Wealth International, Limited

Offshore News Digest for Week of October 3, 2005

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

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Lending to China’s real estate market may spawn as much as 525 billion yuan ($110 billion) in new bad loans at Chinese banks, Ernst & Young LLP said. The debt would consist of “special-mention loans”, in which borrowers can be in arrears even though the debt has not been reclassified as nonperforming, according to an Ernst & Young report. China’s real estate loans stand at about 6 trillion yuan, the report said. “Most people think China has the earnings potential to be able to write it off,” Jack Rodman, an Ernst & Young partner who helped write the report, said. “But everyone should be aware that this stuff is out there.”

Link here.


“No people on Earth are such bad-mannered, rude, ultra-nationalistic, racist, tasteless and stiff pigs as the Dutch, and besides, the weather is awful, the country is too flat, healthcare is sickening, the traffic is like war, the Randstad is overcrowded, the streets are full of dogs excrement, one can buy drugs everywhere, there is legalised killing called euthanasia …” (from Expatica’s Discussion Forum)

Complaints by expats in the Netherlands are nothing new, but an internal survey by the International Organisations Staff Associations set the cat among the pigeons recently. One of the startling findings was that 70% of the expat staff of international organizations based there do not want to stay in the Netherlands. The main messages were that the Netherlands is unwelcoming, too bureaucratic and not at all “user friendly”. Two experts have been asked to give their opinions on whether the survey results – which were leaked to the press – reflect a general attitude of expats living in the Netherlands.

Link here.


The Caribbean is synonymous with hedonism – from the mass tourist Mecca of the Bahamas to the off-the-beaten-path divers’ paradise of Bonaire. What you might not know about the Caribbean, however, is that it is also home to one of the most appealing – and inexpensive – expatriate and retirement havens in the world. This little-known gem, though off the well-trodden path taken by most travelers, has a lot to offer. So if you are longing for the good life in a tropical haven, duck the crowds and head to Dominica.

With no direct flights from North America or Europe, Dominica is welcome retreat of peace and quiet in the Caribbean’s sea of mass tourism. Roughly halfway between Martinique and Guadeloupe, the island is splendidly underdeveloped. A land of waterfalls, rivers (365 of them), hot springs, and lush rain forests, Dominica is the Caribbean’s most rugged isle. Instead of luxury resorts and long stretches of crowded white sand beaches, you will find volcanic mountains, intimate beaches, little-explored reefs and small hotels.

And unlike most of the Caribbean’s islands, which cater to tourists and the high-end market, Dominica’s prices are refreshingly down-to-earth. For example, right now you will find a beautiful private 1.7-acre lot with ocean views for only $37,000, and a 1/2-acre lot with ocean views located only 15 minutes from the airport with an asking price of $50,000 – both perfect places for your dream home (which can be built for as little as $24,000-$40,000). Also: a 4-bedroom fixer-upper overlooking the ocean for $97,000; a stunning 3200-sqare foot home with 4-bedrooms and 3.5 baths on 1/4 acre lot with ocean views for $229,000; a 2.15-acre riverfront lot with cocoa, coffee, grapefruit and bamboo trees on the property waiting for your dream home for $105,000; and a nice 2-bedroom home with fruit trees (pineapple, avocado, etc.) on the property, close to beaches and waterfall can be yours for only $100,000 or best offer. A fully-furnished 2-bedroom, 1-bath starter home rents out for $562 a month – only a 15-minute drive to the capital. Residential telephones and cell phones are reliable and high-speed Internet access is readily available.

Outside of the costs, there are other reasons to consider Domnica, including fishing, snorkeling, ocean diving, swimming and bathing in any of the hundreds of area rivers, waterfalls and natural hot springs, and exploring lush tropical mountains and valleys as beautiful as anything you have seen anywhere in the world. Exotic cuisine and some of the best seafood in the world can be had for as little as $5 per person.

Link here.


Headlines in the daily newspapers in the Dominican Republic attest to rising rates of crime, some of a violent nature, a burgeoning drug culture and some 36% of the population living below the poverty line (which means on less than $2 a day). So, is it still safe to live as an expatriate in the Dominican Republic or is Dominican society falling apart? Can the American and European retirement population still find their piece of paradise in the sun, to make their golden years truly golden, or do they have to surround themselves with high tech security devices in order to protect themselves against robbery … and worse?

It is certainly true that the current Dominican Republic is not the same as the one this writer emigrated to more than 12 years ago. Then there were few expatriates, those who were here integrated with the Dominican population, drugs on the streets were virtually unheard of and crime rates were very low. All of that has changed as what is, after all, a third world country struggles to enter the 21st century. In fact what is happening here is in many ways similar to what happened in other parts of the world 50 years ago and more. A population move from countryside to town, an agrarian economy becoming more industrialized, a switch of focus from extended to nuclear family and, yes, drug vending and associated crime.

None of this is peculiar to the Dominican Republic – it is the hallmark of “progress” with all its attendant ills. Add to this mix 4 years of the most corrupt Government the Dominican Republic has ever had (2000-2004) and rising unemployment and it is not difficult to see why some crime exists. In the last few years U.S. citizens have “re-found” the Dominican Republic. Property prices, while escalating, still seem a “snip” to Europeans and Americans alike. Rates on interest gained on investments are far higher than in most Western countries, making it possible to live on the interest gained and never dip into the capital. Currently this has the benefit of being tax free although this could well change. The weather is wonderful (other than during hurricanes!) and the indigenous population is friendly and helpful. So in many ways the Dominican Republic is an ideal retirement destination.

Unfortunately, some of the newer foreign arrivals would appear to have more money than sense. They can afford an opulent lifestyle in a third world country. Many prefer not to bother to learn the language (Spanish), the culture and the mores of the country they have chosen to call “home”. Thus they need to buy property near others who speak their language and live in areas which virtually become gringo enclaves. All this demonstrates for economically poorer Dominicans is the lifestyle gap – more of a crater than a gap. And, not surprisingly, a people who are not resentful of others’ good fortune by nature, are likely to have feelings of social injustice, which has been known to manifest itself in some robbery of expatriate homes.

But, this has to be put in perspective. It is not a crime wave and there are many other countries which are far, far worse. Those looking for their piece of paradise could do a lot worse than move to the Dominican Republic. But only after doing a lot of research, making a start on understanding the country and its people and being determined to integrate as far as possible with the Dominicans. Those not prepared to make these adjustments had better head to Florida!

Link here.


As everyone knows, American health care is unbelievably expensive and complicated. Not so on Margarita Island – here are just a few examples. A few months back my significant other, KC, and I were roaming around the island playing “tourist” and KC stepped wrong and hurt her foot. I took her to a hospital that was close by. It was clean, efficient and a very nice doctor saw her immediately, examined her foot, ordered two x-rays and diagnosed a sprain. He also wrote a prescription for arch supports to help give her more stability in future and told us where to order them. He walked us out to the reception desk and I asked how much was owed. To my amazement there was no charge!! They almost had to put me into Cardiac Care! It turns out we had “stumbled” onto one of the free hospitals, thinking it was a regular “for profit” hospital.

KC had been having increasing vision problems over the last few years. Shortly after we moved to the island, friends recommended an eye clinic conveniently located within walking distance of our condo. Following a complete exam, Dr. Sarabia said surgery and a lens implant were necessary to correct her vision. We were told the risk was minimal, and we were very impressed by the Doctor, his spotlessly clean and modern clinic and the time the Doctor took to thoroughly describe the procedure and answer all our questions. The total price (routine lab tests were $20 extra) including medications and follow-up visits was about $800. Surgery was scheduled for the following week – not several months later. The surgery turned out perfectly with the expected recovery time of 10 days and no swimming for 1 month.

I needed some dental work last year and some cosmetic dentistry. I had checked with my dentist in the U.S. and he estimated the cost of the work at about $22,000. Here on Margarita I went to the most renowned and expensive dentist (he is a graduate one of the most respected dental colleges in the U.S. plus additional schooling in Caracas, has given seminars around the world, and speaks excellent English) and had all the work done for $5,800. This included two permanent bridges, all silver amalgam fillings removed and replaced with white porcelain, all “smile” teeth capped and others crowned with German porcelain. The entire process took 7 visits and numerous follow-ups until everything was completed.

If your considering any medical procedures you might want to check out Margarita as it is much less expensive here. Where to stay well – we have a beautiful condo w/pool or a 4 bedroom house w/pool for rent within walking distance of Doctors, Dentists, Plastic Surgeons, Ophthalmologists, Medical Labs, and Pharmacies. The properties are located in one of the most prestigious areas on the island. For more information about living and working on a Caribbean island at a pace that will not kill you before your time, check out my website.

Link here. Vacation to Isla Margarita – link.


One of the first persons I met after starting at the magazine was Pedro Sarasqueta. He has become an excellent resource for me and many expats on how and why to invest in Panama. Pedro was the first contact for many of the expats that now live in the residential development Altos del Maria. He is the best I have seen at getting you, the expat, from A to B to Z in Panama, so he is someone you should talk to if you are thinking about moving to Panama or even just visiting with an idea of staying.

Pedro graduated with a Master’s degree in Geology from Christian Albrecht Universität in Kiel, Germany. He speaks fluent German and English. He was nominated Business and Tourism Attaché to the Panamanian Embassy in Germany from 1995 to 1999. When he returned to Panama in 1999, Pedro worked with the residential project Altos del Maria, which is located in the mountains one hour from Panama City. And today he has set up his own company, Panama Realty Corporation, which is designed to help people buy property in Panama or relocate to Panama. His wife Petra is German and has worked with the UN in Europe and as a German tutor in Panama.

I have turned to Pedro in this article in order to answer many questions that readers have asked me over the past few months – I hope the interview will shed light on subjects that I have not yet touched on in my articles. If not, contact Pedro. In the end I think that living in Latin America is a good idea for anyone; at least having a place here is a good idea. In the future this will be the best of the global neighborhoods. Low population, good water, a fairytale landscape, individual liberty, low cost, modern, yet not too modern and completed. Far from the centers of world conflicts and politics … in other words, a place to escape to that really feels like an escape.

Link here. Exploring the Panama canal and walking through the jungles by Gatun Lake – link.

Panama is the most globalized country in Latin America.

Thanks to a high degree of trade, Panama captured the top slot in the first annual Latin American Globalization Index developed by Latin Business Chronicle. The index of 17 countries looks at six factors that measure a country’s links with the outside world, 1.) exports of goods and services as a percent of GDP, 2.) imports of goods and services as a percent of GDP, 3.) foreign direct investment as a percent of GDP, 4.) tourism receipts as a percent of GDP, 5.) remittances as a percent of GDP, and 6.) internet penetration.

The countries that belong to the CAFTA trade pact did well. Five of the top seven ranks went to CAFTA countries. The Andean countries on the other hand fared less well. Four of the seven-least globalized countries are Andean. No other country had export and import levels as high as Panama. Its exports of 64% of GDP were higher than the number two in that category, the Dominican Republic (48%), while its imports of 61% were higher than Honduras at 51%.

The high levels of Panamanian trade are in large part due to the Colon Free Trade Zone, the largest free trade zones in the Western Hemisphere. Last year the zone accounted for 92% of Panama’s exports and 65% of its imports. Panama also did well in tourism receipts as percent of GDP and foreign direct investment as a percent of GDP (the 4th-highest in Latin America in both categories) and Internet penetration (8th-highest rate in Latin America).

Link here.

U.S., Panama plan final talks on free-trade deal.

After two years of talks, Panama and the U.S. are hoping to wrap up a free trade agreement at a new set of negotiations likely later this month, the two governments said this week. Panama said that U.S. President George W. Bush would visit as part of a Latin American tour in November, but it was unclear if the trip was related to the free trade talks. The talks started in 2003 but have snagged on Panamanian concerns that open access to its agricultural markets could hit farmers. U.S. business is also pushing for a strong government procurement package that would give it a fair shot at anticipated expansion work on the Panama Canal. The rest of Central America and the Dominican Republic have signed a trade pact with United States known as CAFTA, but tiny Panama stayed out of that deal. Panama’s economy, like that of the U.S., is predominantly service-based, and its government believes it can gain greater advantages through a bilateral deal.

Link here.

World Bank Board discusses Panama’s interim strategy for the next two years.

To support Panama in its efforts to reduce poverty, the World Bank’s Board of Executive Directors discussed yesterday an Interim Strategy Note (ISN) for the country. The strategy presents a program of stepped-up engagement for the World Bank at the request of the administration led by Martin Torrijos, who took office in September 2004. It provides for engagement with the country over the next two years with a strong emphasis on preparation and discussion of analytical reports in key areas of public expenditure management, poverty reduction, trade and competitiveness. It also includes a policy-based loan and three poverty-focused investment projects totaling $160 million.

“Panama has made substantial progress in the past year, notably in reestablishing fiscal discipline and increasing transparency,” said Jane Armitage, World Bank Country Director for Panama and Central America. “The Bank’s strategy for the country was prepared in record time to ensure that the whole array of the Bank’s services is available to assist the Government. Our strategy aims to contribute by responding to the Government’s request for significant analytical and advisory work and by providing financial resources and technical assistance for targeted poverty reduction activities.”

The ISN aims to deepen the Bank’s role as a development partner in Panama. Despite Panama’s continuous economic growth averaging 3.5% between 1997 and 2003, moderate and extreme poverty rates remained practically unchanged. This suggests that the country’s high levels of income inequality and structural issues in economic and social policy are preventing growth from reducing poverty in the country. Roughly half of the moderate poor live in urban areas and the vast majority of extremely poor live in rural and indigenous communities. Due to low level of recent engagement, the World Bank’s current portfolio in Panama comprises only three active projects with $93 million in commitments, of which $63 million have still to be disbursed.

Link here.


Parliament has turned down a People’s Party proposal to give cantons and local authorities full autonomy in granting Swiss citizenship. The House of Representatives voted against the idea, arguing that it went against anti-discrimination laws enshrined in the constitution. The proposal challenged a 2003 Federal Court ruling on Switzerland’s citizenship procedure, which effectively meant that citizenship requests could not be decided at the ballot box, by parliaments or other assemblies. The judges said that failed candidates must be given a reason for their rejection, to avoid arbitrary decisions.

Voters in the town of Emmen near Lucerne had, for example, turned down applicants from the Balkans, apparently only on the basis of their origin. This pattern was repeated in other parts of central Switzerland. The proposal from People’s Party parliamentarian Rudolf Joder wanted the courts to be excluded from any part of the naturalization process, and cantons and local authorities to be given the right to decide how citizenship was granted. The parliamentarian added that he felt local autonomy was more important than anti-discrimination legislation.

The proposal was fought from all sides of the House. “For many voters, being faced with an applicant from the Balkans is reason enough to say ‘no’,” said Social Democrat Vreni Hubmann. “This would open the door to unfair and discriminatory decisions.” Green Party representative Josef Lang also pointed out that voters could not have the final word on everything in a liberal democracy. The Radicals and Christian Democrats were tempted to consider more local autonomy for naturalizations, but turned down Joder’s proposal because it ruled out appeals to the Federal Court.

Swiss citizens might have the last word on the issue at the ballot box. The People’s Party is collecting signatures to force a nationwide vote on a proposal similar to Joder’s. Voters have generally been against easing citizenship rules in recent times, and could toe the People’s Party line.

Link here.


Although The Bahamas is doing its part with regard to international cooperation, its best efforts are only as good as a fair and equal playing field that has been set for each country involved. Allyson Maynard-Gibson, Minister of Financial Services and Investments, emphasized how serious The Bahamas is in meeting its international obligations. “The Bahamas takes its international obligations very seriously and we are committed to cooperating with our neighbours in the global fight to ensure the integrity and security of the world’s financial system,” said Mrs Maynard-Gibson. The Minister pointed out that “information sharing and strong regulation of the financial services sector” were key to protecting the industry.

“In The Bahamas we have merged the best agreed international principles with our strong respect for the legitimate right to privacy to produce a blue chip well-regulated and cooperative jurisdiction,” Mrs. Maynard-Gibson said. However, she added that the success of these depend to a great extent on cooperation and fair standards between partnering countries that have agreed to exchange information in order to protect their respective financial systems and combat international crime that have the potential to threaten their economies.

In addition, the Minister pointed out that, “Inconsistencies in standards between large and small nations, OECD and non-OECD, can only be avoided where we sit at the same table, evaluate by the same measures and consistently apply penalties.” She emphasized the importance of forums that provide an opportunity for an exchange of views as well as for an update from the regulators on their work as it relates to The Bahamas’ obligations under its international treaties.

Link here.


Canada, Australia, Austria and Switzerland were picked as the ideal destinations in the survey by the Economist Intelligence Unit. However, the research to assess the “liveability” of 127 cities worldwide was also impressed with Belgium, placing its capital joint 20th in the pecking order, along with Oslo in Norway, Auckland and Wellington in New Zealand, Berlin. and Japan’s Osaka Kobe. The cities were rated on 40 indicators, including their standards of healthcare, stability, culture, the environment, education and infrastructure. At the end of the research, they were given a score between 0 and 100.

A low score means a city is attractive while above 20% real problems are seen to begin and cities with scores of above 50% have “severe restrictions on lifestyle”. Vancouver in Canada gained a 1% score to emerge as the number one city to live in. The EIU commented that “with low crime, little threat from instability or terrorism and a highly developed infrastructure, Canada has the most liveable destinations in the world.” Melbourne, Vienna, and Geneva achieved 2% scores, while Australia’s Perth attained a 3% score. Brussels was awarded a 6% score, putting it above Madrid (8%) and London (10%). Istanbul, in EU accession-hopeful Turkey, scores low in liveability at 39% – in part due to recent terror attacks including the 2003 attacks which specifically targeted expatriates. Port Moresby, Papua New Guinea scored the worst with a 66% score.

Link here. Geneva is simply the second best – llink.


Yukos, the Russian oil company entangled in a long-running tax dispute with the Kremlin, lost an appellate court ruling, opening the door to the possible seizure of assets, a company spokeswoman said. Yukos is already nearly broke after a losing streak in Russian courts that culminated with the loss of its largest production unit, Yuganskneftegaz, to tax authorities last year. Its investments for capital and equipment in oil fields were down 54% in 2004. The turmoil at the company, once Russia’s largest crude oil producer, has broad consequences because it is slowing Russia’s overall growth in oil output at a time when global supplies are tight.

Another court ruling in Russia, however, came down on the side of a separate oil company in a dispute with tax authorities and was seen as a modest but encouraging sign for private investment in the booming energy sector. An arbitration court effectively ruled to dismiss a $140 million assessment of back taxes against a joint venture of BP and the TNK oil company of Russia, a company spokeswoman said. In the ruling against Yukos, the Supreme Arbitration Court upheld a $3.45 billion back tax claim for the 2000 tax year. The court dismissed the Yukos arguments that a statute of limitations had expired, the Interfax news agency reported. The court ruled that the time limit did not apply if a company had a pattern of delinquent payments, Interfax reported.

“This is another interesting case where the law is applied uniquely for Yukos,” a company spokeswoman, Claire Davidson, said. Ms. Davidson said the ruling opened the door for court bailiffs to seize some of Yukos’s remaining property. Shares of Yukos fell 10% Tuesday in trading in Russia. The company’s founder, Mikhail B. Khodorkovsky, a political opponent of President Vladimir V. Putin, is serving an eight year prison sentence for fraud and tax evasion.

Link here.

Russian police announce money-laundering probes at major banks, companies.

Russian prosecutors kept up the pressure on the Yukos oil company, as authorities raided the offices of a fund established by its jailed former owner apparently in connection with a money-laundering investigation. Meanwhile, police unveiled broad anti-money-laundering efforts, announcing that they were investigating a number of Russian and foreign banks. Several thousand money-laundering investigations had been opened this year involving banks, gambling operations, energy companies and precious metals firms, said Viktor Zubkov, head of Russia’s Financial Monitoring Committee. The names of the companies involved will be unveiled at the end of the year, he said.

In May, prosecutors announced they would bring separate money-laundering charges against Mikhail Khodorkovsky and business partner Platon Lebedev. Both are serving 8-year sentences after being convicted on tax evasion and fraud charges. Khodorkovsky’s jailing and the parallel state moves to collect on disputed back tax bills against his oil company are widely considered Kremlin revenge for the tycoon’s funding of opposition parties in 2003. Khodorkovsky has published frequent letters from prison criticizing President Vladimir Putin’s Kremlin and calling for political change since his arrest at gunpoint on a Siberian airfield in October 2003.

Link here.

Rssian and Dutch offices of Yukos raided.

Russian and Dutch investigators raided the offices of Yukos subsidiaries in Moscow and Amsterdam in connection with a $7 billion money laundering probe that could bring new charges against Mikhail Khodorkovsky. Raids were also carried out on the offices of one of Mr. Khodorkovsky’s lawyers, who had been threatened with being disbarred, and other independent law and accountancy firms which had done work for Yukos. The raids open a second front in an attack on Mr. Khodorkovsky and his business partners just two weeks after he lost an appeal against an 8-year prison sentence.

Prosecutors had threatened to bring new charges against Mr. Khodorkovsky. Shortly before his sentence was confirmed, he tried to register as a parliamentary candidate in a Moscow by-election, an attempt curtailed by the speedy conclusion of his appeal.

Link here.


Quebec Premier Jean Charest joined several top U.S. politicians in urging the federal government to abandon its plan to require passports for crossing the border with Canada. “It would be a further impediment to travel and trade,” said Charest, who was meeting with New York Gov. George Pataki at the third annual Quebec New York Economic Summit held in Albany. “We are each other’s most important trading partner,” said Charest, adding the border must be part of the solution to enhance international trade, not a problem.

“I think there has to be alternatives,” said Pataki, a Republican. He then held up his New York driver’s licence, and noted it is imbedded with many safeguards and identifiers that could be scanned by border officials. “I think this should constitute a reasonable alternative, and there are others.” Pataki, a leading ally and fundraiser for President George W. Bush, said he will make his opposition known to the Bush administration. By 2008, the government plans to require travelers crossing land borders to show a passport or one of four other secure documents, under the Western Hemisphere Travel Initiative.

Separately, Senator Hillary Clinton also stated her problems with the plan. Clinton argued the passport could hamper everything from kids’ hockey games to big-dollar trade, threatening hundreds of millions of dollars in economic activity on both sides of the border. She said that during a meeting with Michael Chertoff, head of the Homeland Security Department, she again pressed him to find a cheaper, simpler solution to protecting the border.

A U.S. passport costs $97, and officials say they are working to come up with a cheaper, more widely used alternate document for U.S. citizens. A driver’s licence and a birth certificate are used by most who cross the Canadian border now. But a driver’s licence does not meet the congressional standard: proof of identity and of citizenship, said Homeland Security spokesman Jarrod Agen.

Link here.

Volunteers beginning watch near Canada-U.S. border.

The Minutemen have come to New England. The civilian group, which previously focused its efforts on patrolling the Mexican border, is turning its attention to the U.S.-Canada line. The group is seeking volunteers in eight northern states in an attempt to prevent people from entering the U.S. illegally and began watching border crossings in some of those states, including Vermont, over the weekend. “The north is still a threat to national security,” said Chris Simcox, president of the Minuteman Civil Defense Corps. “There are 1,000 border patrol agents to cover a 4,000-mile northern border. It’s an outrage. It’s an embarrassment that millions of people a year enter this country illegally across both borders.”

The organizers are seeking volunteers to watch the 789-mile Canadian border along New Hampshire, Maine, and Vermont, in addition to the other northern states. The effort is part of a monthlong, nationwide campaign to keep a closer eye on the nation’s entry points and to draw attention to what Simcox’s group says are the inadequate resources given to border control in this country. The effort has started more quietly in New England than in states on the southern border, where Simcox said about 500 people volunteered this month. Local officials question the necessity of the volunteer force, and immigrant-rights groups decried the effort, accusing the Minutemen of importing intolerance to the region.

The Minuteman volunteers park themselves in lawn chairs on this side of the border, with binoculars and cellphones, ready to report illegal entrants. They watch for people who are crossing over fields, through woods, and along unmanned roadways. “We feel we can do most good by being a pair of extra eyes,” Simcox said. “Our goal is to force the government to do its job. Until they do it in a way that meets our satisfaction, we will help do it ourselves. That’s the American way.”

Link here.


Anything is available in Bangkok for a price: women, men, children, endangered species, drugs, counterfeit drugs, DVDs – and passports, ready in two hours for just 10,000 baht ($245). Forged travel documents are readily and affordable available on Bangkok streets, according to one man who sells forged student identity cards in the city’s bustling tourist district. And security analysts say that for higher sums, much better counterfeits can be obtained.

The attention of the world’s intelligence services is again on Thailand after British police announced they had begun extradition proceedings for an Algerian man arrested in Bangkok in late August with 180 fake passports. “Thailand is recognized as a center for forgery, but false documents are produced throughout the world, including in Albania, Dubai (and) Singapore,” Britain’s National Criminal Intelligence Service said in its latest threat assessment from serious and organized crime. Between February 2004 and August 2005, some 1,275 counterfeit passports had been seized and 12 foreigners arrested in separate incidents in Thailand.

Most arrests occurred in Bangkok. In June, a French woman was arrested on Thailand’s resort island of Samui for selling stolen French passports on Bangkok streets for 40,000 to 50,000 baht ($1,000 to $1,250) each. Punishment for possession of a fake Thai passport, by either a vendor or a customer, is up to 10 years in prison. Possession of a fake passport from another country is punishable by up to five years, and both offenses carry up to a 50,000 baht fine.

Link here.


Mexican immigrants living in the U.S. have less expensive ways to send money to relatives in Mexico, using private and government money-transfer programs aimed at encouraging immigrants to join the U.S. banking system. Bank of America Corp. last week announced the launch of SafeSend, a free money-transfer service between the bank’s branches in the U.S. and several Mexican financial institutions. The Federal Reserve and the Central Bank of Mexico are promoting a joint program called Directo a México, under which participating U.S. banks charge low fees to send money to Mexico by using the central banks as intermediaries.

People sending money to Mexico pay as much as $15 per transaction – known as a remittance – to companies such as First Data Corp.’s Western Union Financial Services and MoneyGram International. Those companies handle most of the estimated $20 billion a year sent between the U.S. and Mexico. Banks account for only about 5% of that amount. “The end goal is to get a banking relationship started,” said Diane Wagner, a Bank of America spokeswoman.

The SafeSend service is available free to any Bank of America customer with a personal checking account. It links the bank’s U.S. branches to 4,500 locations across Mexico, including branches of Grupo Financiero Banorte SA and Santander Central Hispano SA. When a customer in the U.S. requests a transfer, the banks in the two countries exchange dollars for pesos. Depending on the time of day a transfer is sent, the money is available in Mexico within two hours or on the next business day. Hispanics are an attractive target for U.S. banks, analysts said, because a smaller percentage of Hispanics have bank accounts than among the overall U.S. population.

Link here.


The E.U. began accession talks with Croatia. The E.U. foreign ministers’ meeting in Luxembourg, which was dominated by the crisis caused by Austria’s reluctance to agree to open accession negotiations with Turkey, ended with agreement to begin talks with both Turkey and Croatia. The improved prospects for Croatia’s integration with the E.U. will help stabilize its government, shore up the reformers and restore faith in the E.U.’s commitment to the whole region.

The decision on Croati’qs accession negotiations became tangled with the controversy over Turkey. Austrian Chancellor Wolfgang Schuessel argued that if Turkey was to be trusted to make further progress after negotiations had started, then so should Croatia. Vienna has long been a champion of Croatia’s membership bid, and although Schuessel denied any linkage between Turkey and Croatia, there was speculation that a positive decision for Croatia might help persuade Austria to back down over Turkey.

The E.U. ministers also approved the opening of talks with Serbia and Montenegro (SCG) on a Stabilization and Association Agreement, which Belgrade had been expecting. The success enjoyed by Croatia and SCG may also calm the fears of other Balkan states, which were depressed by the French and Dutch rejections of the E.U. constitution in June. The positive decisions for Croatia and SCG will encourage renewed efforts in meeting E.U. integration criteria, both in those countries and elsewhere in the region, calming fears that the E.U. is losing its appetite for further enlargement, and that its commitment to welcoming the countries of the Balkans might be put on hold indefinitely.

Link here.



A U.S. Congressman has moved to block American firms from relocating their headquarters offshore to avoid taxes by refiling a bill that he said would result in an additional $5 billion being collected by the U.S. Treasury at a time when the budget is being stretched by an increasing defence budget and the Hurricane Katrina recovery operation. “Today marks the third time in as many Congresses that I have introduced the Corporate Patriot Enforcement Act,” Massachusetts Democrat Richard E. Neal said during a floor speech.

“Over the years, dozens of American companies have filed papers to trade in their U.S. corporate citizenship for citizenship in tax haven countries like Bermuda,” Neal said. “By washing their hands of their U.S. citizenship, they are able to stop paying taxes on their foreign profits, draining more than $4 billion out of U.S. coffers.” Past efforts expired within the two-year period of each Congress.

Link here.

Fighting fiscal protectionism, helping companies compete.

Supporters of tax competition and fiscal sovereignty face an important challenge. At issue is whether U.S.-chartered companies should have the right to escape America’s anti-competitive “worldwide” tax system by re-domiciling in low-tax jurisdictions like Bermuda (a process known as expatriation). The outcome of this battle could be pivotal in the conflict between tax harmonizers and supporters of market liberalism. Many legislators understand that tax competition is a liberalizing force. But tax competition is like free trade. It is a theory that people appreciate, but people sometimes are willing to abandon good policy if they happen to be less competitive than their neighbors.

Link here. Corporate expatriation protects American jobs – link.


The accounting firm KPMG and a law firm have agreed to pay $195 million to as many as 280 wealthy investors who bought four types of questionable shelters, the first major step by the two firms to deal with billions of dollars in potential civil claims. The agreement also calls for the firms to pay the lead plaintiffs’ lawyers $30 million in fees. Papers describing the settlement were filed in federal court in Newark this week, and will be presented to a judge next week for approval.

The settlement covers four tax shelters known as Blips, Flip, Opis and SOS that were sold to investors to help them evade billions of dollars in taxes. All but the SOS shelter were cited in the $456 million deferred-prosecution agreement reached last month that allowed KPMG to avoid a criminal indictment. The settlement covers buyers of the shelters who received legal opinions or representations from KPMG and the law firm of Brown & Wood, now Sidley Austin Brown & Wood, from Jan. 1, 1996 through Sept. 14 of this year. (KPMG, however, stopped selling the questionable shelters well before that date.) KPMG used other law firms to sell the four shelters, but the settlement covers only those bought through the accounting firm and Brown & Wood.

Sidley Austin Brown & Wood will pay about 20% of the $195 million, according to a person briefed on the settlement. Sidley Austin Brown & Wood wrote legal opinions blessing the transactions. The size of the civil settlement – which amounts to an average of $696,000 for each eligible investor – may offer small consolation to KPMG’s former clients, whose tax bills from the shelters, including interest and penalties, ran into the tens and even hundreds of millions of dollars.

Link here.

KPMG settlement sends shockwaves through accounting industry.

“Big Four” accounting firm KPMG LLP has acknowledged criminal tax fraud in providing sham tax shelters to wealthy clients between 1996 and 2002, the U.S. Justice Department announced in an August 29 press release. The Justice Department levied a $456 million fine: $100 million for failing to disclose tax shelters on tax filings, as required by law, which cost the U.S. at least $2.5 billion in tax revenues, according to court papers; $128 million for illegally earning $115 million in fees; and $228 million to be paid to the IRS for $2.5 billion in loss of taxes due to illegal activities. The Justice Department in turn agreed to shelve the criminal charges by December 31, 2006, provided that KPMG pay all fines by that date and cease to provide fraudulent tax shelters to its clients.

Nine former employees are facing criminal prosecution for intentionally defrauding the IRS, concealing the nature of those tax shelters, and lying under oath during Senate testimony. Corporate fraud had far-reaching consequences,” said Attorney General Alberto R. Gonzales in the press release. “The stiff financial penalty announced today means that the firm is paying for its conduct, while the guarantees of cooperation, oversight, and meaningful reform will help to ensure that its future business is conducted with honesty and integrity.” The Justice Department qualified its press release, “The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.”

Four specific illegal tax shelters were named in the indictment. These tax shelters, once part of KPMG’s lucrative tax practice, allegedly allow investors to reduce taxes through non-existent losses. Class action lawsuits are being filed on behalf of those investors who paid large fees to KPMG for those tax shelters between 1998 and 2003.

Link here.


Swiss authorities have agreed in principle to hand over client records of more than 500 Australians ensnared in the nation’s biggest tax evasion investigation. The Weekend Australian has revealed that the Swiss Justice Department has provisionally agreed with the ATO and Australian Crime Commission’s request for assistance in obtaining documents from Geneva-based accountancy firm Strachans. The matter was referred to a high-profile investigating judge with a reputation for taking a tough approach to international money laundering. The group caught in the case includes several celebrities and sports stars.

The principal of Strachans, Philip Egglishaw, formerly of Jersey, is accused of establishing a labyrinthine network of criminal offshore tax avoidance schemes worth more than $300 million. “A priori it is not a simple case of tax evasion that would be rejected out of hand,” said Rudolf Wyss, head of the international legal assistance division of the Swiss Justice Department.

The Justice Department, having seen credible evidence of tax fraud, which is a crime in Switzerland, has appointed investigating judge Daniel Dumartheray. The appointment gives hope to the ATO and ACC’s push for assistance. Earlier this year Judge Dumartheray blocked US$100 million in bank accounts during a probe into an alleged bribery and corruption scandal linked to a division of Halliburton, the oil company headed by Dick Cheney before he became U.S. Vice-President. Judge Dumartheray said the Australian case, though “complicated”, showed some evidence of serious fraud. “This exposes the limit between tax evasion and fraud,” he said. “But we could co-operate (with the handing over of documents) if there are ingenious manoeuvres and fictitious structures and artificial operations.”

Link here.

Swiss banks fight for secrecy.

The Australian tax office faces stiff opposition from the powerful Swiss banking sector as it pressures authorities in Switzerland to hand over sensitive client and bank records of 500 people caught up in Australia’s biggest tax evasion investigation. Swiss authorities have agreed in principle to co-operate with the joint Australian Taxation Office and Australian Crime Commission investigation of the activities of Geneva-based accountancy firm Strachans and its principal, the reclusive Philip Egglishaw, formerly of Jersey in the Channel Islands. Rudolf Wyss, head of the international legal assistance division of the Swiss Justice Department, said the Australian dossier did show “there are at least in part some elements of fraud.”

But the Association of Swiss Bankers is fighting the Swiss Justice Department’s increasing willingness to co-operate with countries pursuing fraudulent financiers and accountants operating out of Switzerland. The association has lodged an official protest with the Swiss Government for handing over sensitive bank records to foreign authorities pursuing “politically motivated investigations”. It called for better protections for the bank clients embroiled in criminal investigations launched in foreign countries.

However, Australia has a likely ally in judge Daniel Dumartheray, who was appointed to rule on Australia’s request for assistance in the Strachans investigation known as Operation Wickenby. Judge Dumartheray would not disclose the names of the prominent Australians caught up in the investigation but he said Switzerland could co-operate with the handing-over of documents if there were ingenious manoeuvres and fictitious structures and artificial operations.

Link here. Swiss Mutual Assistance Law, as seen by the IRS – link (scroll down).

Australian Taxation Office’s view of tax havens explained.

This publication explains the Tax Office’s view of tax havens, how we approach compliance in this area, what we are finding, and some situations where we suggest taxpayers be cautious. It aims to help taxpayers understand both the legal and illegal uses of tax havens. In general terms, Australian tax law is based on the premise that a resident is subject to Australian tax on their worldwide income from all sources in or outside of Australia. There are specific provisions that apply to international dealings.

Australia is part of a dynamic global economy within which countries often promote opportunities to business and individuals in other countries. It is not unusual for certain countries, such as those operating as tax havens, to offer beneficial financial, legal and tax regimes. In a global economy it is to be expected that there will be legitimate transactions with tax havens. However, we are concerned about schemes and arrangements where taxpayers exploit the secrecy laws of tax havens in an attempt to conceal assets and income that are subject to tax in Australia.

Having no or nominal taxes in a jurisdiction is not sufficient, by itself, to characterise that jurisdiction as a tax haven. Our concern arises when there is also a lack of an effective exchange of information and transparency. Without an effective exchange of information, it is more difficult and costly to identify which transactions between Australia and tax havens are legitimate, and which are not. Products are being marketed which potentially draw a taxpayer into an arrangement to avoid or evade their tax obligations. This publication provides a list of red flags to assist in avoiding these arrangements.

Link here.


The European Savings Tax Directive has no doubt caused many expats to reconsider their tax-mitigation strategies when it comes to holding cash deposits in EU member states. Having considered in previous columns some of the challenges, let us this week explore a few precautionary protection measures to put offshore and onshore investors alike out of harm’s way for the far foreseeable future.

What types of investments fall outside of the current regulations? There are a number of sound and legal precautionary measures to adopt such as investment policies written as “whole-of-life” insurance contracts or offshore life insurance policies, managed pension accounts and savings plans, offshore annuity contracts and critical illness cover, personal portfolio programs, corporate investment instruments, and private foundation and trust-wrapped vehicles.

Investment contracts written in Isle of Man and Channel Island jurisdictions can be structured as whole-of-life insurance policies. Therefore, they are exempt from EUSD regulations as the life insurance company owns the assets, but the individual or corporate entity owns the policy. In turn, the policyholder, foundation or trust receives the benefits, incomes and death benefits can be tax efficient. In this way, many deposits, funds, investments and so forth can be bought in a managed W-O-L instrument that is non-declarable for EUSD purposes no matter whether one lives in Europe or other global expat communities. Investors’ assets are managed by centuries-old, Standard & Poor’s-rated institutions. These offshore instruments can be used for cash and investment holdings as well. Should EU nationals hold property in their home countries, these investment vehicles can be utilized for settling Revenue Department claims in a tax efficient manner.

For expats everywhere, from Spain to Santiago, Armenia to the Americas and Thailand to Turkestan, there are options.

Link here.


Barbados has again made it clear that it is not a tax haven. The position has been outlined by Minister of Industry and International Business, Dale Marshall, who also said that the treaty Barbados has with China can be used to create partnerships with Canadian businesses in Bridgetown. “Barbados is indeed a highly developed, well-regulated, mature and sophisticated low tax jurisdiction,” Marshall told several Canadian business persons. “In fact, we have developed an international b usiness sector based on the philosophy of facilitating astute tax planning, supported by a network of double taxation treaties.”

Barbados and a number of other jurisdictions were once accused of indulging in harmful taxation by the OECD and its sidekick body the FATF. The two had threatened to blacklist those countries unless they corrected certain areas of their legislation dealing with offshore business. That threat no longer hangs over the heads of the countries. He made the point that Government is continuously upgrading both its domestic and international tax regime to enhance its competitiveness as a location where both international and domestic companies can operate, grow and prosper.

Acknowledging the importance of a sound treaty network, which in most cases includes provisions for the exchange of information and dispute settlement mechanisms, Marshall said that Barbados has taken steps to ensure t hat com panies have no problem meeting the minimum tax requirements and compliance with reporting standards of their respective countries. “This has allowed Barbados to pass the scrutiny of all international agencies,” he reasoned.

Link here.


The New Zealand Inland Revenue Department has launched a new crackdown on foreign companies operating in the country in an attempt to curtail what it considers to be a growing wave of abusive tax planning schemes. The Inland Revenue Department’s deputy commissioner Robin Oliver said that the department has already held discussions with certain foreign firms, particularly those based in Australia, to remind them of their obligations to the New Zealand tax system. “We are prepared to put resources into it because to raise $4 billion or half the corporate tax base if we went down to the level of U.S. tax collections we would have to get it [the $4 billion] off individuals. That would be a significant increase in the tax burden,” he added.

Mr. Oliver went on to comment that the IRD is becoming increasingly concerned at the way foreign companies can “suddenly turn” income generated in New Zealand into foreign-related income through the use of intangible assets and foreign subsidiaries. The IRD’s campaign is likely to involve the use of targeted tax audits, but it could also help bring about changes in legislation. Indeed, the issue is high on the New Zealand government’s legislative agenda, and Revenue Minister Michael Cullen has already announced proposals closing a loophole to prevent Australasian groups of companies abusing the country’s domestic tax rules on dividends and imputation credits.

Link here.


The U.S. moved a step closer to reinstating a double taxation agreement with Malta after President George W. Bush raised the subject himself and made a clear commitment to work towards this goal during a meeting with Prime Minister Lawrence Gonzi at the White House. Dr. Gonzi emerged from the 35-minute meeting at the Oval Office satisfied that Malta’s status as a gateway to Europe and North Africa for investors would be enhanced as a result of the positive move made by Mr Bush. The Prime Minister said the two leaders agreed to continue working together to create the environment that made Malta an even more interesting place to attract investment. Mr. Bush said at the outset of the meeting that he was “looking forward to strengthening our bilateral relations.”

Link here.


This web page provides links to articles and web sites that offer what I regard as responsible information about a variety of tax avoidance devices that are blatently illegal. Unlike the tax protestor who argues that the entire tax law is illegal in some manner, a tax scam (or scheme) is simply based on arguments or theories about specific parts of the tax law that have been found to be false by various court cases – or which are blatently at odds with the tax law.

The purpose of this web site is to describe a variety of legal methods of tax avoidance or deferral that are sanctioned by the law. This web page is about the various tax dodges and scams that are not legal and will not stand up to a challenge by the IRS.

Link here. Offshore tax articles index here.


A growing national economy, strong consumer spending and improved collection has helped the South African Revenue Service (SARS) to amass a record amount of tax revenues in the past year, SARS Commissioner Pravin Gordhan stated in the tax office’s annual report. According to Commissioner Gordhan, tax collections had reached R354.98 billion by the end of March 2005, a little under R10 billion higher than the estimated revenue count. Corporate income tax flows, which performed above expectations, accounted for R71.63 billion of this total, while personal income tax collections amounted to R111.7 billion, representing a 9% increase on the previous financial year.

There was also an increase in value added tax revenues, which rose to R98.16 billion, some R2.66 billion above the February 2005 estimate, reflecting strong growth in domestic expenditure. The booming property market also contributed substantially to the record tax take as R7.11 billion in transfer duties were collected.

Link here.



A new federal bankruptcy law tries to reduce what some see as abuse among debtors by requiring more monitoring, repayment plans, tighter deadlines and higher costs. But some critics said there is no evidence that a substantial amount of abuse or fraud went undiscovered or unpunished, while the increased cost and requirements to file may deny needier people and riskier businesses the fresh start the bankruptcy system was designed to offer. Estimates of debtor fraud range from 1% to 10% of the cases.

Some experts said that, under the new law – most of which takes effect October 17 – more small businesses will dissolve and more people will be forced into repayment plans or be unable to afford using the bankruptcy system at all. Such individuals may then have property foreclosed or repossessed, have their wages garnished and be subject to other creditor collections.

For individuals, those with an income above the state median will undergo a means test. If the court then determines that filers have at least $100 a month in discretionary income after some necessary expenses are paid, they may not be able to file under Chapter 7, through which they might lose some property but would be freed from most debts. Instead, those individuals will have to file under Chapter 13, which requires a repayment plan.

Link here.

Debt-ridden rushing to file before deadline.

There has been a stampede to the courthouse as debtors rush to file for bankruptcy before a new federal law takes effect October 17. The new law, a decade in the making, will make it more complicated and expensive for individuals to file for Chapter 7 and Chapter 13 bankruptcy. Whether it prevents or dissuades people from erasing or reducing their debts via bankruptcy remains to be seen. Under the new law, people who make less than the median income for their state can usually file for Chapter 7 bankruptcy.

Chapter 7 essentially wipes out a person’s debt, although creditors can seize his or her assets, except for those that are either exempt or outside the bankruptcy estate. People with no significant assets generally prefer Chapter 7. The new law requires those who make more than the median income to take a means test to see if they could theoretically repay at least $6,000 in debt over five years, or $100 a month. If the test shows they cannot repay that amount, they can still file for Chapter 7.

f the test shows they can pay that amount, they generally must file for Chapter 13, although there are some exceptions. Chapter 13 requires debtors to repay secured debt (such as a house or car) and a percentage of unsecured debt (such as credit cards). The advantage of Chapter 13 is that debtors can keep their assets if they complete the repayment plan, and the black mark stays on their credit history for seven years, compared with 10 years for Chapter 7.

Under the new law, bankruptcy lawyers become responsible for making sure their clients fill out the means test properly or risk being sued. Attorneys are likely to increase their fees to cover the added paperwork and responsibility. Today, attorneys on average charge about $1,000 in cities and $700 to $800 in rural areas to file bankruptcies, says Steve Elias, author of The New Bankruptcy: What It Will Do for You, from Nolo Press. “That’s going to double,” Elias predicts.

Like most U.S. bankruptcy courts, the one for Northern California, in San Francisco, has been inundated with cases. Its Chapter 7 filings increased 32% in August and 125% in September from the same months last year.

Link here.


Say you are sitting on a block of stock with a huge gain in it. Would you be tempted by this offer? You can (a) have your cake, (b) eat it, too, and (c) not pay taxes until later. Just such an offer was made by a firm called Derivium Capital LLC. Several hundred wealthy investors grabbed it. The Derivium deal called for the customer to get a loan equal to 90% of the value of his shares. If the stock went up, he could get it back by repaying the loan, with interest. If the stock went down, he could walk away and owe nothing. And, supposedly, the initial loan was not a sale and thus not taxable.

Now Derivium, which did $1 billion in loans, is in bankruptcy and under investigation by the IRS. Some clients could face back tax bills and others could lose millions in stock gains in a mystery that includes a former Citibank executive, companies in Ireland and the Isle of Man and Britain’s former honorary consul to Liechtenstein. “It’s beginning to look like it may have been a very sophisticated Ponzi scheme,” worries Alan M. Grayson, a lawyer and former president of long-distance provider IDT. He figures the shares he used as collateral for Derivium loans are now worth $12 million more than his loan balances. But Derivium reports it has no stock and no money in the bank.

At the center of the mess is one Charles D. Cathcart. In a deposition he gave last year to California regulators, he said he controlled the risk of a slide in the stock price by immediately selling the stock. As for the upside, he said he gave the offshore lenders backing the loans advice on strategies they could pursue, but had no “specific knowledge” of what hedges actually took place. In fact, some borrowers say they did not learn until 2002 that Derivium was using an offshore lender – first an Irish company and, from 2000 on, Bancroft Ventures Ltd., on the Isle of Man. Earlier this year Bancroft’s directors in the Isle of Man quit, and the firm was moved to Cyprus. Its newest directors live in Beirut.

Link here.


Paul Fairchild, a 34-year-old Web developer in Edmond, Oklahoma, has never spent $500 on fine tobacco. He has never slaked a shoe fetish with $1,500 charges at Manolo Blahnik and Neiman Marcus, nor has he ever bought diamonds online, furs in SoHo, or anything at e-Luxury.com. He has never owned an apartment building in Brooklyn, and he has never peddled flesh. Over the last two years, however, his credit report has suggested otherwise. In retelling his ordeal with identity theft, Mr. Fairchild has developed the acid sarcasm and droll nonchalance of a standup comic – a defense mechanism, his wife, Rachel, says, that belies two years of hell. “Once this happens, you can’t believe how deep the rabbit hole goes,” Mr. Fairchild said.

Indeed, in a year of prominent cases of stolen or lost consumer information – from the hacking of university computers and the disappearance of backup tapes at Citigroup, to fraudulent downloads from the databases of companies like ChoicePoint and LexisNexis – the rabbit hole seems to be getting deeper. About 10 million Americans fall victim each year to identity theft, according to the Federal Trade Commission. And in about a third of those cases, victims see far more than their existing credit card accounts tapped. Their private information is used by thieves to open new accounts, secure loans and otherwise lead parallel and often luxurious lives.

For victims like Mr. Fairchild – and two others who recounted their troubles and shared their sometimes vast paper trails – it can be an unnerving, protracted whodunit, with collection agents demanding payment for cars they have never driven, credit card accounts they never opened, loans they never obtained, and myriad other debts accrued by shadowy versions of themselves. Prosecutions are rare, and police investigations – when they do happen – are time-consuming, costly and easily stymied. A 2003 study by the Gartner Inc. consulting firm suggested that an identity thief had about a 1 in 700 chance of getting caught. “It’s a crime in which you can get a lot of money, and have a very low probability of ever getting caught,” Mari J. Frank, a lawyer and author of several books on identity theft, said in an interview. “Criminals are now saying, Why am I using a gun?”

Link here.

Reducing your identity theft risk factors.

This guide includes the following items: 1.) Test your identity risk factor. 2.) How do thieves get my information? 3.) Tips to Businesses. 4.) Tips to Consumers.

Link here.

Some fraud-wary credit card customers opt for single-use credit card numbers.

John Roos used to be afraid to shop online. But Roos, of New Rochelle, N.Y., recently bought a $500 TV online after he discovered a little-known credit card service that allows him to give Internet retailers a substitute credit card number for his account. Offered to holders of Citi, Discover and MBNA cards, these “virtual credit cards”, or single-use card numbers, are designed to give some peace of mind to consumers concerned about credit card fraud. Although the system slightly differs on each card, the principle is the same: For no extra charge, consumers sign up at the credit card’s Web site, often downloading software on their computers. Then, when they are ready to shop, they receive a randomly generated substitute 16-digit number that they can use at the online store. The number can be used once or, in some cases, repeatedly at the same store.

“The only people who know the real number are you and us,” said Jim Donahue, spokesman for MBNA. Although initially designed for Internet shopping, the card number can also be used to buy goods and services over the phone and through the mail, but it cannot be used for in-store purchases that require a traditional plastic card. (Nor can it be used for purchases that require a credit card to be produced at the time of pickup, such as movie tickets.)

Link here or here.


The arms of EU tax collectors are long – very long – and they are reaching out to Bermuda. But an attempt to interfere with a lucrative money pot on the Island is being contested by Government as it bids to protect what it sees as an important aspect of Bermuda’s international business. It argues that exemptions given to other offshore banking havens, such as the Channel Islands, should be the right of Bermuda too.

Increasingly it looks like a case of “Big Brother is Watching You” for EU citizens who are being targeted by sweeping new powers that allow financial information about their savings to be swapped among government departments of EU countries and some third party “aligned” countries. The closing down of tax-avoiding loopholes is the reason for the latest European directive, but countries and jurisdictions outside the EU are being roped in to varying degrees. That is where Bermuda fits in.

The Island is host to financial institutions that gather investments from agents across Europe and so is seen as being within the scope of the EU Directive on the Taxation of Savings Income by one of Europe’s premier banking centres Switzerland. However, Bermuda’s Ministry of Finance is not so sure and has made a case with the Swiss tax authorities for the funds based on the Island to be given exemption. After all it argues, the UK and other EU States have accepted that professional funds in offshore jurisdictions such as the Channel Islands are outside the scope of the new rules. A delegation went to Switzerland in August to talk with their counterparts about the implications for businesses and financial institutes on the Island who have “paying agents” in Switzerland. Switzerland is not an EU State, although the landlocked country’s main business is with the rest of the continent and is reputed to be the home of one-third of the world’s savings.

Link here.

Oprah eyes home in Bermuda.

TV superstar Oprah Winfrey has reportedly looked at a house in Bermuda with a view to buying it. A source said that she viewed a property in Tucker’s Town, but has not yet made a commitment to purchasing it. However, it is understood that the $25 million property is owned by a local. And that should rule out the possibility of Ms. Winfrey being allowed to buy it. Since February this year, when Government changed the rules on property sales, foreigners have only been allowed to buy homes which have an annual rental value (ARV) above $126,000 and which are being sold by non-Bermudians. At the time of the change, Labour & Home Affairs Minister Randy Horton said it was time “to turn off the tap” of land falling into foreign hands.

Ms. Winfrey is listed by Forbes as the 507th wealthiest person in the world and has a net worth of around $1.3 billion. Five years ago, the then-Premier Jennifer Smith wrote to Ms. Winfrey in a failed attempt to be interviewed on the show.

Link here.


Terrorists, drug dealers and smugglers are using a global system as old as the Silk Road to finance their operations. And there is not much we can do about it.

When federal authorities busted Abad Elfgeeh two years ago, they thought they had broken a critical link in the chain of terror financing. Between 1995 and 2003 the Yemeni immigrant and a group of family members, friends and associates sent $22 million by way of a JPMorgan Chase bank account to countries all over the world, including Pakistan, Thailand and Yemen. Among the alleged recipients: Mohammed Ali Hassan al-Moayad, a Yemeni sheikh who boasted of his ties to Osama bin Laden and was sentenced in July to 75 years in federal prison for conspiring to finance Hamas and al Qaeda. In court filings federal prosecutors in Brooklyn, N.Y. cited stunning evidence of a damning relationship between the men. But as the trial got under way in mid-September, prosecutors were forced to make do with far lesser charges. The indictment made no mention of terrorism. Instead, Elfgeeh was found guilty of five counts, including operating a money-transfer business without a license and avoiding currency-reporting laws.

For law enforcement this case highlights one of the most difficult and frustrating aspects of battling international terrorism: following the flow of money that supports it. Funds used to underwrite terror frequently start off “clean” and become “dirty” much later. The sheer size of the global financial industry has confounded prosecutors’ attempts at untangling the illegal use of money transfers from the innocent one of sending money home for relatives’ living expenses. Tracing any of the money to an individual in a remote corner of the world is all but impossible, and just as U.S. and other Western investigators clamp down on one sort of mechanism, terrorists figure out a new scheme.

Particularly vexing is the kind of business Elfgeeh ran out of the Carnival French Ice Cream Supermarket: hawala, an informal money-remittance service that operates on the fringes of the global financial system. Faster and cheaper than traditional banks or companies like Western Union, these outfits reach parts of the world others cannot and are a lifeline for the millions of immigrants and guest workers living in rich countries who send money back home. Last year an estimated 35% of the $150 billion in global transfers to developing countries flowed through these channels – and possibly far, far more.

It is not plausible to simply shut down the entire hawala industry. Families back in the home countries would starve. And yet the authorities cannot ignore the ugly side. Hawala is exploited by criminals to launder funds from traffic in immigrants, illegal drugs, sex slaves, weapons and even body parts. The system is marked by trust and informality, and operators are as sketchy with their records as any bookie – they have nothing but a scribble of first names or code words and a few details of the transaction. Where the funds end up – and what they are used for – is often a mystery to everyone but the recipient.

Link here.



Exit strategy is very important. Recently a producer from MSNBC contacted me about the disappearance of Patrick McDermott wanting to know if it was possible if he just disappeared. Anything is possible; however, just walking away is unlikely. If you are looking to move on, disappear or simply start over you need a good exit strategy. For several years, I have been giving advice on how to disappear. I receive emails from many people with questions ranging from property information to medical questions. When you break it down disappearing is simply starting over again, no different then loading that U-haul and having a checklist at hand.

First thing, you have to determine is how you are going to make money when you get to your predetermined location. If you are a bartender, waiter or cabana boy most likely, you will be able to get a job off the books and keep yourself under the radar. If you got tons of dough and plan on day trading or swing trading your even in better shape. Since you can set up offshore corporations and trading accounts easily and legally. It is important you research your location for job opportunities as well as the legalities of an expatriate working in the country. Some countries appear inexpensive to live in, keep in mind there is a reason why. Typically, the wages paid and the comforts of home are not up to par as in the U.S. This does not mean you will not find yourself an offshore haven, just tread carefully.

When buying that new condominium, house or beachfront properties there are important questions you need answered. Is there a transfer tax? When does it need to be paid and in what currency? The beachfront land, find out if electric and water can be run there. What are your rights if you leave for two months and come back and there are squatters occupying your new home? Find out what types of property insurance is available, if any. Do not buy anything sight on seen, like some great piece of property advertised for ten grand. If you have not been, there you have not seen what is down the block or across the street.

What and who are you leaving behind depends on your exit strategy. Are you simply looking for a new life and escaping the EX? If so, tidy up your affairs and get rolling. You do not want to leave bad credit behind – you may have to come back someday. Do the best you can to pay what needs to be paid. When I work with clients who want to disappear some of them desire to trash their credit, not pay off their electric and leave the bills unattended. Big mistake, look where you were five years ago, you probably did not think you were going to be thinking about disappearing today. You do not know what your situation will be like in five years from now. Some of my clients have fled because of debt, I suggest they deal with it properly, file bankruptcy, arrange with creditors. Do not toss your bills into the wind. Remember some skip tracer might find you in your offshore haven.

I get questions about second passports a lot. My answer is simply they are useful for types of identification intra-country in South or Central America but I would not try crossing a U.S., Canadian or European border with one. Read, read, read about offshore living from sites such as this. The above are a few thoughts one should consider if leaving or disappearing. Good luck and enjoy your new life, remember a little offshore living is a good thing but a lot of beach living is a better thing.

Link here.


Pentagon intelligence operatives would be allowed to collect information from U.S. citizens without revealing their status as government spies under legislation approved by the Senate Intelligence Committee and publicly released this week. The bill would end a long-standing requirement that military intelligence officers disclose their government ties when approaching an American citizen in the U.S. – a law designed to protect Americans from domestic intelligence activities by the Defense Department.

The provision is one of several sections of the legislation that would roll back privacy-related protections as part of an effort to improve the ability of U.S. intelligence agencies to detect and prevent domestic terrorist plots. Another provision would make it easier for U.S. spy agencies to gain access to sensitive government records on citizens that are generally prohibited from being disseminated under privacy laws. The changes are part of an intelligence authorization bill that calls for what officials described as a significant increase in funding for U.S. spy agencies. It would shift money away from controversial spy satellite programs that many lawmakers consider outdated and unnecessary.

Although the bill was endorsed unanimously by committee members, two Democrats expressed concerns with the privacy provisions in written comments attached to the legislation. Supporters of the provision noted that it would extend to Pentagon intelligence operatives authority that CIA case officers already have. The CIA is barred from collecting intelligence on U.S. citizens, but agency officers routinely approach American business executives and overseas travelers to glean information on foreigners.

Link here.


The FBI says it sometimes gets the wrong number when it intercepts conversations in terrorism investigations, an admission critics say underscores a need to revise wiretap provisions in the Patriot Act. The FBI would not say how often these mistakes happen. And, though any incriminating evidence mistakenly collected is not legally admissible in a criminal case, there is no way of knowing whether it is used to begin an investigation.

Parts of the Patriot Act, including a section on “roving wiretaps”, expire in December. Such wiretaps allow the FBI to get permission from a secret federal court to listen in on any phone line or monitor any Internet account that a terrorism suspect may be using, whether or not others who are not suspects also regularly use it. The FBI’s acknowledgment that it makes mistakes in some wiretaps – although not specifically roving wiretaps – came in a recent Justice Department inspector general’s report on the FBI’s backlog of intercepted but unreviewed foreign-language conversations.

Privacy activists said the FBI’s explanation of the mistaken wiretaps was unacceptably vague, and that in an era of cell phones and computers it is easier than ever for the government to access communications from innocent third parties.

Link here.


You would expect an announcement that would forever change the face of the internet to be a grand affair – a big stage, spotlights, media scrums and a charismatic frontman working the crowd. But unless you knew where he was sitting, all you got was David Hendon’s slightly apprehensive voice through a beige plastic earbox. The words were calm, measured and unexciting, but their implications will be felt for generations to come. Hendon is the Department for Trade and Industry’s director of business relations and was in Geneva representing the UK government and EU at the third and final preparatory meeting for next month’s World Summit on the Information Society. He had just announced a political coup over the running of the internet.

Old allies in world politics, representatives from the UK and U.S. sat just feet away from each other, but all looked straight ahead as Hendon explained the EU had decided to end the U.S. government’s unilateral control of the internet and put in place a new body that would now run this revolutionary communications medium. The issue of who should control the net had proved an extremely divisive issue, and for 11 days the world’s governments traded blows. For the vast majority of people who use the internet, the only real concern is getting on it. But with the internet now essential to countries’ basic infrastructure – Brazil relies on it for 90% of its tax collection – the question of who has control has become critical.

And the unwelcome answer for many is that it is the U.S. government. In the early days, an enlightened Department of Commerce (DoC) pushed and funded expansion of the internet. And when it became global, it created a private company, the Internet Corporation for Assigned Names and Numbers (ICANN) to run it. But the DoC retained overall control, and in June stated what many had always feared: that it would retain indefinite control of the internet’s foundation – its “root servers”, which act as the basic directory for the whole internet.

A number of countries represented in Geneva insisted the U.S. give up control, but it refused. The meeting “was going nowhere”, Hendon says, and so the EU took a bold step and proposed two stark changes: a new forum that would decide public policy, and a “cooperation model” comprising governments that would be in overall charge. Much to the distress of the U.S., the idea proved popular. Its refusal to budge only strengthened opposition, and now the world’s governments are expected to agree a deal to award themselves ultimate control. The internet will never be the same again.

Link here.



Ministers are rethinking controversial plans to create a new offence of “glorifying” terrorism amid concern that the proposal will need to be more tightly defined if it is to work in law. Tony Blair said there was a balance to be struck between protecting people’s lives and putting civil liberties at risk. Asked about the new offence, the prime minister said it was important to get the wording of a bill to be published shortly “very clear and very right”.

Link here (subscribers only).


The Supreme Court was asked to let libraries speak out about FBI demands for their records in a case involving the Patriot Act anti-terrorism law. The American Civil Liberties Union filed the emergency appeal, on behalf of an anonymous client, but the paperwork is censored and gives few details. The ACLU has argued that a gag order prevents its client, apparently librarians in Connecticut, from participating in a debate over whether Congress should reauthorize the Patriot Act.

A federal judge said that the gag order had “the practical effect of silencing individuals with a constitutionally protected interest in speech and whose voices are particularly important in an ongoing national debate about the intrusion of governmental authority into individual lives.” The 2nd U.S. Circuit Court of Appeals in New York put the decision on hold, and the Supreme Court was asked to overrule the appeals court. Federal prosecutors have maintained that secrecy about records demands is necessary to keep from alerting suspects and jeopardizing terrorism investigations. They contend the gag order prevents only the release of the client’s identity.

Ann Beeson, the ACLU attorney in the Supreme Court case, said that “the government’s application of the gag order is preventing me from explaining our First Amendment argument” about the free-speech rights of her client. “It’s really ridiculous,” said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press. “I’m just waiting for the first search of a newsroom to come down and for someone to say, ‘You can’t report we just searched you.’”

Link here.

Help Wanted: U.S. Supreme Court Judge. No experience necessary. Contribute here.

Until today, I had kept quiet on the issue of Supreme Court nominations. In the case of our new Chief Justice, John Roberts, I was going to complain from the standpoint of the mistaken belief that becoming Chief was usually preceded by some dues-paying time as an Associate justice, and here he is, going straight to the top. However, a little digging proved this was not so. I could see where the untimely death of Rehnquist would give Bush a golden opportunity to place his stamp on the bench, and, disappointingly, most of the Senate fell into line. But again, that is a separate topic.

What finally sent me over the edge was the announcement of Bush’s new nominee to replace Sandra Day O’Connor, Harriet Miers, someone whose entire career has been nothing more than that of political operative and water carrier, with no judicial experience of any kind. This had me thinking of the Roman emperor Caligula, who was alleged to have appointed his favorite horse a consul. (The parallels of the misadventures of certain mentally unstable Roman emperors with the Bush Administration are too delicious to ignore.)

Of course, it would not be the first time Bush has promoted people utterly unqualified for their jobs. The case of Michael Brown, as head of FEMA, is now a classic in the annals of Bush Blunder. Ms. Miers, while once being touted as a “pit bull in size-6 shoes”, has never been a judge, never argued a case before the high Court, and never been other than a Bush loyalist who is now getting rewarded for that loyalty. But Bush’s off the cuff description is an insult to pit bulls, and I am sure I am not the only one to find it mildly disturbing that Bush would know her shoe size. But all of this raises the more fundamental question of how does one really Qualify to be a Supreme Court Justice, or Chief Justice of that court?

There is no clear pattern one can discern that shows boldly the path one must follow if one is to become an Associate or Chief Justice. The path has always been marked with opportunism, connections, rewards for loyalty, and other political chicanery. But as history unfolded, there was one pattern that one could plainly see: that which ultimately led to a political “litmus test” for court nominees. It began after the FDR appointments in the 1930’s, and has grown worse from each administration to the next, until today, the Court sits in danger of having “Caligula’s horse” as one of its members.

Link here.


Computers and their criminal investigation capabilities turned Dori Schulze, an IRS special agent, into a self-proclaimed “geek” by the early 1990s. That initial embrace of computers by her and her employer led to the largest retail tax evasion conviction at the tim. She used a computer to gather evidence against Stew Leonard Sr., the founder of Stew Leonard’s Dairy in Norwalk, who was convicted of evading $6.8 million in taxes in 1993. Now, the knowledge and tools the IRS uses to crack cases ranging from fraud to tax evasion are being taught to local and state law enforcement departments. The goal is to use the same tools to look deep into the hard drive of a computer for evidence in cases ranging from child pornography to public corruption.

That is what a mix of local and federal law enforcement officers gathered to learn at the FBI’s New Haven, Connecticut office. Sitting in front of rows of desks with computers, 20 people were taken step by step through the IRS’ Ilook Investigator program. “Just about every crime committed these days … there’s a computer,” U.S. Attorney Kevin J. O’Connor told the group, opening the two-day training session with officers from cities and towns statewide as well as the U.S. Coast Guard. The percentage of criminal cases involving evidence found on a computer has grown from 5% to 95% over the last decade, the FBI and IRS said. And agents often must deal with multiple computers in a network.

The Ilook program was initially developed by Elliot Spencer, the head of forensic computing for the UK’s anti-fraud agency. It allows investigators to take an “image”, or exact copy, of another hard drive. With that copy, investigators can recover destroyed files and search the computer thoroughly. The IRS Criminal Investigation Division joined with Spencer to further develop the program in 2001, and versions of it are available to law enforcement and other government agencies. While the IRS can, for example, use the program to more easily uncover a double set of financial books in a fraud case, local police and other federal agencies can use it to find records detailing drug trafficking and organized crime.

Link here.



Canada’s ambassador to the U.S. gives a failing grade to his new country of residence. In a speech to the Empire Club of Canada, Frank McKenna called the U.S. government dysfunctional and raised the alarm over America’s growing budget deficit. “The United States is a wonderful creation,” McKenna said. However, “the government of the United States is in large measure dysfunctional.” McKenna began his term as ambassador in Washington six months ago. His speech in Toronto was delivered to an audience of businesspeople and politicians.

Among the achievements McKenna boasted, Canada is the only major industrialized country to post a budgetary surplus, over the past three years. Canada is the biggest exporter of electricity, natural gas, and uranium to the U.S. Canada is also now the biggest exporter of oil to the U.S., having displaced Saudi Arabia in 2004. While McKenna admits the U.S. offers the best medical care to some of its citizens, he adds that, overall, Canada still has a higher average life expectancy.

Link here.


The Canadian ambassador says the Bush administration is “dysfunctional”. And in today’s International Herald Tribune, columnist Bob Herbert says the war in Iraq is both un-winnable and deplorable. “Brave troops died for the mindless fantasies spun by a gang of dissembling, inept politicians,” he writes. Even from the get-go, we thought the war in Iraq would turn into a mess. What we did not realize was that it was supposed to be a mess. We gave a speech to the World Money Show group and described our view of the big picture. Birds gotta fly. Dogs gotta bark. What do empires gotta do?

The answer came from a surprising source last night. We were reading a recent biography of one of the world’s greatest empire builders, Genghis Khan. There is one thing all empires must do, the book tells us – expand. We tried to think of a counter example. Except for the very odd case of the Austro-Hungarian Empire, we could think of none. A nation-state has more or less fixed borders. Italy is Italy. Bulgaria is Bulgaria. The nation-state maintains an army to protect its borders. It does not, normally, seek to conquer neighboring states. It does not, normally, maintain foreign colonies, lackey governments in foreign countries, or vassal states and territories. Empires expand, or contract, because that is what makes them empires. If they minded their own business and stayed within their own borders, they would not be empires.

The other thing an empire must do is go broke. We read in the paper that spending under George W. Bush has increased more than under any president since Lyndon Johnson. Bush is a “Big Government conservative”, which is to say, he manages to combine the worst elements of two appalling creeds – military adventures overseas with bread and circuses at home. But we are not complaining. A true empire cannot help itself. It must engage in such extravagant “imperial overstretch” that it can no longer pay the costs. Even the primitive Mongol empire had to reward its troops and pay its administrators. It did so by stealing the wealth of conquered peoples and demanding tribute from them. This forced the Mongols to undertake ever more distant and more ambitions campaigns – because they had already robbed the cities under their control.

The Anglo-Saxon empire is a commercial enterprise, rather than a larcenous one. The Romans had their armies and engineers as the source of their hegemonic power. The Mongols had their horses and bowmen. The Anglo-Saxons had factories – originally, those in England and New England. But every imperial advantage is eventually dulled, worn out, emulated or rendered obsolete. Eventually, the empire expands until reaches beyond its limits. Then, it either goes broke, is defeated, or both. The Anglo-Saxon industrial advantage exhausted itself first in England and then in America. England’s economy reached its competitive peak before the end of the 19th century. Then, America took the lead, and was able to compete effectively for most of the next century, achieving a positive trade balance until the 1970s. It has been downhill since then, financed no longer by commerce, but by debt. American men earn hardly a penny more, in real terms, per hour, than they did in 1971. They feel richer, but only because they owe more, work longer hours, and put their wives to work.

America still has the world’s reserve currency. It can sell U.S. Treasury bonds to finance its imperial expenses, with the Fed holding rates conveniently low. The result of such easy credit has been a sharp increase in asset prices all over the world. A quarter of a century ago, you could have bought the typical house in California for 200 ounces of gold. Today, you will need 1200 ounces. The real question is not what is ahead (every empire must decline … along with the price of its assets) but when and how it happens. Already, we notice ominous portents. In 2003, the amount of U.S. Treasury bonds in foreign hands rose by $175 billion. In 2004, the increase came to $295 billion. But during the first seven months of 2005, only $2 billion more has been added. We do not know what will happen next, but we hope to enjoy the spectacle.

Link here.
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