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FINGER AND FACEPRINTS GET GREEN LIGHT FOR EUROPE’S ID STANDARD
The EU can taken the first step towards standardized ID with biometrics on-board, in the shape of two proposals from the Commission covering a uniform format for visas and residence permits for third country nationals. But this is only the first stage; the Commission’s announcement notes that The Thessaloniki European Council earlier this year “confirmed that ‘a coherent approach is needed in the EU on biometric identifiers or biometric data which would result in harmonized solutions for documents for third country nationals, EU citizens’ passports and information systems (VIS and SIS II)’, and invited the Commission ‘to prepare the appropriate proposals, starting with the visa.’”
Given the desire for “harmonized solutions” it is perfectly reasonable to see the Commission’s third country national proposals as green-lighting the use of biometrics in a future Europe-wide standard ID document. The proposals put forward facial image as a “primary biometric identifier in order to ensure interoperability’, presumably with other systems which are designed with the work of the ICAO (International Civil Aviation Organization) on biometrics in mind. Fingerprint is put forward as a secondary biometric identifier “as it provides the best solution for so-called ‘background checks’” -- possibly the Commission here means that fingerprints are currently a more established and proven technology than facial image.
Statewatch points out that the Commission is proposing the new measures in the form of a regulation which applies across the EU, and leaves member States no discretion, as would be the case with a directive, and notes that also although the Commission says that the data held will come under the EC 1995 Directive on data protection “it also highlights the inadequacy of the data protection regime at national level across the EU.” Effectively, the Commission is proposing to land Europe’s data protection authorities with a whole new area to supervise, and expecting them to more or less figure it out for themselves.More on this story here.
INTEL CEO ADMITS: JOBS ARE NOT COMING BACK TO U.S.
They are calling it the “jobless recovery”, but it is a misleading phrase. New jobs are being created in the tech sector, only CEOs are making sure they are in China and India rather than at home in the United States. Intel CEO Craig Barrett admits to the New York Times that while Intel has maintained a steady head count in the US, it has hired a thousand new software engineers in India and China.
Gartner Group predicts one in ten tech jobs will be moved offshore by the end of 2004 and half of them will be skilled engineering positions. The trend is nothing new: but for the first time it is affecting the technocrat middle class. The benefits and inevitability of globalization were preached while first manufacturing then service jobs went off shore.More on this story here.
US INCOME TAX CELEBRATES 90TH BIRTHDAY THIS MONTH
President Woodrow Wilson introduced income tax as part of the Underwood Tariff Act in 1913. Since then the legislation has swelled from a 400 page booklet to cover some 50,000 pages today. To honour the occasion, tax advisory firm CCH has published a commemorative booklet reproducing the 1913 law which originally levied a 1% “normal income tax” on the “net income” of individuals. On income over $20,000, a graduated tax of 1% to 6% was imposed and the top 6% rate kicked in on income above $500,000.
From the beginning, income tax was levied on all sources of income from all Americans regardless of where in the world they lived. It also taxed the income of resident aliens and the US income of non-residents. The tax filing procedure also began life on a form 1040 still used to this very day. The original form was three pages long with an extra page for instructions. While today’s form 1040 is two pages long, it is accompanied by a 126 page explanatory booklet.More on this story here.
The IRS vs. The Bill of Rights
To get an idea of what it is like to tangle with the IRS, imagine having to fight Mike Tyson -- with both hands tied behind your back. The IRS is the most feared government agency, and with good reason. Americans who run afoul of this bureaucratic behemoth have little chance of surviving unscathed.
In large part, this is because the rules are rigged against taxpayers. We have to provide information to the IRS, even though the Bill of Rights supposedly protects us from self-incrimination. We are guilty until we prove ourselves innocent, even though our Constitution -- at least in theory -- guarantees the presumption of innocence. And heaven forbid you scribble a little message in the margins of your tax return: The IRS has the power to fine you for exercising your right to free speech.
Yet even with the playing field tilted in its favor, the IRS wants more power. Because some taxpayers have had the unmitigated gall to challenge this Darth Vader-like bureaucracy, the IRS is targeting lawyer-client confidentiality. More specifically, the agency has filed summonses against a number of law firms, accounting firms and other professional tax advisers demanding that they reveal confidential information about their clients. Why? Because the IRS suspects their clients are seeking to exploit “loopholes” in order to lower their tax bills. And even though tax avoidance is not against the law, IRS officials want to use these firms as deputy tax collectors.More on this story here.
Former commissioner says IRS is overstretched.
While the IRS has made vast improvements to its service in the last few years, according to former IRS Commissioner Charles Rossotti, the organization lacks the funding to fulfil its ever-expanding remit. Electronic filing, more advanced technology and “competitive sourcing” hads achieved much, but, he stressed, “We still need money.”More on this story here.
MAKING AMERICAN COMPANIES MORE COMPETITIVE
The World Trade Organization (WTO) has repeatedly sided with the European Union (EU) and ruled that provisions of U.S. tax law provide impermissible “subsidies” because business income from exports is sometimes not taxed at the same rate as other forms of corporate income. More specifically, the WTO twice ruled that the Foreign Sales Corporation (FSC) portion of the tax code violated trade rules, leading U.S. lawmakers to replace FSC with the Extraterritorial Income Act (ETI). But the EU argued that the new law also was an impermissible subsidy, and the WTO subsequently ruled two more times against the United States.
The WTO decisions put the United States in a difficult position. If FSC/ETI is not repealed, the EU has the right to impose more than $4 billion of “compensatory” tariffs every year on American products. These taxes on U.S. exports, which could be as high as 100%, would fall on over 1,800 different products including agriculture, jewelry, steel, machinery and mechanical appliances, wool and cotton textiles, and toys. Yet repealing the law means higher corporate income taxes -- also about $4 billion annually -- for companies that benefit from the law. This seems like a no-win situation.
While not desirable, the WTO decisions could be a blessing in disguise if they spurred much-needed tax reform. The tax code has numerous features that significantly undermine the competitiveness of U.S.-based companies. The bad news is that fixing these problems would “cost” money, at least according to static revenue-estimating models. The good news, in a manner of speaking, is that repealing ETI would generate about $49.4 billion in tax revenue over the next 10 years -- money that can be used to ameliorate the anti-competitive provisions of the tax code.More on this story here.
U.S. FOCUSING ON DUBAI AS FINANCIAL CENTER FOR TERRORISTS
Every day, millions of dollars sluice through bank accounts held in luminescent office towers overlooking the Persian Gulf, testimony to how this old trading port, with its lucrative oil supplies starting to run thin, has recast itself as the ultramodern Switzerland of the Arab world.
But Western law enforcement and intelligence officials say that Dubai’s free-wheeling financial environment -- a mix of modern wealth and ancient commerce -- has allowed the country to become an important crossroads for financing terrorism. U.S. officials are focusing closely on Dubai, looking for ways to stop the flow of terrorists’ funds. But experts say there are daunting difficulties to penetrating the maze.
Dubai’s conduits for terrorist money, experts say, include thriving Russian and Indian organized crime syndicates as well as the emirates’ many free trade zones, which allow the commingling of legal and illegal commerce. But the most significant, elusive conduit is the informal international money-transfer network known as hawala. The emirates, which are about the size of New Jersey, are home to about 50 banks. There are even more hawala operators -- about 80, most of them concentrated in Dubai and many operating out of its fabled gold souk, or market, its storefront windows adorned by strands of intricately braided gold.More on this story here.
GERMANY AND FRANCE TO POLAND AND SPAIN: SHUT UP OR FACE AID CUTS
Germany and France have issued a thinly-veiled warning to Spain and Poland that they risk losing billions of euros of European Union aid if they disrupt talks on a new EU constitution. The tough message came as 25 European leaders began negotiations in Rome on the new constitutional treaty, which they hope to agree by December. The biggest obstacle to a deal is the insistence by Spain and Poland that they should wield similar voting power to larger countries, such as Germany.
José María Aznar, the Spanish prime minister, and Leszek Miller, his Polish counterpart, made it clear on Saturday that they would not accept any treaty which reduced their influence. Their position has infuriated Gerhard Schröder of Germany and Jacques Chirac of France, who both support the draft treaty drawn up last June by Valéry Giscard d’Estaing’s European Convention.
Mr Schröder has already warned that his country is tired of being the EU’s “milk cow”, especially in view of the costs of rebuilding eastern Germany and the country’s precarious economic situation.More on this story here.
CFP TO CO-HOST TAX COMPETITION ROUNDTABLE IN OTTAWA ON OCTOBER 13
The Center for Freedom and Prosperity has announced the speakers for a Tax Competition Roundtable to be held in Ottawa Canada on Monday, October 13. The Roundtable is co-sponsored by the Heritage Foundation.
The Roundtable will coincide with the OECD’s Global Forum on International Tax Policy, which will take place October 14-15. The CFP event is designed to educate policy makers and hopefully will hinder the OECD’s effort to undermine economic liberalization. The Roundtable is bringing together leading international tax experts to discuss how best to preserve tax competition, financial privacy, and fiscal sovereignty. An OECD representative has been invited to participate in the Roundtable.More on this story here.
SCOTTISH GENTRY HIDE LAND OWNERSHIP IN TAX HAVENS
Research by the Sunday Herald and the independent research organization “Who Owns Scotland” has discovered that at least 1.1 million acres of Scottish land is owned by companies based in offshore tax havens and nominee companies that hide true ownership. Another 2.5 million acres, 13% of Scottish land, is held in private trusts that help their owners avoid paying tax.
The investigation has established that dozens of Scotland’s largest estates are owned and registered “offshore” in so-called tax havens in “low” or “no tax” jurisdictions such as the Cayman Islands, Dutch Antilles, Bahamas and Panama, as well as in tax havens still blacklisted by the OECD including Liechtenstein, Andorra and Liberia. These countries charge virtually no tax to companies and guarantee the anonymity of ownership.
Nominee companies hide true ownership. In the case of the Buccleuch estate, the largest private land holding in Scotland, 99.7% of the shares are owned by a nominee company which has not traded since its incorporation in 1992, with a total of four £1 shares owned by four Edinburgh lawyers. While these companies pay corporation taxes, it is estimated that millions of pounds of tax revenue are lost amid the sheer volume of cash that flows in and out of the UK via complex networks of companies and trusts. While these estates avoid paying millions in tax, they also apply for public grants and subsidies for housing improvements, forestry, agricultural and environmental schemes.More on this story here.
CANADIAN CITIZENS EXEMPTED FROM A U.S. PLAN TO TIGHTEN BORDER SECURITY
Canadian citizens are exempt from a U.S. plan to tighten border security through increased screening of foreign visitors, Homeland Security Secretary Tom Ridge said Friday. Ridge and Canadian Deputy Prime Minister John Manley emphasized the U.S. policy to exempt Canadian citizens from the Visitor Immigrant Status Indication Technology (VISIT) system approved by Congress could change as implementation plans solidify.
The VISIT system is scheduled to take effect at airports and seaports starting next year, and at land border crossings at the start of 2005. Manley has expressed concern the system would jam the land border crossed by 200 million people each year by requiring Canadian citizens who now simply show their passports to fill out forms or undergo time-consuming screening for entry-exit records.
Most of those who drive across the border are Canadian and U.S. citizens, and a joint statement issued by Manley and Ridge said citizens of both countries “would not be subject to the U.S. VISIT program under current U.S. policy.” Ridge stressed that U.S. policy regarding the border with Canada must be practical, taking into account the important economic and social ties they share.More on this story here.
WASHINGTON IS ACCUSED OF “DIVIDE AND RULE” IN CARIBBEAN
President George W. Bush’s recent invitation to meet some Caribbean leaders for a working breakfast is being viewed as another of Washington’s attempts to divide and rule the region, as the administration seeks more bilateral agreements to counter opposition to its global policies. At least six Caribbean leaders were not at the meeting, leading to suggestions in the region’s media that their exclusion follows from their refusal to sign bilateral agreements with Washington to exempt U.S. nationals from the jurisdiction of the International Criminal Court (ICC).
It has been obvious for “some time” that Community countries hold divergent views on various U.S. policies, said Vaughan Lewis, a lecturer at the Institute of International Research of the University of the West Indies. He recalled that the region had appeared divided on issues of offshore banking raised by the OECD when it was felt that Barbados had broken ranks, even though Bridgetown later denied the allegation. Another divisive issue was the region’s position on the Iraq war, when some states, notably St. Vincent and the Grenadines, claimed that since some of their nationals might be fighting in Iraq, they would have to show a certain degree of sympathy, says Mr. Lewis.
Washington has provided considerable financial assistance to the mostly island states, mainly through its Caribbean Basin Initiative (CBI) under which garment producers, for example, are able to export their products duty-free into the U.S. market. In addition, Washington has anted up millions of dollars to help the region fight the illegal drugs trade.More on this story here.
SOUTH AFRICAN OFFSHORE AMNESTY UPDATE
There is going to be an extension of the November 30 offshore amnesty deadline -- or so everyone seems to assume. But this is all conjecture and there is not even a hint of an extension from the SA Revenue Service at this stage. This week the long-awaited offshore amnesty regulations finally made it into the Government Gazette.
There has been a stream of applications to the amnesty unit. Certainly the controversies at dinner parties and on the golf course have died down a bit. That chap who said he was going to ride it out is now quietly phoning a tax adviser. Applications for amnesty will be considered in detail to make sure that unlawful money does not get laundered. The number of applications are such that, even if the deadline expires on November 30, it is going to take ages to get the whole process completed.More on this story here.
INVESTMENT BANKERS HEAD BACK TO RUSSIA IN SEARCH OF RICH M&A PICKINGS
Five years after their spectacular retreat from the Russian market following the 1998 debt default, investment bankers are pouring back in, their eyes fixed on even bigger prizes than before. From financial institutions to telecommunications and consumer goods groups, Russia has an abundance of companies seeking a foreign partner. And the tinsel of opportunity has attracted Wall Street and the City of London, including investment banks UBS, Morgan Stanley, Credit Suisse First Boston and Goldman Sachs.
With worldwide mergers and acquisitions at their lowest level since 1997, Russia represents an untapped revenue stream for starved corporate financiers. “There are billions of euros of value in Russian companies that will be released as transparency improves and confidence follows,” says Peter Weinberg, chief executive of Goldman Sachs Europe. Russian M&A activity has increased almost fourfold this year and the country is the 12th largest provider of M&A fees, according to Dealogic. Since the currency devaluation of 1998, the RTS stock index has increased more than 14-fold. To cash in, western investment banks are increasing their presence in the area.
For western bankers, the differences in M&A styles can be challenging. Russian companies are notorious for doing deals on their own, or sometimes with help from a small, local firm. To bridge the cultural gap, some banks have chosen joint ventures with a domestic partner. And unlike other regions where it can be advantageous to work for a few select clients, in Russia, investment banks are reluctant to invite wealthy and powerful oligarchs on to their advisory boards. “The danger of picking sides in Russia is that it is a very small country for the business world and you can end up alienating a revenue source,” says one investment banker.More on this story here.
US INTEREST RATES RISE AFTER JOB GAINS REPORT
U.S. Treasury prices fell abruptly on Friday after jobs data showing the first employment gains in eight months caught the market off guard. Despite lingering signs of labor market weakness, the 57,000 jobs added to U.S. payrolls in September hinted at a possible turnaround in the long-slumping labor market. Analysts had been looking for a drop of 30,000 jobs.
The shock rise prompted a surge in bond yields, with rates on the benchmark 10-year note jumping to 4.20% from 4.00% late Thursday. Stock markets reacted exuberantly to the news. Eurodollar futures dived as the market began to worry once again about how soon the Federal Reserve might start to tighten policy. It was the fourth-largest one-day sell-off in government debt this year.
The Federal Reserve released figures late Thursday that showed foreign central banks stepped up their purchases of U.S. debt last week despite the slide in the dollar. Offshore central banks bought a hefty $12.1 billion in Treasuries and agencies, taking their holdings at the Fed to a record $980 billion as of Wednesday. There has been speculation that the G7’s call for more flexible exchange rates would dissuade Asian central banks from recycling their trade surpluses into U.S. dollar-denominated debt, but so far there has been scant sign of such a shift.More on this story here.
UNDERSTANDING THE USES OF WILLS, LIVING TRUSTS, BYPASS TRUSTS
Q: Which is better, a living trust or a bypass trust? I own my home and a few stock investments.
A: I think what you are really asking is whether a living trust or a will is better. But before I answer that, it is important to note the differences between living and bypass trusts. A living trust is a revocable trust created while a person is alive. It is simply an ownership arrangement where property is held in the name of a trustee rather than in the name of the person who really owns the property.
A bypass trust is typically an irrevocable trust created when a married person dies, and it can be created by a living trust or by a will. It is not “better” or worse than a living trust because the two are very different from each other.
If you want your heirs to avoid probate, a living trust is the way to go. If you are disabled or elderly, you can benefit from a living trust now because you can name a person or trust company to manage your financial affairs. If you are wealthy and want privacy, a living trust can avoid public disclosure of your property. Placing the out-of-state property located in a living trust can avoid an expensive probate proceeding in another state. A living trust may make it harder for the unhappy heir to win a lawsuit contesting the estate dispersion’s terms.More on this story here.
LIFE INSURANCE: SHOULD YOU CASH OUT BEFORE CASHING IN?
The partnership between the marketing gurus and actuaries has seen massive growth in the number of life assurance products, and has made the corporations they work for immensely wealthy. The sales force will sell you products that promise wealth and riches in your retirement. But, the problem is you will be worth more dead than alive.
Of course, when you are a young breadwinner in a new marriage, with a family and lots of responsibilities you must have adequate life cover. Very few people would “rest-in-peace” knowing that if their income was lost their family would lose their home, car and financial stability. Raising children is hard enough, but made much harder if you are the surviving spouse with debt, and an insufficient salary. However, having survived the trials of work, play and parenthood, most of our mature clients have more life cover than they had when they were thirty, and this does not make sense at all.More on this story here.
THE HIDDEN COSTS OF MUTUAL FUNDS
BERMUDA: What is the real cost of purchasing and owning a mutual fund? Many local mutual fund investors are not really sure, even if they are truly conscientious and read all of the fine print in the investment materials. Part of the information problem is the lack of sophistication of offshore Internet mutual fund reporting, particularly compared to the US reporting standards.
All mutual funds must issue a prospectus that tells you everything about the mutual fund structure, investment policy, managers, administrative costs, sales commissions, risk of capital markets and so on. What the prospectus does not do is compute for you the real cost of owning a mutual fund over a period of time.More on this story here.
UK UNIT TRUSTS ADVISED NOT TO DEAL WITH HEDGE FUNDS
A leading adviser has written to unit trust groups urging them not to deal with secretive hedge fund companies. The moves come amid fears that small savers in the UK could be disadvantaged by the activities of those hedge funds that buy and sell stakes in unit trusts. Allenbridge, a specialist in fund analysis, issued its plea after growing increasingly alarmed by the “market-timing” strategies deployed by some hedge funds. Hedge funds have different aims, some acting to protect the capital of their wealthy clients, while others promise above-average returns.
By moving large amounts of money in and out of unit trusts, hedge funds can exploit minute mispricings. The practice is not illegal, but it is widely regarded as unethical because it harms the interests of long-term unit-holders by reducing their total returns. The managing director of Allenbridge says in a letter to top unit trust groups that the practice of market-timing raises issues of conflict of interest. “If we cannot get an assurance that you will not allow this, we will remove your funds from our buy list,” he says.
The warnings to unit trust groups come against the background of the latest scandal to hit Wall Street. Eliot Spitzer, the New York attorney general, led an investigation which found that mutual funds and hedge funds there had colluded illegally, to the detriment of small investors.More on this story here.
BRAZIL TAX ABATEMENT SCAM EXPOSED
The alleged scam involved public employees deleting company debts from computer files. A number of people have been arrested and the police are double-checking tax records in other parts of the country.
By all accounts, this was an audacious and lucrative scam in which federal employees are said to have charged Brazilian companies a commission before deleting all record of the debts those companies owed the government by way of tax and national insurance contributions. Around $90 million is said to have been wiped from computer files, but the true figure could be as much as four times that according to some estimates.More on this story here.
ID THEFT AND COUNTERFEITING UNDERMINE INTEGRATED TERROR WATCH LISTS
Despite the government’s efforts to integrate dozens of terrorist watch list databases, terrorists may still be slipping through major cracks in homeland defenses by stealing identities and using computers to create fraudulent travel documents, officials told Congress.
Testifying before the House Select Committee on Homeland Security, Ronald D. Malfi, director of the General Accounting Office’s Office of Special Investigations, said that during the past three years, his staff has successfully created fraudulent identities and documents on home computers that allowed officials to do everything from entering the U.S. from foreign countries to buying firearms and gaining unfettered access to government buildings. “We created fictitious identities and counterfeit identification documents, such as driver’s licenses, birth certificates, and Social Security cards ... using inexpensive computer software and hardware that are readily available to any purchaser,” said Malfi. “In March 2002, we breached the security of four federal office buildings in the Atlanta area using counterfeit law enforcement credentials to obtain genuine building passes, which we then counterfeited.”
Lawmakers and federal homeland security experts argued in favor of wider deployment of biometric technologies and standardization of driver’s licenses throughout the country. Currently, 21 states do not require proof of legal residence to get a driver’s license. In addition, there are 240 variations of driver’s licenses used throughout the 50 states. California and New Mexico also issue valid driver’s licenses to noncitizens, and Arizona is debating the issue.More on this story here.
CATO INSTITUTE: MORE SURVEILLANCE EQUALS LESS LIBERTY
Now that two years have passed since the trauma of the September 11 catastrophe, it is a good time to take a step back from the politics of the moment and take stock as to how our policymakers have responded to the threat posed by terrorism. Sending American soldiers to Afghanistan was a decisive move by President Bush -- because it was going right to the root of the problem, which is Osama bin Laden, his elite henchmen and his training camps.
The war on the home front also has been aggressive but in many ways misguided. The assumption has been that there was simply too much liberty and privacy in America -- and that federal law-enforcement agencies did not have enough power. To remedy that perceived problem, policymakers rushed the USA Patriot Act into law. The Patriot Act was designed to reduce privacy and increase security. It has succeeded in at least reducing privacy.
Financial privacy is essentially gone. The feds have turned banks, brokerage houses, insurers and other financial institutions into state informers. Those firms must notify the Treasury Department about “suspicious” transactions, and the government can subpoena your checking-account records even if there is no evidence of wrongdoing. Even though the feds were notified about several of hijacker Mohammed Atta’s financial transactions before September 11, no action was taken. But in the logic of the public sector, that failure means the government was hobbled by insufficient money and insufficient power. Thus, the Treasury Department is now engaging in more surveillance.More on this story here.
THE COMING U.S. NATIONAL ID CARD
A series of articles published by WorldNetDaily.com this week have proven, beyond a shadow of doubt, that Americans will soon have to endure more of the kind of statism normally reserved for despotic regimes in the Third World. That outrage will come in the form of a national ID card.
The crux of the articles is about granting driver’s licenses to illegal aliens, which, according to one immigration-reform group, is occurring in many more states than previously believed. So what, you may ask. What does it matter if illegal aliens get a driver’s license? If illegal aliens possess a driver’s license, then there really is no way to find out that person’s legitimate country of origin. How much harder will that make it for U.S. and international authorities to track terrorists who were smuggled into California long enough to apply for, and receive, a legitimate driver’s license?
What is the obvious answer? “Some statist at Homeland Security will come up with a national ID card,” my friend says. I think he is right.More on this story here.
INVESTOR RESOURCE: STOCKCHARTS.COM FREE CHARTS
In is invariably interesting to break the divide the universe of stocks into meaningful industry sector groups. Invariably one will find that certain sectors are leading the way in the current stock market trend, while others are notably lagging. A theory that explains some of this market behavior is that different sectors are stronger at different points in the economic cycle, and investors will try to anticipate economic effects. StockCharts.com’s free charts are designed to give you a taste of their offerings. Sectoral charts are available here.
BAHAMAS MAN INDICTED FOR FRAUD AGAINST NYC HEDGE FUND
Viktor Kozeny was indicted last week in New York on charges of stealing $182 million from clients of Omega Advisors Inc., a New York-based hedge fund company. Kozeny, a 39-year-old Czech financier, has lived in The Bahamas since 1993. This is the first criminal action to grow out of a long-running civil dispute between Kozeny and several prominent U.S. investors. The charges are felonies punishable by up to 25 years in prison.
The current indictment grew out of a deal Mr Kozeny made with the president of the former Soviet republic of Azerbaijan, which never went through and which left Omega investors holding the bag. Mr Kozeny promised Omega managers that he would buy on their behalf “privatization vouchers” and related options that would have amounted to a controlling stake in the Azerbaijani State Oil Company, were the country to sell it. Instead, prosecutors allege, he simply stole the Omega investors’ money.
According to a report in the Wall Street Journal, “investigators have dogged Mr Kozeny for years, and angry investors have been suing him in a tangle of civil proceedings in the United States and other countries. He has thus far managed to avoid arrest and has lately been living in luxurious Lyford Cay in The Bahamas.”More on this story here.
WAKE-UP CALL -- THE CAYMAN ISLANDS HAVE SURPASSED THE BAHAMAS
The Bahamas was becoming moribund in the financial services industry long before a package of financial legislation was enacted in 2000, according to trade negotiator Raymond Winder, a partner at Deloitte & Touche. “The legislation served to bring the thing to the surface but the reality is before that the Bahamas was slowly dying in the financial services sector,” Mr. Winder said.More on this story here.
FRANCE’S AUTUMN BLUES
France is gripped by an outbreak of introspective morosity. Since the start of September, known in French publishing as la rentrée littéraire, two bestselling books have prompted an outpouring of “declinism”. One title in particular, La France qui Tombe (France is falling over), a tirade against its failings, has provoked a debate about whether France is indeed in terminal decline.
Nicolas Baverez reads like a man in a rage. A conspiracy of interests, he argues, between France’s political class, its bureaucrats and its union leaders is working to defend a state-heavy economic model that has long outlived its usefulness. A system that served France well in the past, in an era of big infrastructure and industrial projects, has never been overhauled in ways that could have helped the country to adapt to the changing world economy. In brief, job-creating enterprise has been suffocated: too many bureaucrats, enforcing too many rules, imposing too many taxes. The result, as he points out, is that the French, whose GDP was 25% higher than Britain’s during the 1970s, have been impoverished: today, it is 9% lower, and the French rank only 19th in the OECD wealth-per-head table.
Perhaps Mr. Baverez’s greatest rage is leveled at the missed opportunity presented by the 2002 presidential election. Such was the support for Jean-Marie Le Pen, the National Front leader, that he evicted the Socialist candidate, Lionel Jospin, in the first round. The electorate, argues Mr. Baverez, was crying out for change. Instead, they got half-hearted “mini-reforms”. It is nonsense, Mr. Baverez writes, to say that France is unreformable: “It is the government which is incapable of conceiving and implementing reform.”
Where Mr. Baverez is clinical in his analysis and unsentimental in style, Jean-Marie Rouart, in Adieu à la France qui s’en va (Farewell to a gone France), transports the reader into an altogether different world of nostalgia for a France long-gone. His is a beautifully written lament for a different age, and idea, of France.More on this story here.
French villages with funny names form united front against teasing.
Tired of being sniggered at, people from French villages whose names sound like “Filthy Swine” and “My Arse” plan a weekend get-together in a tiny hamlet whose name means “Eat Onions” in old French. The idea, local newspapers say, is for the villagers to form a united front against constant teasing and forge a new pride in their colorful home town names.
Quirky French place names are nothing new to some English-speaking tourists who several times a year make off with signposts from the southwestern town of Condom.More on this story here.
POLITICS IS A BIG TURN-OFF FOR SWITZERLAND’S YOUTH
Recent studies show that young people in Switzerland and across Europe are becoming less and less interested in politics. About 28% of 18-25 year olds in Switzerland say they will definitely vote in the parliamentary elections on October 19, according to a recent survey. About 25% of 18-24 year olds voted in the last parliamentary elections in 1999. According to a comparison of 28 nations, young people in Switzerland identify with their country the least and are rather apathetic about their homeland. They also showed below-average political knowledge and lacked awareness of major issues such as immigration. In an attempt to reverse the trend, hundreds of delegates -- including young Swiss -- gathered to discuss the problem in Lucerne.
On a more positive note, Swiss teenagers expressed a very high level of trust in their government in comparison with other countries. Some analysts claim young people do not feel the need to be active in politics because they believe politicians have everything under control.More on this story here.
THE EURO’S DEFICIT RULES ARE APPARENTLY UNENFORCEABLE YET UNCHANGEABLE
When the prime ministers and presidents of the European Union assemble in Rome this month to start discussing a new constitution for the EU, they will be preparing to do battle on many issues: the relative voting power of countries in the Union; the future of European defence policy and criminal law; the place of religion in a declaration of European values. But one element of the draft that will very probably be nodded through without much ado is Article III-76, on “excessive government deficits”, along with its associated protocol, which lays out a number of fiendish punishments for countries that run budget deficits of more than 3% of GDP.
The excessive-deficit procedure already exists in European law and is being put into the constitution, with minor modifications. This is a very peculiar state of affairs. No less an authority than Romano Prodi, the head of the European Commission, has called the current rules “stupid”. The governments of France, Germany and Britain have all made it clear that they think they should be made more flexible. The whole thing has been falling apart anyway, as France and Germany have repeatedly breached the 3% limit. The drafting of a new constitution would have provided an ideal opportunity to change the rules and make them more realistic. Instead, the entire cumbersome procedure is being set in the stone of constitutional law.
The problem may sound technical but has profound political implications. The excessive-deficit procedure embodies the fundamental political issue facing the EU: how much sovereignty are countries truly prepared to hand over to Brussels? Jean-Pierre Raffarin, the prime minister of France, the country most at risk of being fined, has spoken irritably of not bowing to the wishes of pen-pushers in Brussels.More on this story here.
HOW GOVERNMENTS MANIPULATE THE GOLD MARKET -- A PRIMER
After gold trading closed in New York on October 3 $13.70 lower from the previous day, a Reuters article gave the following reason for gold’s rout: “Gold tumbled 3.5 percent in New York on Friday as the first rise in U.S. payrolls in eight months lifted anxiety about economic growth and undermined the safe-haven case for bullion days after it had hit seven-year highs.”
Their point of view sounds plausible I suppose, though I think the recent seven-year highs in gold are far more telling about gold’s prospects than any one month’s economic data. But regardless of whether Reuters conclusion makes economic sense or not, the payrolls data was released at 8.30 a.m., and gold’s sell-off did not start until 12.10 p.m. Therefore, did we see a delayed knee-jerk reaction to the data? Or was some other factor at work?
In my view, it was clearly the latter. It is now becoming a well-known “secret” that governments are trying to manage the gold price by actively intervening in the gold market, and last Friday’s trading was a good example of their fiddling with the free-market process. Here are some pointers for everyone interested in learning how governments intervene in the gold market.More on this story here.
What is happening to America’s gold?
This past December I wrote about my discovery of a discrepancy between two reports that tracked the status of the US Gold Reserve. The Federal Reserve prepares both reports. The first report is the balance sheet of the Federal Reserve, and the item of note is an entry entitled “Gold Stock”. Because of its ownership of the Gold Certificates issued by the US Treasury, the Federal Reserve has a claim to the total US Gold Reserve, reportedly 261.6 million ounces. Therefore, this liability of the US Treasury -- evidenced by its Gold Certificates to pay gold -- is an asset on the balance sheet of the Federal Reserve.
The second report prepared by the Federal Reserve presents the US Reserve Assets, which records all of the Treasury’s international monetary assets. These include the Treasury’s holdings of foreign currencies, SDR’s issued by the International Monetary Fund, and gold. The item of note in this report is also the gold stock, which again is this same US Gold Reserve. Thus, it is clear that the gold held by the US Treasury -- the US Gold Reserve -- does double-duty.
The important point is that last December I observed that the weight of gold in these two reports was different, and I explained why each weight should always be identical. They are the one and the same hoard of gold, and there is a body of federal law saying so. Furthermore, we have been repeatedly informed by various Treasury and Federal Reserve officials that the US government does not intervene in the gold market, that it does not trade gold for its account or the account of others, and that the US Gold Reserve remains in storage at Fort Knox and the other depositories. If their contention was true, then why are these two reports showing different weights for the same hoard of gold?More on this story here.
THE MYTH OF INSUFFICIENT GOLD
One of the standard arguments against a gold standard is this: “There’s not enough gold to facilitate all of the transactions in a free market economy.” This is an old criticism. It was a lot more popular before the desktop computer industry started cutting prices every year, while increasing product quality. These days, people expect falling prices in desktop computers. What if they expected price cuts in all other industries?
If you have ever wondered what would happen if a relatively fixed supply of above-ground gold were the primary medium of exchange, this essay may help clarify things.
Most people have no conception of what you are about to read. They are not interested. They do not know that their futures will depend heavily on the answers to these questions that will be adopted by the Federal Reserve System’s policy-makers. They think, “I cannot be bothered with monetary theory.” Therein lies your investment opportunity.More on this story here.
THE ADVERSE IMPACT OF TAX HARMONIZATION AND INFORMATION EXCHANGE ON THE U.S. ECONOMY
A November 2001 paper from the Center for Freedom and Prosperity that is still highly relevant today.
The United States is the world’s biggest beneficiary of jurisdictional tax competition. A modest tax burden, combined with advantageous tax and privacy laws for nonresident aliens, has helped attract more than $9 trillion of foreign investment to the U.S. economy. This translates into more jobs and higher incomes for American workers. European-sponsored tax harmonization initiatives would undermine this competitive advantage. At the behest of uncompetitive nations like France, international bureaucracies want to give high-tax governments the power to tax income earned in low-tax jurisdictions. This is a direct threat to America’s economic interests. Tax harmonization proposals such as “information exchange” would make America much less attractive to the world's investors and likely would result in a significant loss of capital.More on this story here.
U.S. TO RELEASE NEW $20 BILL
The United States Treasury will release a new $20 bill this week as a result of an increase in counterfeit US money. Newly designed $50 and $100 are anticipated for release in 2005. The new $20 bill, which will be released on October 9, will feature background colors and updated security features designed to make it harder to counterfeit and easier to authenticate. Diverting from the traditional US greenback, the new notes have subtle green, peach and blue features in the background.
The notes retain three security features first introduced in the late 1990s: the watermark (a faint image similar to the large portrait, part of the paper itself and visible from both sides when held up to the light), the security thread (also visible from both sides, embedded in the paper and reading “USA TWENTY” with a small flag), and the color shifting ink in the numeral 20 in the lower right corner on the face of the notes. This ink changes from copper to green when the notes are tilted, and is more dramatic on the new-design notes.
The redesign also features symbols of American freedom: a blue eagle in the background to the left of the portrait, and a metallic green eagle and shield to the right of the portrait. As is the case with all US currency, the new notes will be interchangeable with US currency already in circulation. All denominations of notes, new or old, will continue to maintain their current value.More on this story here.
EXPECT TERRORIST ATTACKS ON GLOBAL FINANCIAL SYSTEM SAYS CONFERENCE SPEAKER
FREDERICTON, NEW BRUNSWICK: A successful terrorist attack on America’s financial infrastructure could bring the US and global economies to a standstill, and the real surprise is that it has not been attempted yet. “We’ve gone after al-Qaeda’s finances, and it would strike me that in a sense, we can expect retaliation in kind,” Dr. Phil Williams said during his keynote address at the annual conference of the Centre for Conflict Studies at the University of New Brunswick in Atlantic Canada.
Williams says the attack, when and if it comes, would likely focus on what he calls key nodes in the US financial infrastructure: Fedwire and Fednet. Fedwire is the financial funds transfer system that exchanges money among US banks, while Fednet is the electronic network that handles the transactions. The system has one primary installation and three backups.
“You can find out on the Internet where the backups are. If those could be taken out by a mix of cyber and physical activities, the US economy would basically come to a halt,” Williams said. If the takedown were to include the international funds transfer networks CHIPS and SWIFT then the entire global economy could be thrown into chaos.More on this story here.
No techno fix for crime or terrorism cops.
The Tamil Tigers were early adopters of the Web, and use their deep knowledge of search engines to help drown out their critics. al-Qaeda sleeper cells set up online chat rooms to keep in touch. Drug dealers were among the first and most exuberant users of cell phones and pagers. Law enforcement also uses increasingly networked tools to combat criminal activities, but they cannot just Google their way through a single mass database searching for patterns of criminal acvitity.
Peter Gill, a leading British scholar and author on intelligence and security issues, said even if it was technically possible to link all of the islands of information together into one Great Big Database, it would be pointless. “GIGO still applies,” he says. “Garbage in, garbage out. It’s still the dominant rule of computer systems.” Gill says the further the information is from its source, the more likely it is simply wrong.More on this story here.
INTEL’S GROVE WARNS ABOUT OUTSOURCING
Intel chairman Andy Grove said that software and serices were likely to suffer the same fate as the US steel and chip industry. The USA will lose market share to foreigners unless the Federal government acts fast to fix the problem, Grove said.More on this story here and here.
PANAMA’S MINISTER OF FOREIGN RELATIONS ATTACKS THE OECD
Jose Miguel Aleman launched a strong attack on what he called the OECD’s “imperialistic agenda” at the International Bar Association Conference last week in Durban, South Africa, calling for a level playing field between OECD members and offshore economies, and distinguishing between countries such as Panama and jurisdictions which are dependent territories of larger states:
“The Panamanian economy has consolidated itself as an international services provider thru the establishment of a banking system, a regime for insurance companies, the existence of the largest duty free zone in the western hemisphere, a stock market, corporate legal principles which were born out of those in the United States such as the Law of Corporations, a trust and a leasing system, a shipping registry which is the largest and most advanced in the World, and the existence of legal principles for the promotion and protection of private investment, intellectual and industrial property.
“Panama is, for those and other reasons, a real international provider which collects a significant amount of income from the different duties and taxes collected from those activities which in no case are by any means fictitious or unregulated, as the OECD reports have repeatedly reported.”
He concluded: “Panama will cooperate with the OECD in matters of transparency and exchange of tax information because it wishes to preserve its image, competitiveness and integration in the global world. Panama does not want to be labeled anymore. However, this cooperation will be based upon the principle of level playing field. Any and all measures proposed by the OECD must be implemented by, both, members and non-members of the OECD.”More on this story here. Complete speech here.
Panama: Pathway to offshore protection and privacy.
“The authorities and the banking industry are very aware of the prudential risks associated with money laundering and have in place adequate safeguards to deter improper use of the banking system for illegal purposes. While no system is infallible, the mission team concludes that the legal, regulatory and supervisory systems in place in the banking sector compare favourably with internationally accepted prudential supervision practices ... The legal and regulatory requirements are strict and many requirements exceed those in place in industrial countries.” Which jurisdiction is being referred to? Bermuda? The Channel Islands? The remarks, actually, are from a 2001 report published by the IMF about Panama’s compliance with established international standards for an offshore banking system./
The positive tenor throughout the report on Panama underlines the fact that the jurisdiction is conscious of the need to have sound financial regulatory and supervisory systems in place. Equally, the jurisdiction has won high praise for its money laundering controls which are also mentioned in the IMF report: “The legal and regulatory requirements are strict and many requirements exceed those in place in industrial countries ... the level of supervision dedicated to anti-money laundering is exceptional and under different circumstances disproportionate relative to the risk posed by money laundering”.
Against this favorable background Panama has continued to attract business requiring trusts, foundations and offshore companies (known also as IBCs), these being the core offshore services offered by the jurisdiction.More on this story here.
OECD TAX EVASION PLAN FACES COLLAPSE
Member countries of the OECD, have failed to reach agreement on a key element of a tax evasion crackdown initiative they will be discussing with representatives of offshore tax havens in Ottowa next Tuesday. Switzerland and Luxembourg have objected to proposals for improved access to bank information that leading OECD members, including the US and the UK, say is crucial to the fight against money-laundering and tax evasion.
The split among OECD members is threatening to undermine the organization’s efforts to persuade tax havens to stick with the initiative. At the September meeting of the OECD’s governing council, Switzerland and Luxembourg blocked agreement on a common definition of tax fraud that could apply when exchanging bank information between nations. They also objected, together with Austria and Belgium, to a deadline of December 2005 for access to bank information for verification of residents’ tax liabilities.
The OECD initiative has been damaged by the EU’s decision in June not to insist on a commitment from Austria, Belgium and Luxembourg to exchange information about non-residents’ savings income from 2005. Glenroy Forbes, chairman of the International Trade and Investment Organization, which represents offshore centers, said: “The OECD has praised our co-operation but is sadly unable to deliver its own key members.”More on this story here.
GUERNSEY INVESTIGATING REPORTS OF U.K. “CRACKDOWN” ON OFFSHORE ACCOUNTS AND TRUSTS
The Guernsey Advisory and Finance Committee is investigating reports of an Inland Revenue crackdown on offshore bank accounts and trusts. The Sunday Times said that the Exchequer was set to receive a £1 billion windfall following an investigation into suspected tax evasion within the high street banks in Guernsey, Jersey and the Isle of Man. It claimed that the Revenue was conducting its first coordinated attempt to end evasion by offshore trusts and accounts.
More than 20 banks and building societies were allegedly being investigated, though the Revenue declined to comment when contacted by the Sunday Times. The A & F Committee said that it had heard nothing of a crackdown.More on this story here.
THE REBEL PRINCESS OF MONACO
For the gossip mags, Princess Stephanie of Monaco is the gift that just keeps on giving. Here she is, newly married to a circus acrobat and living in a caravan somewhere near Geneva, a lifestyle choice that might seem more remarkable if she had not already had an affair with a married elephant trainer, a series of tumbles below the royal stairs and three children to various of her bodyguards.
You could say that Stephanie’s romantic life is chaotic; indeed, there is supposed to be a 400-year-old curse on the Grimaldis that condemns them to be forever unhappy in love. At the same time, there is something truly impressive about her body count. Other women of her age complain that they never seem able to meet men.
Actually, it is not Stephanie’s love life brushes that has maddened Prince Rainier. It was her brushes with the Riviera’s virulent criminal world. Monaco, it must be remembered, is one of the richest countries in the world only because it offers a tax haven to the very rich, many of whom are also very dodgy. A recent French judicial report concluded, among many damning accusations, that the famous state-owned casino was used for laundering money. Rainier himself is a director of the casino. All this is not new; it was not far past the start of the last century when Somerset Maugham described the principality as “a sunny place for shady people”. Until recently, however, the Grimaldis had never been tainted by any hint of wrongdoing.More on this story here.
FATF GIVES ISRAEL ALL CLEAR
The OECD Financial Action Task Force on Money Laundering (FATF) will cease its money laundering monitoring of Israel, FATF’s representative informed the Ministry of Justice. The move follows a decision taken at the FATF plenary meeting in Stockholm last week that Israel meets international standards for combating money laundering.
Ministry of Justice director-general Dr. Aaron Abramovich said in additional to the economic dangers that hang over countries on the FATF list of Non-Cooperative Countries and Territories, Israel’s inclusion in the list limited its ability to influence the creation of international anti-money laundering norms, particularly as they relate to the financing of terrorism.More on this story here.
FATF says Philippines still slack on money laundering.
An international list of nine nations seen as slack on money laundering remained unchanged after a meeting of the Financial Action Task Force, but two countries, Indonesia and Ukraine, were hailed as having made progress, FATF President Claes Norgren said. “Progress has been registered in Indonesia, and to a lesser degree in Ukraine,” he said. The nine countries on the uncooperative list are Ukraine, the Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines.More on this story here.
FATF team to review Philippines’ anti-money laundering program.
An FATF team will arrive in the Philippines this month to review the implementation of the anti-money laundering law, Finance Secretary Jose Isidro Camacho said. The review is part of, what is turning out to be, a long process of taking the Philippines off the Paris-based group’s list of countries regarded to be non-cooperative in the fight against money laundering, he said. Presence in this list is widely expected to turn-off international investors and makes it difficult to make financial transactions with anyone in the country.More on this story here.
BARBADOS NEEDS LESS RED TAPE TO ATTRACT MORE FOREIGN INVESTMENTS
You hear the lament the world over, “bureaucratic inefficiency” and “government red tape”. Even in our little paradise of Barbados, critics cite the slowly churning wheels of government agencies. Add to this the perception by some that doing business in the island is overly expensive. Although many may say, “that’s how government works, why complain”, were these perceived faults capable of hurting Barbados in the face of impending globalization and market liberalization?
Some of the businessmen operating the International Business Corporations “will tell you -- though privately for fear of work permit repercussions -- that Barbados has not only a reputation of being a jurisdiction in which operating costs are very high ... but worst of all, their commercial activity is hindered by far too much red tape and bureaucratic inefficiency,” stated local businessman Peter Morgan.
An American businessman attending the lunch, who declined to provide his name, noted that both the US and Europe last year experienced a relocation by various corporations of hundreds of thousands of service-related jobs to India where human resources, telecommunications and feasible costs made such moves attractive. While Barbados should position itself as an alternative market for some of these jobs, the businessman believed that significant changes needed to take place in the areas of governmental procedures, costs, telecommunications and human resources.More on this story here.
US PRAISES VANUATU IN TACKLING CORRUPTION
The United States has commended steps taken by Vanuatu to regulate its offshore financial sector.More on this story here.
EXPATRIATING BRITS NEGLECTING BANKING PLANNING
A quarter of a million Britons a year leave their homeland for life in pastures new, but do they give a thought to banking abroad? Judging by the television schedules these days, we cannot seem to get enough of the concept of a new life abroad. We all think we know the pitfalls, and maybe we should after watching so many versions of Darren and Sharon moving themselves and their family to Tuscany. Or Umbria. Or wherever.
Britons, of course, are justifiably notorious for not learning the language of the countries they go to live in. But a press release from Abbey National shows that banking in their new homeland is even lower down the list of priorities. Around 250,000 of us head off to foreign climes to work or retire each year, but only a fifth of those will consider banking needs or local tax issues before departure. The retired tend to be more clued up in this field, with 1 in 4 viewing banking as the most important area to consider before the big move. Abbey are at pains to point out that it is far easier to organize your finances before leaving Blighty, especially as you will have quite enough on your hands learning the ropes in a new nation.More on this story here.
AMERICANS’ FINANCIAL PRIVACY AND PROPERTY RIGHTS PLACED AT RISK BY PATRIOT ACT
The Justice Department recently revealed that the Patriot Act is being routinely used to prosecute a wide array of non-terrorist offenses. While many Americans assumed that the Patriot Act only concerned terrorists, the reality is that the act poses a grave threat to (all) Americans’ financial privacy and property rights.
The Patriot Act makes it far easier for the feds to vacuum up Americans’ financial records without a warrant. Banks are now required to gather far more information on their clients -- their background, their sources of income, their financial behavior, etc. Money Laundering Alert, a pro-government newsletter, described one financial provision of the Patriot Act as a “dream-come-true information gathering tool for U.S. agencies,” extending a “welcome mat to the CIA, National Security Agency and other U.S. counterparts” to look at the new financial information on American citizens and others.
The Justice Department is exploiting powers gained via the Patriot Act to confiscate millions of dollars from foreign banks operating in the United States in cases with no terrorist connections or allegations. The Justice Department used the Patriot Act to confiscate the bank accounts of Canadian telemarketers accused of fraud.
The Patriot Act creates other new pretexts to seize private property. In 1998, the Supreme Court ruled that the Customs Service’s routine confiscation of money from international travelers who failed to declare their cash to the government “violates the Excessive Fines Clause [of the Eighth Amendment of the Bill of Rights] if it is grossly disproportional to the gravity of a defendant’s offense.” The Patriot Act effectively overturned the Supreme Court decision by creating a new crime of “bulk cash smuggling.”More on this story here.
U.S. RANKS 18TH BEST IN SURVEY OF CORRUPT NATIONS
Rich countries should end their financial support for corrupt governments and blacklist companies that get caught paying bribes abroad, Transparency International said on Tuesday. Half of developing countries suffer from “a high level of corruption”, and some wealthy nations fare little better, according to surveys of business people, academics and risk analysts by TI.
Bangladesh came in last, at 133, trailed by Nigeria and Haiti as the three most corrupt countries, according to the 2003 Transparency International Corruption Perceptions Index. Rated #1, or least corrupt, was Finland, followed by Iceland and, in a tie for third, Denmark and New Zealand. The United States was 18 on the list, tied with Ireland.
TI’s latest survey noted corruption in rich countries too. Levels of corruption are “worryingly high” in Greece, number 50 on the list, and Italy, ranked 35th, said Laurence Cockcroft, the head of Transparency International in Britain. Several potentially wealthy oil-producing countries stood out for poor scores on the corruption index. Angola, Azerbaijan, Indonesia, Libya, Venezuela and Kazakhstan all ranked among the most corrupt 25% of countries surveyed.More on this story here and here.
BRITISH LAWYERS MUST REPORT TAX EVASION
A British ruling that divorce lawyers must report attempts at tax evasion by couples has the legal system in an uproar, the Times of London said Thursday. In a move that brings a new hazard to getting divorced, Dame Elizabeth Butler-Sloss said barristers and lawyers who fail to report any tax dodging or social security fraud to the National Criminal Intelligence Service (NCIS) risk committing a criminal offence.
The ruling applies equally to the family who pay a builder or nanny partly in cash, and the millionaire with a string of offshore accounts. The judge warned that the effect will be to create “serious delays” in hearing family cases. Dozens of divorce cases had been put on hold in anticipation of the judgment. Lawyers fear more “do-ityourself” divorce settlements as couples seek to avoid an Inland Revenue investigation by not involving solicitors.More on this story here and here.
CANADA TAKING AIM AT LAWYERS IN MONEY LAUNDERING MOVE
The federal government, in response to pressure from the international community, plans to beef up its laws against money laundering by finding a way to expressly include lawyers on the list of entities that must report suspicious transactions. Ottawa will consult with the legal profession in an effort to take its concerns into consideration before introducing any changes to the legislation, Andrée Houde, a spokeswoman at the Department of Finance, said yesterday.
Law enforcement officials said at a money laundering conference in Toronto yesterday that Ottawa needs to amend its laws if it wants to remain in good standing with the international community. The FATF recommended in June that lawyers should be forced to supply information about their clients’ finances. The Paris-based agency is backed by most of the world’s industrialized nations, including Canada. The recommendations made by the FATF must be written into the law books of its member nations.
The government had initially required lawyers to secretly notify authorities if they suspected a client could be laundering ill-gotten funds. But in the wake of enormous pressure from the legal profession, the government scuttled the provision in March. The government had repeatedly portrayed the measure as an indispensable weapon in the battle to identify and prosecute criminals and terrorists. Its unexpected about-face followed two years of opposition from legal groups who argued that the provisions would destroy the age-old principle of lawyer-client privilege.More on this story here.
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