiasm by overseas subsidiaries, increasingly they are viewed with resentment, and seen as taking valuable jobs and resources from the local operation. The question remains as to why multinational head offices are so stubborn in their insistence that expatriates are essential to the operation of local subsidiaries when these expatriates are often resented. Certainly there is an element of international human resources arrogance, but more commonly the assignment fulfils a strategic objective.

More on this story here.


The ability of jurors to judge evidence in complicated fraud and murder cases has recently been questioned by Parliament. At the same time, reporter John Higginson was a juror on a £7-million fraud case lasting 10 weeks ...

The defendant, William Cook, aged 78, a Canadian accountant, was accused by the Crown of conspiring to defraud by offering a monthly interest of between 10 and 35% on investments in a high-yield programme during 1999 with no aim of paying it back. The fraud took place, with many people losing their life savings -- this was not contested. But Mr Cook’s defence was he was duped by fraudsters into letting one or more of them use his account to launder money.

Being a juror was one of the most important things I have ever done and we were all acutely aware of those, including our own Government, who felt we were not up to the job.

More on this story here.


The dramatic impact of globalization on the world’s economic interdependence is demonstrated in new figures on foreign direct investment (FDI) released on Monday by the United Nations Conference on Trade and Development ahead of its annual world investment report next week. The global stock of FDI jumped more than tenfold between 1980 and 2002 to $7.1 trillion, as transnational companies spread their production and distribution systems around the world.

The figures showed China rapidly catching up with the US as the world’s most popular location for foreign investment. The US tops the league table of overseas investment destinations with a stock of FDI of $1,351 billion. But the stock in China totalled $448 billion, up from just $25 billion in 1990. Combined with Hong Kong’s stock of FDI of $433 billion, greater China takes the number two spot.

A combination of cheap labour, robust domestic growth and market deregulation helped China attracted a record $52.7 billion in FDI last year -- more than any other country. By contrast, net FDI inflows into the US have stagnated in recent years. Last year there was a net outflow of $98 billion.

More on this story here.


Five years ago the world’s financial system was in danger of collapse. Long-Term Capital Management (LTCM), the world’s biggest hedge fund, staffed by some of the sharpest mathematical brains in the US including two Nobel laureates, had got its sums spectacularly wrong. LTCM’s creditors included some of the world’s biggest financial institutions and the rest of the story is well-known: the Federal Reserve, led by chairman Alan Greenspan, took the view that LTCM was simply too big to be allowed to collapse and organised a bail-out to save the integrity of the markets.

Five years on, there has been no repeat of the LTCM debacle but it is hard to know if that reflects luck or judgment. Hedge funds are still unregulated and are mostly registered in offshore tax havens such as the Cayman Islands and Bermuda, even though the people running them tend to operate out of New York, London or Geneva.

Most worrying perhaps is this assessment from a hedge fund manager in London who understandably prefers to be anonymous: “Yes, an LTCM could happen again. There is nothing to stop it but the sense and strategies of fund managers themselves.” The good news is that post-LTCM, good sense seems to be more evident.

The single biggest factor in LTCM’s downfall was its level of borrowing. The outside world’s astonishment at the scale of LTCM’s borrowing was matched by the ignorance of how and where it was investing. In this regard, the industry does appear to have changed.

More on this story here.


The British economist, John Maynard Keynes, is famous for one aphorism, “In the long run, we are all dead,” which he applied to the operations of the price system, and one phrase: “barbarous relic,” which he applied to the gold standard. He believed that the free market needed to be policed by bureaucrats to be made efficient. He also believed that the gold standard’s restriction of State power is a great evil.

Keynes’ hostility to the traditional gold standard is shared by all inflationists and statists. It places temporary limits on the government’s ability to create fiat money and thereby spend without taxing directly. I say “temporary”, because the traditional gold standard is a promise made by a government. It is made to be broken later, during an emergency that is declared by the government. It is ultimately paper gold. It is a misuse of the people’s trust.

The gold standard made possible much of the civilization of the ancient world, until gold was abandoned in the third-century by the government of Rome. Then classical civilization disappeared in the West. But in the Eastern Roman Empire (Byzantium), a reliable gold coinage lasted for over a thousand years. When the costs of maintaining Rome’s war machine and its bread and circuses at home grew too great for direct taxation to fund them, the government began to debase its coins. This debasement paralleled the decay of the Roman Empire.

Is the traditional gold standard really a relic? Yes. It becomes a relic in every empire, as surely as there was gold at the beginning of that empire. No nation honors the requirements of a State-run gold standard: the free convertibility of the State’s money into gold.

In the twentieth century, the State persuaded the masses to accept its IOU nothings. The result has been a vast expansion of state power and state debt, coupled with a vast depreciation of money’s purchasing power. This will not be reversed until the debt system overwhelms the monetary system (deflation), or the state’s official money is abandoned by the public (inflation).

More on this story here.


The Tax Foundation’s page provides background information, news, research, and other links focusing on international tax issues relevant to America.

More on this story here.


The line that got me was the one Attorney General John Ashcroft used on the stump last week. Ashcroft was trying to rally the masses in support of the one government initiative that has succeeded in uniting the political left and the right, albeit in rabid opposition to it. He said the USA Patriot Act, which expands law-enforcement powers to levels that make J. Edgar Hoover’s legendary goons look like Girl Scouts, “ensures liberty”.

I kept thinking that something about that line rang familiar. So I went to the library and began searching. I scrolled through the computerized card catalog. I searched the Net. I talked to a librarian. I finally found it, right there among the science fiction classics.

“War is peace. Freedom is slavery. Ignorance is strength.” Ashcroft was channeling George Orwell.

But now that I had figured that out, I realized that I, too, could be a suspect. And to make things worse, I had left all kinds of evidence of my seditious tendencies there in the library’s computer database.

More on this story here.

New York Times editorial: An Unpatriotic Act

John Ashcroft has embarked on a charm offensive on behalf of the USA Patriot Act. He is traveling the country to rally support for the law, which many people, both liberals and conservatives, consider a dangerous assault on civil liberties. Mr. Ashcroft’s efforts to promote the law are misguided. He should abandon the roadshow and spend more time in Washington working with those who want to reform the law.

The administration is clearly worried, as opposition to the excesses of the Patriot Act grows across the country and the political spectrum. Instead of spin-doctoring the problem, Mr. Ashcroft should work with the law’s critics to develop a law that respects Americans’ fundamental rights.

More on this story here.

Ron Paul on “Ashcroft’s Bizarre Promo Tour”.

Attorney General John Ashcroft has embarked on a bizarre promotional tour to counter growing public opposition to the Patriot Act. The administration clearly is worried by recent votes in Congress to limit the scope of the Act, votes that reflect the willingness of even GOP loyalists to buck the president on the issue. So Mr. Ashcroft is visiting several cities to give a stump speech that essentially says this: Trust us -- we’re the government, and we say the Patriot Act does not threaten civil liberties.

But the attorney general misses the point. Government assurances are not good enough in a free society. The overwhelming burden must always be placed on government to justify any new encroachment on our liberty. Now that the emotions of September 11th have cooled, the American people are less willing to blindly accept terrorism as an excuse for expanding federal surveillance powers.

Furthermore, Mr. Ashcroft is an administrator, not a legislator. It is not his job to write laws or say what the law should be. His job is to execute the laws passed by Congress. It is not his place to chide Congress or the American people for not supporting his viewpoint. He certainly should not be spending taxpayer money to lobby for his political positions.

More on this story here.


Sen. Orrin Hatch, R-Utah, reportedly plans to introduce legislation in September to further expand federal police powers. The Hatch bill, entitled the Victory Act (Vital Interdiction of Criminal Terrorist Organizations Act), is seen by some to be a substitute for the so-called Patriot Act II -- the Domestic Security Enhancement Act of 2003 -- which was leaked and caused a furor in Congress as well as among liberal and conservative civil liberties groups. A draft copy of the Victory Act has been posted on the Web (www.libertythink.com).

The draconian Patriot Act II would have empowered the federal government to conduct secret arrests, collect DNA samples from anyone suspected of terrorism and allow the government to take away an American's citizenship. Despite its comforting title, the June 27 draft of the Victory Act contains similar provisions.

The ironically named Victory Act would not be a victory for freedom loving people. It is really a wish list for those who want more federal police power.

More on this story here.


The Government announced plans to extend the use of biometric technology throughout the UK visa system in a crackdown against abuse of the immigration system. Visitors seeking a UK visa will, in due course, be required to provide a biometric -- fingerprints, iris or facial recognition scans -- at point of application. The Home Office says the procedure will facilitate the cross-reference of data to prevent people staying here illegally or claiming asylum fraudulently.

A biometric technology pilot for visa applications in Sri Lanka began last month. Under the scheme just launched biometric visas will be extended to cover visitors from a far greater range of countries.

More on this story here.


A trial of technology underpinning the next generation of biometric passports could also be used to lay the groundwork for the introduction of identity cards in the UK. The Guardian reports that the Home Office wants to complete a six-month trial of fingerprint and iris-scanning technology by next April. The pilot will also test public reaction.

A Home Office spokesman told The Register that this trial would test the “feasibility and cost” of the enrollment of biometric information for a new credit-card sized passport to be introduced in 2006. He said the Passport Service has paid for the pilot but conceded that information from the project could be applied to the development of a UK ID, or entitlement, card.

More on this story here.


What I wanted to write is a clever little piece about the epidemiology of computer viruses, but it turned out to be too complicated. With the biological equivalent, you can make valid predictions about whether you are at risk: you traveled on a plane with someone infected with SARS, or a kid at your kid’s school has chicken pox and may have infected your kid and, since you never had it, you. But I am in all sorts of address books, as evidenced by the number of “Hi - here’s my new email address” messages I get from people I have never heard of. Unlike the physical world, I am closer, in viral terms, to people I barely know. The addresses of my closest friends, with whom I correspond frequently, usually are not in my (non-Outlook) address book, because I know them by heart. Sobig extracted email addresses from Web caches on people’s hard drives and all sorts of other obscure locations. None of the hundreds of copies I got came from anyone I know.

The rise of such techniques means that any sort of epidemiology is nearly meaningless. For the future, it is probably much more important to assume that everyone is at risk and ask what we are going to do about a situation that is escalating so far out of control. It is morbidly funny: people used to talk about convergence as this great thing coming towards us, and they meant broadcasting, computers, and telecommunications. In fact the convergence we are getting is spam and viruses. The problem is that all the choices on offer to combat this marriage are bad.

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Microsoft software “riddled with vulnerabilities”, trade body claims.

The US Computer and Communications Industry Association (CCIA) has urged the US Department of Homeland Security to avoid using Microsoft software. The Washington based association, which represents members that generate over $300 billion in sales, has issued an open letter to Tom Ridge, Secretary of the department, urging him to review his decision to choose Microsoft for its desktops and servers.

The letter accuses Microsoft of being more interested in economic marketing and competition than security and said the lack of diversity within a network system “amplifies the risk emanating from any vulnerabilities that do exist”.

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Feds close in on Blaster suspect.

The FBI are poised to arrest an unnamed 18 year-old in connection with the release of a variant of the notorious Blaster worm. The teen has already been questioned by investigators and put under surveillance. The 18 year-old suspect was reportedly seen by a witness testing his virus, which was based on Blaster-A, the ur-worm

. More on this story here.


The Java Anonymous Proxy (JAP) service, a collaborative effort of Dresden University of Technology, Free University Berlin and the Independent Centre for Privacy Protection Schleswig-Holstein, Germany (ICPP), has been allowed to suspend its monitoring of users’ IP traffic pending a decision on the legality of back-dooring it.

An appeals court has allowed the operators to discontinue logging until their appeal has been answered. When a decision has been reached, the JAP team says they will document the whole affair, but cannot do so until the court issues its ruling.

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Belgian “dentists”, afficionados of untraceable bearer bonds and offshore accounts free of withholding taxes, are to be tempted back with a pardon and a penalty. Success could bring the financially challenged treasury an estimated €500 million. There is even talk of a boost to Belgian equity markets if the dentists are persuaded to invest in stocks in exchange for lower fines.

The problem is fixing the level of the fine. Too high and the tax-dodgers will turn up their noses; too low and it becomes morally indefensible and could be politically embarrassing.

But the lure of billions of euros has created a momentum and there is a model that is exciting the imitators. Italy and Germany have already implemented amnesty laws. If Belgium succeeds, and France follows the trend, the recycling of hundreds of billions of euros could be a welcome stimulus to the eurozone economy.

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Malta announces once off investment tax amnesty.

The Maltese government has announced a one-off extension of an investment registration and tax amnesty that will allow residents to repatriate funds placed offshore in contravention of the Exchange Control Act.

The decision has been motivated in part by the apparent success of a previous scheme implemented by the government which resulted in some Lm291 million flowing back to Maltese shores. The new scheme will be operational from September 1st to November 15th and is available through appointed registration agents and financial operators.

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There are many good reasons to include foreign stocks in an investment portfolio. But in the wake of the recent tax code changes, it makes sense to take another look at exactly which international stocks are held, and in what form.

The new tax laws have significant implications for international portfolios held by US citizens and taxpayers. In particular, the dividends from “qualified foreign corporations” are eligible for the lower tax rates prescribed in the 2003 Tax Act and, if held more than a year, these investments also will pay capital gains tax at the lower 15% rate.

While there is disagreement among tax advisers over some aspects of the changes, the reduction in the dividend tax rates to 15% for most investors from a maximum of 38.6% means US investors will be better off in ADRs than in stocks sold only on foreign markets. The tax on investments not meeting the new rules will be 20% on capital gains and 35% on payouts.

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The rich are as guarded as everyone else about the nascent recovery in stock markets, but they are tentatively dabbling in stocks again, so long as they have some protection. Structured products are proving a popular re-entry into the market for investors willing to pay for some guarantees on return or capital safeguards, according to Rhian Horgan, head of the structured products group for Europe, Middle East and Africa at JP Morgan Private Bank.

After prolonged volatile markets, many well-off investors are sitting on mountains of cash. While fed-up with meager money market returns and getting more bullish on the outlook for stocks, they nevertheless require some hand-holding to make the asset reallocation leap.

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Dublin-based firm Research and Markets Ltd. is offering a comprehensive report on European-owned alternative investment assets. The Offshore Financial Services Databook 2003 represents the first in-depth quantitative study of the offshore investment market, focusing on European-owned assets, specifically those owned by Benelux, French, German, Italian, Nordic, Spanish and UK investors. It examines 13 major offshore locations holding European assets.

The 128-page report says that 2002 saw the offshore market decline for the first time in five years; total offshore deposits and mutual funds stood at €3,612.7 billion compared to €3,691.5 billion a year earlier. Investors’ choice of offshore deposit destination, says the report, is related to proximity of those centers to the investor’s home market. Europeans accounted for 84% of all deposits in Dublin IFSC and 72% of deposits in Isle of Man, US investors accounted for 62% of all deposits in the Bahamas and Asian investors accounted for 48% of all deposits in Hong Kong.

The report is priced at €5,345 for electronic delivery, and ordering details can be found here.

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Discussing the Bank of Butterfield’s acquisition of the entire share capital of Thorand Bank & Trust Ltd. in Nassau, Central Bank Governor Julian Francis said, “The Bahamas could not attract a first-class institution such as the Bank of Butterfield, if this jurisdiction is not seen to be stable and offering good business prospects.” The move brings to four the remaining Bahamian-owned offshore financial institutions in the country.

Commenting on the acquisition, president and CEO of Bank of Butterfield Alan Thompson said the company has achieved a “strategic objective” by entering The Bahamas, a jurisdiction which has shown commitment and success in developing a quality international business environment.

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A Californian businessman has been sentenced to serve over 5 years in jail after being convicted of an international tax and investment fraud. Neil R. Brown confessed to defrauding the United States government of income tax by advising his clients to pay “consulting fees” through offshore trusts and corporations between 1993 and 2000. He also admitted to encouraging investors to utilize employee leasing schemes through offshore companies in Dublin and Gibraltar so as to avoid US income taxes.

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At the 4th Summit of Heads of State and Government between the Republic of China and the SICA Member States, the Central American leaders reiterated their support for Taiwan’s reincorporation into the United Nations and its participation in other regional and international organizations.

At meetings apart from the Summit, the Belize Prime Minister also held important bilateral meetings with President Chen and Senior Government Officials of the Taiwanese Government on economic affairs and relations between both countries. As a result of those meetings, the Taiwanese Government committed to funding a new 5-year Economic Cooperation Program for Belize, which will finance projects in the areas of health, water, sanitation, housing, and education.

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HONG KONG: In dealing with this summer’s unprecedented demonstrations against the government in Hong Kong, Chinese officials are betting that residents of this shopper’s paradise care more about their pocketbooks than the ballot box. During the past weeks, China and Hong Kong have signed an agreement on closer economic cooperation, including no tariffs on many exports from Hong Kong to the mainland. They have relaxed restrictions on Chinese tourists traveling to Hong Kong -- a move expected to revitalize the territory’s sagging tourism sector, which has been hit hard by the SARS epidemic.

China also is allowing its people to buy property in Hong Kong, which could help bolster the flagging property market. And it has approved a plan to build a multibillion-dollar bridge across the Pearl River Delta that is supposed to bolster Hong Kong’s role as a transportation hub.

The Beijing government meanwhile is exploring the possibility of telling Hong Kong officials to delay the introduction of a controversial national security bill at least until after Legislative Council elections next year, political leaders said.

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A leading economic indicator suggests Switzerland’s sluggish economy is unlikely to deteriorate further next year, although any recovery would be fragile. Improved sentiment among Switzerland’s exporters, banks and insurers has offered a glimmer of hope that the current downturn may have reached its lowest point. The figures from the Swiss Institute for Business Cycle Research (KOF) came amid new evidence that Switzerland’s unemployment situation is deteriorating.

More on this story here.

Swiss abroad seek parliamentary voice.

A record number of Swiss expatriates are set to contest seats in this October’s general election. The Organisation of the Swiss Abroad (OSA) said at least sixteen candidates had so far put their names forward.

Known as the “fifth Switzerland”, Swiss citizens abroad have long been recognized by the country’s main political parties as an important group of voters. Of the 600,000 Swiss estimated to be living outside their home country, 82,000 were registered to cast their ballot last year, making them the fourth largest group of voters after Switzerland’s three biggest cantons -- Zurich, Bern and Vaud.

Expatriates have only been eligible to vote in Swiss parliamentary elections for the past eleven years. During that time, fourteen have campaigned -- unsuccessfully -- for a seat in parliament.

More on this story here.

US and Swiss competent authorities provide treaty benefits guidance.

The competent authorities of the United States and Switzerland concluded an agreement last week concerning the Limitation on Benefits Article of the 1996 Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and accompanying Revised Memorandum of Understanding.

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“The IMF sees further potential for a depreciation of the dollar given the high current account deficit”, the draft report said. It sees the U.S. budget deficit reaching 6.1% of gross domestic product in 2003, with a structural deficit of 5.2% of GDP, and only expects a slight decline in 2004. The IMF sees U.S. GDP growth accelerating to 3.6% in 2004 due to “unprecedented” monetary and fiscal policy stimulus, adding that growth may be even stronger than predicted.

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European institutions are turning to alternative investments such as hedge funds in a bid to close the growing gap between pension assets and liabilities, according to research released today by JPMorgan Fleming Asset Management. Peter Schwicht, head of European institutional business at the bank’s asset management arm, said the trend has been exacerbated by the three-year bear market.

“The mismatch between pension liabilities and pension assets is now estimated at around €2,100 billion ($2,290 billion), creating an unprecedented burden on pension funds to make the right investment decisions,” he said.

“One might consider that there is a massive temptation for pension funds to ‘play safe’ and not diversify into less-familiar investment strategies. Yet, This survey suggests that pension funds are very keen to see how alternative asset classes can help to diversify sources of risk and enhance the long-term potential for growth.”

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Chief executives of companies that had the largest layoffs and most underfunded pensions and that moved operations offshore to avoid U.S. taxes were rewarded with the biggest pay hikes in 2002, on average, a new report has found. While the median CEO pay increase was 6% in 2002, median pay rocketed 44% for chiefs of the 50 companies that announced the biggest layoffs in 2001, according to the report. The study, released Monday by United for a Fair Economy in Boston and the Institute for Policy Studies in Washington, used methodology that some companies criticized as misleading. Still, the report may add to the furor over executive pay.

Carol Bowie, director of governance research at the Investor Responsibility Research Center in Washington, said the study “demonstrates the flaws in how some incentive pay plans are constructed.” Many plans “are fairly short-term in nature and all of these things -- layoffs, underfunded pensions and going offshore to avoid taxes -- can pump up short-term results,” Bowie said.

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The advantages of owning an overseas holiday home through an offshore company are under attack. Using an offshore company is traditionally viewed as one of the most tax-efficient ways of owning property overseas. For a start, companies pay corporation tax, whereas those who own the property direct have to pay UK income tax on rental income and UK capital gains tax on profits made on disposal. Corporation tax is normally lower. In addition, many Brits who purchase properties in countries such as France, Spain and Portugal use offshore companies to avoid problems with local taxes and succession laws.

But a general tightening of tax laws, both domestic and foreign, is beginning to cast a dark shadow over that little place in the sun. For instance, the Inland Revenue has been arguing for the past four years that people who live rent-free in properties owned by offshore companies should be treated as “shadow directors”. This means the property should be treated as a perk and therefore subject to income tax.

More on this story here.

Financial links of interest to U.K. citizens here.


The Boston Consulting Group’s report titled Winning in a Challenging Market: Global Wealth 2003 suggests several years of unprofitable stock markets have hit wealthy Canadians, and the wealth managers who work for them, hard, as assets under management fell by almost 12% in 2002 and financial services revenues fell by 15%. Wealthy Canadians, defined as those with more than US$250,000 under management in 2002, saw their collective investments decline to $794 billion in 2002, the report suggests.

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The liquidity problems experienced by smaller banks and the eventual erosion of the deposit base of some of the bigger banks in the first half of 2002 were resolved in a satisfactory manner during the past year, the SARB said in its annual economic review on Tuesday. At the end of June 2003, approximately 83% of total deposits by the public landed in the vaults of the big four banks.

Banks operating in the country are well capitalised, with an average risk-weighted capital adequacy ratio of 12.4% at the end of June 2003. Moreover, 35 banks holding 98% of total banking assets have capital adequacy ratios exceeding the statutory minimum of 10%. The liquidity of the banking sector was also generally adequate. The average daily amount of liquid assets held in June 2003 exceeded the minimum requirement by about 20%.

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“A kiss on the hand may be quite Continental, but diamonds are a Russian’s best friend”, Marilyn Monroe might have sung if she were around today. For jewelry stores are springing up all over Moscow as the country’s new rich try to outsparkle each other. At least, that is the official version. For, as every billionaire knows, diamonds are also a useful way of moving money around the world without the authorities noticing, especially given the current paranoia about “money laundering”. As the old saying goes,“Have you ever tried to swallow $10,000?”

Not even the terrorist attacks of September 11, which hit the luxury goods market, have managed to put a real damper on the diamond trade. In spite of the Sars outbreak and the war in Iraq, the world’s biggest producer of rough diamonds, De Beers, recently sparkled with a 34% rise in first-half profits to $414 million while its sales and marketing arm sold $2.9 billion worth of gems, a 2.75% rise.

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The implementation of public video surveillance is a direct result of the inefficiencies of state law enforcement. As a result, instead of loosening regulations and allowing individuals to purchase protection for themselves from private agencies, the state is attempting to account for its own incompetence. Of the many absurd features of the adoption of public video surveillance, there are three notable injustices that will arise.

First, how will government decide where the cameras will be placed? Obviously the purpose of the tactic is to aid the ineffectual law enforcement in high crime areas, but whose property will be in the eye of the lens? Clearly, this is just another instance of subsidization, some benefit at the expense of others.

Secondly, which of the state’s personnel will view the footage and judge how such footage can be used? Further, who is to determine the legitimacy or conclusiveness of evidence caught on tape? Could someone smoking a cigarette be accused of smoking dope, or could someone sipping a milkshake in their car be accused of drinking and driving?

Finally, who or what will set limits on the usage of the cameras? When will usage go too far? What ludicrous, illegitimate new laws condemning victimless crimes will be passed for individuals to uphold once personal activities on private property have been publicized? These chief issues surrounding the implementation of public surveillance merely scratch the surface into what such measures would certainly bring about.

Although it is difficult for many to admit, public law enforcement is characterized by the same traits that are exhibited in all government provided goods and services.

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A national computerized ID system that was criticized for its Big Brother overtones when started last year became fully operational yesterday, allowing Japan’s 126 million citizens to cut through red tape with an 11-digit number. The online database, which contains every citizen’s name, address, birth date and sex, is the centerpiece of a government initiative to speed up administrative procedures such as filing change-of-address forms and applying for passports.

Three local governments -- two subdivisions of Tokyo and a small town north of the capital -- continued to boycott the system, and a citizens’ group reportedly planned to seek a court injunction to block the system.

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