Wealth International, Limited

Offshore News Digest for Week of October 25, 2004

Note:  This week’s Financial Digest may be found here.

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Sixty of the world’s countries are plagued by rampant corruption, defined as a score of less than three on the annual index compiled by Transparency International, a non-governmental organisation. The index focuses on the misuse of public office for private gain. Countries are scored from zero to ten, with ten indicating the least corruption. Once again this year, Finland remains the least corrupt country in the world.

Link here.


Economists and economic journalists do a lot of hand-wringing about America’s budget and trade deficits. They worry that the dollar will plunge and that foreign investors will flee U.S. financial markets. The country is committing the sin of profligacy, it is said, and will suffer for it. But let me make a fearless prediction: The next big financial crisis will not happen in the U.S. Nor will it occur in Europe. No, China is in the biggest danger of a meltdown over the next five years. Within this decade, its financial system will hit a big bump, and the response of China’s political leaders will determine whether the country recovers quickly or slips into depression. Moreover, if a real financial crisis happens in China, the economic and political implications for the rest of the world will be tremendous.

On the surface, this forecast may seem absolutely ludicrous. After all, China has averaged annual growth of almost 10% for the past 20 years -- a faster pace than almost any other country. It is on the verge of making the big jump to being an industrial superpower. And it has run a $100 billion trade surplus with the U.S. in the first eight months of this year alone. Yet if you look back over the last 15 years, it is apparent that financial crises are more likely to hit booming economies than weak ones. The Japanese financial breakdown of the early 1990s came after several years of very strong growth, when it looked like Japan was on top of the world. Similarly, the Asian crisis of 1997 was preceded by several years of huge growth in countries such as Indonesia, Korea, Taiwan, and Thailand. And the bursting of the U.S. tech bubble came after a boom period.

Right now, the Chinese financial system seems to be funding a lot of investment that will never pay off. As we wrote in May, “China is still burdened with a backward financial system that can’t tell a good risk from a bad one -- and often doesn’t seem to care.” As a result, a bubble of unprofitable investments and excess capacity is building up in China. By itself, that is not such a big deal, since capitalist economies regularly overshoot and then retrench. The real issue, though, is that China has built a modern economy on top of a quasi-socialist political system, and it is that hybrid system that could be the key deficiency.

Link here.


The E.U. has decided that it will lift, at least temporarily, the sanctions it has imposed on U.S. goods, now that Congress enacted sweeping changes in corporate tax law earlier this month. But the E.U., which doubts that the new law fully complies with a 2001 ruling by the World Trade Organization, intends to file a new complaint with the WTO, the official said. If the Geneva-based trade body finds that the new law still violates global trade rules, Brussels may reimpose the sanctions, which involve stiff duties on a targeted list of U.S. goods shipped to the European market.

The European move sends two messages to Washington. One is conciliatory, but the other is confrontational, and may suggest that Brussels intends to play hardball in another trade dispute involving the rivalry between Boeing and Airbus. By lifting the sanctions, Brussels is conveying its appreciation for Congress’s efforts in hammering out legislation as required by the WTO ruling. Failure to lift the sanctions would surely have stoked outrage in Congress, which labored for more than two years on the tax bill after the WTO ruled that the Foreign Sales Corporation/Extraterritorial Income Exclusion (FSC/ETI) provisions of the U.S. tax code illegally subsidize exports. Spurring lawmakers to act were pleas by makers of U.S. goods such as shoes, jewelry, carpets, paper and wood products, shipments of which to Europe have been slapped with 12% tariffs authorized by the WTO.

But the bill may not go far enough toward meeting the requirements set by the WTO’s ruling because it phases out the export subsidies rather than eliminating them and contains “grandfather” clauses effectively allowing certain businesses to continue enjoying the illegal subsidies if their contracts were signed early enough. The E.U.’s new strategy may give it a stronger hand to play in the dispute over aircraft, which escalated on Oct. 6 when the Bush administration filed a WTO complaint accusing European governments of illegally subsidizing Airbus, the continent’s airplane manufacturer. E.U. officials were angered that the administration brought that dispute to the WTO, and they have publicly noted the fact that Boeing is one of the major beneficiaries of the FSC/ETI subsidies.

Link here.


As if the US presidential contest was not enough like a horse race, web users all over the world can now bet on the outcome through online futures exchanges that treat politics like corn, cocoa or other commodities. At websites like the Iowa Electronics Markets and Dublin-based Intrade, members can buy contracts predicting that President George W. Bush will win re-election on November 2 -- or sell them off if they think Senator John Kerry will unseat him. Savvy traders can make money along the way as prices fluctuate with the candidates’ fortunes.

On the Iowa exchange, traders gave the Republican Mr Bush a 59.8% chance of winning. On Intrade, Mr. Bush re-election contracts were trading at 59.5, meaning that traders believed Mr Bush had a 59.5% chance of being re-elected. Most national polls this week showed the candidates running at a dead heat or Mr. Bush slightly ahead. Democrat Mr Kerry fared better with a 55.7 price at the Presidential Market, where traders compete for a trip to Washington for the inauguration, but do not wager real money.

The Iowa markets have predicted the winner in all but one election since they were started as a teaching tool in 1988, said Joyce Berg, a University of Iowa accounting professor. With 3,000 participants, the exchange’s 1.4% margin of error over that period is lower than the two per cent average of telephone polls, Prof. Berg said. Markets like these can predict the outcome with a high degree of accuracy because traders examine the evidence critically before making a decision, said Intrade spokesman Mike Knesevitch.

Link here.


Officials from Antigua & Barbuda and the U.S. have failed to reach a bilateral agreement regarding their internet gambling dispute, and reports suggest that the small Caribbean state will now trigger an action leading to the release of a WTO report on the issue. Antigua and Barbuda brought the case to the WTO in 2003, arguing that by restricting the internet gambling activities of US citizens, the U.S. was unfairly damaging the jurisdiction’s economy, in contravention of the General Agreement on Trade and Services (GATS). After the US lost an arbitration proceeding under the trade dispute resolution process of the WTO in March, both sides attempted to reach a negotiated settlement.

However, following four months of negotiations, Dr. Errol Court, Antigua’s finance minister, has revealed that, “We held five face-to-face meetings with various branches of the US government, but ultimately, we concluded that the elements necessary for an amicable resolution would not be forthcoming at this time from the United States.” As a result of the deadlock, the Antigua delegation has taken the decision to release the WTO’s final report, and Dr. Court has indicated that the U.S. authorities have been given ten working days’ notice of his government’s intent.

Link here.


Cuban President Fidel Castro, seeking to rid his country of the currency of his arch-enemy, said Cuba was ending circulation of the U.S. dollar as of Nov. 8 in response to tightened American sanctions. Cubans, foreign residents and tourists will have to use locally printed convertible pesos, equal in value to the dollar, for all cash purchases, a Central Bank decree said. A 10% commission will be charged for changing dollars into the local currency, according to the decree read on a special television broadcast attended by Castro.

“The empire is determined to create more difficulties for us,” he said, referring to Bush administration steps to restrict travel and cash flows to the island nation. The dollar was legalized in Cuba in 1993 after the fall of the Soviet Union plunged the island into deep economic crisis and forced it to open up to tourism and foreign investment. Dollars became the dominant currency and are used to buy most consumer goods in dollar stores that will now only accept the local currency. The decision will effect cash remittances from the U.S., a major support for the cash-strapped Cuban economy that amount to an estimated $1 billion a year, unless they are sent in other currencies. The government encouraged Cubans living abroad to send remittances to their relatives in Cuba in euros, British pounds, Swiss francs or Canadian dollars, to avoid exchange costs.

Castro said his communist government was not banning possession of dollars, just their use in the economy. A four-decade-old U.S. trade embargo against his communist government prohibits the use of dollars in transactions with Cuba unless they are licensed by the U.S. Treasury. Foreign banks were put on guard in May when the Federal Reserve fined UBS , Switzerland’s largest bank, $100 million for illegally transferring freshly printed dollar notes to Cuba and three other countries subject to U.S. sanctions, Libya, Iran and Yugoslavia. Foreign bankers in Havana said this had created serious problems for Cuba to deposit its dollars abroad and renew bills in circulation.

The commission will not affect credit cards payments. Cards issued by U.S.-based banks are not valid in Cuba. Cuba took the first step to curb dollar circulation last year when it banned state corporations from using the U.S. currency in their domestic operations.

Link here.


Switzerland and the European Union have signed a second set of bilateral agreements, as well as a protocol on extending an accord on the free movement of people to the new EU member states. The set of agreements consists of three main accords -- taxation of savings income, combating customs fraud and Schengen/Dublin -- and six accords allowing Switzerland to participate in various European programs in the fields of agriculture, statistics, pension schemes, the environment and the EU’s media programme. It remains to be seen whether the accords will be the last between the two sides. Both sides described the occasion as an “important day” for Swiss-EU relations.

The Swiss People’s Party and the isolationist Campaign for an Independent and Neutral Switzerland have already threatened to force a nationwide vote on one of the most controversial of the nine accords: the Schengen/Dublin treaty which governs closer cooperation on security and asylum.

Link here.

Swiss money funds U.S. presidential elections.

The United States election campaign is being closely followed, and funded, not only by the American people, but also by Swiss companies with interests in the U.S. For Swiss firms, financial considerations play a major part in the decision to support George Bush or John Kerry. If re-elected, the incumbent president could well bring further joy to financial institutions by fulfilling his promise to lighten the tax burden on high-income earners -- a move very much in the interests of the major banks. John Kerry, on the other hand, is in danger of acquiring a “spoilsport” image with his declared intention is to increase taxation on incomes over $200,000.

Link here.


The Bureau of Diplomatic Security’s investigative efforts lead to the arrest of a Miami Beach Police Department “Top Ten Fugitive” in Belize City, Belize. Cuban-born fugitive Reinaldo Silvestre is wanted on charges of organized fraud, aggravated battery, practicing medicine without a license, and grand theft. These charges stem from a series of surgeries he performed without a license that resulted in permanent disfigurement of the victims. He failed to appear in court and a warrant for his arrest was issued in September 1999.

The Bureau of Diplomatic Security was contacted by the Miami Beach Police Department when they received an anonymous tip that Silvestre was teaching and practicing medicine in Belize City. The Diplomatic Security special agent assigned to the U.S. Embassy in Belize coordinated with the Belize police to locate Silvestre. A Belizean magistrate signed an arrest order and the Belize Police arrested him. Silvestre will remain in Belize Police custody until he is formally extradited to the United States.

Links here and here.


Three years after the horrors of September 11, 2001, the events of that day continue to overshadow ties between Switzerland and the Bush administration. The “war on terror” has led to tighter controls and regulations in Switzerland, affecting not only the banking and export sectors, but also tourists and mobile-phone users. Since the beginning of the month, all Swiss citizens entering the US have had to have their fingerprints and photograph taken. To comply with State Department requirements, Switzerland says it will also start issuing biometric passports containing face recognition data from the end of next year. Even obtaining a visa for the US has become an increasingly difficult process.

But differences of opinion in some quarters have not posed an obstacle to strengthening links between the two countries, especially in the fight against terrorism. The tracking of Swiss prepaid mobile phones used by al-Qaeda members has resulted in several high-profile arrests, including that of Khalid Sheikh Mohammed and other operatives suspected of involvement in the September 11 attacks. The Swiss authorities are now closing the loophole that allowed customers to buy prepaid phones without registering their details.

As of last month, the economics ministry said it had frozen 82 bank accounts suspected of links to Osama bin Laden, al-Qaeda, or the Taliban, containing around SFr34 million ($28 million). On the business front, exporting goods from Switzerland to the U.S. has become more difficult and much more bureaucratic. But it has not all been one-way traffic, with the Swiss authorities merely doing Washington’s bidding. Throughout the “war on terror”, the government has refused to compromise the country’s neutral status and humanitarian traditions.

Link here.

Swiss have negative view of the U.S.

The Swiss are among the harshest critics of the United States, a global survey has revealed. They oppose the foreign policy of the Bush administration and the role played by Washington in the war on terror. The survey questioned 50,000 people in 60 countries. Among Swiss the US had an approval rating of just 13%, well below the average of 28%. It was also at the bottom of their list of western countries.

Asked for their opinion on each of the G8 countries, respondents in the 60 countries ranked the U.S. just above Russia, which came last. On average, the U.S. garnered a global approval rating of 28%. Greek respondents were almost as critical of the US as the Swiss, with only a 16% approval rating. Austria was also unimpressed, with an 18% approval rating. Around two thirds of Swiss (61%) said the foreign policies of the Bush administration had a negative impact on their country, while 10% saw the influence as positive. Across all 60 countries, almost half said American interventionism was a threat to their country.

Link here.

Swiss parties look for lessons from America.

Switzerland’s political parties have been closely watching the presidential election campaign in the United States to see if they can learn any lessons. They say greater emotion could be injected into Swiss politics as well as more professional campaign planning. But the four main Swiss parties are quick to point out major differences between the political cultures in the US and Switzerland.

Link here.


Spain is launching a charm offensive on Gibraltar, aimed at breaking down resistance in the British colony to a sovereignty-sharing agreement between Spain and the UK. Jack Straw, the British foreign secretary, is due in Madrid this week to discuss Spain’s new approach to a 300-year-old dispute. It is Mr. Straw’s first visit since a new Socialist government took office in Spain in April. Negotiations over the future of the British colony came to a rude halt in November 2002, when Gibraltar’s 30,000 residents voted overwhelmingly against joint British-Spanish rule.

The Spanish foreign ministry says that while the referendum had no legal validity, it cannot be ignored. Miguel Angel Moratinos, Spain’s new foreign minister, is proposing to put the sovereignty issue on the back burner, while sponsoring a series of “trust-building” measures between Gibraltar and surrounding Spanish towns in the Bay of Algeciras, with a population of 240,000. Mr. Straw and Mr. Moratinos are expected to announce an agreement on the joint commercial use of Gibraltarwts airport. Other agreements, on water supplies and waste disposal for the British colony, bus routes, and the use of schools and hospitals on the Spanish mainland, are expected to follow.

According to British officials, the UK is anxious to sign up to parts of the Schengen agreement to increase co-operation in the fight against terrorism and organised crime, but progress has been complicated by Spain’s claim on Gibraltar. Spain also continues to challenge Gibraltar’s special status as an offshore financial center, which Madrid believes facilitates tax evasion and money-laundering. Spanish diplomats hope co-operation on practical matters will make the sovereignty issue irrelevant although Spain insists it will never renounce its claim on the rock.

Link here.


The first foreign listing in South Africa may not be far off after finance minister Trevor Manuel lifted the limits on how much South Africans could invest in foreign companies that list on the JSE Securities Exchange. He first said in February this year that foreign listings would be allowed. The Reserve Bank made further allowances for this last month, but investors could still only pump a maximum of R750,000 into a foreign listing. Goldman Sachs, the investment house, said then that the limit made a local listing “less than interesting” for offshore companies.

Nicky Newton-King, the deputy chief executive of the JSE, said that she expected South Africa to have its first inward listing soon and that this was a good sign for the economy and for investors. Manuel also removed limits on outward investments, while still ensuring that all outward investments were strictly controlled. Officials said they did not expect a massive outflow of funds because many investors now realised the risks attached to investments abroad, while major new investment opportunities had opened up in South Africa in terms of the planned R165 billion capital expenditure programmes recently announced by Transnet and Eskom.

The R1 billion limit on outward investments outside of Africa and the R2 billion limit on investments in Africa had both been lifted but all investments would still be screened by the Reserve Bank’s exchange control department, officials said. South Africans would be allowed to retain foreign dividends offshore. Foreign dividends repatriated to South Africa after October 26 could be transferred offshore again. Manuel lifted the R750,000 limit on what foreign companies, the government and institutions could list on local bond and securities exchanges.

Link here.


Given an abiding belief in the virtue of possessing a large sum of money, I have never been inclined to blithely slap the adjective “filthy” onto the noun “cash”. That is until I received an e-mail message from Donna Mastrandrea in response to a recent column on travel and food poisoning. A frequent world traveler from New York City, Ms. Mastrandrea wrote that in countries “where personal hygiene is accomplished without the intervention of paper products (to put it delicately), paper money becomes a breeding ground for some truly nasty germs.”

In her e-mail message and in a subsequent telephone conversation, Ms. Mastrandrea, a graphic designer, recalled two recent trips to Egypt with her husband, Joe, a strategist for a computer security company. Each of the trips was highlighted by shivering bathroom-trotting bouts of the sort of bacterial illness that is commonly regarded as food poisoning. Spoiled food, or food handled by someone with dirty hands, was of course the prime suspect, as it always is when travel and wrenching gastrointestinal illness happen to coincide. But the Mastrandreas learned, from friends living temporarily in Egypt, that there can be other suspects. “They said that paper money is always considered a possible culprit,” she said.

Even the good old American greenback has been implicated. In a study presented in 2001 at the annual meeting of the American Society of Microbiology, researchers collected and tested 68 one-dollar bills. Nearly 90% of them were found to harbor bacteria that can cause illness. Furthermore, the researchers pointed out, paper currency travels. It moves rapidly from person to person and can go great distances in a few days.

Link here.


To ensure soldiers at this U.S. base in southwest Germany could participate in the Nov. 2 presidential election, voting assistance officer John Miller ordered 6,000 “write-in” absentee ballots more than enough, he believed. But by this week, all but 100 of the generic ballots were gone just one reflection of the intense interest in voting among Americans in Germany, soldiers and civilians alike. “The write-in ballots went like wildfire,” said Miller, a civilian whose job is helping soldiers with the 1st Armored Division at Giessen register and vote by absentee ballot. The same experience confronted Henry Nickel, an American in Berlin who has been helping register civilians in his role as chairman of Republicans Abroad International.

“The level of interest has been incredible,” Nickel said. “In 2000, when I was here, I probably got 10 phone calls, faxes per week. This year it is about 20 per day since June.” The U.S. Consulate in Frankfurt says there are about 260,000 Americans living in Germany, but not all of them are of voting age. About 80,000 U.S. soldiers are stationed in the country. Phil Hill of American Voices Abroad Berlin, which opposes the war in Iraq, said his group registered 2,000 new voters and predicted that Americans here would vote for Kerry.

Links here, here, here, and here.

U.S. expats jump on planes to vote.

Determined to make sure their voices count, some American expatriates who missed registration deadlines or are worried about the reliability of absentee ballots are flying home next week just to vote. Paying up to €1,000 euros for transatlantic journeys to states as far away as Arizona, at least five Americans in Europe believe Tuesday’s presidential election is so important, and so close, that their votes are worth the expense and effort.

Link here.

Kids select Bush in Presidential poll.

The students who read Weekly Reader’s magazines have made their preference for President known. They want to send President Bush back to the White House. Hundreds of thousands of students participated, giving the Republican President more than 60% of the votes cast and making him a decisive choice over Democratic Senator John Kerry. Since 1956, Weekly Reader students in grades 1-12 have correctly picked the president, making the poll one of the most accurate predictors of presidential outcomes in history.

Link here.

Broward County, Florida to resend thousands of missing absentee ballots.

Hoping to avoid another presidential election fiasco, Broward County officials scrambled Wednesday to replace tens of thousands of missing absentee ballots, cut long waits for early voting and beef up a phone system deluged with calls from angry voters. A day after acknowledging that up to 58,000 absentee ballots have not reached the voters who requested them, Elections Supervisor Brenda Snipes decided to mail new ones. She will pay extra for overnight delivery of those sent outside Broward in hopes of ensuring voters can return them before Tuesday’s deadline.

Link here.

Ballot bedlam.

For at least a few months running up to this next election, it seems that the United States is becoming a third-world country in its approach to its self-styled “democracy”. Electioneering is descending into desperation, campaigning is turning tawdry, and the voter rolls are being rigged like a flying clipper ship. I was in the Allegheny County Elections Office yesterday, in Pittsburgh. I wanted to vote absentee, because there is a possibility that I may be out of the state on November 2. My wanting to vote absentee was no big deal, and took all of five minutes. But the almost-pandemonium of a big-city election office, three weeks before Election Wrestle Mania, was a sight to behold.

I asked one of the workers how things were going. She shook her head. “Every day, every day... it is one more thing. We just received a mailbag of requests for ballots from the University of Pittsburgh. A lot of the college kids want to vote absentee here in Pittsburgh. But they are probably registered back home, too and ought to be voting in their hometowns.... And a lot of them probably are going to do just that.”

Yes, I think a lot of people are going to do just that. If everyone votes enough times in the same election, do you think that eventually we will get it right? Or maybe if everyone votes enough times the same election, we will install someone into power who will decide that since he received so many votes he does not need to hold elections any more? I worry that we might be on the verge of finding out.

Link here.


European companies will have to disclose their offshore activity and off-balance sheet items in tighter rules proposed by the EU’s executive as part of a drive to prevent accounting scandals. The EC’s four-pronged proposal, aimed at bolstering confidence in corporate financial reporting, would also ensure that board members are collectively responsible for financial statements and key non-financial information.

The key proposal was that all companies -- listed or not -- should disclose all off-balance sheet arrangements, including their financial impact. These would include so-called special-purpose vehicles located offshore, where supervision is scarce. The EU started work on the rules after accounting scandals at Enron in the United States and at Italy’s Parmalat, which revealed a multi-billion-euro account held in the company’s Bonlat unit in the Cayman Islands was fake. In both cases, the existence of massive debts was concealed through items that normally do not appear on the balance sheet.

Link here.



The Appeals Division of the IRS has reassessed and tightened the settlement guidelines under which it will accept offers to settle cases with taxpayers who participated in certain abusive transactions. Last month, the IRS Appeals Division and the Large and Mid-Size Business Division began sending letters to taxpayers involved in lease strips, inflated-basis assets derived from lease strips, and intermediary transactions, notifying them that the settlement terms available to resolve these transactions have been tightened.

Under the new guidelines, the IRS will not settle unless taxpayers concede 100% of the claimed losses or deductions, reduced by only the amount of transaction costs up to 10% of the claimed losses or deductions. Furthermore, taxpayers must concede 50% of the accuracy-related penalty at issue. If both the 40% gross valuation misstatement penalty and the 20% substantial understatement penalty were asserted, then the settlement will apply to the gross valuation misstatement penalty.

Link here.


Without fanfare, President Bush yesterday signed into law a nearly $140 billion corporate tax cut derided by its critics as a giveaway to special interests. The new law aims to end a trade fight with the EU by repealing export tax subsidies that violate global trade rules, but the EU has objected to some provisions and has yet to say whether it will remove its sanctions on $4 billion worth of American goods.

The White House accompanied the signing of other major tax bills with lavish public ceremonies. This one was noted with a one-paragraph statement by the press secretary. The $140 billion in new business tax breaks included many special-interest provisions criticized by public interest groups and fiscal conservatives.

Link here.


The OECD’s annual Revenue Statistics data for 2003 shows the ratio of tax to GDP rising in 13 of the 23 countries for which figures are available, following a tax burden decline in most members between 2000 and 2002. The largest overall increases between 2002 and 2003 were in Iceland, where taxation as a share of the national economy rose from 38.1% of GDP to 40.3%, Turkey (up from 31.1% to 32.9%) and Ireland (up from 28.4% to 30.0%).

Conversely, a number of countries experienced a particularly large reduction in their tax to GDP ratio. One example of this is the United States, where lower personal income tax rates and higher tax credits shrank the tax burden by 4.5% of GDP between 2000 and 2003. Substantial reductions in the tax to GDP ratio were also experienced over the same period in Finland (3.1%), Sweden (3.0%), the Netherlands (2.4%), and the U.K. (2.1%).

Link here.


Doug Perkins, managing director of the Specsavers Optical Group, fears that encouraging more business to Guernsey would make economic conditions even more difficult. He also believes that new business created as a result of the adoption of so-called “zero-10” tax on companies may not create more wealth for the island. He fears that beneficial owners of new firms, who should bear the tax brunt, may choose not to move to the island and thus escape local tax.

“... It would offer no real incentive for them to live here and these sorts of enterprise would put even more strain on the labor market, driving wage inflation and discriminating against genuine, locally-based entrepreneurs and businesses. We need to look at all our tax options and consider their likely impact,” he said.

The Treasury and Resources Department is due next month to unveil its initial plans for zero-10, and the resultant hole in States finances. Deputy minister Charles Parkinson confirmed that Mr. Perkins’s concerns about non-residents benefiting from zero-10 were realistic.

Link here.

Tax moves must not hurt local business, Guernsey business group warns.

Policy Council working party is currently reviewing a range of corporate tax options, including the so-called “zero-10” package. In its pure form, the measure would see new investors in the island exempt from tax, existing major banks paying 10% and other industries facing the existing 20% flat rate. The Confederation of Guernsey Industry believes changes are needed so that the island’s finance industry can remain competitive. But director Peter Budwin wants parity between existing businesses in the finance and industry sectors. And he wants to minimise the disadvantages to existing local businesses of any new package to attract investors.

Mr. Budwin said that if more businesses were being attracted to the island, then the States would have to develop an immigration and licensing policy that would allow for growth. He added that there had to be a balance between all interests.

Link here.


Included examples of fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted. Leading the list is a case where an Akron, Ohio man was sentenced to 151 months imprisonment, to be followed by 3 years supervised release, and a $95,000 fine. At trial, the evidence proved the defendants used a maze of trusts and corporations to try to hide approximately $18 million in income generated by various businesses they controlled. Between January 1, 1994, and July 8, 2003, they paid little or no taxes on the income earned, while nonetheless living lavishly. He was convicted of tax evasion for tax years 1987, 1989, and 1990. In addition, between 1998 and 2002, while in federal prison after convictions for racketeering and income tax evasion, assistants kept his businesses running and continued to operate the illegal conspiracy.

Link here.


According to reports, the Belgian authorities have collected just €47 million under the amnesty scheme, which commenced in January and concludes at the end of the year, representing a paltry 5.5% of the targeted total. As a result, Finance Minster Didier Reynders has reportedly has been forced to drastically cut the government’s ambitious €850 million revenue target for the amnesty to €250-300 million. The banks however, are even more pessimistic, predicting a final tally of between €100-250 million.

Link here.


Sen. John Kerry keeps telling us that “the rich” need to pay more in taxes. The senator and his wife are among the 400 richest Americans. He says that he has “a plan to tax the rich.” Under the senator’s tax plan, what percentage of the Kerrys’ income do you think they would pay the IRS? (a) 50%, (b) 40%, (c) 30%, or (d) 15%. The correct answer is (d). According to an analysis by the Argus Group, a well respected tax law and economics firm, the Kerrys’ average tax rate would only increase by 1.8 percentage points to 15.2% under the senator’s plan, while many small business people would see their average rate rise by 4.0 percentage points, resulting in effective rates as high as 35 to 40%, including certain deduction phase-outs.

Last year, Mr. Kerry and his wife paid only 13.4% of their declared $5.5 million income in federal taxes. President and Mrs. Bush, whose income was only 15% of the Kerrys’, paid a tax rate more than twice as high, 27.7%. Despite all of the senator’s bombast about the rich paying more, under his plan he and Mrs. Kerry would still pay a lower average rate than most middle-income Americans. Mr. Kerry’s running mate, Sen. John Edwards and his wife paid an average tax rate of only 5.1% on their reported $434,000 of income, or less than one-third of what the average taxpayer pays.

As Mr. Kerry’s own tax situation shows, he is not proposing increased taxes on those who are already rich -- through inheritance, hard work, luck or marrying a rich woman -- but is proposing increasing taxes on those who are trying to become rich. His plan proposes to make it more difficult for people to join his club of the very wealthy. If you are already rich, you can tax shelter much of your income, but if you have little in the way of assets, it is almost impossible to shelter your earnings from taxes.

Link here.


In a letter sent to Commerce, State and Justice Appropriations Subcommittee chairmen, Senator Judd Gregg (R-New Hampshire) and Congressman Frank Wolf (R-Virginia) earlier this month, the Coalition for Tax Competition, which comprises more than 30 US free market groups, called on the US government to withdraw its financial support of the OECD if the body persists in promoting policies which are in opposition to America’s economic interests.

The letter, sent last week, argued that, “Federal spending is too high and should be reduced. As part of an overall effort to help control the size of government, we believe American taxpayers should not subsidize the [OECD].”

Link here.


Philip Green and Lakshmi Mittal could escape tax bills totalling nearly £400 million on their recent dividend awards thanks to Britain’s generous tax loopholes for the wealthy, raising questions over New Labour’s record in taxing the super-rich. Because the assets of Mr Green’s Arcadia Group are held outside the UK and controlled by his wife, a non-UK resident, Mr Green could save as much as £115 million in tax on his £460 million dividend from part of his British retail empire.

Lakshmi Mittal, the British-based Indian-born steel magnate who became the UK’s wealthiest man this week, is also reported to be a “non-domicile” resident in the UK. This means he claims another country as his true home and pays no tax in the UK on earnings made elsewhere in the world. The holding company for most of his assets is in the Dutch Antilles, and he too could escape a tax bill of £275 million on the £1.1 billion dividend he revealed this week. The Government estimates that some 65,000 people in Britain are non-domiciled, and 16,000 of them declared foreign earnings of £800 million in 2002 on which they paid no tax. As well as non-domiciles, there are also a number of wealthy UK non-residents, who return to Britain no more than 90 days a year.

Mike Warburton, a senior tax partner at Grant Thornton, said that “Wealthy foreigners coming to the UK can plan their affairs very efficiently. They can open deposit account in Jersey, have the interest paid into another account and live off the capital in the deposit account tax-free. If a dividend payment from UK company earnings goes to an offshore trust, it too will escape a tax bill if the money stays outside the UK.”

But even without choosing to live abroad and hold assets through offshore trusts, the super-rich are already enjoying the most after-tax wealth in the country for 70 years. Income tax, however, is an extremely thorny issue for any Government at any time. Critics of the non-domicile rules, which affect only a handful of wealthy foreigners living in Britain, believe they could be easily changed without much political fallout. But opponents to change argue that encouraging wealthy individuals to live and do business in the UK is a boost to the economy. The Government launched a review of residency and domicile laws in 2002. It is still ongoing.

Link here.


Michael Craig Cooper, founder of Renaissance, The Tax People, Inc. (“Renaissance”) was arrested crossing the border from Mexico to the U.S. near Laredo, Texas. On August 13 of this year, a federal grand jury returned a 148-count indictment charging Mr. Cooper, together with Jesse Ayala Cota, Todd Eugene Strand, Daniel Joel Gleason, and Renaissance with conspiracy to defraud the United States by impeding the IRS and to commit mail and wire fraud, willfully assisting in the preparation of fraudulent federal income tax returns, mail fraud and wire fraud.

Mr. Cooper and Renaissance are also charged with money laundering and conspiracy to commit money laundering and engaging in monetary transactions in criminally derived property of a value greater than $10,000. The indictment remained sealed pending the arrest of Mr. Cooper.

The indictment alleges that from June 1997 though April 2002, the defendants operated a scheme to defraud the IRS and other individuals by marketing a program designed to sell individuals tax deductions through false, fraudulent and misleading representations. According to court papers, Renaissance sold a fraudulent home-based business package through which it offered tax support to its members in the form of purportedly legitimate tax return preparation, tax advice and audit protection.

Participants were allegedly encouraged to modify their Forms W-4 to decrease the amount of income taxes withheld from their pay in order to afford the $300 to $1,200 purchase price for a Renaissance package. The defendants allegedly promoted the unlawful deduction of personal expenses as if they were legitimate business expenses. They also allegedly made false assurances as to the legality of Renaissance’s activity during meetings and in promotional material, going so far as to infer that the IRS had approved the Renaissance tax program. The indictment alleges the defendants operated an illegal pyramid scheme, requiring participants to pay monthly fees to qualify for commissions and offering participants the opportunity to receive commissions and bonuses for recruiting others to join Renaissance.

Link here.



Identity theft involves the most intimate, the most stealthy and perhaps the most intrusive of frauds -- the wholesale lifting of someone’s financial persona to secure bank loans, credit cards and mortgages in that person’s name. Even when the crimes are discovered early, it can take months, sometimes years, for innocent people to restore tattered credit histories. While most consumers usually do not have to pay for illicit purchases on their credit cards, they may be held liable in thefts involving other types of loans.

“Ultimately, victims don’t have to pay debts incurred by another person, but that’s not the point,” said Bridget J. Thomas, a homemaker in Prairieville, Louisiana, who spent months repairing her credit history in 2002 after a thief appropriated her identity to snare about $65,000 in loans. “It’s the sleepless nights, and the time, and the stress you have to go through to clean up your record that really hurts victims.”

Several factors have combined to make identity theft a particularly intractable crime: the growth of the Internet and digital finance, decades of expanding consumer credit worldwide, the hodgepodge nature of local and federal law enforcement, and the changing but often still inadequate regulations governing the credit industry. Everyone is fair game. Thieves recently snatched the identity of a three-week-old infant in Bothell, Washington. The dead have been favorite targets of identity thieves for years. Nor is identity theft limited to people. A growing number of thieves now assume the false guise of entire companies, adopting a business’s employer identification number to secure commercial loans, corporate leases or expensive office products.

Schemes known as “phishing” use e-mail messages to lure unwitting consumers to Web sites masquerading as home pages of trusted banks and credit card issuers, corporate security specialists say. Online visitors are then induced to reveal passwords as well as bank account, Social Security and credit card numbers.

Link here.

Insecurity begins at home.

Spyware is rife and virus infection commonplace yet many home users reckon they are safe from online threats. An AOL/National Cyber Security Alliance (NCSA) Online Safety Study -- conducted by technical experts in the homes of 329 typical dial-up and broadband computer users across the US -- found that most computer users think they are safe but lack basic defences against viruses, spyware, hackers, and other online threats. Only half of broadband consumers used a firewall.

Worse still four in five of home PCs inspected were infected with spyware. The average infected user has 93 spyware/adware components on their computer. Two thirds lacked up to date anti-virus software, while 15% had no AV software at all -- so it comes as no particular surprise that one in five of the surveyed PCs were infected by a virus. Despite this legion of problems 77% of those polled reckon they are safe from online threats. The NCSA wants to shake this complacency and encourage more people to guard the sensitive personal and financial information many keep on home PCs from attack.

Links here, here, and here.


Drawing on the results of Research and Markets’s Offshore Market Leaders Survey of 95 offshore financial services companies about the impact of the impending EU Savings Tax Directive, this report analyzes what companies are doing to inform customers and to develop products and services to mitigate the Directives effects.

The opening paragraph of the Directive makes reference to a number of key terms. Taken in turn, these are “interest payments”, “individuals” and “another member state”. Upon closer inspection, each offers wealth managers scope to mitigate the Directive’s effects on their clients.

The Directive is clearly seen as a negative event for jurisdictions within its remit. Results from our Offshore Market Leaders Survey 2004 show the Directive to be considered the single biggest threat to offshore revenues over the next two years. Over half of the industry harbors serious concerns that it will drive assets onshore. The market has responded to the Directive along three broad themes. These are by augmenting their existing product portfolio, by developing their ability to offer trust and company structures, and by putting in place an ability to manage assets from other jurisdictions.

Link here.


BVI Chief Minister Dr. D. Orlando Smith, has informed the country’s Legislative Council that a two-year transition period will be put in place to smooth the changeover to the proposed new Business Companies Act. The new legislation, expected to take effect on 1st January 2005, has been drafted to ensure the territory is fully compliant with the EU Savings Tax Directive and EU Code of Conduct on Business Taxation, as required by the UK of all its Overseas Territories, and will lower the income tax rate to 0% for both local and IBCs.

However, under the transition arrangements announced by Dr Smith, new incorporations will still be possible under old legislation throughout 2005. Then, in 2006, new incorporations must be made under the new Business Companies Act, although companies already on the register will be permitted to operate under the old IBC Act or Companies Act for an additional year. By 1st January 2007, it is expected that all companies will operate under the new legislation. The Act will require companies to use a registered agent to ensure compliance with the new laws.

Link here.


Living in the shadow of the Jungfrau and the Eiger, the Swiss do not often think in terms of level playing fields. But due to forces both outside and inside the country, that may be changing. Internationally, Swiss banks’ steadfast devotion to the principle of client confidentiality has long tested the patience of tax agencies both in the U.S. and in the E.U. In May, Switzerland and the E.U. negotiated a compromise. Under the deal, the two sides agreed that Swiss banks would withhold a percentage of dividends and interest from all accounts held by EU residents starting in 2005, rather than exchange information about EU taxpayers.

The deal is expected to mean less business for many Swiss financial institutions. But they signed on to the agreement, which the Swiss Parliament has not yet approved, because Swiss banks feared being squeezed in EU countries in which they operate. At the same time, some expect clients will find loopholes to avoid the withholdings -- possibly by changing personal accounts to corporate accounts, or by switching to nondividend-producing financial products.

But if the Swiss are already considering how to maneuver around the new regulations, they are also debating internally about the creation of an overarching federal financial authority that will supervise all Swiss financial companies, in an effort to burnish the reputation of the Swiss financial services industry. And that includes independent asset managers, who currently are subject only to Switzerland’s money-laundering rules, although in 2000 they were required to join a self-regulatory organization. The expert Zimmerli Commission at Switzerland’s Federal Department of Finance is expected to publish a set of recommendations for regulating independent asset managers in January.

Link here.


Secrecy in the Cayman Islands has always been taken seriously so that trading strategies, market positions and information about investors may be protected. However, with both investors and regulators demanding a more open market, the islands have been forced to re-establish their commitment to transparency. Hedge funds, and offshore funds in particular, often require secrecy to protect their trading strategies, market positions and sensitive information about their investors. However, at the same time as investor demands are driving managers to provide more information on their investments, so the demands of regulators, both onshore and offshore, are obliging funds and their managers to disclose more information.

There is a prevailing myth that all business conducted in the Cayman Islands is veiled in an impenetrable cloak of secrecy. Not so. Although the legitimate right to privacy is respected in the Cayman Islands, it is arguable that, in comparison, onshore jurisdictions such as the U.K., Germany and the U.S. currently have more regimented regimes of privacy and data protection. Indeed, there are a number of circumstances in the Cayman Islands where confidential information must or can be disclosed, subject to appropriate safeguards.

As a British overseas territory, Cayman law on confidentiality is predominantly based on principles of English common law. In the Cayman Islands, a duty of confidence may be owed to a person under statute, namely the Confidential Relationships (Preservation) Law (1995 Revision) (Confidentiality Law), as well as under common law. Criminal penalties may be imposed for statutory breach, whereas breach of a common law duty can give rise to civil remedies (such as an injunction) and a claim for damages.

Link here.



There are so many government initiatives to keep track of that we nearly missed spotting that if anyone wants to complain to the US government about its plans for “Secure Flight”, as the remix of CAPPS-II is known, you need to do it by October 25. CAPPS-II was the privacy-invasive plan to converge data from government and commercial databases to pre-check passengers before they boarded flights. People did not like the sound of this, and eventually after some very loud objections from folks like EPIC everyone broke out the banners to celebrate the death of CAPPS-II. Everyone also knew it was only a matter of minutes befrore CAPPS-II was reinvented as something else. Secure Flight, coupled with its companion, the Registered Traveler program, is that something else.

Or it is one-half of something else. The other half is US-VISIT (“U.S. Visitor & Immigration Status Indication Technology System”), the initiative that has all foreigners being face-scanned and fingerprinted at the US border. This Welcome Wagon for tourists is initially being circled just at airports, but in another few weeks Mexicans and Canadians can look forward to it, too, when they add “land ports of entry” to the list. US-VISIT became operation at 115 airports and 14 seaports on January 5, 2004, since when more than 10 million foreigners have been processed and nearly 300 “criminals or immigration violators” have been caught. We note in passing that he detailed list of who they have caught includes only *one* of the Four Horsemen: drug traffickers. No organized crime, pedophiles, or -- and this might be the important one considering this is what the system is supposed to be for -- terrorists.

Secure Flight and Registered Traveler are more inclusive. The idea is, you register in advance with a whole load of personal detail -- you may be asked to list everywhere you have lived for the last five years as well as give fingerprints and iris scans -- and thereafter you get to use a sort of express line. The TSA wants the airlines to hand over all the passenger record data from June 2004. Under EU law, this ought to be illegal in at least some cases, since people who might have bought their tickets as much as a year before can hardly be described as giving consent to this use of their data. Why does the EU not take stronger stance on this. What is the US going to do? Ban all Europeans from entering the country?

Is this any way to to keep terrorists off planes? This paper talks about how to “game” the original CAPPS system by sending through enough test subjects to find out what gets through. Many of the 9/11 terrorists had valid IDs. Many had flown many times before without blowing up planes. If frequent flyers are trusted travelers, then terrorists will spend the money and time to become frequent flyers. Study all the biometrics you want, but you will not find the guy with the blameless past who has been preparing for just this moment. But you will build a huge infrastructure by which you can monitor and control the movements of ordinary citizens.

Link here.


Millions of visitors from Japan, Australia, New Zealand, Singapore and much of Europe are getting a temporary reprieve from a new U.S. requirement that they carry passports that can be read by scanning machines. All were supposed to have the passports starting Tuesday. But the Homeland Security Department announced that visitors from those countries who have not gotten the new passports will be granted a one-time exemption. Anyone granted an exemption will be notified that if they do not have a new passport the next time they visit they may be refused entry. Border and Transportation Security Undersecretary Asa Hutchinson said the new policy will help make sure that people’s first experience in the United States is positive. He said the rule will be reviewed after six months.

The new “machine-readable” passports have printed biographical data and a photograph that meet international standards and can be read by an optical scanner. Hutchinson said such passports minimize the chances of someone using another person’s passport to gain entry to the country. Many countries could not meet the deadline for the new passports, thus the extension.

Link here.

Airline issues passport warning.

New US State Department rules have come into force requiring all U.K. travellers, including children, to have machine-readable passports. These passports feature two lines of coded data at the bottom of the photo page that can be swiped at check-in. Travelers who do not have a machine-readable passport will have to apply for a visa to enter the U.S. Machine-readable passports have been issued in Britain since November 1991, and holders can travel to the U.S. without a visa for the 10-year lifetime of the document.

Nevertheless, British Airways said that they were concerned that some travelers to the US could fall foul of the law change. Children who are currently on another person’s passport will need to obtain their own machine-readable passport for visa-free travel to the U.S., and the holders of some U.K. passports issued at overseas embassies may find that they are not machine readable. Failure to have a machine-readable passport or valid visa could lead to people being refused entry into the U.S.

Links here and here.

E.U. agrees to put biometric data in passports.

The EU reached a provisional agreement to issue passports with biometric data such as fingerprints and digital photographs in the coming years, diplomats said. Blank passports are stolen every year from EU states and big members Germany and Britain have pushed for the bloc to increase the security features of passports. EU diplomats said a formal deal was expected soon. Once the EU has reached a final agreement, member states will have to start issuing passports with digital photos within 18 months and include fingerprints within 36 months. Despite the deal, the EU will fail to meet a U.S. deadline of October, 2005, for travelers to have biometric data in their passports to enjoy visa-free trips to the United States.

Link here.


David Blunkett is to publish his response to the Home Affairs Committee’s heavily critical report on his ID card scheme Wednesday, Tony Blair said at his monthly press conference. The HAC report found very little positive to say about the scheme, but bafflingly concluded that “the Government has made a convincing case for proceeding with the introduction of identity cards,” and gave it the green light. Blunkett’s mission will therefore be primarily not to make the case for an ID scheme, but to provide a convincing explanation of how it will work and how it can be successfully implemented.

Blair’s brief statement to the press conference also provided some useful perspective on where, from the government’s point of view, we stand as regards the progress of the scheme. He said he had taken part in the biometric ID card trial that morning (clips of him grinning cheesily at an iris scanner are available on last night’s news bulletins), and that, “It is important we get this technology right and ensure it will be user-friendly for the public. That is of course the purpose of the trial.” Except there was of course no “of course” about it when the trial was announced. The Home Office did not clearly specify that the trial was nothing about finding out whether the public actually wanted ID cards or not, and all about honing the process of giving them the cards they were definitely going to get.

Blair said that, “I think ID cards have an important role to play in fighting serious crime and terrorism and tackling illegal immigration. We know that false identities are important to terrorists and criminals, and we know that because they keep on using them. ... at least one third of terrorists use multiple identities routinely. ...” But the dodgy MI6-sourced factoid that one third of terrorists use multiple IDs routinely is meaningless without there being more data attached to it. It is no more than a statement of the bleeding obvious that a lot of terrorists are going to be using assumed names. A more valid justification for an ID scheme would be statistics showing that a significant number of terrorist attacks were conducted using a false ID which would have been detected by an ID scheme. As the government presents no such data, we must deduce that it has none.

Blair followed this up with what is effectively a prayer for a “secure modern solution”. That would be nice, would it not? But really he is still in the pub bore “it’s obvious/everybody knows” groove, “sleepwalking into a surveillance society.”

Link here. U.K. Home Office confirms that the UK national ID card is to be issued alongside passports -- link.

Blunkett changes ID card scheme.

Plans to combine new compulsory identity cards with passports and driving licences have been dropped by Home Secretary David Blunkett. The changes to the controversial scheme comes in response to MPs who said the plans were badly thought out. Mr. Blunkett also promised to allow the whole scheme to be overseen by a new independent watchdog. The legislation to allow ID cards is widely expected to be promised in next month’s Queen’s Speech. “When cost, implementation and risk considerations are assessed together, we now think the option of a free-standing card is more attractive,” a Home Office spokesman said.

The new cards will include biometric details of each cardholder, such as their fingerprints, an electronic scan of the dimensions of their face or a scan of the iris of their eye. Approved agencies will be able to check those details against a central database.

Benefits to the public, the Home Office says, will include people not having to worry about using driving licences, passports or bank statements to prove their identity. If they are introduced they will be the first national ID since the Second World War ones ended more than 50 years ago. They will be phased in -- people will get them at the same time as they renew or get a passport -- and eventually be compulsory to have, though not to carry.

The Home Office had originally planned to phase in ID cards from 2007-2008 by bringing in new passports which would include a microchip bearing biometric data and would double-up as ID cards. Instead, passport applicants from 2007-2008 will get a new biometric passport and a separate ID card.

Link here.

U.K. secret services to be given access to ID card database.

The intelligence services will be given unprecedented access to the government database underpinning the controversial identity card scheme, the Home Office said, prompting accusations of Big Brother-style surveillance of people’s everyday lives. The plan emerged as David Blunkett announced “refinements” to his ID card proposals, saying that the central register containing the cards’ information would provide a “full audit trail” of when and where they were used. This could include every time holders use public services -- including hospitals, benefits offices or colleges -- buy an expensive item or make large withdrawals from banks.

The Home Office insisted that only the security services, such as MI5 and MI6, and not police or government officials, would be allowed to access the data. But a spokesman for Liberty, the civil liberties organisation, said, “It’s very easy to say today that only intelligence services could access this information. But they can’t say that would be the case in five years’ time. Once the information is in the system, it’s open to misuse.”

Link here.


As humans, we have been gleefully watching people do stupid things for millennia. From the earliest Cro-Magnon lighting his beard on fire (to uproarious laughter from his fellow cave dwellers, no doubt) to the medieval court jester, and from the Barnum and Bailey Circus to the television-age addiction to “reality TV,” we love to watch people flounder and fail -- at least when it does not happen to us. Such obsessive satisfaction in the misfortune of others, and the burgeoning use of technology to share in it real time, however, carries with it a political component, and it is not positive. Simply put, the current obsession with reality TV has immunized American society to the changes wrought by pervasive government surveillance.

The American conception of personal privacy as a right has its origins in the long-held tenet of English jurisprudence that “a man’s house is his castle”. In modern times, the importance of privacy to our very way of life is eloquently captured by philosopher Ayn Rand in her 1943 novel The Fountainhead, in which she posits that “privacy” is the very bedrock of modern civilization. While not a purely American concept, the value of privacy has taken root in our society more than any other. Indeed, it is enshrined in the Fourth Amendment to our Constitution -- the government cannot invade our persons, homes or papers to gather evidence against us without a good reason for doing so; private lives are, well, private.

In the olden days, this actually meant something. People were outraged when someone’s laundry, be it clean or dirty, was aired publicly without a good reason. Today, however, one need just do a little channel surfing during prime time to see just how far removed we are as a society from such quaint notions of propriety. From the networks to cable to the Internet, beautiful and ugly people alike are on display all the time in their most intimate moments for our viewing pleasure. Perhaps our love for The Apprentice, Desperate Housewives and Fear Factor reflect a deeper yearning for some sort of cathartic need to watch people do silly things, safe in the knowledge that it is not us. But when we start seeing shows actually called Big Brother, we need to start asking other and far more serious questions.

Link here.


Wireless LAN specialist, Airespace, has developed a system using regular Wi-Fi that can pinpoint you to within ten meters. Its Wireless Location Services (WLS) using a technique known as RF (radio frequency) pinpointing. According to Airespace’s Jeff Aaron, other location methods have far less accuracy. He pointed out that using triangulation from base stations does not always work because a Wi-Fi user could be standing feet away from a base station but not get a strong signal with a wall in the way. RF fingerprinting takes the geography of a building into account.

Link here.


A third party developer in Tokyo has developed an add-on to Vodafone handsets, intended to be used as a night filter to allow the taking pictures with the phones in the dark. The night vision camera has an unexpected side effect -- in the right circumstances, as well as taking snaps in the dark, the infrared filter sees through people’s clothes. When attached to a high-end camera, the device can give the effect of seeing through some garments -- it depends on how easily infrared can penetrate the fabric in question -- and is reportedly particularly effective on dark bikinis. The handset most often used with the £100 filter, the V602-SH, is only available in Japan.

Camera phone technology has long prompted fears of voyeurism, leading several gyms -- and even some Scottish schools -- to ban picture phones in case they were used to take inappropriate pictures. Voyeurism with camera phones became such a problem in South Korea that the government legislated the phones must make a noise when pictures are taken.

Link here.


The driver’s license, that ubiquitous piece of plastic that people show millions of times a day for everything from buying a bottle of liquor to getting on an airplane -- and even, occasionally, for proving to a police officer that the bearer is allowed behind the steering wheel -- is going high tech. Apply for a license in Oklahoma, and a computer will scan your digitized photo, convert it to a series of numbers, and then compare the results with every other photo already on file in the state motor vehicle department’s database, to make sure you do not already have a license under some other name.

Many states now repeat all of the printed information digitally, using a bar code or a magnetic stripe or both. In Michigan, the digital information even includes what is known as a “digital watermark”, so any tampering will be detectable. The trend is still in its early stages. Virginia held a hearing earlier this month on putting computer chips into its licenses, which could store fingerprints or eye prints. Civil libertarians fear the next step is a radio-frequency identification card, akin to an E-ZPass or smart card used to pay subway fares. This would let anyone with the right equipment read a license while it was still in its owner’s wallet.

Civil libertarians argue that as drivers’ licenses become standardized, the country is moving toward a national identification card. And by checking the cards at numerous locations, the government could easily keep track of citizens’ movements. “Once you get a national ID, you know there’s going to be an expansion beyond just government use,” said Marv Johnson, the ACLU’s legislative counsel in Washington. “It’s going to become the gold standard for information exchange. Private entities are going to want to see your national ID card. They’re going to have their own readers to read the data.”

Link here.



David Blunkett, the U.K. Home Secretary, is considering changes to money laundering legislation after protests from professional advisers about the way it is working. He also wants to ease concern among customers faced with rigorous rules about proving their identity to banks to make even simple transactions. The Home Office has opened discussions about easing some of the regulations initially designed to target terrorists and fraudsters but widened and complicated by the 2002 Proceeds of Crime Act and tougher money laundering regulations to meet EU directives.

Bankers, accountants, lawyers and other advisers have been thrown into turmoil because they are under an obligation to report to police any suspicions about clients benefiting from the proceeds of any crime. The wide ranging legislation has resulted in advisers being pitched against each other and taking different views about what they should tell police. Lawyers, complaining that Mr. Blunkett has “gold plated” EU directives, are leading the charge pressing Mr. Blunkett to bring some “common sense” into a “complex and onerous” regime and are mounting a test case over the disclosure provisions. Bank customers, whether individuals or companies, have been bewildered by the “inquisition” some of them have faced in everyday account, money transfer or withdrawals.

The Financial Services Authority, the City custodian of the money laundering legislation, is softening its stance on thorny identification issues after “challenging” business groups to come up with something better. One of the key proposals is switching to electronic verification for identification purposes for personal accounts but at least one director will still have to appear in person to open a business account.

Link here.


The Financial Action Task Force urged Governments to step up controls on cross-border money movements and share more intelligence on “cash couriers” suspected of funding terror. The FATF, meeting in Paris, approved a new recommendation on the detection and policing of large amounts of cash crossing borders in travelers’ luggage. The move reflects growing concern that existing controls, often designed to impede flows of drug money, are out of date and unsuited to the struggle against terrorism.

Terror funds are harder to detect than the proceeds of organized crime because the amounts of money involved are smaller. “Financing a terrorist network doesn’t cost much,” FATF president Jean-Louis Fort said. Some States already have tightened their controls, but many “weak links” remain, he added. “We’ve seen that those responsible for these misdeeds observe these differences and exploit them.” The FATF’s member countries, most of them industrialised, have all pledged to adopt its recommended measures on money laundering and terrorist finance in their own national laws. Anti-terrorism experts say extremist groups are increasingly turning to cash couriers, charities and non-government organizations to move their funds after financial institutions have tightened their controls.

Link here.


Citigroup Inc. said it will close its trust banking unit in Japan within a year, after Japanese authorities ordered the U.S. financial services giant to suspend its private banking business there. Charles Prince, Citigroup’s chief executive, apologized to Japanese authorities for the problems and said the company would appoint a new CEO for Citibank Japan.

Japan’s Financial Services Agency last month suspended the private banking division of Citibank, a unit of New York-based Citigroup, and announced it would revoke its license after a year, effectively expelling it from the Japanese market. The FSA accused the private bank, which manages the investments of wealthy individuals, of failing to implement safeguards against money laundering, misleading customers about financial risks, and other violations. On Monday, Citigroup acknowledged that management at its private bank had “failed to establish a culture that ensured ongoing compliance with laws and regulations.”

Link here.


While in the background the EU’s interior ministers hatched plans to fingerprint all 450 million of us, the foregrounded story in the UK was our opt-out/opt-in/veto. Shadow Home Secretary David Davis claimed that actual Home Secretary (arguably the shadowier one) David Blunkett was selling the UK down the river by accepting qualified majority voting and losing the veto, while Blunkett insisted that we were getting the best of both worlds. Blunkett’s claim appears to be based, more or less, on the view that majority voting will make it a lot easier to bring in new security wheezes without having to bother too much about objections from lily-livered Scandinavians, but that by retaining the ability to just say no, the UK does not have to get involved in “federalist” stuff like EU border police and an EU consular service and common visa. As Blunkett himself put it so clearly, “we don’t have an opt-in, we have an opt-out.”

What is the true story? As a public service Statewatch has commissioned a briefing on Vetoes, Opt-outs and EU Immigration and Asylum law. This document, which we commend to all Prime Ministers, tells us that the opt-out countries (of which the UK is one) have three months to decide whether or not to opt in, that if they do opt in discussion goes ahead with their full participation, but that if their objections then hold up adoption the non-opt-out states can go ahead without them anyway. They can also change their mind, and opt in to legislation they had previously not opted in to. Got that? Professor Peers tells us that the UK has opted in to all proposals concerning asylum and civil law, and nearly all concerning illegal migration.

Link here.


A trust company director appeared in the Magistrate’s Court charged with defrauding a client of more than £1.5 million. Christine Susan Bryce-Richards (42) denied 14 counts of fraudulently converting trust assets and other funds held for the use of Joan Helen Edmonds. The court heard that the defendant had moved away from the Jersey jurisdiction and had been brought back by police to face the charges. Police legal adviser Lawrence O’Donnell, prosecuting, said that assets to the approximate value of £1.5 million held by Bryce-Richards in the Island had been seized. Advocate Peter Mourant said it was very unlikely that the case would ultimately be heard in the lower court. “This is clearly a matter for the Royal Court,” he said.

Link here.


Devin Theriot-Orr, a member a feisty group of reporter-activists called Indymedia, was surprised when two FBI agents showed up at his Seattle law office, saying the visit was a “courtesy call” on behalf of Swiss authorities. Theriot-Orr was even more surprised a week later when more than 20 Indymedia Web sites were knocked offline as the computer servers that hosted them were seized in Britain. The Independent Media Center, more commonly known as Indymedia, says the seizure is tantamount to censorship, and civil libertarians agree. The Internet is a publishing medium just like a printing press, they argue, and governments have no right to remove Web sites.

The case, which involves an Internet company based in Texas, photos of undercover Swiss police officers and a request from an Italian prosecutor investigating anarchists, raises questions about the circumstances under which Internet companies can be compelled to turn over data. “The implications are profound,” said Barry Steinhardt of the American Civil Liberties Union, calling the Indymedia activists “classic dissenters” and likening the case to “seizing a printing press or shutting down a radio transmitter.”

Internet providers in the U.S. routinely remain silent when ordered by authorities to turn over data, though actual seizures of their servers is rare. The October 7 seizure involves a particularly vocal group -- Indymedia activists work in 140 collectives around the world from the Czech Republic to Uruguay to western Massachusetts and their sites get about 18 million page views a month -- and generated intense interest in Europe, including questioning in Britain’s House of Commons.

The two computers were seized from the London office of Texas-based Rackspace Managed Hosting, and while they were returned October 12 and all the sites are now back up, some that did not have back up are missing posts and photos. The governments involved did not provide The Associated Press with a clear picture of what was sought or which country initiated the action.

Link here.


China ordered banks to begin regular reporting of large foreign currency transactions. According to the State Administration of Foreign Exchange, new rules requiring banks and other financial institutions to report large or suspicious forex transactions would help improve efforts to block money laundering in the realm of foreign exchange.

Transactions suspected of some criminal involvement should be reported to police. Large transactions were defined as those involving more than US$10,000 in cash by an individual or business, or US$100,000 of non-cash instruments by individuals. Non-cash transactions of more than $500,000 by businesses should also be reported.

Link here.


The train wrecks of the Justice Department’s domestic War on Terror continue to pile up. Despite the perennial victory claims by Attorney General John Ashcroft and other high officials, three recent cases vivify how federal prosecutors and FBI agents continue tripping over the evidence -- or worse.

The three instances may be only the tip of the iceberg as the government can usually rely on acquiescent federal judges or coerced plea bargains to keep most of its dirty laundry out of view. The public soundbites seek to reassure us that the Justice Department’s domestic War on Terror is going well by invoking largely meaningless numbers. In a July report on the Patriot Act, DOJ bragged, “the Department has charged 310 defendants with criminal offenses as a result of terrorism investigations since the attacks of September 11, 2001, and 179 of those defendants have already been convicted.” But the vast majority of the convictions have had nothing to do with terrorism. Instead, they are a litany of credit-card fraud, visa violations, and other offenses whose prosecution does nothing to protect America against deadly foreign threats -- while the pursuit of PR victories over bogus plots diverts resources from real terrorist dangers.

As the election draws closer, the Bush administration may unveil new arrests on terrorism charges. If so, it would be wise to wait until long after the triumphant press conferences to gauge whether the government has finally got the goods -- or whether the busts are simply another effort simultaneously to frighten and comfort voters.

Link here.


A senior Bush administration official defended the Patriot Act as a “smart, ordinary and constitutional” tool in fighting terrorism and rejected attacks on it as rash and misinformed. The comments by James B. Comey Jr., the deputy attorney general, coming in a speech before the American Bar Association on the third anniversary of the passage of the act, offered a preview of what is likely to be a fierce fight in Congress next year over its future.

With key elements of the act set to expire at the end of 2005, President Bush has urged Congress to renew the law as a valuable weapon in tracking terrorists. But liberals and some conservatives in Congress have repeatedly raised concerns about whether the law has given the federal government too much power and have urged a go-slow approach in considering whether it should be renewed in its entirety.

In the face of frequent criticism of the law, Bush administration officials have mounted an increasingly aggressive and public defense of the legislation and attacked what they regard as distortions about what it does. Mr. Comey’s speech came on the same day that Attorney General John Ashcroft, in an op-ed piece in The Wall Street Journal, called the act “an indispensable tool” in fighting terrorism and said it was “often portrayed in an outright false light.” Critics challenged the Justice Department’s energetic defense of the law.

“It’s ironic that the same Department of Justice that has misled the public about the Patriot Act would complain that the public has been misled,” said Gregory Nojeim, associate director of the Washington legislative office of the American Civil Liberties Union.

Link here.



At long last, we are coming down the homestretch of this hideous and seemingly endless election. The polls are fairly tight and the outcome is still uncertain. Since many pundits are making their predictions as to what is going to happen, I have decided to throw my hat into the ring with some hopefully accurate and unorthodox prognostications. First, whatever the outcome, I believe that this election will be remembered by posterity as the most thoroughly corrupt one in American history. Everyone should fasten their seatbelts, since I suspect that an avalanche of election fraud is coming our way.

While both sides will undoubtedly cheat, I predict that the Democrats will especially outdo themselves this time. I do not think this because the Republicans are more honest (to the contrary, the neocons would steal candy from a baby if it helped to advance their agenda), but rather because the Republicans simply do not have the corrupt, urban political machines that the Democrats have at their disposal. And I expect that these machines will be working overtime this year. The dead will rise again to vote, busloads of unregistered voters will go from polling station to polling station with trial lawyers in tow, illegal immigrants will cast ballots in droves, and bedridden Alzheimer’s patients will miraculously become lucid enough to mail in absentee ballots.

More to the point, I predict a flood of sleaze this year for several reasons. First, the Democratic Party is now dominated by sixties baby-boomer Marxists. As a group, they have always believed that the end justifies the means. They will engage in any chicanery imaginable to advance their political agenda, including massive voter fraud. Ethics and morality are alien concepts to them, and they mean to win at any cost. While a certain morally ambiguous attitude has always infected the thinking of political operatives, this crowd is in a league by themselves. Second, the Democrats are harboring bitter resentment over the outcome of the last election in Florida. They believe (wrongly, in my opinion), that the 2000 election was stolen via underhanded maneuvers by Jeb Bush. Consequently, they think that massive fraud is now justified on their part to win this election.

As far as the winner is concerned, the first thing to keep in mind is that (due to the above-mentioned fraud), we will probably never know who actually won this election. But as a consequence of the electoral swindling, I expect Kerry to win several swing states and emerge victorious. I further expect that this will not pass unnoticed by the right-wingers, who will squeal like stuck piglets. This election thus may well be an even bigger train wreck than the last one, with Kerry emerging as a wounded president from the very beginning. Overall, I think that there are several silver linings in all of this for the typical libertarian bystander.

Link here.


Each country that plunges into nightmare-- whether Germany under Hitler, the Soviet Union under the Bolsheviks, Chile under Pinochet, or, for that matter, Iraq under Saddam Hussein -- travels there along its own path. The American political system -- based on free elections, the rights of citizens, and the rule of law -- is, though under the severest pressure, still available for use. If it is lost, and the full American nightmare descends, there will be many causes. They will include the militarization of foreign policy, global imperial ambition, the loss of balance among the branches of government, the erosion of civil liberties, and the overwhelming influence of corporate money and power over political life -- all present before Osama bin Laden made his appearance. But at every step of the way the skids will be greased by the national capacity, conferred by the media and exploited by politicians, to produce and consume illusion, which, though hardly an American monopoly, may be the specific form of corruption most dangerous to American democracy.

Once, observers imagined that we were entering an information age, but they were wrong. It is a misinformation age. The stupendous machinery of modern media has reached into every cranny of American life. Its outlets have been posted in every household, like a mechanical standing army. The steady, mild propaganda of advertising has long saturated the home for hours every day, the mental equivalent of low-level radiation. Now the public is being dosed with more virulent stuff. The standing army has been given increasingly insistent political marching orders. Stalin and Mao, confined mainly to radios and megaphones, could only dream of such penetration of daily life by their propaganda apparatuses.

The injection of fantasy into the real offends the aesthetic sense, but the true price is paid in blood -- in the torture of prisoners, in the launch of wars. If a grasp of reality and the constitutional machinery to act upon it remain intact, then every other ill can be addressed. But if these are lost, the capacity to recover is lost with it, and the game is over.

Link here.


There is a surreal quality about visiting the United States in the last days of the presidential campaign. If George W Bush wins, according to a scientist I met, who escaped Nazi-dominated Europe, America will surrender many of its democratic trappings and succumb to its totalitarian impulses. If John Kerry wins, according to most Democrat voters, the only mandate he will have is that he is not Bush.

Never have so many liberal hands been wrung over a candidate whose only memorable statements seek to out-Bush Bush. Take Iran. One of Kerry’s national security advisers, Susan Rice, has accused Bush of “standing on the sidelines while Iran’s nuclear programme has been advanced”. There is not a shred of evidence that Iran is developing nuclear weapons, yet Kerry is joining in the same orchestrated frenzy that led to the invasion of Iraq. Having begun his campaign by promising another 40,000 troops for Iraq, he is said to have a “secret plan to end the war” which foresees a withdrawal in four years. This is an echo of Richard Nixon, who in the 1968 presidential campaign promised a “secret plan” to end the war in Vietnam. Once in office, he accelerated the slaughter and the war dragged on for six and a half years. For Kerry, like Nixon, the message is that he is not a wimp. Nothing in his campaign or his career suggests he will not continue, even escalate, the “war on terror”, which is now sanctified as a crusade of Americanism like that against communism. No Democratic president has shirked such a task: John Kennedy on the cold war, Lyndon Johnson on Vietnam.

This presents great danger for all of us, but none of it is allowed to intrude upon the campaign or the media “coverage”. In a supposedly free and open society, the degree of censorship by omission is staggering. The New York Times, the country’s liberal standard-bearer, having recovered from a mild bout of contrition over its abject failure to challenge Bush’s lies about Iraq, has been running tombstones of column inches about what-went-wrong in the “liberation” of that country. It blames mistakes such as tactical oversights, faulty intelligence. Not a word suggests that the invasion was a colonial conquest, deliberate like any other, and that 60 years of international law make it “the paramount war crime”, to quote the Nuremberg judges. Not a word suggests that the American onslaught on the population of Iraq was and is systematically atrocious, of which the torture of prisoners at Abu Ghraib was merely a glimpse. The coming atrocity in the city of Fallujah, in which British troops, against the wishes of the British people, are to be accessories, is a case in point.

Link here.


All Saints’ Day has been recognized and celebrated for many centuries. But Halloween is a new import from America to Europe, along with the whole shebang of decorations, customs and commercial opportunities that accompany it. There is a world of difference between All Saints’ Day and Halloween. The spirits that one honors on All Saints’ were not, after all, all saints. They were real. They were spirits that might be honored... or feared. Regardless of your views on the afterlife, All Saints’ requires at least some reflection, on the lives of our forebears, the challenges they faced and perhaps the lessons that could be learned from them. At the very least, you might stand before the grave of someone you knew ... offer flowers ... and spend a moment recalling the person. This is not a ritual that lends itself to the Internet age.

Halloween, on the other hand, is an example of what Philippe Muray calls “Festivus”. Muray has noticed the way in which the genuine, dark, primeval, wild and dangerous currents and undercurrents in society have been tamed ... and transformed into harmless celebrations. This applies not merely to the shift from All Saints’ to Halloween, but also to the political process, where genuinely revolutionary parties have been replaced by a token opposition and emasculated rebels.

We have often noted how in America you cannot even say what you want about taxes anymore...without fear of criminal prosecution. Yet is there any real opposition -- of a sort that might be described as dangerous to the government? No, we celebrate the First Amendment now; we do not practice it. Likewise, America celebrates liberty. It is like Halloween: an empty expression, a hollow festival, something to feel good about. No reflection required. No risk, either. But what would the ghosts of Jefferson and Adams think of us?

Link here (scroll down to piece by Bill Bonner).
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