Wealth International, Limited

Offshore News Digest for Week of June 20, 2005

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

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President Hugo Chavez of Venezuela wants to build a new empire. The new strongman of South America hopes to re-establish a new Gran Colombia – including Ecuador, Venezuela, Colombia and Panama – an oil-rich colossus astride a key global trade route and access to the Panama Canal. Chavez has adopted the repressive practices of his friend Fidel Castro: Civil society has been strangled, the churches have been cowed, teachers cannot speak freely, and private business has been decimated. He has taken over foreign exchange institutions, established neighborhood watch committees with spies, and sacked the best of the military.

Billions in oil revenue have disappeared, even as poverty levels have increased from 44% to 54% of the population during Chavez’s misrule. 27,000 Cubans have been imported to, in part, spy and do his dirty work, even as some of them masquerade as doctors or teachers. In return 80,000 barrels of oil per day – 29 million barrels of oil per year – are sent to Cuba with no prospect for payment. Already, Cuba owes Venezuela $1 billion. Even while furnishing the oppressive Castro regime with free oil, the official unemployment rate in Venezuela exceeds 16%, a nearly 50% increase since 1998. The number of private industries has dropped from more than 11,000 to 5,000. And public debt has risen from $27 billion to $44 billion.

Chavez has kept his disastrous economic policies partly afloat by his mass distribution of free beer to the poor amid the slums of Caracas and elsewhere. Chavez has assumed control over the state-owned oil industry, PDVSA, while firing 7,000 staff and top management, resulting in peak production being 1 million barrels less than capacity. What used to be one of the best-run oil industries in the world has sharply deteriorated. Oil revenue has been stolen to finance government political campaigns, buy off opponents, pay off the Cubans, buy weapons and establish relations with terrorist nations and terrorist organizations.

It is here that the actions of Chavez are most worrisome. Chavez has financed campaigns in other countries to topple democratic governments …

Link here.

Crisis at home keeps Torrijos from attending Mercosur summit.

Panama´s President Martin Torrijos has canceled attendance to the Southern Common Market (MERCOSUR) Summit in Paraguay due to mounting domestic crisis gripping his country. Strikes and protests convened by the National Front in Defense of Social Security (FRENADESSO), a coalition of 50 unions, target Social Security reforms that raise retirement age for men from 62 to 65 years and from 60 to 62 for women from 2007 to 2015. Coordinator Andres Rodriguez called for a rally to demand the annulment of a law that raises the retirement quotas for 1.2 million beneficiaries from 7.25% to 9% and from 10.25% to 13.25% for companies from 2006 to 2010.

Rodriguez called the population to protest at the Attorney’s Office because of police attacks of protesters who are charged with crimes against national security. Social Security director Rene Luciani said that if the present $3.7 billion deficit prevails by 2012 the institution is heading for bankruptcy. President Torrijos announced a national dialogue involving the government, company management and unions for next week.

Link here.


There was a time when China’s supporters in Hong Kong dismissed Donald Tsang as a British stooge. But this week, with China’s backing, he effectively secured the territory’s highest post, raising the intriguing prospect of the proud recipient of a British knighthood in a job previously earmarked for those with a long track-record of unquestioning loyalty to the Communist government in Beijing.

In 1997, when Britain handed Hong Kong back to China, there were even doubts about whether Mr. Tsang (who shrewdly chooses not to call himself Sir Donald) would be ejected from the top echelons of the government he had served for three decades under colonial rule. He had worked closely with Chris Patten, Hong Kong’s last British governor and a strident critic of Chinese policy toward the territory. Although in the last two years of British rule he was responsible for financial affairs, he occasionally spoke out against attempts by China to interfere in Hong Kong’s administration.

But China’s strategy for dealing with Hong Kong, and apparently its attitude toward Mr. Tsang, have changed markedly since hundreds of thousands of people took to the streets on July 1st 2003 to protest against a proposed new law against subversion and to call on Mr. Tsang’s predecessor, Tung Chee-hwa, to step down. Mr. Tsang may prove more fortunate than Mr. Tung, much of whose time in office was plagued by a severe economic downturn not of his own making. The economy is showing strong signs of recovery. China shows no sign of wanting Mr. Tsang to revive the anti-subversion legislation that backfired so dramatically against Mr. Tung, and Mr. Tsang says he has no plan to do so. Public demand for more rapid progress toward full democracy for now appears muted. Mr. Tsang says his policy will not be markedly different from his predecessor’s, only that he will try to make it “more focused, more coherent”. For many in Hong Kong, this would appear to be a good enough start.

Link here.


Switzerland could sign a framework agreement with the EU as an alternative to joining the organization, according to a senior diplomat. Michael Ambühl says the government will weigh up the advantages and disadvantages of this and other options in a report to be compiled over the next two years. Ambühl said the government wanted to establish a new basis for dealings with the EU following a vote in September on extending an accord on the free movement of people to the ten new member states.

Link here.

Swiss banks record best result in 4 years.

Swiss banks made a total net profit of SFr15.6 billion ($12.25 billion) last year – one-fifth more than the year before and their best annual result since 2000. For the first time since 2001, the banks also increased their staffing levels, according to the Swiss National Bank (SNB). In 2004 the banks increased total annual profit by SFr2.7 billion, the SNB said in its annual statistical yearbook. Of the 338 banks covered, 316 reported a profit and 22 a loss. The cumulative profit for 2004 was the third highest in history, and 21% higher than the year before.

The SNB said the increase in profit was largely due to the “significant fall in depreciation and value adjustments”. These were considerably lower for all banking groups, but particularly for the country’s two biggest banks – UBS and Credit Suisse. On the operational side, gross profit from banking operations increased by 8% – due primarily to commission business and services.

Link here.


Year 2005 is turning out to be the year of “Islamic Banking”. The West is taking a serious interest in this regard and it looks like that within the next two years banks around the world will have become Islamic banks. The sudden growths of Islamic banks have attracted full attention of world banks. Islamic banking and finance has become a hot topic of the financial world across the globe. In recent months, international interest has appeared in favour of Islamic banking. The British Financial Services Authority has brought legislative changes to allow Islamic banks to operate under the Islamic Law. The U.S. Federal Reserve Bank in its New York meeting decided to provide regulatory framework for Islamic banks to operate without restrictions.

Very briefly, the traditional banks are either lending money or borrowing money and either receiving interest or paying interest. The conventional banks are not allowed to do trade whereas the Islamic banks do trade. They do not pay or receive interest, as it is unlawful under the Shariah principles. Thus the Islamic banks receives deposits and invest them and after a year share profits with the depositors. No prefixed interest is available in Islamic banks. If there is no profit, bank gets nothing. The Islamic banks share risks with the depositors. The Islamic banks act as agents for the depositors. The investments could be by way of Murabaha agreement. There are various forms of Islamic investment and trade agreements, i.e, Mudarba (fund management), Musharakah (Partnership), Ijarah (leasing), Muraheba (sale profit), Istisna (financing manufacturing), Salam (a form of sale to supply goods, material and agricultural produce to a buyer in future at a discounted price paid up front).

Islamic finance and products are attractive trends of global financial markets. Sukuks – Islamic bonds are becoming popular all over the world. Islamic trade & finance agreement and products are now studied and practiced by the muslim and non-muslim bankers, scholars and lawyers alike. The UAE rulers can play a vital and constructive role in this regard. Dubai is becoming a global financial center. Islamic currency of dinar or dirham may be established with the value of one barrel of oil at current price. The new dinar or dirham may not be linked with dollar and euro and kept as an independent Islamic currency. The oil reserves may become monetary reserves, in this way a usury free and trade based Islamic financial system will emerge for the benefit of everyone in the global village.

Link here.


They might like to celebrate the Queen’s birthday in both Abu Dhabi and Dubai, as they did in mid-April, but for most of the 100,000 British nationals, the UAE inspires strong loyalty. Sun, schools, sand dunes and social life become the mainstay of expat life which began as far back as in 1892. “I did go to the UK for a year after having spent four years here after 1997, but missed Dubai so much that I came back,” says Andrew Pitt, Business Development Manager, Landmark Properties, who compares the experience of going back from Dubai as “going from color to black and white!”

The weather, ever hailed as the British contribution to the art of polite conversation, is interesting here. While the fierce heat in the summer may not be comfortable, expats from the region that sings “rain, rain, go away” most of the year are very happy with the extremely pleasant, warm, dry days, clear blue, cloudless skies. But not always.

Link here.


The media perception (and almost universal subliminal messages) is that being categorized in the upper class means that you have arrived. In days of rigid class structure, most arrived in the upper class intact by sheer genetic accident, having been born with the proverbial silver spoon in one’s mouth. Some others ascended by virtue of arranged marriages, pure love, or conspicuous accumulation of wealth. The rest of us settled for stainless steel, its modern version plastic, or, simply, no spoon at all. But however classes were characterized, the labels were there (and are still are). What has changed is the descriptive nature of class itself, who now exists within these circles, and how they got there.

In a stunning display of journalism derived from diligent research, The New York Times recently published a series of thoughtful, frank, interactive articles on the quest for financial success among classes in America. A team of reporters spent more than a year exploring ways that class – defined as a combination of income, education, wealth and occupation – influences destiny in a society that likes to think of itself as a land of unbounded opportunity.

In reading this series I was immediately struck by eerie similarities of striving for upward mobility happening in the U.S. happening in parallel here. Granted there are differences, but some of the broader messages about the perceived stratification between lower, middle, and upper class can be interpreted wherever one can change the word America to Western society. You decide if the similarities outweigh the differences.

Link here.

On visiting Bermuda.

Bermuda is trying to shake off its fusty image and is undergoing a much-needed face lift. After the government passed a $100 million tax-free renovation incentive for hotels in 2000, almost every large hotel is tossing out the floral bedspreads and bringing in the Wi-Fi. Luxury hotel companies are taking a closer look at Bermuda’s low crime rate, perfect sweater-set semitropical climate (average temperatures range between 68 and 84 degrees) and pristine pink beaches.

Link here.


Japan’s Tokyo and Osaka are the world’s most expensive cities with London in 3rd place, according to a survey released Monday. New York, the most costly of American cities, placed 13th. The annual report ranked cities based on the comparative cost of more than 200 items including housing, public and private transport, food, clothing and entertainment. For example researchers for Mercer Human Resource Consulting found a bus ride in London cost $3.66 compared to 51 cents in Prague, $1.83 in Dublin and $1.76 in Paris. Surveys are conducted in 144 cities around the globe every March. All cities are compared to New York, which is automatically given a ranking of 100, Tokyo in comparison scored 135. South America was home to the least expensive cities, with Asuncion, Paraguay the cheapest of all surveyed cities.

Link here.


The recent Kremlin-orchestrated verdict in the prosecution (really, persecution) of YUKOS Oil Chairman Mikhail Khodorkovsky should finally confirm doubts about Russian President Vladimir Putin’s commitment to President Bush to keep Russia on the path of democratic reform. Coupled with Mr. Putin’s recent seizure of media outlets, harassment of political opponents and illegal confiscation of private property, the soviet-style show trial unmasked the true autocratic soul of Mr. Putin and the KGB-era anti-Western “siloviki”(roughly translated “power people”) Politburo that now rules the Kremlin.

Regrettably, the Bush administration reaction to the verdict was disappointingly muted. Indeed, no matter how one tries to find consistency in President Bush’s approach to the Russian democracy rollback, the U.S. policy toward Russia, or whatever passes as policy, seems forever under “internal review” – and yes, another such review is under way as if it is supposed to constitute policy. This is all the more surprising since Secretary of State Condoleezza Rice is the administration’s Russia policy “czarina”, given her careerlong immersion in U.S.-Russian relations.

In the face of the stagnant state of U.S.-Russian relations and Miss Rice’s ineffective leadership in response, she appears headed toward the very failures she berated the Clinton administration for with regard to Russia – namely, failing to “tell the truth” about what is happening inside Russia and ignoring the consequences of Mr. Putin's increasingly authoritarian policies to U.S. national interests.

Link here.

Fall in investment hits Russian economy.

Judged by Moscow’s buzzing restaurants, shopping malls and boutiques, the Russian economy is booming. State finances also seem to be in good shape: foreign currency reserves are at an all-time high, the stabilization fund is swelling with petrodollars and budgets are in comfortable surplus. But between exuberant consumer spending at the bottom and burgeoning coffers at the top, the picture is one of falling investment and stagnating production.

Link here.


The building boom of the past several years in and around Boquete shows no sign of letting up. Due to its cool mountain air and proximity to the spectacular Volcan Baru National Park, Boquete has become very popular with North American and European retirees. The rise in real estate prices is of some concern to area farmers who want to continue their vocation rather than sell their land for development. The higher property values are driving up their taxes while the prices they fetch for their oranges, coffee, vegetables or other crops go up and down without any relationship to the land rush. More retirees are coming to town every day and it looks like that trend will continue.

Link here.

Where some of the world’s finest – and most expensive – coffee grows.

Some of the worlds finest coffee is grown in Panama, and in the Best of Panama 2005 the world’s most expensive took another best of show, this time $20.10 per pound – not far off the mark from last years record setting $21.00 per pound. The supreme quality was not a surprise this time, which, Daniel Peterson of the family owned farm, Hacienda Esmeralda, that produces the coffee, explains the slight drop in price this year. “This year the surprise was that we were able to maintain the flavor,” Peterson said, which he points out was no easy task.

Most of Hacienda Esmeralda’s coffee is sold to Starbucks and Peet’s Coffee, Peterson said. Peet’s buys most of the Esmeralda Special, he said, adding that “we like to have a few micro-roasters [sell our coffee] as well.” Starbucks is very concerned with quality, said Peterson, which makes Panamanian coffee a natural choice. Peterson pointed out that when coffee prices were very low during crisis a few years ago, Starbucks would still pay around $1.20 per pound for good specialty coffee, which helped keep a lot of people in business through hard times. The Petersons also try to give something back to the environment that gave them their extraordinary crop. Though not “organic”, the Petersons take the waste from their coffee processing areas and use it to fertilize the plants, Daniel Peterson said. Every year the Petersons find ways to use less and less water in production, he adds.

The future of coffee in Panama is in the specialty market, according to Peterson. The cost to produce a pound of coffee here is about 90 cents, but in Vietnam they can do it for 40 cents or less, notes Peterson. The influx of Europeans and North Americans into the Boquete area, where most of Panama’s coffee is grown, is causing a rapid rise in land value, and in the taxes that go with it, said Peterson. “It’s part of development,” he said. Hacienda Esmeralda, like most of its neighbors, depends on the labor from the indigenous Ngobe to pick coffee. If that less expensive labor were not available, Hacienda Esmeralda might only be able to produce the Special, and not the Premium coffee which currently accounts for much of their business, Peterson said.

Link here.


Foreign Policy magazine and the consulting firm A.T. Kearny released the fifth edition of the Globalization Index in May, which analyzes the global integration of the economies of 62 nations. The data accounts for 96% of the world’s GDP and 85% of the world’s population. The index evaluates nations in four categories: economic integration (foreign trade volume and direct foreign-owned investment), personal contacts (tourism, international travel, international telephone traffic and personal fund transfers), technological connectivity (number of Internet users, Internet hosts, and secure servers through which financial transfers are carried out), and political engagement (membership in representative international organizations, personnel and financial contributions to UN peacekeeping missions, ratification of multilateral treaties). This year, only eight Latin American nations appeared in the index. Panama, ranked 24, placed highest, while Brazil was ranked 57.

Link here.


Paris, that fantasy destination for so many expats and luxury goods connoisseurs, has become an unlikely destination for Americans hoping to acquire second homes. The prospective buyers are so plentiful, in fact, that they have spawned a cottage industry of local fixers who specialize in ushering Americans through the 7% transfer fee, codified inheritance rules, requisite “notaire” and other bewildering rituals of French real estate. A strong euro has scared away some buyers, but others have clearly decided that it is a sign to buy in. Though the euro has sagged a bit in recent months, many economists see it bouncing back, indicating that now may be the time to buy. Of course, when the alternative is investing in municipal bonds, who would not prefer a private hideaway stocked with French armoires and raw-milk Camembert? The average cost of a square foot in an older building in the fashionable Sixth Arrondissement in the third quarter of 2004 was €655, or about $800, compared with $942 in Greenwich Village, an equivalent New York neighborhood.

Link here. A resource for those comtemplating buying property in France – link.


A major new opinion poll shows Labour and National neck and neck in the lead-up to the forthcoming General Election, with tax set to be a defining issue for voters. The first in what will be a series of comprehensive nationwide polls by ACNielsen for newspaper owner Fairfax reveals several key points which signal a closely contested election and also give an insight into the issues likely to influence voters in the coming months. The poll showed Labour leading the party vote with 40% support to National’s 38% and New Zealand First in a strong position to hold the balance of power with 9% support. The Greens are the only other party to breach the 5% threshold.

The poll revealed strong support (75%) for immediate income tax cuts. More worrying for the Government was the finding that 68% of Labour voters wanted tax cuts now. Support for tax cuts dropped slightly to 64% if they meant a cut in government spending. Just over half of respondents (52%) thought New Zealand immigration laws were “not tough enough”, although that figure jumped to 78% of New Zealand First voters.

Link here.

Ex-pat givers to Kiwi election preoccupied by taxes.

It is taxing stuff in the drawing rooms of South Kensington or within a stunning London docklands apartment – or even a stateroom aboard a Sydney-based mega-yacht – to decide which party gets the high-flying ex-pat’s vote for this year’s election. The ex-pat vote – for this read money, lots of money – is already a significant factor in the run-up to the expected September poll.

Link here.



HM Revenue & Customs (HMRC) has told credit card companies to hand over account details, according to legal firm DLA Piper Rudnick Gray Cary. HMRC declined to comment on whether it had approached the card companies. However, in a statement HMRC said it was “increasingly focussed on tackling tax evasion by people using offshore debit and credit cards.” The move by HMRC has been initiated by its Offshore Fraud Project Group (OFPG), DLA Piper said. The group was set up in 2003 to investigate UK residents who were suspected of evading tax using accounts in offshore tax havens such as the Channel Islands and the Isle of Man. It is not illegal for a UK-domiciled person to hold money in an offshore account, but the interest earned must be declared.

In a statement, HMRC said it was “well aware” that offshore accounts were used to avoid paying UK taxes. “HMRC is increasingly focussed on tackling tax evasion by people using offshore debit and credit cards and we are using a very wide range of information sources to solve the problem in order to create a fair and level playing field for all taxpayers,” the statement said. “This means is it is no longer possible to evade UK tax by simply salting away money in an offshore account.”

Links here and here. Irish banks included in U.K. offshore probe – link.


Where do the boundaries lie between legitimate tax planning, tax avoidance and outright tax evasion? The issue has been raised afresh this week by news that KPMG may face charges in the US for marketing “abusive” tax shelters to wealthy clients. In this particular case the firm admits the schemes were unlawful [under extreme pressure … but whatever. Ed]. Yet in most cases of tax avoidance, the hypocricy of the authorities is palpable. On the one hand we are invited to believe it immoral. In the U.S., Britain and Australia, tax advisers are now required to seek pre-approval from the revenue for their tax-saving wheezes.

Yet with a different hat on, all these jurisdictions actively market themselves to international business on the basis of their supposedly benign tax regimes. Tax competition? Nonsense. Most of these supposed tax benefits are simply tolerated forms of tax avoidance, often at the expense of a rival jurisdiction. The rule seems to be that tax avoidance is wrong verging on the criminal when at your own Government’s expense, but perfectly fine when at somebody else’s. No wonder no one knows where they stand any more.

Link here.


One reason I thought it was a bad idea to appoint a tax reform commission is that its members would waste a lot of time reviewing options that most tax experts rejected long ago. I know from experience everybody and his brother have some brilliant scheme to reform the tax system that may appear superficially plausible. But once it is subjected to careful political and economic analysis, one quickly discovers why no one has ever given it serious consideration. Take, for example, the deceptively simple-sounding idea of taxing all financial transactions instead of income, profits or sales. The economy’s volume of transactions is many times greater than the GDP, so theoretically one could match current federal revenues with a very low tax rate. The tax would be assessed through the banking system, which would deduct the fee on every check, electronic funds transfer or credit card transaction. Currency would be taxed whenever deposited or withdrawn.

A recent study by the IMF of real world experiences with financial transactions taxes comes down very hard against them. For starters, by targeting the means of payment, a transactions tax will hinder development of a nation’s financial system, which all economists believe is critical to economic development, and lead to disintermediation from the banking system. Primitive economies use cash and barter; advanced economies use checks, credit cards and debit cards. So why would we want to encourage people to use primitive financial methods and discourage using advanced methods?

The study notes wealthy people were able to avoid transactions taxes by using offshore financial institutions, and businesses did so by vertically integrating to keep transactions in-house and not utilize the banking system. It also found governments often penalized themselves with such taxes because much financial activity involved trading in government securities. The tax raised interest rates, thereby forcing governments to pay more to finance their debts. The only attraction of a financial transactions tax is the low rate. But it is a chimera and would have many undesirable economic consequences if enacted. We should stick to taxes we better understand and know will work in the real world.

Link here.


New European tax rules come into force at the start of July, which will potentially affect thousands of British savers who hold money in offshore bank accounts. Under this new EU Savings Tax Directive, financial institutions in all EU member states, plus a number of neighboring territories, will be required to either disclose information about your investments to the relevant tax authority – or charge a punitive withholding tax. In other words, if you are resident in the UK, but have a savings account elsewhere in the EU, the bank will automatically inform the Inland Revenue how much interest you earned last year. This allows the tax inspectors to double-check this information against a self-assessment form to determine who has – and more importantly who has not – paid the tax due.

It is not just EU states that have signed up to this directive. A number of tax havens have also agreed to follow suit. These include Jersey, Guernsey, the Isle of Man, the British Virgin Islands, the Cayman Islands, Switzerland, Liechtenstein, Monaco and San Marino. Most of these tax havens have built up a reputation over generations for being discreet and not asking too many questions when it comes to handling customers’ money. In order to continue offering such a service, most will offer savers an alternative to handing their details over the taxman.

In order to keep details of their wealth private, customers can opt to pay this withholding tax which will be levied directly in the country in which their savings are held. This will be charged at a rate of 15% for the first three years, 20% for the next three years and 35% from 2011 onwards. For many savers this may appear to be a choice between the devil and the deep blue sea. Pay tax offshore or pay tax onshore – either way it sounds like you will end up with a larger tax bill.

The fear that the Revenue could start prying into money earned abroad, and on which it suspects UK income tax should have been paid, has already begun triggering an exodus of funds to financial centres outside those which have signed up for the directive. These include Singapore, Bermuda and Dubai. Savings experts reckon that up to £1 billion may already have been moved to these areas. As well as savers moving money to far-flung corners of the globe in an effort to – illegally – evade tax, many people are also restructuring their financial affairs in order to legally minimize future tax bills. One way of doing this is through a “deferred interest account”, which accrues interest on a daily basis, but the interest is not credited to the account until the depositor decides to close it.

Link here.



Offshore bank accounts and funds are linked in our imaginations to spy films and crime thrillers, yet they have provided increasingly popular tax havens for many ordinary investors. But from next month all that will change. New EU tax rules mean that savings held offshore, in places such as Luxembourg, Guernsey and Jersey, can no longer be kept from the scrutiny of the taxman. Those serious about avoiding tax will be forced to switch their money to the other side of the world.

Starting July 1, EU members and a few other states that have signed up to the new savings directive must either make full disclosure of all investments held by institutions or begin deducting tax before distributing returns. The worry is that once an individual’s full wealth is disclosed to the Inland Revenue, it could trigger further investigations if there is any suspicion that income tax or other taxes have been avoided in the past.

Early indications are that many investors are intent on keeping a veil over their financial affairs. The fear that the Revenue could start prying into money earned abroad has already begun triggering an exodus of funds to financial centers outside those that have signed up for the directive – such as Singapore, Bermuda and Dubai. David Aird, managing director of Investec Fund Managers, says, “We already know that Singapore is a beneficiary and has seen a big influx of funds.” However, Symes urges caution. “You need strong nerves to invest in some of these centers, and do so at your peril.”

Link here.


Some Guernsey banks are not offering their customers an important option that could exempt them from the EU Savings Tax Directive, according to a local expert. Following an Ecofin meeting last week, the implementation of the directive will go ahead on 1 July. “Guernsey has gone to the trouble to include a specific exemption that is available to UK resident but non-domiciled individuals who do not receive their savings income in the UK,” said Graham Parrott, tax partner at Ernst & Young. “We are aware that some local banks are not offering this option and the reasons for their cautious approach are understandable. But, while protecting their own position, this stance is not in their customers’ best interest or arguably that of the island. The whole reason for the exemption is to reduce the impact on Guernsey and the ‘non-dom’ community is important to the island’s banks.”

Link here.


Gibraltar has been voted as this year’s winner of the Offshore Finance Awards by the readership of UK-based finance magazine Investment International. The surprise result emerged after the magazine carried out a mailing to some of its readers and placed a form on its website inviting responses. “The rival offshore centers of the Channel islands and Isle of Man are better known for deposit taking while jurisdictions such as the Cayman islands and the Bahamas are known for their corporate structures,” the magazine observed. However, the Rock appears to have become increasingly popular with British expats and investors, with one reader declaring, “It’s a great place. I do a lot of business there.”

While the jurisdiction’s economy is not wholly dependent on financial services, the industry constitutes about one-third of its economy. The news was greeted with enthusiasm by Gibraltar’s government.

Link here.


Increasing numbers of the rich and famous could soon be moving to Switzerland following the removal of residency restrictions on EU citizens. But experts say wealthy foreigners are also still attracted by the country’s famous tax breaks and its high quality of life. Switzerland – whose population is made up of 20% foreigners – is already home to thousands of prosperous immigrants and it is estimated that at least half of the country’s 300 richest people come from abroad.

Due to the lifting of settlement and labor restrictions on EU citizens last year, they may soon find their privileged haunts becoming more crowded. “Since June 2004, European citizens have not needed a work permit in order to take up residence in Switzerland,” said the Federal Migration Office’s Mario Tuor. “They just need to prove they have the funds to support themselves.” Previously there were a lot of legal restrictions to settling down in Switzerland, with even the wealthiest of Europeans being refused residency in more than 50% of cases.

Link here.


Following criticism of a number of low-tax jurisdictions in the late 1990s, the BVI made a concerted effort to make a number of significant improvements to its legislative structure. The changes have served to satisfy international regulatory requirements and have ensured that the BVI goes from strength to strength in its ability to attract foreign investors to the jurisdiction. With the introduction of comprehensive insolvency legislation in 2004 giving regulators greater powers of intervention and protecting creditors and investors alike, draftsmen turned their attention to the International Business Companies (IBC) Act on the 20th anniversary of its coming into force. The BVI Business Companies Act (the new act) came into force on 1 January 2005. It is designed to be an enhancement of the IBC Act with a number of new features.

Link here. BVI Guide on EU Savings Tax Directive – link.


“Want drive fast cars?” asks an advertisement, in broken English, atop the Web site iaaca.com. “Want live in premium hotels? Want own beautiful girls? It’s possible with dumps from Zo0mer.” A “dump”, in the blunt vernacular of a relentlessly flourishing online black market, is a credit card number. And what Zo0mer is peddling is stolen account information – name, billing address, phone – for Gold Visa cards and MasterCards at $100 apiece. It is not clear whether any data stolen from CardSystems Solutions, the payment processor reported last week to have exposed 40 million credit card accounts to possible theft, has entered this black market. But law enforcement officials and security experts say it is a safe bet that the data will eventually be peddled at sites like iaaca.com – its very name a swaggering shorthand for International Association for the Advancement of Criminal Activity.

For despite years of security improvements and tougher, more coordinated law enforcement efforts, the information that criminals siphon – credit card and bank account numbers, and whole buckets of raw consumer information – is boldly hawked on the Internet. The data’s value arises from its ready conversion into online purchases, counterfeit card manufacture, or more elaborate identity-theft schemes. The online trade in credit card and bank account numbers, as well as other raw consumer information, is highly structured. There are buyers and sellers, intermediaries and even service industries. The players come from all over the world, but most of the Web sites where they meet are run from computer servers in the former Soviet Union, making them difficult to police.

Traders quickly earn titles, ratings and reputations for the quality of the goods they deliver – quality that also determines prices. And a wealth of institutional knowledge and shared wisdom is doled out to newcomers seeking entry into the market, like how to move payments and the best time of month to crack an account. The Federal Trade Commission estimates that roughly 10 million Americans have their personal information pilfered and misused in some way or another every year, costing consumers $5 billion and businesses $48 billion annually. No one is willing to estimate how many cards and account numbers actually make it to the Internet auction block, but law enforcement agents consistently describe the market as huge.

Link here.


The chief of the credit card processing company whose computer system was penetrated by data thieves, exposing 40 million cardholders to a risk of fraud, acknowledged that the company should not have been retaining those records. The CEO of CardSystems Solutions indicated that the records known to have been stolen covered roughly 200,000 of the 40 million compromised credit card accounts, from Visa, MasterCard and other card issuers. He said the data was in a file being stored for “research purposes” to determine why certain transactions had registered as unauthorized or uncompleted. “We should not have been doing that,” Perry said. “That, however, has been remediated.” As for the sensitive data, he added, “we no longer store it on files.”

Under rules established by Visa and MasterCard, processors are not allowed to retain cardholder information including names, account numbers, expiration dates and security codes after a transaction is handled. “CardSystems provides services and is supposed to pass that information on to the banks and not keep it,” said Joshua Peirez, a MasterCard senior vice president who has been involved with the investigation. “They were keeping it.”

Link here.

Breach reveals vulnerability of credit cards.

The criminal exploit that exposed 40 million credit card accounts to possible fraud is shedding light on an arcane but sensitive piece of the financial industry: the hundreds of companies that process transactions between merchants and card issuers. While enormous in scope, the breach disclosed at CardSystems Solutions was by no means the first such attack on a card processor. Many analysts believe that banks and credit card companies, despite working hard to tighten their own security, have failed to force payment processors to maintain similar standards.

In recent years, card associations such as Visa and MasterCard have set up security requirements for processors to follow. No laws in particular govern this program, but the card associations can impose fines of several hundred thousand dollars for transgressions. However, aggressive audits of companies like CardSystems are not being done.

The break-in is the latest high-profile data breach to be publicly disclosed in recent months involving credit card companies, retailers and data brokers that amass and sell consumer data. Security and fraud experts say two factors are behind the trend: (1) Information thieves are becoming ever more sophisticated at grabbing and selling financially sensitive information. (2) A California law took effect this year that requires companies to notify state residents when their personal information is compromised. Congress is now debating a national version. Consumer advocates believe that retailers and banks are reluctant to do anything to change the credit system because they fear it would slow the process by which consumers get and use credit.

Link here.

Regulators start inquiry in data loss.

Federal banking regulators said yesterday that they had started an investigation into CardSystems Solutions, the payment processor where a security breach has put millions of American cardholders at risk for fraud. The Federal Financial Institutions Examination Council, an interagency group of the five federal banking regulators, said the investigation began last week. Officials are assessing security at CardSystems’ operational centers, at the major credit card companies and at any banks that may be involved, the council said. It would not identify the banks contacted in the inquiry. The investigation is expected to take two to four weeks. There is a separate criminal investigation by the F.B.I.

Link here.

CardSystems’ data was left unsecured.

CardSystems Solutions, the credit-card processing company that recently exposed 40 million debit and credit-card accounts in a cyber break-in, failed to secure its network, even though the network had been certified secure to a data security standard, according to Visa. Since 2001, Visa and MasterCard have been touting a data security industry standard they developed in an effort to prevent credit-card data theft and stave off federal regulation. The standard has become a required criteria for businesses handling credit-card transactions. Visa spokeswoman Rosetta Jones told Wired News that CardSystems Solutions received certification in June 2004 that it was compliant with the standard, but an assessment after the breach showed it was not compliant. “Had they been following the rules and requirements, they would not have been compromised,” Jones said.

Jones would not provide specifics on what auditors found in their assessment. But when asked if it would be fair to say that the evidence indicated a failure to apply a firewall or maintain virus definitions – two basic steps in securing a network – she said, “That would be fair.” The standard, called the Payment Card Industry Data Security Standard, or PCI, consists of 12 requirements, such as installing a firewall and anti-virus software and regularly updating virus definitions. It also requires companies to encrypt data, to restrict data access to people who need it and to assign a unique identifying number to people with access rights in order to monitor who views and downloads data. Since 2001, any business wishing to process credit-card transactions had to sign a contract binding them to the PCI standard and obtain a security audit from an approved assessor certifying their compliance.

Bruce Schneier, chief technology officer at Counterpane, a computer security firm that helps companies secure and monitor their networks, said the revelation highlights a universal problem with enforcing standards. “The standard not only has to be good, but the compliance process has to have integrity,” Schneier said. “But a lot of (compliance involves) self-certification. It’s things you say you do. And it’s only audited minimally.”

Link here.

Security flaw exposes CVS purchase data.

A security hole that allowed easy access to the purchase information of millions of CVS’s loyalty card customers prompted the company to pull Internet access to the data. The Woonsocket, Rhode Island-based drugstore chain, which has issued 50 million of the cards, said it would restore Web-based access to the information after it creates additional security hurdles. The data security flaw in the ExtraCare card service was exposed by the grassroots group Consumers Against Supermarket Privacy Invasion and Numbering, or CASPIAN. It said anyone could learn what a customer had purchased with an ExtraCare card by logging on to a company Web site with the card number, the customer’s zip code and first three letters of the customer's last name.

Link here.

U.S. senators to unveil data-breach bill.

Business leaders who fail to tell consumers when they may be at risk of identity theft could face jail under a bipartisan bill expected to be introduced in the Senate next week. Senate Judiciary Committee Chairman Arlen Specter and Sen. Patrick Leahy, the committee’s top Democrat, would also restrict a freewheeling trade in Social Security numbers that are prized by identity thieves. The bill, the first to draw Republican sponsorship, comes on the heels of the largest security breach announced to date after an outsider gained access to 40 million credit-card accounts held by CardSystems Solutions, a payment processor.

Dozens of similar breaches have been disclosed this year after a California state law required businesses to make such incidents public. Businesses and consumers have urged the Republican-controlled Congress to pass a national version of the California notification law. Specter and Leahy’s bill would require businesses across the nation to make data-security breaches public. Those that do not could face criminal prosecution. Businesses would not be able to require consumers to reveal their Social Security numbers in return for goods or services, and they would be forbidden to buy or sell Social Security numbers without consumer permission. Consumers would also be able to access the profiles maintained by “data brokers” like ChoicePoint and fix any errors, as they are currently able to do with credit reports. Republicans in the House are preparing efforts of their own.

Link here.


Crooked call center workers in India are flogging details of Britons’ bank accounts, a Sun probe has found. Our undercover reporter Oliver Harvey was sold the top secret information on a thousand accounts, and numbers of passports and credit cards. City of London police launched an investigation after receiving a dossier of information from The Sun giving details of the banks whose security may have been compromised. A number of high street banks including Barclays, the Woolwich, HSBC and Lloyds TSB, said they were working with police. Harvey, who paid a total of $5,000 (£2,750) for the information and was asked for another £275 to be sent later, was told details usually cost £4.25 but he was getting a special deal.

Kkaran Bahree, who said he got the details from a network of call center workers in Delhi, also boasted that he could get up to 2,000 account details a month. The information received included account holders’ addresses, secret passwords, credit card details, passports and driving licence information. In some cases there were also the issue and expiry dates of bank cards, as well as the three digit security number from the back of the card.

Link here.


Prime Minister Paul Martin’s three sons will be called before a parliamentary finance committee this fall to explain how their father’s steamship line business takes advantage of tax havens in Barbados. The three opposition parties in the House of Commons recently decided to call Paul, James and David Martin – who oversee their father’s company Canada Steamship Lines [CSL)]– to testify. When Martin became Canada’s finance minister, he signed an obligatory blind management agreement to avoid a potential conflict of interest. It allowed him to be consulted about major decisions involving his assets. An interim manager was appointed. In August 2003, when Martin was running for leadership of the Liberal party, he transferred his interest to his sons. Martin has come under fire for not closing Canadian tax loopholes for firms like CSL that do business in the Barbados.

Link here.



The U.S. Department of Justice is quietly shopping around the explosive idea of requiring Internet service providers to retain records of their customers’ online activities. Data retention rules could permit police to obtain records of e-mail chatter, Web browsing or chat-room activity months after Internet providers ordinarily would have deleted the logs – that is, if logs were ever kept in the first place. No U.S. law currently mandates that such logs be kept.

In theory, at least, data retention could permit successful criminal and terrorism prosecutions that otherwise would have failed because of insufficient evidence. But privacy worries and questions about the practicality of assembling massive databases of customer behavior have caused a similar proposal to stall in Europe and could engender stiff opposition domestically. In Europe, the Council of Justice and Home Affairs ministers say logs must be kept for between one and three years. One U.S. industry representative, who spoke on condition of anonymity, said the Justice Department is interested in at least a two-month requirement.

“It was raised not once but several times in the meeting, very emphatically,” said Dave McClure, president of the U.S. Internet Industry Association, which represents small to midsize companies. “We were told, ‘You’re going to have to start thinking about data retention if you don’t want people to think you’re soft on child porn.’” The idea represents an abrupt shift in the Justice Department’s long-held position that data retention is unnecessary and imposes an unacceptable burden on Internet providers.

Link here.


More than 55% of U.S. companies snoop on their staff’s private email and over 60% are planning to hire more spies, according to a 2005 survey by the American Management Association and training and consulting firm The ePolicy Institute. Most snooping is carried out under the pretence that companies are trying to protect company secrets and a quarter say that they have fired people because of “email abuse”. This abuse can range from sending details of the price of the staff coffee machine to a mate to writing a letter to your mum during your lunch break.

Link here.


So, you think the USA Patriot Act has nothing to do with you because you are not a terrorist, do not know one and have not wired any money to the “Axis of Evil” lately? Think again. Your bank is now the U.S. government’s secret informant. Each time you open an account, the bank is under direct orders to start a dossier and squeal if you do something suspicious. A Richmond reader who asked that his identity be protected was shocked to learn about this snooping firsthand. Not only did he catch the federal government prying into his financial activities, but he said it later wound up costing him a higher interest rate on a loan.

I will explain later. First, is it true that the federal government under the Patriot Act peers into everybody’s banking activities now? Yes, banking officials confirmed. “Banks and other financial institutions now are required to monitor their customers and comply with the Patriot Act so that they’re not unknowingly opening up accounts for suspected terrorists,” said Joe Face, director of the state Bureau of Financial Institutions, in Richmond. Why do consumers not know about this? “I don’t know that it was all that well-publicized,” he said.Yet a spokesman for the Office of the Comptroller of the Currency in Washington, Dean DeBuck, said that, “This really affects everybody.”

Banks must collect information about consumers and track their behavior when they open new accounts. So must savings associations, trust companies, credit unions, brokerages and dealers, mutual fund administrators, casinos, the futures traders, credit-card system operators such as Visa and MasterCard, and even jewelry dealers and jewelry retailers that trade more than $50,000 in precious gems. But they do not have to report everybody who opens a new account, just those caught doing something suspicious, said Anne Marie Kelly, spokeswoman for the Financial Crimes Enforcement Network, or FinCEN. In 2004 alone, FinCEN received 689,414 suspicious-activity reports.

So do not bother walking into a bank and plunking down an unusually large pile of cash. The bank may not say much to you about it. But you can bet it will fill out a detailed “suspicious-activity form” and forward it to FinCEN. So what exactly happened to our reader? …

Link here. Suspicious activity rules explained when first issued in 1996 here SARs reissued in 2002 – link.


The federal agency in charge of aviation security collected extensive personal information about airline passengers even though Congress forbade it and officials said they would not do it, according to documents obtained Monday by The Associated Press. The Transportation Security Administration bought and is storing details about U.S. citizens who flew on commercial airlines in June 2004 as part of a test of a terrorist screening program called Secure Flight, the documents indicate. “TSA is losing the public’s trust,” said Tim Sparapani, a privacy lawyer with the American Civil Liberties Union. “They have a repeated, consistent problem with doing one thing and then saying they did another.”

Secure Flight and its predecessor, CAPPS II, have been criticized for secretly obtaining personal information about airline passengers and failing to do enough to protect it. According to the documents, which will be published in the Federal Register this week, the TSA gave the data, known as passenger name records, to its contractor, Virginia-based EagleForce Associates. EagleForce then compared the passenger name records with commercial data from three contractors that included first, last and middle names, home address and phone number, birth date, name suffix, second surname, spouse first name, gender, second address, third address, ZIP code and latitude and longitude of address. The reason for the comparison was to find out if the passenger name record data was accurate, according to the TSA.

EagleForce then produced CD-ROMs containing the information – except for latitude and longitude and spouse’s first name – “and provided those CD-ROMs to TSA for use in watch list match testing,” the documents said. TSA now stores that data. According to previous official notices, TSA had said it would not store commercial data about airline passengers. Bruce Schneier, a security expert who serves on the TSA-appointed oversight panel for Secure Flight, said the agency was explicitly told not to try to verify passengers’ identity with commercial data. “They’re doing what they want and they’re working around any rules that exist,” Schneier said.

Link here.


The Social Security Administration has relaxed its privacy restrictions and searched thousands of its files at the request of the F.B.I. as part of terrorism investigations since the Sept. 11, 2001 attacks, newly disclosed records and interviews show. The privacy policy typically bans the sharing of such confidential information, which includes home addresses, medical information and other personal data. But senior officials at the Social Security agency agreed to an “ad hoc” policy that authorized the release of information to the bureau for investigations related to Sept. 11 because officials saw a “life-threatening” emergency, internal memorandums say.

The I.R.S. also worked with the bureau and the Social Security agency to provide income and taxpayer information in terror inquiries, law enforcement officials said. Officials said the I.R.S. information was limited because legal restrictions prevented the sharing of taxpayer information except by court order or in cases of “imminent danger” or other exemptions. The tax agency refused to comment. The Social Security memorandums were obtained through a Freedom of Information Act request by the Electronic Privacy Information Center, a civil liberties group here.

Social Security and law enforcement officials said that they were sensitive to privacy concerns and had put safeguards in place, but that they believed that the information gave investigators a valuable tool. “We ran thousands of Social Security numbers,” said a former senior F.B.I. official who insisted on anonymity because the files involved internal cases. “We got very useful information, that’s for sure,” the former official said. “We recognized the value of having that information to track leads, and, to their credit, so did the Social Security Administration.” Some privacy advocates and members of Congress, although sympathetic to the extraordinary demands posed by the Sept. 11 investigation, said they were troubled by what they saw as a significant shift in privacy policies.

Link here.


Law has dual, conflicting effects on privacy. Law is essential for protecting privacy because it backs individuals’ privacy-protecting decisions, but much legislation plays a significant role in undermining privacy. Indeed, the principal threats to privacy come from governments. These threats fall into three classes. The first, government surveillance, is a profound and well-recognized threat to privacy. Governments also undermine privacy by collecting, cataloging, and sharing personal information about citizens for administrative purposes. Less acknowledged – but no less important – is the wide variety of laws and regulations that degrade citizens’ power to protect privacy as they see fit.

Whether it is anti-privacy regulation, data collection required by all manner of government programs, or outright surveillance, the relationship of governments to privacy is typically antagonistic. Privacy thrives when aware and empowered citizens are able to exercise control of information about themselves. Thoughtful policymakers should recognize the detrimental effects many programs have on consumers’ privacy and respond with proposals that reduce the role of government in individuals’ lives.

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


I was opening up my almost brand new Dell 600m laptop, to replace a broken PCMCIA slot riser on the motherboard. As soon as I got the keyboard off, I noticed a small cable running from the keyboard connection underneath a piece of metal protecting the motherboard. I figured “No Big Deal”, and continued with the dissasembly. But when I got the metal panels off, I saw a small white heatshink-wrapped package. Being ever-curious, I sliced the heatshrink open. I found a little circuit board inside. Being an EE by trade, this piqued my curiosity considerably. On one side of the board, one Atmel AT45D041A four megabit Flash memory chip. On the other side, one Microchip Technology PIC16F876 Programmable Interrupt Controller, along with a little Fairchild Semiconductor CD4066BCM quad bilateral switch. Looking further, I saw that the other end of the cable was connected to the integrated ethernet board.

What could this mean? I called Dell tech support about it, and they said, and I quote, “The intregrated service tag identifier is there for assisting customers in the event of lost or misplaced personal information.” He then hung up. A little more research, and I found that that board spliced in between the keyboard and the ethernet chip is little more than a Keyghost hardware keylogger. The reasons Dell would put this in thier laptops can only be left up to your imagination. It would be very impractical to hand-anylze the logs, and very CPU-intensive to do so on a computer for every person that purchased a Dell laptop. Why are these keyloggers here? I recently almost found out.

I called the police, as having a keylogger unknown to me in my laptop is a serious offense. They told me to call the Department of Homeland Security. At this point, I am in disbelief. Why would the DHS have a keylogger in my laptop? It was surreal. So I called them, and they told me to submit a Freedom of Information Act request. This is what I got back …

Link here.



Supreme Court Justice Louis D. Brandeis described privacy as the right “to be left alone”. In subsequent decisions throughout the 20th century, the judiciary expanded this definition in limited ways, mostly based on the Fourth Amendment. But the primary fight for privacy does not take place in the courts. Congress has been the battlefield. Americans generally think of the the legislative branch as the champion of privacy issues, but it has been, and will forever be, powerless to do so in a meaningful and pervasive way. The reason: technology.

Legislation moves in a linear process. It has its own pace and tempo, and God help whoever tries to rush it. Newcomers to Washington are astonished by how much time it takes to craft, draft, and pass a bill. It can be years. The pace of technological innovation is geometric. Actual research also takes years, but most of the high-tech advances that affect our lives are changes to existing products – innovations not inventions. The legislative machinery of Congress cannot keep up with the tempo of those innovations.

Examples of this abound. For more than a century, patrons of the U.S. Postal Service have enjoyed the benefit of laws protect them from fraud and mail tampering. However, e-mail users do not have that same shield – and probably never will. This same problem exists today for land lines and cell phones, and almost certainly will apply equally to emerging technologies like Voice over IP (VoIP). So why can’t an enlightened future Congress just pass bills remedying this deficiency? They can, but all it would take is a tweak of the target technology to emasculate most such laws. Legislation is only effective when narrowly drafted, targeting a specific, well-understood problem. The judicial system abhors ambiguity – legal vagueness equates with legal impotence.

The government’s current approach consists of industry self-regulation through trade groups like TrustE or by voluntary use of privacy policies. All you have to do is read the newspapers to see that that approach is not working. In the first half of 2005, half a dozen major privacy breaches have already taken place. The difficulty in legally protecting identity data is that it is so darn useful to institutions and the government. The needs of commercial interests and national security are antithetical to a citizen’s desire to be left alone. It is naïve to expect either institution to voluntarily respect personal boundaries.

The solution is to guarantee the right to privacy to all citizens by amending the Constitution, which has no such safeguard today. In fact, the word privacy is never mentioned in the document, even in an amendment. The lack of a Constitutional mention of privacy relegates its defense to lawyers and legislators who are free to define it in any way that suits them and their constituents.

Link here.


Third-level graduates have less respect for the rule of law, displaying a greater tolerance for tax evasion, speeding and purchasing stolen goods, according to a new opinion poll. Lansdowne Market Research interviewed 1,200 people aged 15 and over during April 13th-25th for the social-policy think-tank TASC. Questioned about their attitudes to the rule of law, the number who believed that evading tax and dropping litter could be excused in some cases are almost identical at 67% and 69% respectively.

But the toleration for law-breaking is higher in nearly all categories among third-level graduates, compared to those with a second-level or primary education. 39% of those educated at third level have some toleration for tax evasion, compared with 27% of those with only a primary education and 28% with second level. 37% of those educated to third level are ambivalent about speeding, compared with 19% of those educated to primary level and 21% of second-level graduates.

“With just one exception (falsely claiming benefits), those with third-level education were significantly more ambivalent towards the law than those with primary or second-level education only,” said Paula Clancy, Ian Hughes and Teresa Brannick in an analysis of the findings.

Link here.


Head of the UK Central Authority for Organized Crimes and International Directorate at the Home Office, Mr. Simon Regis, in Abuja, said that the late military leader, General Sani Abacha, laundered about $1.3 billion through UK banks. Regis who is in Nigeria along with two other colleagues to train members of the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC) made the disclosure while fielding questions from newsmen.

Responding to a question on UK’s commitment to collaborating with Nigeria in fighting corruption, Regis said, “In terms of Abacha money in the UK, when the case came to light, our financial services authority conducted an investigation. A lot of banks were found to have adopted procedures that were less than appropriate. Those procedures were rectified. What was discovered was that at least $1.3 billion was laundered through the UK.” Abacha who was Head of State from 1993 until he died in 1998, was believed to have stolen more than $3 billion and kept in various bank accounts in Europe. The Obasanjo administration has since inception in 1999 been making efforts to get Abacha loot repatriated.

Link here.


Syrian assets held by Swiss banks have dropped SF5.5 billion ($4.3 billion) during the past year. The 39% drop was unexplained, but it could reflect sanctions imposed in May 2004 by the United States, which accuses the country of supporting terrorism and undermining efforts to stabilise Iraq. The sanctions restrict the dealings U.S.-based banks can have with their Syrian counterparts. Major Swiss banks, which have extensive operations in the U.S., may have heeded the sanctions. Spokesmen for the largest banks, UBS and Credit Suisse, declined to comment.

Link here.


Charlotte Amalie, U.S. Virgin Islands – A federal judge threw out evidence against four men charged with laundering more than $60 million through their chain of U.S. Virgin Islands grocery stores, ruling that FBI agents acted in “reckless disregard for the truth”. The ruling found that the FBI’s search warrant was obtained improperly. It said agents, who had claimed to have seen suspicious tax records from the men, admitted they had only seen a computer printout of the records and did not thoroughly verify the evidence with the U.S. Caribbean territory’s Internal Revenue Bureau.

In September 2003, prosecutors indicted the four men on charges they evaded $60 million in taxes from their Plaza Extra grocery stores from 1996 to 2001, laundered the money and smuggled it to bank accounts in Amman, Jordan, and the nearby French Caribbean island of St. Martin. The agents initially said the men claimed to have made just $270,000 in 1998. A review of the original tax records showed the men reported making more than $39 million, according to the June 16 order.

“It is our hope that the government will come to its senses, that they will stop harassing these people just because they are Arabs and Muslims,” said Pamela Colon, a lawyer for the men, who face from 20 to 93 years in prison if convicted. Colon said the evidence thrown out included more than 100,000 documents and was the backbone of the government’s case against the men.

Link here.


Cities may bulldoze people’s homes to make way for shopping malls or other private development, a divided Supreme Court ruled, giving local governments broad power to seize private property to generate tax revenue. In a scathing dissent, Justice Sandra Day O’Connor said the decision bowed to the rich and powerful at the expense of middle-class Americans. The 5-4 decision means that homeowners will have more limited rights. Still, legal experts said they did not expect a rush to claim homes.

Opponents, including property-rights activists and advocates for elderly and low-income urban residents, had argued that forcibly shifting land from one private owner to another, even with fair compensation, violates the 5th Amendment to the Constitution, which prohibits the taking of property by government except for “public use”. But Justice John Paul Stevens, writing for the majority, cited cases in which the court has interpreted “public use” to include not only such traditional projects as bridges or highways but also slum clearance and land redistribution. He concluded that a “public purpose” such as creating jobs in a depressed city can also satisfy the 5th Amendment.

The court should not “second-gues”q local governments, Stevens added, noting that “[p]romoting economic development is a traditional and long accepted function of government.” He was joined in his opinion by other members of the court’s liberal wing – David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer, as well as Reagan appointee Justice Anthony Kennedy, in noting that states are free to pass additional protections if they see fit.

Links here and here.

Top court’s less than landmark ruling.

The U.S. Supreme Court is often vested with awesome power – the last word, the final arbiter and all that. Once in a blue moon, that is true, but mostly it is a crock, and the “takings” case the court just decided shows why. In the case of Kelo v. City of New London, the court ruled 5 to 4 that a city may take control of private homes and use underlying land for an economic revitalization project, provided, of course, that the city pays the home owners “just compensation.” The issue in the case was whether the taking was for “public use”, which is what the U.S. Constitution requires.

But the court did not really decide that the scheme was public. More accurately, it decided that it would not decide, nodding to its “long-standing policy of deference to legislative judgments in this field.” In this case, the court majority could not defer enough. Nor would the court nitpick about the New London plan particulars. Everyone agrees that the state cannot take land to confer purely private benefits. But the “hard question of when a purportedly ‘public purpose’ taking meets the public-use requirement” really wasn’t for the justices to judge,” Stevens said. In his concurring opinion, Justice Anthony Kennedy invoked the Supreme Court’s traditional deference to lowly trial courts in determining what is what.

Reacting to the decision, Chip Mellor, president of the Institute for Justice, which argued the case for the home owners, seized on this idea that the lower courts hold most of the cards. In a statement, he said, “The majority and the dissent both recognized that the action now turns to state supreme courts, where the public-use battle will be fought out under state constitutions.” He added that “today’s decision in no way binds those courts.” The dissenting opinion by Justice Sandra Day O’Connor argued that the majority had gone too far, but not by much. O’Connor would have overturned the taking of two parcels, which would have been for office space and parking. The rest, including retail shops, other office space and private condominiums, was OK.

We often hear about unelected judges making law from the bench and all that. But the Kelo case is the overwhelming norm. When individuals do reach the high court, hortatory fluff is mostly what they get.

Link here.



The recent incident in Boynton Beach, Florida, in which a police officer hit a 22-year-old woman twice with a 50 thousand-volt taser gun, is being played out in the usual manner: all heat and no light. Yet, beyond all of the rhetoric that has accompanied the aftermath of this action, we can see that it represents a much deeper problem in our society – and tells us just how far we have strayed from our roots of liberty. For those not familiar with the story, the officer stopped the woman for a routine traffic violation. When he walked to her vehicle, she was talking on her cell phone and did not end the conversation when the officer ordered her to do so. He then told her to get out of the car; she did not respond. (She still was talking on the phone.)

The officer then told her to get out of the car or he would “tase” her. When she did not respond, he shocked her and she screamed. He then shocked her again, after she had fallen to the ground. He and his partner then handcuffed her and led her off to a patrol car. The woman was black and the officer was white, which is how much of the story is being framed. Unfortunately, that does not do justice to what happened, as it clearly was not a racial incident in the way we might think of such a thing happening. I make that claim because from what I could see, the officer would have done the same thing had the motorist been a white man or a white, pregnant woman.

The issue here is not race; rather the real issue is whether or not we are to “obey” people in authority or be subservient to them. In my lifetime, I have seen Americans become increasingly subservient to government officials – who, in turn, have seized more and more power over our individual lives. “Modern” academies teach that everyone is a criminal and that police officers are to have total contempt for the public. Furthermore, their training makes clear that police are to ensure that everyone obeys them, and obedience in this case is nothing less than full subservience. Anything else is treated as a threat and dealt with accordingly.

In the not-so-distant past, raids conducted by law enforcement officers were rare events. Today, raids are commonplace and often are conducted where it is obvious that the only people who are armed are police. Raids ostensibly are carried out to deal with dangerous people, but in the vast majority of raids today, the only “dangerous” individuals are the “law enforcement” personnel, many of whom obviously are itching to be able to gun down somebody – anybody. The purpose of the modern raid, of course, is not to ensure the capture of the “bad guy”q or to protect the lives of officers, but rather to send a message to the rest of us: government officials can do what they want when they want. The rest of us are scum and peons.

Link here. Taser stun weapons face increasing opposition – link.

The militarization of the police.

About 20 years ago in my hometown the police quietly and at night pulled up about 50 marijuana plants from a woman’s backyard. They bagged them and disposed of them however the police dispose of such things. The next morning an outraged elderly woman called the police and complained some hooligans had sneaked on her property the night before and pulled up every one of her okra plants. And then absconded with them! The police were embarrassed, but came clean and admitted their mistake. They compensated her for her plants, the newspapers had a good laugh, and the whole thing was forgotten. According to Google, marijuana and okra bear a strong resemblance to each other. I assume the police were sending a message to whomever they thought was the grower: we know who you are, so quit what you are doing, or next time you will get in big trouble. Call it a friendly warning.

That common sense among the police is evaporating, if not gone. Now imagine how that raid might have gone down today: cops dressed in ninja-suits, with submachine guns, crashing through the woman’s doors and windows in a pre-dawn raid, throwing concussion grenades throughout the house and macing and tazering and cuffing the poor old lady after tossing her on her floor from her wheelchair, and shooting her incontinent Pomeranian as a potential threat. And maybe shooting her, too, if she did not die from a stroke or heart attack. My, how things have changed in 20 years. Officer Friendly has turned into the Gestapo pointing a Heckler and Koch submachine gun into the face of a six-year-old Elian Gonzalez. How can a man like that live with himself?

What the heck has happened here? How has the line between the police and the military degraded and eroded? Could it have anything to do with the War on [Insert Whatever]? Whenever people say, “There ought to be a law” what they are saying, even though they rarely understand it, is that ultimately the police should be allowed to stick a gun in someone’s face – or even kill them – to make them follow the law, no matter how stupid or immoral that law is. “Declaring war” on whatever is currently illegal means militarizing the police and demonizing lawbreakers. Unfortunately, that demonizing always slops over onto whatever innocent citizen who happens to get into the way. Everyone becomes guilty, no trial involved.

Link here.


Although the American people slept through the facile national debate about whether the Bush administration should invade Iraq and the post-invasion unraveling of justifications for doing so, the public is finally waking up to the nightmare of U.S. policy in Iraq. And their representatives in Congress, many of whom were previously hiding in the bushes, are now beginning to get the courage to finally speak out. A recent New York Times poll shows how low support for the Bush administration’s adventure in Iraq has sunk. 60% of the American public thinks that the U.S. effort to bring stability to Iraq is going badly, 59% disapprove of the way President Bush is handling the situation, and 51% now believe that the U.S. should have stayed out of Iraq in the first place. All of these measures of support for the war effort have gradually deteriorated over time and can be expected to decline further as the carnage continues.

This erosion of support has emboldened some thinking members of Congress to propose a resolution calling for the president to begin withdrawing U.S. forces from Iraq by October 1, 2006. The sponsors of the resolution come from across the political spectrum, including a liberal, a moderate, a conservative, and a libertarian. Although the resolution does not specify a date for the completion of the draw down, it is a long overdue exercise of Congress’s underused constitutional role of determining whether, when, and where U.S. forces are in harm’s way around the world. The last time Congress flexed its muscles and ended an unnecessary Executive Branch–initiated quagmire was the termination of funding for the Vietnam War. Since then, a cowed Congress has blindly gone along with many ill-advised presidential brushfire wars.

The Iraqi guerrillas have ample evidence that the American pubic will eventually react to mounting casualties and elusive victory. In the last three or so decades, the U.S. not only withdrew from Vietnam, but also left Somalia and Lebanon because of public disapproval of excessive casualties in faraway wars. The Bush administration is pinning all its hopes in Iraq on eventual Sunni participation in the political process and the quick establishment of competent Iraqi security forces. But the Sunni Arab guerrillas will be better off if the United States leaves. The administration should at least be honest with itself, if not the public, and realize that the war has been lost. It should follow the proposal of the aforementioned bipartisan congressional group, setting a schedule for withdrawal, and begin negotiations with all Iraqi groups – including the Sunni guerrillas – for a comprehensive peace settlement.

Link here.


At the end of the school year of June, 1938, my parents received a polite, but firm letter from Dr. Gregor Ziemer, headmaster of “The American School of Berlin”, stating that Jewish children were no longer permitted to attend. It was the only school I had ever known, from kindergarten up through fifth grade, and I loved it. My older sisters liked it, too, because – amongst other things – there were a lot of cute American boys in attendance and everybody spoke English. It was not just American School, though. Jewish kids were no longer allowed into any schools whatsoever.

This rejection was based on an edict formulated by the German “Enabling Act” of 1933, which gave the Nazi government incalculable powers over individuals, groups, and targeted population components. As a matter of fact, the German “Enabling Act” of 1933 is remarkably similar to our current Patriot Act, which is currently up for revisions not only giving it expanded powers well beyond those it already has, but making it permanent, just like the German Enabling Act was made permanent. (The more one compares the Nazi Germany “Enabling Act” with the U.S.A. “Patriot Act”, the more they appear to be Siamese twins.)

In Germany, anyone anywhere would simply disappear. Jews were the primary target, but other ethnicities such as Gypsies as well as randomly chosen persons perceived to have a “Non-Aryan” cast to their features also got hauled off. Unfortunately, the USA, currently, seems to be targeting persons of a particular ethnic background just as happily as the Nazis did. The FBI is a more-than-willing propagator of entrapment and other “stings” targeting Muslim citizens of our country. First, it was David Mayhew, the lawyer whose only sin was being a Caucasian Muslim-American who belonged to a mosque. He was framed for allegedly having had his fingerprints on one of the bombs that blew up the Madrid railroad and it was only because of the Spanish government’s insistence that this man was being wrongly detained, that he was freed.

Now, just recently, two more Muslim-American citizens have been entrapped. Dr. Paul Craig Roberts has exposed a recent FBI attempt to do away with Dr. R.A. Sabir (an Ivy League educated physician) and Tarik Shah (a well-known jazz musician). In the past, judges routinely threw out entrapment cases, because – more often than not – there had been no intent to commit a crime. But now, with the Patriot Act giving police “more effective measures to clear criminals off our streets,” this has changed. Dr. Sabir is charged with agreeing to provide medical care to wounded “holy warriors” in Saudi Arabia. Tarik Shah is charged with agreeing to train jihadists in martial arts.

It should be noted, that these two latest victims could not possible have offered their services to jihadists, because no jihadists were ever present. Neither Sabir nor Shah had any contacts with any jihadists, and they committed no acts of service to them. And, most important of all, the FBI is not even accusing these two persons of actually performing the acts of service of which they are accused. Nevertheless, each one faces $250,000 in fines as well as fifteen years in prison. This, my friends, is a test case. If Sabir and Shah are put away, then the FBI, in conjunction with power given them by the Patriot Act can go on to bigger and better things.

The major beast hiding in the political “bushes” right now, is more dangerous and more devastating to any and all of us here in America than anything coming before it, and that is the parallel between what the Nazis did to their constitution coupled with what we are about to do to ours: The Nazis, in their infamous February 28 decree, successfully attacked the German constitution. The government then in place, was informed that the state was in danger, and that emergency procedures were necessary.

At this moment, in our own government, the supplemental budget bill, passed unanimously (100-0) on May 11, 2005, which assigns $82 billion more to the war in Iraq, contains a provision establishing “The Sunset Commission”: A committee composed of legislators whose job it will be to revise all branches of the federal government including the Constitution. Yes, this is really happening. Unless all citizens realize this, and rise up in protest, our government, as we know it – our wonderful constitution as we know it – will cease to exist as we know it!

In Nazi Germany, farmers stood in their fields beside the railroad tracks where they smiled, waved, and drew their fingers across their throats in the traditional “death” gesture when the cattle-cars went past. No one tore down the loudspeakers booming propaganda speeches at every bus stop in Berlin. No one tore down the propaganda posters which not only depicted hideous cartoons of “devil Jews” but also showed scary images of people who did not vote “correctly” at elections being hauled away because voting “No” was a crime.

Today, we accept quite nonchalantly that – according to verified and actual memos (which no one has even denied exist) – that the invasion of Iraq was planned two years in advance by Dubbya in concert with Tony Blair. No one seems to care that the Patriot Act in all its Nazi-inspired glory is being reviewed in order to make it a permanent fixture of government. Tomorrow, then, when we watch folks being carted off – adults and children both – to detention centers, both in the USA and overseas, will we smile, and wave, and draw our fingers across out throats in the traditional gesture of death?

My biggest fear is the prevalent shrug, with its attitude of, “Well as long as it isn’t in my back yard, or involving my family, what the heck do I care.” That is the ultimate enabling … giving fascism everything it needs to become all-powerful. And, when it is too late, then what? World War III? Who is gonna be around to fight it? Please advise…

Link here.


mySociety, the people who brought you NotApathetic.com and WriteToThem.com are at it again, attempting to use the net for political purposes. We say good on them, because their latest idea is a very interesting one. PledgeBank.com is a place you can go to make promises about things you want to do to make the world a better place. Nice idea. But the difference is that instead of going it alone, you are encouraging others to join your efforts. If no one does, you do nothing, if enough people sign up, your actions have more weight behind them and will make more of a difference. Site-founder Tom Steinberg says that the site is “a direct attack on the age-old barrier to action that comes from the feeling that you can’t achieve things when you’re on our own. It lets users say ‘I’ll do something, but only if X other people will do the same.’”

Although the site is politically neutral, that does not mean the pledges registered on it have to be. For example, the No2ID team has pledged to refuse to register for (U.K.) ID cards, along with a small donation to a legal defence fund for other refusers. But 10,000 other people need to sign up to make this one happen. Whether you feel like fighting the power, or just like you can make a comfortable home for stag beetles in your garden, take a look at the actions on offer here.

Link here.


The U.S. government is larger, more consolidated, more powerful, and more intrusive than it has ever been in its history – indeed our sweet land of liberty is now host to the most powerful leviathan state that has ever existed. Never before has a government in human history owned more weapons of mass destruction, looted as much wealth from a country, or assumed unto itself the power to regulate the minutiae of daily life as much as this one. By comparison to the overgrown behemoth in Washington, with its printing press to crank out money for the world and its annual $2.2 trillion in largess to toss at adoring crowds, even communist states were powerless paupers.

At the same time, paradoxically, the U.S. is overall the wealthiest society in the history of the world. The World Bank lists Luxembourg, Switzerland, and Norway as competitive in this regard, but the statistics do not take into account the challenges to mass wealth that exist in the US relative to small, homogenous states such as its closest competitors. In the U.S., more people from more classes and geographic regions have access to more goods and services at prices they can afford, and possess the disposable income and access to credit to put them to use, than any other time in history. Truly we live in the age of extreme abundance.

What is the relationship between the rise of big government and the rise of American prosperity? It seems that people on the right and left are quick to confuse correlation with causation. They believe that the U.S. is wealthy because the government is big and expansive. This error is probably the most common of all errors in political economy. It is just assumed that buildings are safe because of building codes, that stock markets are not dens of thieves because of the SEC, that the elderly do not starve and die because of Social Security, and so on, all the way to concluding that we should credit big government for American wealth.

Now, this is where economic logic comes into play. You have to understand something about the way cause and effect operates in human affairs to understand that big government does not bring about prosperity. Government is not productive. It has no wealth of its own. All it acquires it must take from the private sector. You might believe that it is necessary and you might believe it does great good, but we must grant that it does not have the ability to produce wealth in the way the market does. Lasting prosperity can only come about through human effort in the framework of a market economy that allows people to cooperate to their mutual advantage, innovate and invest in an environment of freedom, retain earnings as private property, and save generation to generation without fear of having estates looted through taxation and inflation. This is the source of wealth. This is the means by which a rising population is fed, clothed, and housed. This is the method by which even the poorest country can become rich.

Now, does this system as described characterize the United States? Yes and no. How does enterprise continue to thrive in the face of incredibly bad, enterprise-killing, policies? The answer is complex. In many ways we continue to live off the borrowed capital of previous generations. Some economic sectors benefit too greatly from an artificial injection of created credit, making prosperity seem more real than it is in sectors such as housing and perhaps stocks. There is a bitter irony at work here too in that the larger the economy is, the more there is to tax, and so government grows as an after effect of economic growth.

But here I would like to concentrate on what I think is an explanation that is too often overlooked. It requires that we understand something about the extraordinary capacity of the human mind to overcome obstacles put in its path. …

Link here.
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