Wealth International, Limited

Offshore News Digest for Week of October 2, 2006

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

Global Living & Business Taxes Asset Protection / Legal Structures Privacy Law Opinion & Analysis



From Tokyo to Shanghai to Mumbai, the loudest complaint from financial executives is that the shortage of talent is getting worse as competition for Asia’s wealthy increases. A lack of well-trained fund managers and private bankers throughout Asia poses a risk for the wealth management business as the industry expands too quickly for newcomers to gain experience. “We have a number of concerns about the experience of people coming to us looking for licences,” said Martin Wheatley, chief executive of Hong Kong’s Securities and Futures Commission, during the Reuters Wealth Management Summit. “That’s across the board in financial services.”

Asia’s wealthy – considered to be people with more than $1 million in investable assets beyond their house – rose 7.3% to 2.4 million people last year, faster than the more developed markets of the U.S. and Europe. Financial firms are gearing up to take care of this new class of rich customers, but the talent shortage is costing big money as firms struggle with high turnover rates as employees with minimal experience jump to competitors for bigger paychecks. Private bankers are particularly hard to find as they need to make personal connections with the world’s richest people, and some country officials are trying to fill the void. “At the high end, people like to have relationships with people like themselves,” said Dave Seymour, global head of investment management and funds practice for KPMG, noting that Singapore has set up banker training schools.

The shortage is not limited to Asia, as companies in the U.S. and Europe face similar challenges, but many foreign companies are particularly hamstrung when trying to find bilingual staffers. “The biggest issue in Japan for a foreign institution is to find people,” said Francois Barbe, the Japan chief executive of Societe Generale’s private banking arm. SocGen is trying to hire nine more private bankers by the end of next year, up from its current 26. Increasingly, the company is rubbing up against local competition that is also keen to expand into the higher echelons of private wealth.

“It’s not easy to develop or raise fund managers,” said Koshiro Taniguchi, head of private banking for Daiwa Securities Group, Japan’s second-biggest brokerage. For Daiwa and its rivals, grooming fund managers with a nose for making money is crucial as Japan’s wealth management business shifts from relying on broker commissions to earning fees based on the returns of a client’s portfolio. Taniguchi said that Daiwa also recently lost one of its three tax specialists to a rival firm. “He was headhunted,” the 29-year Daiwa veteran said.

Link here.


Singapore’s housing market, dead for five years, is suddenly gripped by frenzy. Developers are falling over each other to buy older condominiums “en bloc” from their individual owners only to tear them down and build anew. So far this year, such collective purchases have amounted to S$6 billion ($3.8 billion), three times the figure for all of last year. The builders reckon that when the new apartments are ready there will be buyers who will compensate them for the elevated prices paid for the land because they, in turn, will have tenants willing to pay high rents.

For now, it is all going according to the script. But if the excesses continue unabated, a collapse may occur, perhaps as early as next year. The en-bloc madness is contributing to a shortage of apartments available for rent. The vacancy ratio shows that the market is at its tightest since the first quarter of 2001. Tenants looking to renew their apartment leases in the past few months have been asked to pay 20% to 50% more by landlords. Homeowners feel confident amid the booming economy that they will be able to pass on their high and rising mortgage costs to tenants.

The Singapore economy probably will expand near the top end of the government’s forecast of 6.5% to 7.5% growth this year, vs. 6.4% last year. Job creation this year may come in at 125,000, beating last year’s 113,000. With the city’s own labor force near full employment, more new jobs mean more foreign workers looking for places to live. All of this is fueling optimism among property owners. What was a slow and steady increase in rents until just a few months ago is suddenly at a fast gallop. Perhaps, the acceleration is just the last-lap effect. With the U.S. economy on the cusp of a slowdown, the property boom in Singapore may not have much farther to go, especially if cracks appear in the rental market. By this time next year, a lot of new, empty apartments may be scattered around the city.

Nine out of 10 local households live in their own homes, typically a Housing Development Board flat. Rising rental costs, therefore, do not lead to a general discontent among the island’s 3.5 million locals. Their impact is limited to the 800,000 or so foreigners. The presence of foreigners in Singapore is directly linked to the health of the world economy. After the Sept. 11 terror attacks, many global companies scaled back operations in Singapore and recalled or fired employees. The property market tumbled for the next several years. Now, it is the recovery that appears excessive.

As a small, open and export-dependent economy, Singapore swims and sinks with the global tide. In their excitement to corner prime locations, developers seem to be taking for granted that the global economy in 2007 will be as good as 2006. In the fourth quarter of 2000, a lot of people in Singapore had felt the same way about 2001.

Link here.


The EU has finally agreed to admit Bulgaria and Romania on January 1, 2007, but expressed deep concern about the level of corruption in both countries. Is this a problem that affects only the countries concerned, or might it affect the EU economy as a whole, bringing it new diseconomies from EU enlargement?

The political arguments for and against EU expansion are clear. On the one hand, the EU wants to take in its poorer neighbors, to include them in a greater European federation that can pull its weight in world affairs and produce prosperity for its people. On the other hand, as the EU goes further East and South, it comes to countries which are either exceedingly poor – hence possibly a burden on EU social funds and other programs – or culturally sufficiently different from the European majority (e.g., primarily Moslem) that their assimilation might prove difficult. There is no hard dividing line. Bosnia is a Moslem country that is historically well within the European heartland, while Armenia is a Christian country whose history has little connection with Western Europe. Nevertheless it is clear that politically, while the absorption of culturally close entities such as East Germany and Hungary was supported by the great majority of EU citizens, expansion beyond the European heartland poses progressively more difficult problems.

Economically, at first sight it is a question of scale and pace. Slovenia – tiny, relatively well off and subjected to a form of Communism that was barely more collectivist than several EU members – was easy to absorb. Poland, unquestionably part of Europe but much bigger and somewhat poorer, has proved much more difficult, with free movement of labor producing an oversupply of immigrant Poles in Britain, already too crowded to wish for more population. Nevertheless, by delaying entry until the economy was both capitalist and as rich as the poorer parts of the EU, and staging it so that no more than 5%-10% was added to EU population in each decade, it would theoretically have been possible to expand the EU seamlessly, with both old members and new benefiting enormously from the expansion. Companies in old EU member countries would enter a free trade zone with a supply of labor that was cheaper than at home, allowing them to become more competitive in world markets, while new member countries would find a steady supply of foreign investment arriving, improving the nation’s capital stock and permitting a rapid growth in local wage rates and living standards.

However, in reality economic frictions make it more difficult for the EU to absorb new countries than at first sight appears. Countries such as Poland, and later Turkey and Ukraine with large and impoverished populations cause a major strain on the EU economy, because the mechanisms that pull those countries’ living standards up to an EU norm require enormous amounts of capital and a long time to take effect. As expansion moves to poorer countries, it must thus proceed at a slower and slower pace, to prevent those countries from being hollowed out by emigration.

The most important difficulty of all in absorbing some new countries into the EU is their lack of progress towards a free market economy. Whereas Central European countries had essentially completed the transition from a communist to a capitalist economic system, as you go further south and east the transition becomes progressively more incomplete. In countries like Belarus the process has come to a halt, since the economy has been captured by post-Soviet elites, who as “red directors” dominate the business sector and extract rents from the economy by constructing monopolies that are not subjected to a freely competitive process. The elites have both economic and political power. In this respect they differ from the early stage Russian “oligarchs” such as Yukos’s Mikhail Khodorkhovsky, whose political power was limited and who therefore lost control of his business empire and ended up in prison in Siberia. Once political and economic power are in the same hands, in an economy where free competition is not permitted, the chance for further change has disappeared.

If an economy with a stalled transition is admitted to the EU, even if that economy is quite small, the positive effects of EU membership disappear and negative externalities intrude. At that point, the EU might as well abolish the country’s membership (unless it contains oil wells) – there will be no gain to the EU as a whole from its membership, nor to the country and its inhabitants, only a continuing “black hole” for EU private and public money.

If the simplistic free market view was correct, Romania and Bulgaria would pose few absorption problems. Both are part of the European heartland, predominantly Christian and fairly small. While poor they are not desperately so, and not hugely poorer than Poland. Historically, Romania even had oil, although today it is only 50% self-sufficient. One would expect a “rush to the West” if immigration is freed immediately, which would cause problems coming so quickly after the flow from Poland and the other 2004 EU entrants, but that can be solved by delaying free labor movement for a few years. The difficulty with Romanian and Bulgarian EU accession lies entirely with their “Transition Progress”. In both countries, their history since 1991 is unpromising. In Romania a post-Communist coalition continued to govern the country in the interests of the nomenklatura until 2004. Privatization was dominated by insiders and economic reform was modest at best. The post-2004 “nationalist” government has made reforms, and offers hope for the future. Nevertheless if Romania follows the normal East European pattern, the next elections, due in 2008, will once more return to power the post-Communists and their “red director” allies.

Vulgaria at first sight offers more hope. It ousted the post-Communists by street demonstrations in 1997, and enjoyed first a reformist if corrupt anti-Communist government from 1997 to 2001, then the extraordinary spectacle of the former Tsar Simeon II returning to Bulgaria, winning an election and governing the country as prime minister Simeon Saxe-Coburgotski in 2001-5. Since Simeon was of German descent and education, Bulgaria enjoyed for that period a government of German Christian Democrat outlook and near-German intolerance of corruption. Unfortunately in 2005, the electorate obeyed the normal East European pattern and returned the post-Communists to power. It is thus by no means clear that a truly open and free economy has been securely established in Bulgaria.

Bulgaria and Romania could go either way, with Bulgaria’s chances of success and absorption into the rich west being somewhat better than Romania’s. If they become more open to new investment and free competition, both political and economic, their living standards will rapidly improve and Bulgaria in particular will provide the EU with an excellent new source of cheap engineering and design talent. If on the other hand, the centralization of power produced by the EU bureaucracy serves to entrench anti-competitive power structures, the “red directors” will continue to dominate political and economic life, corruption will remain rampant, organized crime will flourish, the economies will stall and both countries will become staggeringly large drains on the taxpayers and economies of the EU as a whole.

Whether or not Bulgaria and Romania succeed, if the EU continues to expand, at some point one of the new EU entrants will fail to adapt to the free market, remaining controlled by the old oligarchy, becoming a pit of corruption and crime and dragging down living standards and political stability throughout the EU. Croatia, more “transitioned” than Slovenia, small and richer than Poland, will not pose that problem and should be admitted quickly to the EU. Beyond Croatia, however, the road is much rockier. At some point, the EU has to stop absorbing new countries. Politically, Moslem Turkey may be the expansion that proves too difficult to absorb, but economically, the only real problem with Turkey is its huge size. However the undeniably European, fairly small (except Ukraine) and apparently easy to absorb countries of the remaining Balkans and the European ex-Soviet Union may economically, because of their corruption prove an expansion too far.

Link here.


Caribbean countries are alarmed that legislation approved by the U.S. Congress last week to defer WHTI rules for the carrying of passports by U.S. citizens does not apply to air travel. The Intelligence Reform and Terrorism Prevention Act of 2004 requires that by January 1, 2008, travelers to and from the Caribbean, Bermuda, Panama, Mexico and Canada have a passport or other secure, accepted document to enter or re-enter the U.S. Originally, the requirements would have come into force in 2007, but cries of horror from popular tourist destinations in the Caribbean, not to mention U.S. and Canadian resort cities, led to a postponement until 2008.

Now the WHTI (Western Hemisphere Travel Initiative) implementation date of 8th January 2007 has been put back to 1st June 2009 for U.S. citizens traveling within the region by land and sea. However, the provisions of the amendment passed last week are silent as regards air travel. Prior to the new amendment, the timetable was as follows: (1) January 8, 2007 – Requirement applied to all air and sea travel to or from Canada, Mexico, Central and South America, the Caribbean, and Bermuda. (2) January 1, 2008 – Requirement extended to all land border crossings as well as air and sea travel.

President of the Caribbean Hotel Association, Peter Odle, said that the Caribbean countries affected would face economic and social upheaval, saying, “Tourism is the lifeline of the Caribbean, where the industry spans the depth and breadth of the national economies and represents as high as 97% of all direct and indirect jobs in the country. For the Caribbean nations affected, the economic impact has the potential to be disastrous.” Last August, the government of the Cayman Islands has joined the Caribbean Tourism Organisation, the International Council of Cruise Lines and other leading travel organizations in opposing the phasing in of the WHTI.

Monitoring visitor arrivals, the Cayman Department of Tourism has learned that the majority – some 80% – of stay-over visitors currently travel on passports. While not confirmed, the anticipated percentage of non-passport holders is expected to be significantly higher for cruise arrivals, ourism Minister Charles Clifford said. He reiterated that any policy that negatively impacts arrivals by air or sea “or which acts as a disincentive to travel to the region due to perceived additional obstacles and burdens is an unacceptable risk.” In 2005, the Canadian Tourism Commission estimated that a WHTI passport requirement would result in a cumulative loss of some 3.5 million outbound trips by Canadians to the U.S.

Link here.


There is a supposition that when we retire, we are all comfortably in “coupledom”. The ads, the information sites, show nice air-brushed, cozy pictures of couples, sweaters casually thrown round their shoulders deep in conversation, broad smiles on faces – or walking hand in hand towards the sunset. But some of us who retire and relocate are actually on our own, due to divorce, death, or just running away from the tedium of life as we know it.

Retiring Singles Overseas has just been set up as a forum for bringing singles together. Whether for romance, travel, or investment it is designed to show you the best places overseas to live. The site can show you places with affordable healthcare, reasonable costs of living and a climate that suits you! This does not mean that we are looking to return to that familiar state of coupledom, but it would be nice to meet other single, like-minded expats. The site has been designed mostly, but not exclusively, for those born between 1946 and 1964. Many 40 to 60 year olds are retiring early, while some just want to get away before it is too late! A rising number of baby boomers are single due to factors such as divorce and death.

I have read many articles about possible “escape to” locations, traveled singly to Italy and Croatia, researching the beautiful properties overlooking ocean and mountains. I went to Costa Rica and Panama on two separate occasions with small groups of three to four people, who coincidentally turned out to be single too. As we got to know each other better it became apparent to me, that having a like-minded partner would make all the difference to the task of making these decisions. Most of us need someone to share our dreams and joys!! Romance is in the forefront of this site, but certainly not exclusively. You may be looking for a same-sex travel/investment partner (you do not have to be “gay”). This site is for women and men that are interested in the adventure of living overseas, traveling overseas, property purchasing overseas and matching like-minded women and men.

Link here.


Thanks to a port security bill overwhelmingly passed late last Friday, Congress has dealt U.S. poker players the equivalent of 2-7 offsuit when it comes to playing online. Sure, it is still possible to win with a hand like that (or play, in this case), but it is increasingly difficult. The bill makes it unlawful for banks and credit card companies to process transactions for online gaming sites, which generally operate in places such as Costa Rica. President Bush could sign the bill and make it law by November 7.

It does not appear that players are the the target, but rather the financial institutions involved in the transactions. Most credit card companies do not allow such payments online, anyway. Many players use a third-party site such as Neteller, which already has responded to the bill on its Web site. The reaction from some of the online sites has varied. PartyGaming, parent company of PartyPoker.com, said it will close its U.S. accounts if the bill becomes law. PokerStars issued a statement through the 2+2 forums, telling customers their money is safe, but it has not decided if it will close U.S. accounts. Full Tilt is trying to assure its players that it is “… legally regulated and licensed to offer its services to anyone around the world.”

Link here.
Gibraltar could lose millions in tax revenues if there is an exodus of gambling firms – link.
PartyGaming scraps planned interim dividend – link.


The world’s second smallest country and popular tax haven Monaco is to start collating and publishing figures showing its GDP for the first time. YourMonaco.com, who produce an independent travel guide for Monaco and Monte Carlo, say that those who are considering moving to Monaco because of her zero income tax policy have nothing to worry about. “This is much more about Prince Albert pushing ahead with his agenda on the environment and world affairs than it is Monaco’s tax policy,” they claim.

Prince Albert became ruler of Monaco just over a year ago, after the passing of his father Prince Rainier, who transformed the Principality into the world’s best known tax haven in the 50 years he was in charge. “Prince Albert is much more interested in world affairs as he knows the future of Monaco as a tax haven is safe,” Henri Boulanger, YourMonaco’s spokesman, adds. Recognizing that collecting financial information could put off wealthy individuals moving to Monaco, the government has told those businessmen taking part that all information will be kept confidential, and will not be used for fiscal purposes.

Political analysts might see the beginning of information gathering in Monaco as the start of a process to join the EU. “This is highly unlikely,” contend YourMonaco.com, “There are influential figures in the EU who have been pushing for tax harmonization across EU countries for some time now, and while it is unlikely to happen as Britian would veto any move towards this, it would kill the goose that lays the golden egg for Monaco, and far from leading Monaco to the world stage on important issues like the environment and the Third World, it would lead Monaco to being little more than a European backwater with the Grand Prix and casino as her main attractions.”

Due to her tax status property prices in Monaco are among the highest in the world. Typical of Monaco real estate prices are a one bedroom apartment without views of the Mediterranean at €880,000 Euros – after closing costs nearer to €1 million – €1,950,000 for a two bedroom apartment, and expect to pay between €3-4 million for a good three bedroom apartment with sea views and parking space. Aside from the obvious tax advantages Monaco residents enjoy, the Monaco Grand Prix in May draws ten of thousands of tourists to the Principality at the end of May every year, while the Monaco Yacht Show in September is an increasingly popular event.

Link here.


By decision of the Swiss Federal Banking Commission, Faisal Finance (Switzerland) SA has been awarded a full banking license. The company will now be known as Faisal Private Bank (Switzerland) S.A. Swiss private bankers have earned a first-class name for efficient professionalism, prudence, precision, and a culture of client confidentiality. These strengths were supported by a 700 year history of comparative socio-political stability and neutrality. The principal shareholder of Faisal Private Bank Switzerland is the Bahrain-based Ithmaar Bank BSC, which is regulated by the Central Bank of Bahrain, formerly the BMA. The total issued and fully paid-up capital of Ithmaar is $360 million. Faisal Private Bank Switzerland is part of the Group which pioneered the Islamic banking and finance industry.

The launch of Faisal Private Bank Switzerland is a development towards building the bridge between two distinct yet complementary traditions – Swiss private banking and financial solutions based on ethics derived from the Sharia. Marco Rochat, CEO of Faisal Private Bank (Switzerland) SA, commented, “Faisal Private Bank Switzerland is the synthesis of over 15 years of experience in the Swiss private banking arena with a distinctive ethical heritage. This will enable us to continue delivering an innovative platform for an international clientele which trusts our private bankers because they are also accountable for their values.”

Link here
RHB ISlamic plans international banking unit – link.


Farms across the United States are reporting shortfalls in the number of available workers, which in many cases has caused crops to go unpicked. Blame for the lack of labour is laid squarely at the door of a crackdown on illegal workers crossing the U.S.-Mexico border and the absence of flexible legislation that would allow farmers to hire workers on a seasonal basis.

Toni Scully, co-owner of Scully Packing in northern California’s Lake County, said she usually hired 900 fruit pickers to harvest their crop during the 3-week window. This year, however, she could only find 500 workers. “We think about 40 percent of our workers didn’t come because of the increased security on the border,” Scully said. “By our estimates we’ve left about 20 to 30 percent of the crop either hanging on the tree or lying on the ground because we couldn’t pick it. It’s just heartbreaking because we had a beautiful crop.”

Scully’s problems are far from an isolated case, according to farmers trade groupings. The Western Growers Association, whose 3,000 members in California and Arizona account for around 50% of the U.S.’s fresh produce, said the labor squeeze was being felt widely. “We are getting reports almost on a daily basis from our membership,” said WGA spokesman Tim Chelling. “If it’s not a crisis then it’s certainly close to a crisis. Millions of dollars have been lost so far.” Chelling also said the industry was also losing workers to better paid jobs in the construction and tourism sector.

To combat the problem, the WGA wants Congress to overhaul existing labour laws governing migrant workers. A bill before Congress known as “AgJobs”, which would create a program to allow people who have worked in agriculture for a specified period of time to get green cards, failed to be put to a vote in Congress last week. The bill’s supporters sought to have it attached to legislation creating a 700-mile fence on the Mexican border. Prominent California Democrat Senator Dianne Feinstein warned of a worsening crisis in the farm sector unless legislation was introduced. “It is a disaster, and it will be a very costly disaster, for the farm community as well as for the consumers of America,” Feinstein said.

California’s other Democratic Senator Barbara Boxer echoed Feinstein’s warning. “This is tragic for us,” Boxer said. “We could lose these farmers. We could lose agriculture.” Despite the bill’s failure to progress, Toni Scully says she is grimly optimistic that a solution will be found before next year.

Link here.



With the EU hoping to fix its ineffective information-sharing regime by extending its writ worldwide, senior professionals will discuss the issue at Society of Trust and Estate Practitioners’s first Hong Kong conference in October. STEP’s 12,000 members work across the legal, accountancy, trust, banking, insurance and related professions. Martin Glass, Deputy Secretary for Financial Services & the Treasury in Hong Kong, will address the possibility of Hong Kong entering an information-sharing agreement with the EU at STEP’s Trusts & Tax in Asia conference on October 12-13.

A distinguished panel of experts will discuss whether Asia’s regional governments will go the way of the Europeans in tax information sharing. The EU’s Savings Tax Directive has given the taxpayer a duty of disclosure in order to ensure that citizens of EU member states pay the appropriate level of tax. However, the EU are now seeking to extend treaty arrangements, that would have the same effect, around the world. With EU negotiators targeting Hong Kong and Macau this question looms over Hong Kong’s financial success. Martin Glass will give practitioners insight into the progress of negotiations in this area.

Bill Ahern TEP, Managing Director of Wealth & Tax Advisory Services at HSBC Private Bank said “At this exciting time, who can doubt that Hong Kong and Asia’s future is bright in so many ways. This conference will give practitioners an understanding of the threats and opportunities for commercial success in Hong Kong’s private client profession. The issue of information disclosure looms large over the industry in Hong Kong – it will be helpful to see where we will be heading on this issue.”

Link here.


High tax inflows have continued to eat away at the Costa Rican government’s deficit, which fell to only $66.8 million for the first eight months of 2006, representing less than 1% of GDP, compared with 1.3% a year earlier. Revenues rose 22% over last year, partly due to higher import tariffs. Last year’s tax collections were themselves 20.5% higher than in 2004, reducing the 2004 budget deficit of 2.5%.

Government spending has, however, continued to increase, up 14% for the first eight months of 2006, and debt interest of $560 million more than wiped out a primary surplus of $493 million for the period. Still, the economy is doing well. In 2005 there was an increase in exports by 12.8% and a 19% increase in the number of visiting tourists, reaching 1.5 million. Central Bank figures show 5% growth for 2005. Growth is expected to reach 6.8% in 2006.

Successive government have been trying for years to push a fiscal reform bill through the legislature, which would replace the existing territorial basis of taxation with world-wide taxation of income. Such good news from the economy will not encourage legislators to allow the government its planned tax increases.

Link here.


One of the largest tax investigations ever seen in the UK is currently underway by the OFPG. The OFPG was created a couple of years ago to recover tax from untaxed offshore bank accounts. Although it consists of only 40 investigators, they are investigating hundreds of thousands of offshore bank accounts. The OFPG believes that funds held by UK residents in 13 Offshore Financial Centers total over £200 billion with a significant proportion evading tax.

The OFPG persuaded the UK Special Commissioners to issue a production of information notice to force overseas banks to produce massive amounts of information previously thought to be confidential. These notices force the overseas bank to disclose information about bank accounts held by UK residents, even though the identity of these account holders are unknown (and hence unnamed) by the Inland Revenue. The banks attempted to thwart the Revenue’s disclosure notice by arguing, among other matters, that the EU convention on Human Rights would be breached and that the interaction of EU Law and EU Savings Directive overrides the disclosure requirement. However, the taxman successfully argued that the notices should be given because, even though they could not identify the taxpayers, they had reasonable grounds to believe that substantial tax was being evaded and that they could not obtain the information otherwise.

Offshore banks in jurisdictions such as Channel Islands, Isle of Man and Switzerland are all subject to the Exchange of Information agreements signed by their respective governments and may now be compelled to provide even so-called “confidential” information. Based on sample endeavors the Revenue stated that they expect to yield at least £1.55 billion of additional tax – far greater than any tax investigation ever conducted in the UK previously. The tax investigation easily surpasses the Revenue’s secret occupation of a central Post Office in the 1950s, where for nine months they illegally opened Londoners’ private post. The taxman’s bonanza will lead to many criminal prosecutions, fines, interest on unpaid tax, and tax.

The 40 investigators in the OFPG cannot possibly cope with this number of investigations. “Normal” tax investigations will be put on hold to cope with this extra workload. Civil cases will be worked under the civil investigation of fraud process and, as long as the taxpayer fully discloses and cooperates, will be limited to penalties, interest and tax. They will go back up to 20 years. In addition, the tax payers must not be found guilty of providing false documents or dishonesty. The penalty regime will nonetheless be severe, with high penalty levels. In other cases, criminal proceedings may be taken. If the tax payer has already had an investigation, and is now found to have other undisclosed assets, criminal proceedings will very likely follow.

The tax investigation will lead to a full review of the individual’s private and business matters over several years. This tax investigation could have repercussions for expatriates. The information gathered by the UK tax authority during this investigation may also include the account details of many people who currently live overseas. The UK tax authority has agreements with overseas tax authorities whereby it will share information. In the event they suspect tax evasion in another country they are likely to advise the overseas tax authority accordingly. This is likely to be followed by other national tax authorities in their seemingly unremitting pursuit of tax evaders, at a time when all EU countries are anxious to increase tax revenues to meet their unfunded state pension and other social welfare promises.

Note that if you discuss confidentially your position with a UK adviser, and intimate that you have undisclosed assets, your adviser must immediately and secretly report you to the SOCA (the Serious Organized Crime Agency) and is not permitted to tell you about his reporting disclosure, even if the nondisclosure is with an overseas tax authority. So you cannot take advice in the UK about this situation without immediately disclosing it, in which case you need to decide to disclose in full before approaching your adviser. The future for tax investigators is looking exceptionally bright.

Link here.


The Government has been sharply criticized for failing to stop the super rich from avoiding tax. New figures from the Revenue Commissioners show more than 180 big earners in 2003 paid no tax at all. In last December’s Budget, Minister for Finance Brian Cowen announced a range of measures that he said would clamp down on tax avoidance.

However, Labour’s Joan Bruton says these new figures show the system is not working. “We now have a much clearer picture of the extent of this very specialised type of tax avoidance scheme brought in by the Government to help the very wealthy,” she said. “It’s basically allowing very significant numbers of them with astronomical incomes to pay no tax at all and it’s also allowing significant numbers of them to reduce their tax to the lower rate.”

Link here.



In my practice, I encounter plenty of tragic stories where people might have better protected themselves, if only they had foreseen the unforeseeable. Take John and Dianne. They had met in college, became engaged and planned to get married in their home state of California. But before they could marry, one evening John’s car was struck by a car careening down the road, out-of-control and he was killed instantly. Being relatively young, with no children, and just at the eve of starting their life together, it did not occur to John and Dianne to worry about estate planning or asset protection yet. And the consequences to Dianne of this oversight compounded her loss and heartbreak. Though she felt sure John would have wanted her to inherit his property, she did not get a single penny of it. Since he died without a will, under the California laws, the money went to John’s parents. And because they did not approve of John and Dianne’s relationship, they did not pass any of his estate along to her.

Circumstances like this are never planned for – they just happen. And when they do, we need to pay attention to the lesson that everyone, no matter how young or old, needs to construct a succession and asset protection plan. This should include:

Link here (scroll down).


While the majority of bank customers have complied with the requirements of the Financial Intelligence Control Act (FICA) by submitting documents to their branches, many who have not will have their accounts “frozen” by the end of the week. The four big banks confirmed that September 30 was the final deadline for customers to submit documents, saying banks did not have the power to further extend the deadline. They said accounts were being monitored for signs of money-laundering activities.

Most clients who had not yet complied fell into the lower-income category. These customers were also low risk in terms of potential money-laundering transactions. However, there were still some clients in the upper income categories who had not yet complied. Banks urged customers to comply before being faced with the imminent inconvenience of not being able to draw cash or perform transactions on their accounts. Standard Bank spokesperson Eric Larsen said the bank had made good progress in verifying customers’ details. However, many still had not provided the documentation. He noted that customers whose accounts had had transaction restrictions placed on them had responded positively by presenting the necessary documents. A Nedbank spokesperson said there had been a “mad rush” of customers into its branches.

Link here.


Arizona state regulators took action to shut down a non-profit company that has been promising to fund Christian charities and pay investors 24% annual returns. The Arizona Corporation Commission accused the owners of Nakami Chi Group Ministries International of securities fraud and selling unlicensed securities. The state is asking an administrative judge to impose fines for various state violations and to order Nakami to pay restitution to investors.

Nakami co-owner Ed Purvis has denied any wrongdoing. He and Gregg Wolfe, the other owner, told investors at churches in as many as 10 states, including Arizona, that their company was worth $170 billion and controlled assets around the world. In earlier letters to The Arizona Republic, Purvis said he was philanthropic and only engaged in private contracts with private parties. He said the state had no jurisdiction in the case.

FBI agents confirmed last month that they were investigating whether Nakami functioned as a pyramid scheme, in which funds from new investors are used to pay returns to existing ones without a real revenue source. FBI officials said that church members in as many as 10 states had invested several million dollars in Nakami. “This will be the first domino to fall in this case. And more will follow,” said Barry Minkow, a con-man turned pastor who first brought the case to federal authorities and assisted in the investigation. Minkow, who runs a private investigation agency in San Diego called the Fraud Discovery Institute, said the case is unusual because of the support Nakami has received from churches. “Despite the federal and state investigations, pastors at churches continued to insist nothing was wrong,” he said.

In the filing, state regulators outlined two methods Purvis and Wolfe used to encourage investments. They say Nakami told investors to form “corporation soles”, in which investment repayments were made. The corporations are usually used by churches for holding assets, not for individual investment revenue. Purvis and Wolfe told investors the corporation soles would reduce their income-tax liability on investment returns, the state said. Regulators also said Purvis and Wolfe told investors they could put their money into “bridge loans”. “Purvis and Wolfe told … investors that the bridge loan investment funded short-term, high-interest loans to small companies,” the filing said.

In addition to Purvis and Wolfe, the commission accused Phoenix business owner James Keaton of being involved in the effort to defraud investors. Keaton is the owner of ACI Holdings, where Purvis and Wolfe brought church members who asked for proof of Nakami’s holdings. One investor who had dealings with Purvis, Wolfe and Keaton said the action by the state was a long time in coming. “All I’ve ever been after is the truth,” former investor Tony Senarighi of Prescott said. Senarighi, who testified before the commission last month, said he and his son-in-law invested more than $150,000 and later got their money back.

Links here and here.


The Channel Islands are expanding the more sophisticated sections of their offshore industries. Guernsey staged a marketing conference in London last week for its offshore funds industry. Jersey organized a London promotion in May for a wider range of offshore activities. Offshore finance is booming.

It was not supposed to be like this, according to the strategies of mainland jurisdictions. The UK has become tough on offshore trusts – once a core Channel Islands activity. And a few years ago, the EU organized a twin assault – one on tax evasion by EU-resident investors and another on tax-exempt offshore companies. Perversely, these initiatives have encouraged the “tax neutral” centers to expand the more sophisticated sections of their offshore finance industries. Just as the U.S. Securities and Exchange Commission is floundering in its battle to enforce registration of hedge funds, jurisdictions such as Jersey and Guernsey are rolling out the red carpet.

The EU savings directive became effective in July last year but it appears largely to have failed, not only in the Channel Islands but also in Switzerland, at which it was primarily aimed. In the first six months, the country coughed up only €100 million in withholding tax on the trillions in secret savings held there by EU citizens. Jersey delivered just €13 million. There are various loopholes. Deposit interest can be restructured into “dividends” or even Islamic “profits” and escape tax. Or savings can simply be sent to other centers such as Dubai, Singapore or the Bahamas, where the directive does not apply. Growth in bank deposits in Guernsey stalled in the period to mid-2005, which may have reflected some evasive activity. But oddly, deposits jumped by 23% in the following 12 months, suggesting a return to business as normal.

The European Commissioner for taxation, László Kovács, has launched a campaign to extend the savings directive to other jurisdictions. But it is not obvious that he has any worthwhile bargaining power. The Channel Islands, the Isle of Man, the Caymans and British Virgin Islands, being Crown possessions, were delivered up as bargaining chips by UK chancellor Gordon Brown. This manoeuvre was part of a successful negotiation to avoid the imposition of withholding tax on eurobonds, which would have damaged the City of London. But Singapore, for instance, is another matter entirely.

The other international assault on the Channel Islands related to discriminatory corporate taxes, with a zero rate on profits on off-island activities. The deal hammered out was a “zero-ten” structure in which all companies, resident or not, pay no tax on profits from 2008, with the crucial exception that regulated financial businesses will pay 10%. This deal will be expensive for Jersey and Guernsey, and to fill the fiscal black hole, Jersey is to levy a 3% sales tax. The most attractive way out of the deficits for island politicians will be to promote the accelerated expansion of the offshore finance activities that dominate the local economies.

In the past, there has been a certain amount of local political resistance to the rise of the finance sectors – opposition that has been reflected in housing licences and curbs on employee numbers. Jersey is relaxing its complex residential rules while Guernsey, despite facing a shortage of tax revenues, is to offer an income tax cap so that resident hedge fund managers enjoying bumper bonuses will not have to suffer the 20% rate borne by lesser islanders. There is plenty of scope for growth. Advances in communications technology have transformed the potential of offshore centers. They can be smoothly plugged into the electronic networks of firms in the City, Switzerland and almost anywhere else. Regulation is a crucial factor. While clumsy onshore regulators are struggling to install light-touch rules, the offshore financial commissions are far ahead with near-instant regulations backed, if required, by legislation nodded through by local politicians.

Regulatory arbitrage is coming to the fore as an offshore driving force. The EU prospectus directive has brought business to the Channel Islands and there are expectations that the markets in financial instruments directive will also deliver competitive advantages as mainland financial institutions become tangled in yet more red tape. The stakes are rising, though. Last week the SEC launched an investigation into the near-collapse of hedge fund Amaranth Advisors, which lost $6 billion on energy speculation. The mainland watchdogs are becoming concerned about the amount of risk and leverage in alternative investment sectors that are largely outside the regulatory framework. Europe and Caribbean havens have long been bothersome for tax collectors in leading economies, but the question now is whether the offshore boom is becoming big enough to undermine onshore regulation.

As long as the Channel Islands keep their finance sectors out of serious trouble, they will have a largely free run. But if there is a scandal, they will face expensive retribution. Reputational risk is rising to the top of the agenda.

Link here.



The U.S. Treasury’s Terrorist Finance Tracking program had violated the privacy of up to 7,800 international financial institutions in its secret trawl through financial records held by the Belgian firm SWIFT. The Belgian data protection registrar declared today that the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which handles financial transactions on behalf of banks and other financial institutions in G10 countries, had violated Belgian data protection law by complying with the U.S. Treasury’s secret investigation.

“SWIFT should have complied with its obligations under Belgian data protection law,” said the opinion of the Belgian Commission de la Protection de la Vie Privee today. The firm should have informed the Belgian authorities that it was handing its clients records over the the U.S., and it should have complied with rules regarding the transfer of its data to a foreign country, said the opinion. It recognized the efforts SWIFT took to comply with the U.S. subpoenas on its data. Pressured by the U.S. to keep the violation secret, SWIFT took its own steps to protect the privacy of its clients’ data as much as it could. However, “SWIFT made some substantial errors of judgement in complying with the American subpoenas,” said the opinion. “From the beginning, SWIFT should have been aware that the fundamental principles of European law were to be observed, apart from the enforcement of American law,” it continued.

The U.S. Treasury had demanded to examine SWIFT’s records in a hunt for terrorist financiers after 9/11. It had unlimited access to this data for an unspecified time. The opinion said that in order to protect the privacy of its client’s data, SWIFT should have ensured that the U.S. snooping of its records was proportionate, that they were only retained for a limited examination, that the investigation was transparent to the European authorities and so on. Yet a spokeswoman for the Belgian data protection registrar said the office would not prosecute SWIFT. She could not say why, but the opinion gave a clue. “SWIFT finds itself in a conflict situation between American and European law,” it said. SWIFT jumped on this concession. SWIFT’s CEO, Leonard Schrank, called for the U.S. and EU authorities to formulate an agreement that “reconciled data privacy protections with today’s pressing security concerns.”

Link here.

European Central Bank caught in U.S. spy scandal.

The ECB knew the U.S. was conducting a secret probe of the world’s private financial records without official oversight but failed to tell privacy authorities. The central banks of the G10 countries might also be implicated in the scandal because they were told about the U.S. snooping of transactions conducted by their indigenous firms five years ago when, in the wake of 9/11, the U.S. Treasury first started poring through the world’s financial transactions in search of terrorist financiers.

The European Parliament has called on the ECB to state officially what it knew about the controversial intelligence operation in a hearing on October 4. But the more important question could be whether the ECB – and other central banks – had broken any data protection laws by standing back while the U.S. rifled through the world’s private financial records. A spokesman for the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the firm that handles the world’s banking transactions, and which had been forced to deliver its records to the U.S. Treasury under secret subpoena since 2001, said the central banks knew all along. “SWIFT informed its overseers but the overseers didn’t feel obliged to inform their governments,” he said.

Link here.
SWIFT stalled EU probe of U.S. snooping – link.

EU may be powerless to stop U.S. snooping.

A trans-Atlantic dispute over U.S. snooping on international financial transactions is turning into a full-blown test of legal authority, with U.S. security interests on the one side and European privacy guardians on the other. The Europeans believe this could also be as much a test for international business as international law, with Swift, the Belgian firm that has been caught in the middle, feared to be just the first case of many in which a firm has had its privacy trounced by zealous U.S. anti-terrorist investigators.

The test is whether European law has competence over U.S. claims to data held by European firms. Without the unwavering co-ordination warranted by EU law, individual member countries might be tempted to enter bilateral agreements for the unrestricted transfer of corporate data to US investigators. That is not the sort of thing that makes the sun shine in Brussels.

Link here.


Despite intensive negotiations on the matter, the U.S. and the E.U. have missed a crucial deadline for reaching a deal on the transfer of passenger data. In a statement, the EC announced that, “Although the negotiations on a PNR (Passenger Name Records) agreement between the EU and the US could not be concluded before 1st October 2006, the timeframe provided for by the European Court of Justice in its 30th May 2006 ruling. … European Commission Vice-President Franco Frattini and US Homeland Security Secretary Michael Cherftoff have agreed that the negotiations will continue in a constructive atmosphere with a view to concluding an agreement as soon as possible. Much progress has already been made.”

Earlier this year, the ECJ annulled a previous agreement between the E.U. and the U.S. government regarding the handover of air passenger data to U.S. security agencies. In the face of grave concerns, the EC had issued assurances that the U.S. authorities would provide the necessary privacy protections for such data. However, the ECJ disputed that decision, arguing that, “Neither the Commission decision finding that the data are adequately protected by the United States nor the Council decision approving the conclusion of an agreement on their transfer to that country are founded on an appropriate legal basis.”

Until a new agreement is reached, the Commission has urged the U.S. to continue to apply the safeguards for PNR data that were laid down in the now-lapsed 2004 agreement, so as to minimize the risk of legal uncertainty and disruption to EU-U.S. flights. According to reports in the European media this week, several airlines have stated their intention to continue operating under the now-lapsed rules. However, privacy experts have warned that unless they are protected by national legislation, they could face legal action from passengers angry that their data has been transferred to the U.S. authorities.

Links here and here.


Report any “suspicious transactions” in which your customers engage, or go to jail. That is the stark choice that more and more businesses face – not just in the U.S., but in many other countries. The oldest requirements for customer spying are in U.S. banks, which for nearly 20 years have been required to submit suspicious transactions by their customers. What is suspicious? Just about anything even remotely out of the ordinary. Even paying off a loan can be considered suspicious, leading to an investigation and a prolonged account freeze.

In the U.S., these requirements have now been extended to pawnshops, travel agents, jewelry and precious metal dealers, mutual funds, dealers of cars, boats and airplanes and real estate agents. These requirements are now being exported to other countries, in the form of “best practices” recommendations from organizations such as the Financial Action Task Force (FATF). More and more countries now have “financial intelligence units” whose responsibility it is to sift through “suspicious transaction reports” filed by local financial institutions and merchants. In the EU, even lawyers must inform on their clients!

The latest trend is to extend these requirements to utility companies. In British Columbia, for instance, using too much electricity may result in a mandatory “safety inspection”. Abnormal consumption is defined as any residence that uses more than three times the average electrical consumption. More than 18,000 homes fit this definition in BC. A few of the “safety inspections” conducted to date have unveiled marijuana gardens, but most have revealed households with items such as hot tubs, swimming pools, or teenagers.

When will this madness stop? It is hard to say. A privacy buff can only hope. In the meantime, though, I must urge you to be vigilant. Protect what is left of your privacy and property rights right now. I am not afraid to say it, and I do not mean to be the resident downer here – but you will thank me if you do – and you could be very sorry one day if you do not.

Link here (scroll down).


The U.S. government has taken a step back from control of the internet with a new contract between it and overseeing organisation ICANN that just came into effect. The 3-year contract, with an apparently significant halfway review point, has been heralded by both ICANN and the Department of Commerce as a sign that the U.S. government has listened to worldwide criticism of its continued oversight role and has responded by providing ICANN with a new degree of autonomy.

However, experts disagree, with one calling it “old wine in a new bottle,” and another barely concealing his frustration with an administration that promised eight years ago it would end its role but now has decided “we will have to wait another three years, at a minimum.” There are some significant changes in the new contract. It is no longer a “memorandum of understanding” but a “joint project agreement”. The U.S. government has pulled out its prescribed list of actions that ICANN has to meet before it is given autonomy – something that has been continually refreshed since 1998 and was universally criticised as a compliance merry-go-round. Instead, the requirements that ICANN needs to achieve before being granted freedom come in the form of an “Affirmation of Responsibilities” that was approved by the ICANN board. This list was produced by the U.S. government.

Most controversially, it includes the blinkered approach to “whois” data that U.S. organizations have lobbied so hard in Washington for, but which the wider internet community disagrees with. But the shift in emphasis is nonetheless significant. ICANN says, “ICANN will no longer have its work prescribed for it. How it works and what it works on is up to ICANN and its community to devise.” Another important change is the fact that ICANN will no longer be required to report direct to the U.S. government every six months. Instead, it will produce an annual report for the internet community as a whole.

Links here and here.



Buried amongst the untold affronts to the Bill of Rights, the Constitution and the very spirit of America, the torture bill contains a definition of “wrongfully aiding the enemy” which labels all American citizens who breach their “allegiance” to President Bush and the actions of his government as terrorists subject to possible arrest, torture and conviction in front of a military tribunal.

After five hours of searching through the 80+ page bill, Alex Jones, who won the 2004 Project Censored award for his analysis of Patriot Act 2, uncovered numerous other provisions and definitions that make the bill appear as almost a mirror image of Hitler’s 1933 Enabling Act. In section 950j. the bill criminalizes any challenge to the legislation’s legality by the Supreme Court or any U.S. court. Alberto Gonzales has already threatened federal judges to shut up and not question Bush’s authority on the torture of detainees. “No court, justice, or judge shall have jurisdiction to hear or consider any claim or cause of action whatsoever, including any action pending on or filed after the date of the enactment of the Military Commissions Act of 2006, relating to the prosecution, trial, or judgment of a military commission under this chapter, including challenges to the lawfulness of procedures of military commissions under this chapter.”

The Bush administration is preemptively overriding any challenge to the legislation by the Supreme Court. The definition of torture that the legislation cites is U.S. Code 18 §2340. This is a broad definition of torture and completely lacks the specific clarity of the Geneva Conventions. This definition allows the use of torture that is, “incidental to lawful sanctions.” In alliance with the bill’s blanket authority for President Bush to define the Geneva Conventions as he sees fit, this legislates the use of torture. The media has spun the bill as if it outlaws torture - it only outlaws torture for “enemy combatants”, and in fact outlaws the retaliation of any military against the U.S. as “murder”.

In light of Greg Palast’s recent hounding by Homeland Security, after they accused him of potentially giving terrorists key information about U.S. “critical infrastructure” when filming Exxon’s Baton Rouge refinery – clear photos of which were publicly available on Google Maps. Sub-section 27 of section 950v. should send chills down the spine of all investigative journalists and even news-gatherers.

Subsection 4(b) (26) of section 950v. of HR 6166 – Crimes triable by military commissions – includes the following definition. “Any person subject to this chapter who, in breach of an allegiance or duty to the United States, knowingly and intentionally aids an enemy of the United States, or one of the co-belligerents of the enemy, shall be punished as a military commission under this chapter may direct.” For an individual to hold an allegiance or duty to the U.S. they need to be a citizen of the U.S. Why would a foreign terrorist have any allegiance to the U.S. to breach in the first place?

This is another telltale facet that proves the bill applies to U.S. citizens and includes them under the “enemy combatant” designation. Yale law Professor Bruce Ackerman wrote in the L.A. Times, “The compromise legislation … authorizes the president to seize American citizens as enemy combatants, even if they have never left the United States. And once thrown into military prison, they cannot expect a trial by their peers or any other of the normal protections of the Bill of Rights.”

The New York Times stated that the legislation introduced, “A dangerously broad definition of ‘illegal enemy combatant’ in the bill could subject legal residents of the United States, as well as foreign citizens living in their own countries, to summary arrest and indefinite detention with no hope of appeal. The president could give the power to apply this label to anyone he wanted.” Calling the bill “our generation’s version of the Alien and Sedition Acts,” the Times goes on to highlight the rubber stamping of torture.

Since with this bill, in the aggregate, Bush has declared himself to be above the Constitution and the laws of the U.S., the allegiance of American citizens is no longer to the flag or the freedoms for which it stands, but to Bush himself, the self-appointed dictator, and any diversion from that allegiance will mandate arrest, torture and conviction in a military tribunal under the terms of this bill. Similar to the UK’s Glorification of Terrorism law, which top lawyers have slammed as vague, open to interpretation and a potential weapon for the government to kidnap supposed subversives, the nebulous context of “wrongfully aiding the enemy,” could easily be defined to include publicly absolving an accused terrorist of involvement in a terrorist attack. That renders the entire 9/11 truth movement an aid to terrorist suspects and subject to military tribunal and torture. In addition, Bush recently labeled conspiracy theorists as terrorist recruiters.

This should leave us with no doubt as to which parties are the target of the government’s torture and intimidation campaign. Could protesting a war approved by the government and their bootlickers in Congress and the Senate be considered breaching an allegiance to the U.S.? Could campaigning against the bombing of a target country be considered wrongfully aiding the enemy?

Shortly after the bill was finalized it was spun by Bush security advisor Stephen Hadley as “good news and a good day for the American people.” John McCain said that it safeguarded “the integrity and letter and spirit of the Geneva Conventions.” In truth the legislation does the exact opposite, giving Bush carte blanche to “interpret the meaning and application of the Geneva Conventions.” In addition, under the bill, “No person may invoke the Geneva Conventions or any protocols thereto in any habeas corpus or other civil action or proceeding to which the United States, or a current or former officer, employee, member of the Armed Forces, or other agent of the United States is a party as a source of rights in any court of the United States or its States or territories.”

The bill also allows hearsay evidence (obtained via phony confessions after torture) to be considered by the military tribunal and bars the suspect from even having knowledge of the charges against him - making a case for defense impossible. This is guaranteed to produce 100% conviction rates as you would expect in the dictatorships of Uzbekistan or Zimbabwe and other torture protagonists. Following the Supreme Court’s ruling to previously strike down Bush’s shadow penal system, Alberto Gonzales is already out threatening federal judges to shut up and get behind the dictator or face the consequences. Gonzales has the sheer gall to attack judges for even considering to “overturn long-standing traditions or policies without proper support in text or precedent,” which is exactly what Gonzales, Bush and the rest of the White House gang are doing themselves by de facto abolishing the Bill of Rights!

This is a dark day for the United States, the day America died and the bastard birth of a literal dictatorship.

Link here.

Rushing off a cliff.

Here is what happens when this irresponsible Congress railroads a profoundly important bill to serve the mindless politics of a midterm election. The Bush administration uses Republicans’ fear of losing their majority to push through ghastly ideas about antiterrorism that will make American troops less safe and do lasting damage to our 217-year-old nation of laws – while actually doing nothing to protect the nation from terrorists. Democrats betray their principles to avoid last-minute attack ads. Our democracy is the big loser.

Republicans say Congress must act right now to create procedures for charging and trying terrorists – because the men accused of plotting the 9/11 attacks are available for trial. That is pure propaganda. Those men could have been tried and convicted long ago, but President Bush chose not to. He held them in illegal detention, had them questioned in ways that will make real trials very hard, and invented a transparently illegal system of kangaroo courts to convict them. It was only after the Supreme Court issued the inevitable ruling striking down Mr. Bush’s shadow penal system that he adopted his tone of urgency. It serves a cynical goal. Republican strategists think they can win this fall, not by passing a good law but by forcing Democrats to vote against a bad one so they could be made to look soft on terrorism.

Last week, the White House and three Republican senators announced a terrible deal on this legislation that gave Mr. Bush most of what he wanted, including a blanket waiver for crimes Americans may have committed in the service of his antiterrorism policies. Then Vice President Dick Cheney and his willing lawmakers rewrote the rest of the measure so that it would give Mr. Bush the power to jail pretty much anyone he wants for as long as he wants without charging them, to unilaterally reinterpret the Geneva Conventions, to authorize what normal people consider torture, and to deny justice to hundreds of men captured in error.

There is not enough time to fix these bills, especially since the few Republicans who call themselves moderates have been whipped into line, and the Democratic leadership in the Senate seems to have misplaced its spine. If there was ever a moment for a filibuster, this was it. We do not blame the Democrats for being frightened. The Republicans have made it clear that they will use any opportunity to brand anyone who votes against this bill as a terrorist enabler. But Americans of the future will not remember the pragmatic arguments for caving in to the administration. They will know that in 2006, Congress passed a tyrannical law that will be ranked with the low points in American democracy, our generation’s version of the Alien and Sedition Acts.

Link here.

The deeper evil behind the detainee bill.

It was a dark hour indeed last Thursday when the United States Senate voted to end the constitutional republic and transform the country into a “Leader-State”, giving the president and his agents the power to capture, torture and imprison forever anyone – American citizens included – whom they arbitrarily decide is an “enemy combatant”. This also includes those who merely give “terrorism” some kind of “support”, defined so vaguely that many experts say it could encompass legal advice, innocent gifts to charities, or even political opposition to U.S. government policy within its draconian strictures.

All of this is bad enough – a sickening and cowardly surrender of liberty not seen in a major Western democracy since the Enabling Act passed by the German Reichstag in March 1933. But it is by no means the full extent of our degradation. In reality, the darkness is deeper, and more foul, than most people imagine. For in addition to the dictatorial powers of seizure and torment given by Congress to George W. Bush – powers he had already seized and exercised for five years anyway, even without this fig leaf of sham legality – there is a far more sinister imperial right that Bush has claimed – and used – openly, without any demur or debate from Congress at all: ordering the “extrajudicial killing” of anyone on earth that he and his deputies decide – arbitrarily, without charges, court hearing, formal evidence, or appeal – is an “enemy combatant”.

That is right. From the earliest days of the Terror War – September 17, 2001, to be exact – Bush has claimed the peremptory power of life and death over the entire world. If he says you are an enemy of America, you are. If he wants to imprison you and torture you, he can. And if he decides you should die, he will kill you. This is not hyperbole, liberal paranoia, or “conspiracy theory”. It is simply a fact, reported by the mainstream media, attested by senior administration figures, recorded in official government documents – and boasted about by the president himself, in front of Congress and a national television audience.

And although the Republic-snuffing act just passed by Congress does not directly address Bush’s royal prerogative of murder, it nonetheless strengthens it and enshrines it in law. For the measure sets forth clearly that the designation of an “enemy combatant” is left solely to the executive branch. Neither Congress nor the courts have any say in the matter. When this new law is coupled with the existing “Executive Orders” authorizing “lethal force” against arbitrarily designated “enemy combatants”, it becomes, quite literally, a license to kill – with the seal of Congressional approval.

How arbitrary is this process by which all our lives and liberties are now governed? Dave Niewert at Orcinus has unearthed a remarkable admission of its totally capricious nature. In a December 2002 story in the Washington Post, then-Solicitor General Ted Olson described the anarchy at the heart of the process with admirable frankness: “[There is no] requirement that the executive branch spell out its criteria for determining who qualifies as an enemy combatant. There won’t be 10 rules that trigger this or 10 rules that end this. There will be judgments and instincts and evaluations and implementations that have to be made by the executive that are probably going to be different from day to day, depending on the circumstances.” In other words, what is safe to do or say today might imperil your freedom or your life tomorrow. You can never know if you are on the right side of the law, because the “law” is merely the whim of the Leader and his minions. Their “instincts” determine your guilt or innocence, and these flutterings in the gut can change from day to day. This radical uncertainty is the very essence of despotism – and it is now, formally and officially, the guiding principle of the United States government.

And underlying this edifice of tyranny is the prerogative of presidential murder. Perhaps the enormity of this monstrous perversion of law and morality has kept it from being fully comprehended. It sounds unbelievable to most people – a president ordering hits like a Mafia don? But that is our reality, and has been for five years. To overcome what seems to be a widespread cognitive dissonance over this concept, we need only examine the record – a record, by the way, taken entirely from publicly available sources in the mass media. There is nothing secret or contentious about it, nothing that any ordinary citizen could not know – if they choose to know it.

Link here.
Nazi parallels revisited – link.


Online gambling companies were dealt an unexpected blow in their biggest market after Congress snuck through new legislation over the weekend to crack down on Internet betting. The approval of the proposed law, which was tacked onto a port security bill, lopped off billions in market value from Britain’s online gambling companies, many of which count on greedy American bettors for the bulk of their profits.

The bold move on Capitol Hill prompted at least two big London gaming companies – PartyGaming and 888 Holdings – to say they would fold their cards in the U.S., while others are mulling their options. “We’re still getting information and digesting the facts,” said George Hudson of London’s Sportingbet, which garners 62% of its profit from the U.S. and saw its stock drop 65% on Monday. In the meantime, Sportingbet called off talks to buy World Gaming, a rival that generates almost all of its revenue from U.S. bettors.

While Congress stopped short of passing an outright ban on Internet gambling sites, the new legislation seeks to dry up payment methods for the multibillion-dollar industry by banning banks and credit card companies from making payments to online gambling sites. President Bush is widely expected to sign the legislation into law to stir up support for Republicans ahead of the November elections. “Gambling is a serious addiction that undermines the family, dashes dreams and frays the fabric of society,” said Senate Majority Leader Bill Frist, a Tennessee Republican and potential 2008 presidential candidate, who pushed for the addition of the measure into the port security bill. “Although we can’t monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws.”

The approval of the legislation comes as authorities have stepped up their efforts to rein in the fast-growing online betting business, now worth an estimated $12 billion, up from just $30 million a decade ago. In the past few months, authorities have arrested two British online gambling executives as they arrived at U.S. airports and accused them of illegally allowing residents here to make wagers over the Internet. One of the executives, Peter Dicks of Sportingbet, returned home to London last week after after Gov. George Pataki refused to sign a warrant to have the British bookie extradited to Louisiana, where he is accused of letting locals make sports bets over the Internet. The other executive, David Carruthers, is facing more serious charges. He is under house arrest in St. Louis until he faces a trial sometime next year. His company, BetonSports, which also was indicted by the feds in July, ended up laying off 500 employees and shutting its Costa Rican operation that served the U.S.

Internet bettors were miffed by the new legislation. “Why can’t they leave us part-time gamblers alone,” said Steve Lazarus, who has $600 frozen in an account with BetonSports.

Links here and here.


A New York City bank branch, which was purchased by Valley National Bank in 2001, handled $3.7 billion in money transfers from South American money launderers from 1998 to 2002, authorities announced last week, stating that 34 people and 16 British Virgin Island companies were indicted in connection with the transfers. Wayne, N.J.-based Valley, which increased its internal oversight last year, was not charged with wrongdoing, but a former executive was indicted and convicted of money laundering crimes in the early stages of the probe. Valley acquired the Madison Avenue branch and several others in 2001 from Merchant’s Bank.

The case at the Madison Avenue branch also prompted a two-year investigation by the Manhattan district attorney, Immigration and Customs Enforcement and the New York State Banking Department that brought to light suspicious transfers through Bank of America. Authorities alleged that Brazilian money service businesses made more than $3 billion in illegal transfers through the account held at a Bank of America office at 110 W. 33rd St. between May 2002 and April 2004. Most of the money originated from offshore shell companies chartered in Panama and the British Virgin Islands. As a result, District Attorney Robert Morgenthau said last week that Bank of America has agreed to revise its anti-money laundering policies and pay $7.5 million in penalties.

Bank of America also “recognized its failure to take adequate steps to verify the accuracy of the information supplied by their South American customers,” Morgenthau said, adding that his office’s lengthy probe has uncovered a total of $19 billion in suspicious money believed to have been laundered in Manhattan by various banks. Because controls at the banks were inadequate, authorities “have virtually no way of determining the source of most of this money or the identity of the recipients,” he said. “Unlicensed and unregulated money services businesses, both foreign and domestic, pose a threat to the integrity of our nation’s financial system and to our nation’s safety.” The settlement “reminds us all of the importance of making sure that our financial institutions know the customers with whom they do business and that they adequately assess the risks associated with those customers.”

Although Morgenthau’s office did not provide specifics about the case against a former Valley employee, authorities said in 2002, when they arrested Assistant Vice President Maria Carolina Nolasco, that she laundered $500 million in suspected drug money through the bank’s wire transfer facility in Wayne. She headed Valley’s international private banking department. In a civil action related to the indictment, the DA’s Office has frozen $17.4 million suspected of being illegally transmitted from Brazil to New York.

Link here.


Contrary to its reputation, Cayman’s financial services industry is among the world’s cleanest.

Speaking at the Second Annual Global Compliance Conference held last week, Lindsey Cacho, Caymans Financial Reporting Authority Director, gave a detailed presentation on the functions and workings of the organization and revealed interesting statistics in the process. Mr. Cacho said that the total number of suspicious activity reports (SARs) for the 2005-06 financial year had dropped 9.4% on the previous financial year, with 221 SARs filed with the Authority vs. 244 in 2004-05. SARs are the disclosures that financial institutions make to the FRA, with severe penalties for failure to disclose knowledge or suspicion of money laundering.

Mr. Cacho said it is difficult to pinpoint a single reason for the decline but suggested that it may due in part to better risk management/compliance programs within the jurisdiction overall. The Cayman Islands financial services industry is one of the cleanest in the world when it comes to money laundering, according to Fred Heard, Senior Accountant with the FRA. Mr. Heard stated that Cayman had endured unfair criticism when it came to anti-money laundering procedures, saying that Cayman was singled out, while in reality, money laundering is a global activity, not something that can be pinned on a single country.

When questioned as to whether the scope of the money laundering problem was any greater in Cayman than elsewhere, Mr. Heard said, “It is estimated in international publications that money laundering accounts for around eight to 12 per cent of the world’s total economy. It is the challenge faced by organizations such as the FRA to ascertain the specific percentage of this type of crime that is endured by a jurisdiction’s economy.”

Mr. Cacho also said that only one of the Authority’s investigations had led the FRA to implement a freezing order on the assets. When questioned on this at the conference, Mr. Heard said that freezing of assets is really a last ditch attempt by the authorities if they are fearful that the loss of the funds is imminent. Mr. Heard explained that the FRA would usually prefer to monitor the bank accounts while the legal process was given time to address the funds through the courts. He said, “We often work with foreign Financial Intelligence Units to follow the trail of the funds because this can often lead to valuable sources of information and information as to whether the funds are the proceeds of crime. Sometimes these accounts are watched for years and there may well be three or four countries involved.”

Link here.



By now all reasonable people in the world know that the Bush administration (with almost no opposition from Democrats) used 9/11 as a pretense to invade and occupy an oil-rich Middle Eastern country that posed no threat to America. Even President Bush has admitted in a press conference that there were never any WMDs in Iraq. But the war has been very profitable for some, as war always is, as it has drained American taxpayers of hundreds of billions of dollars. It has also ballooned the warfare state, the military-industrial complex, and the conservative anti-civil liberties lobby. (On the day of this writing the talking heads on the FOX War Channel were all but dancing in the streets of Manhattan in celebration of a bill passed by the U.S. Senate the previous evening that would allow for the suspension of habeas corpus. Can mass burn-the-Constitution rallies, perhaps organized by Rush Limbaugh and Sean Hannity, be far behind?)

But the state’s use of this illegitimate war to aggrandize itself goes much, much farther than this. Those Americans who are still concerned about the state’s ability to plunder us into poverty and strip us of personal liberties are extremely fortunate that Professor James Bennett of George Mason University has stepped up to explain exactly how this is happening with his new book, Homeland Security Scams. Read this book and the crassness, dishonesty, and plain chutzpah of the state in using the “war on terror” as an excuse to pick your pocket will boggle your mind. The average reader will also be shocked at the remarkable blueprint for fascism that has been mapped out for us by our rulers in the post-9/11 world.

The major theme of Homeland Security Scams is stated on page 1: “[H]omeland security is developing into the largest boondoggle in the history of the U.S. government. Fed by the … war on terror, homeland security is being used as an excuse … for a vast expansion of government power and spending.” And the spending usually has nothing at all to do with “defense” or “security”. “Homeland security is not making us safer: just poorer, less free, and more dependent on the federal government,” Professor Bennett charges. In the following 217 pages he provides chapter and verse to prove his point.

The primary beneficiaries of all this are “politicians, lobbyists, and a flourishing homeland security industry.” This would also include, in my opinion, all of the neocon “think tanks”, magazines, and “scholars” who are paid to provide the intellectual cover for the scam. The one constant that keeps the racket going is fear. As long as our rulers can continue to frighten the public with promises of “terror” their motives and actions will not be questioned by the vast majority of the public.

The Department of Homeland Security (DHS) was not simply a response to 9/11. Our rulers had planned for an Orwellian bureaucracy of that sort years in advance, with the 12-member Rudman-Hart Commission, originated under Bill Clinton’s administration. 9/11 provided the perfect excuse. Professor Bennett reveals exactly how the plot was hatched. Meanwhile, the already gargantuan “internal security” apparatus of the U.S. government was a complete and total failure on 9/11 because, says Professor Bennett, it had been preoccupied for years with the non-threat of “the bogeymen of the 1990s: militias and other right-wing populist groups.” The so-called militias “made a useful hate object for upper-middle-class liberals who wished to feel threatened,” and the FBI, CIA, BATF, and other federal agencies gladly complied. After all, some of these “militiamen” were alleged tax evaders.

The language of the DHS really is eerily reminiscent of Nazi Germany. Its web site claims that its mission is “securing the homeland”, a “locution so foreign to Americans as to bring a shudder to the spine.” Another slogan is “Preserving our freedoms, protecting America … we secure our homeland.” One can just imagine that there must be a continual showing of the movie Triumph of the Will playing 24 hours a day at DHS headquarters.

You know the pork barrel is massive when “Thirteen committees and sixty subcommittees of the U.S. House of Representatives and Senate have jurisdiction over … the DHS.” Every member of Congress wants to be on a committee or subcommittee that can distribute pork to his or her constituents and campaign contributors under the phony guise of “homeland security”.

State and local police and fire departments are also being slowly nationalized thanks to DHS pork, for with federal money comes federal controls. Conservatives used to fear the federalization of law enforcement, Professor Bennett points out, but now they champion it. As part of its nonstop assault on civil liberties the DHS employs an “entertainment liaison” whose job is to try to “shape the political content of films” made in Hollywood. Its “Computer Assisted Passenger Prescreening System II” (CAPPS II) would “for the first time put the government in the business of conducting regular background checks on everyday citizens.”

The Orwellian PATRIOT Act is expertly dissected by Professor Bennett, and its entrails are revealed to be poisonous to personal liberty in American, patently unpatriotic, and useless in “fighting terrorism”. This totalitarian legislation eviscerates the Fourth Amendment by permitting “sneak and peak” searches, without a warrant, of email, homes, offices, libraries, and internet records. Even the attorney-client privilege has been trashed by the Bush administration. The CIA has been given expanded powers to spy on ordinary American citizens and the GOP’s fascistic “internal security” bureaucracies “reach into banking, business, educational, and financial records” in an unprecedented way. Moreover, “practically any act of civil disobedience could be construed to violate the law” under the laughingly-named PATRIOT Act. This is just a small sampling of how Big Government Conservatives are hard at work destroying American liberty while the “liberal opposition” stands idly by like so many political eunuchs.

Link here.


There has been a lot of talk lately about how we might have better luck trying to work with our friends on the Left now that the hopelessness of the Right is undeniable. I suppose anything might be worth trying and I agree there is reason for giving it a shot. But I am skeptical. My frustration with liberals goes back a long way. When I came of age, back in the ‘60s, it seemed to me that my peers had a healthy mistrust of government, all government. After all, it menaced us in ways one does not have to rehearse. Admittedly, most people’s reasons were generally too crude and uninformed to be intellectually useful, but at least their gut instinct was appropriate.

But the energy of those days faded away as soon as the Viet Nam business ended. The focus of popular anger gone, folks soon forgot the forces that brought on the evil of imperialistic war and its corollary, domestic tyranny, were not gone at all, just moved to the background where the political class and its owners wanted it. The so-called counter culture got co-opted so fast one can hardly remember it ever existed. The Left no longer distrusts the government, it embraces it. How can the Left be taken seriously today when it offers no principled opposition to the system with which it claims to be at odds?

How anyone who thinks himself a Liberal, in the best sense of the term, can stomach the antics of their current crop of saviors of the common man is astonishing to me. If it is not perfectly clear that they are only in it for what is in it for them, and not in any sense for the good of the people they claim to represent, then all I can conclude is that people wish to be deceived. And as long as otherwise good folks think the root of all evil resides exclusively in the machinations of the Republican party, or that by redoubling their efforts to promote the success of the Democrats those evils will be stymied, they will never see the cause of justice advanced. Just as the ruling class wants it.

Instead they waste their energy lamenting the public’s lack of enlightenment instead of shining a light on the dark recesses of the system that eats out our substance. Of course, if they were to shine their flashlights in that direction, it would be the transfixed eyes of their own intellectual raccoons, among others, that glared back. Just listen to what passes for political discourse from its public intellectuals. All one hears are dull, hysterical rants about whether some government vote-buying program should be changed by some trivial amount rather than whether it complies with the moral absolutes we were taught as children. The only question to be decided is whose pockets are to be picked, and whose are to be lined. Who is to be pampered and who is to be clobbered. Whether government will be seen as benign or malevolent depends on the configuration of victims and beneficiaries, rather than whether or not people’s rights are respected and promoted.

This is where the Left’s public intellectuals have so despicably misled their followers. They have become so satisfied just being players in the system, enjoying rubbing their shoulders with the denizens of the ruling and political classes, that they no longer show even a pretense of concern for the rights of free men. Now we should not let the followers of those intellectuals off the hook. If their intellectuals wish to do something useful instead of feathering their own nests at the expense of their deluded followers, they ought to abandon their obsession for petty control mongering, spit on their hands, and get down to the serious business of developing and popularizing a coherent ruling class analysis. But they just cannot give up the notion that their favorite whipping boy needs to be vilified, expropriated, and subjugated. They believe this is their ticket to power, which of course is what they really want.

The same is true for the Left’s political mirror image, the Republicans. Their followers are willing victims of the same illusion. Together they provide the credulous with a battle of ideas more apparent than real, a noisy and obscene spectacle that perfectly serves the purpose of distracting people from what really threatens their safety and security, the growth of a democratically endorsed totalitarian despotism that makes all the old fashioned varieties seem child-like in their thuggish lack of sophistication.

Consequently, government has become confident of the docility of the subjects it rules, and with good reason. No outrage is too outrageous, and no atrocity too atrocious to motivate the sheep to do other than bark impotently. One cannot even get them to recognize tyranny when they see it. Murders on a scale that no civilized man could excuse, torture, bald-faced thievery and extortion, kidnapping, lying, and every kind of monstrous and pitiless perfidy under the sun is seen by them as no big deal. That such a neutered population as this would actually rise up is as unthinkable to me as the very concept of rising up is to them. Run amok maybe, but that is something different. That the Left is as culpable as the Right in bringing about this sorry state of affairs cannot be denied.

Link here.


When, one wonders, will mutiny begin among the troops in Iraq?

We have two sharply differing versions of Iraq. One comes from the professional officers. It holds that the military is making progress and the insurgents losing ground. The Iraqi people love us and want the benefits that we will bring them. The increasing attacks by insurgents are signs of desperation. Things seem bad only because the media emphasize the negative. The officers see light at the end of the tunnel. The body counts are great. The bad guys cannot much longer take the pounding we are giving them. Onward and upward.

The other view comes from enlisted men (and from a lot of reporters before being edited to say whatever the publisher believes). These assert that the Iraqis hate us and we, them. That the insurgency is growing in strength, that we are not making progress but going backward, that our tactics do not work and we cannot win. The pattern is so common in recent wars as to be routine. The enlisted men know that the U.S. is losing. The officers do not know it, or refuse to know it. This will eventually have consequences. When men die pointlessly in a war they know cannot be won and that means nothing to them, when they realize that they are dying for the egos of draft-dodging politicians safe in Washington – they will revolt. It happened before. It will happen again. But when? Next year, I would guess.

Link here.
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