Wealth International, Limited

Offshore News Digest for Week of November 6, 2006

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

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The 2006 Corruption Perceptions Index (CPI), launched this week by Transparency International (TI), has pointed to a strong correlation between corruption and poverty, with a concentration of impoverished states at the bottom of the ranking. The 2006 CPI is a composite index that draws on multiple expert opinion surveys that poll perceptions of public sector corruption in 163 countries around the world. It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption.

Almost three-quarters of the countries in the CPI scored below five (including all low-income countries and all but two African states) indicating that most countries in the world face serious perceived levels of domestic corruption. 71 countries scored below three, indicating that corruption is perceived as rampant. Haiti has the lowest score at 1.8. Guinea, Iraq and Myanmar shared the penultimate slot, each with a score of 1.9. Meanwhile, Finland, Iceland and New Zealand shared the top score of 9.6. Countries with a significant worsening in perceived levels of corruption included Brazil, Cuba, Israel, Jordan, Laos, Seychelles, Trinidad and Tobago, Tunisia and the U.S. Countries with a significant improvement in perceived levels of corruption included Algeria, Czech Republic, India, Japan, Latvia, Lebanon, Mauritius, Paraguay, Slovenia, Turkey, Turkmenistan, and Uruguay.

The weak performance of many countries indicates that the facilitators of corruption continue to assist political elites to launder, store and otherwise profit from unjustly acquired wealth, which often includes looted state assets. “Firms and professional associations for lawyers, accountants and bankers have a special responsibility to take stronger action against corruption,” stated Transparency International Chief Executive David Nussbaum. “Led by prosecuting attorneys, forensic auditors and compliance officers, they can be the stalwarts of a successful fight against corruption.”

Link here.


“I’m going to open a winery!” How many times have those fateful words been uttered, in English, French, Spanish, or Italian? Close your eyes and you can almost see the glee on the entrepreneur’s face as he imagines himself running this new enterprise. “After all, I know a lot about wine,” he says. “I have the money to make it happen. I have some good connections.” He kicks back in an easy chair, swirling a glass of cabernet, picturing days of entertaining buyers, attending awards banquets, and hobnobbing with restaurant owners.

If you want to find out where these gleams in the eye have been leading the past few years, head to the Mendoza region of Argentina, where an exploding wine industry and bargain prices have brought a flood of new development. There are supposedly some 16,000 vineyards in Argentina being fed by the runoff water from the Andes Mountains and depending on whom you talk to, some 1,200 to 1,700 wineries. “There’s no way to really know how many wineries are here,” says Charlie O’Malley, who edits The Grapevine magazine and runs Grapevine Wine Tours with his partner Kelly Thornhill. “New ones are opening all the time and there’s always the issue of who has officially filed the right paperwork or not.” Then there is the geography. Mendoza is the main wine province, but good wine is also coming out of Salta Province in the north and Patagonia in the south.

There is no dispute about the growth path, however. Argentina’s wine exports topped $350 million in 2004 and $400 million in 2005. Over the past decade, the industry has collectively invested some billion and a half dollars in the latest technology and has been quite successful in marketing their wines, especially their signature Malbec, to the world. The country’s wines have gone from jug wines mostly meant for local consumption to ones that are winning awards against the best from the U.S., France, and Italy.

The new dreamers are certainly not the first ones to breeze into Mendoza looking to start a winery. The industry has been in place here since the 19th century, with immigrants from Spain and Italy applying their knowledge and hard work in the new world. These days the immigrants still come from wine-producing countries in Europe, but others now join them from the U.S., Canada, Chile, and far-flung places around the globe. They are lured by an exploding growth curve and land prices that can still be downright cheap. Listings often come in under $2,000 an acre. More than a few investors have returned home later with their tail between their legs, however.

Hubris often leads to an investor’s downfall in the wine region of Mendoza. One of the most common mistakes wine investors make is not making an attempt to understand the people, the culture, and the way things work in a foreign country. Another common mistake is to underestimate the importance of finding the correct site for a vineyard.

The basic laws of economics are still favoring Argentina and will for a while. A vineyard in Napa Valley costs 10 or 15 times what a comparable one does in Argentina, yet the best Argentine wines are starting to command respectable prices. “Vineyard prices will never be what they are in California or Italy,” English says, “but they are certainly moving up toward a middle ground.” Many think that Argentina’s best years are still ahead of it. The overall quality is still improving, the word is still getting out, and a lot of production is still tied up in making cheap jug wine and concentrate. In addition, the Torrontés white wines – fragrant and fruity with crisp acidity – are still mostly just known to tourists. It is only a matter of time until wine drinkers looking for the next new thing start discovering this distinctive wine and importers begin bringing in more stock of Argentine whites to add to the wide range of reds. So for all those wine dreamers with a gleam in the eye, there is a bright future ahead – if you take your time and listed to local advice.

Link here.


Panama’s real-estate market is in the midst of an unprecedented explosion. A combination of easy credit, foreign demographic trends and, most importantly, quite a bit of speculative momentum appears to be behind the surge in investments in the luxury residential market. The intense level of enthusiasm is raising questions about the sustainability of demand, the likely strain on infrastructure, and the potential risks to some investors and end users should the market suddenly burst.

Just when concerns are increasing in the U.S. about the stalled housing market, Panama’s boom appears nowhere near to ending. The country boasts a host of expensive new high-rise apartment and resort complexes that are in the planning stage or already under construction. These are being spearheaded by local and foreign capital, including U.S. and European companies and investors such as Donald Trump, one of the U.S.’s biggest names in property development. While luxury tourist resorts are being built in some coastal areas, much of the activity is concentrated in the capital, Panama City.

Panama is not the only Central American country drawing the attention of foreigner property buyers. Mexico and Costa Rica, even Honduras and Nicaragua, are seeing influxes of capital, especially that of U.S. “baby boomers” looking for affordable retirement homes. But the activity in Panama dwarfs, both in quantity and physical size, that in neighboring countries. A study by Prima Panama, a local real estate marketing and promotion company, identified some 107 building projects under construction in 15 neighborhoods in Panama City as of July, with a total of 10,980 apartments. The total value of these projects is estimated at $3.17 billion – equivalent to 20% of Panama’s overall annual GDP in 2005. Even if all of them do not come to fruition, this would constitute an enormous spending and construction splurge.

Wxpected buyers include local purchasers, encouraged by low interest rates and excess liquidity in the banking system. However, it is the foreign market that is driving the bonanza. Whether the pace of growth is being fuelled more by speculation than by authentic demand is a key question. In the end, Panama’s hot property sector could one day go the way of other similarly frothy markets – such as Singapore, Dubai and Hong Kong – whose real estate markets were magnets for speculative capital and underwent subsequent volatility, even crisis. The risk is that those who come in later could find themselves in an overrated and expensive market, and eventually, with collapsed asset values.

Link here.

Panama to take Argentina’s U.N. Security Council seat.

Panama is set to become Argentina’s replacement on the U.N. Security Council after the body’s Latin American and Caribbean Group (GRULAC) delayed the decision for several days last week because some English-speaking Caribbean members were reportedly upset that they had not been adequately involved in the process. Guatemala, backed by the U.S., and Venezuela, backed by some “non-aligned” states, had been fighting over the seat for weeks, with neither gaining the requisite two-thirds majority despite 47 rounds of voting. Guatemala and Venezuela agreed to withdraw in favor of Panama.

Panama’s election is a testimony to how far the country has come since the dark days of General Noriega, on many levels, including on the economic front. “Panama’s economy has grown at a rate of more than 6 percent during the past three years, and the growth rate is expected to reach 7 percent this year,” said Jane Armitage, World Bank director for Central America recently. “This excellent growth performance in part reflects the past efforts by the Government of Panama to restore greater fiscal discipline and thereby strengthen the overall foundation for sustaining broad-based economic growth.”

Link here.


Former Marxist revolutionary and U.S. Cold War enemy Daniel Ortega headed back toward power on Monday in Nicaragua’s presidential election 16 years after voters threw him out to end a war against U.S.-trained rebels. Two quick counts by respected observer groups gave Ortega a big enough lead to win without facing a runoff. An Ortega victory would be a blow to Washington, which backed Contra rebels in the 1980s civil war and fears the leftist would join an anti-U.S. bloc in Latin America led by Venezuelan President Hugo Chavez. Ortega kept a low profile on Monday but thousands of Sandinista supporters set off fireworks through the night and raced through the streets waving black-and-red party flags.

“We have to leave behind all the serious problems our country has suffered in the past, and move forward,” said Ortega’s vice presidential running mate Jaime Morales, a former Contra leader who joined his old enemy’s camp early this year. Ortega led the Sandinista revolution that toppled U.S.-backed dictator Anastasio Somoza in 1979 and then allied Nicaragua with the Soviet Union as much of Central America became a Cold War battleground. When asked in Washington on Monday about the possibility that Ortega has had a change of heart, U.S. Secretary of State Condoleezza Rice appeared skeptical. “We’ll see,” she said.

Link here.

Will Ortega bring hyperinflation and economic chaos back to Nicaragua?

Nicaragua, Latin America’s second-poorest economy after Haiti, will likely face increased uncertainty after the election of Daniel Ortega as president. Ortega, an early critic of the CAFTA trade pact with the U.S., has signaled that he wants to renegotiate parts of the treaty. “We would view anything that would alter Nicaragua’s full participation in the regional trade accord as negative for the country,” said Bear Stearns analyst Franco Uccelli in a commentary.

Nicaragua has been among the big beneficiaries of CAFTA, which it implemented in March. Although CAFTA mainly reduces trade barriers between Central America and the U.S., it also provides a guarantee for investors. Ortega’s Sandinista party (FSLN) voted against the pact when the national assembly approved it in October last year. Instead, Ortega is expected to promote closer ties with Venezuela and possibly join ALBA, a political-economic pact of Venezuela, Bolivia and Cuba aimed at undermining a U.S.-inspired Free Trade Area of the Americas. On the plus side, Ortega has signaled that he wants to include the business sector in his cabinet.

However, there is still significant concern that Ortega will implement radical economic policies similar to the ones he put in place the last time he ruled Nicaragua (1979-90). Inflation went from 35% in 1980 to 3,004% in 1990. At one point – in 1987 – inflation hit 13,110% percent, according to the IMF. Meanwhile, the economy went from growth of 4.6% in 1980 to a decline of 0.1% in 1990. The economy declined in all but three of the 10 years the Sandinistas ruled Nicaragua. By comparison, the outgoing government of President Enrique Bolaños has been able to provide a relatively stable macro economy despite frequent protests from the Sandinistas and Sandinista-led efforts to take away his power. The economy is expected to grow by 3.7% this year, while inflation should reach 9.2%, according to estimates last week from the IMF.

“The greatest threat posed by a Sandinista administration is populism that tends to spell policy inconsistency,” Global Insight says. “Efforts to woo markets today could easily be converted into an attempt to win voter support through the announcement of left-wing policies. The composition of Congress will prove crucial in determining if Ortega’s authoritarian or unpredictable propensity will be kept in check.” Global Insight maintains high political, legal, and operational risk ratings for Nicaragua.

Another concern is a possible fallout with the IMF and World Bank for ideological reasons. “Nicaragua has grown highly dependent on international donations and concessional loans from multilateral financial institutions to cover its fiscal and external financing needs,” Uccelli says. “While good relations with such entities have served the country well, the potential consequences of a fall-out with the IFIs or of a sudden reduction in their assistance levels could be financially devastating for Nicaragua.”

U.S. investors are also worried about a possible rise in corruption. Nicaragua received a score of 2.6 (with 10 as best and 1 as worst) on the latest global corruption ranking from Transparency International. The ranking, released yesterday, shows Nicaragua falling four places to 111th place out of 163 nations. That puts Nicaragua second-worst in Central America after Honduras. In an effort to gain influence, Ortega in 1999 reached an agreement with the PLC party of then-president Arnoldo Aleman that divided power between the two parties at the expense of Bolaños. “Nicaraguans now assume as a matter of course that resolving a major court case requires making sizeable payments to cronies of Ortega or Aleman; indeed, legal prosecutions are often nothing more than financial extortions in the first place,” Richard Feinberg, a former Latin America advisor to President Clinton, wrote in Latin Business Chronicle recently. Evidence of apparent interference in the judicial system adds to existing concerns over the democratic credentials of the Sandinistas, Global Insight says.

Link here.

Daniel Ortega is again the leader of Nicaragua ... what does this mean for investors?

“I think you should go there soon, before you lose your house,” volunteered a friend. “At least then, you will have the memories.”

She was talking about our place in Nicaragua. There, the old Soviet man, Danny Ortega, has won the presidency. The papers say it will be a disaster for those of us who have invested money down there. But we are not so sure. Will he be a cad? A scoundrel? Will he be good for Nicaragua ... or bad for it? Who knows? Politics is as full of surprises as it is of swindles.

George W. Bush campaigned as a conservative. But once in office, he set in motion the most activist foreign policy since Wilson and the most reckless social spending since Lyndon Johnson. Ortega is bound to be a cross to bear – at least in the short run. He will say and do a lot of repulsive things. The press will pick them up and amplify them. It will look bad for Nicaragua. But a year from now the story may change. The specter of the Sandinistas has hung over Nicaragua for years. If Ortega turns out to be as moderate and reasonable as he now says he is, the ghost of the 1980s could finally be swept away ... and Nicaragua could boom again.

Link here (scroll down).
A tyrant returns to Managua – link (immediately below previous article).


Plans in Nicaragua for a new canal linking the Atlantic and Pacific Oceans to rival the congested Panama Canal could slowly be coming to fruition. Plans for a Nicaragua Canal have been around since the time of the early Spanish settlers in the 16th Century, and the country was seriously considered for the site of an ocean-linking waterway in the 19th Century. But since the construction of the Panama Canal in 1914, the idea has been largely forgotten.

However, with rapid growth in maritime trade, and the construction of ever-larger container ships to convey it, exposing the limitations of the Panama Canal’s capacity, the Nicaraguan idea has become a feasible, if expensive, proposition. The idea is certainly taken seriously in Nicaragua. Legislation for the “Grand Canal” project has already been drafted, feasibility studies undertaken, and government officials have been lobbying internationally for support for the plans. They are also at pains to explain that the new canal is not meant as a rival to Panama as there is plenty of maritime trade to go around.

Costing an estimated $18 billion, the Grand Canal would be a serious undertaking. At 173 miles long, it would be well over three times as long as the Panama Canal and take about 20 years to complete. From the Caribbean, it would run along the San Juan River, which forms Nicaragua’s southern border with Costa Rica and lets out into Lake Nicaragua. A further 12-mile stretch would then run across the Isthmus of Rivas to reach the Pacific. Unlike the Panama Canal however, the Nicaraguan waterway would be able to handle some of the largest modern container ships.

While Nicaragua has to convince financiers of the merits of the plan, there would clearly be benefits for world trade. A Nicaragua Canal would knock about 500 miles off of maritime shipments between America’s east and west coasts. Shipments en route from Asia to the U.S. eastern seaboard would also save substantially in terms of time and money by not having to wait for clearance at the increasingly congested Panama Canal or rounding the tip of South America.

Link here.


Member states of the Eastern Caribbean Currency Union (ECCU) can look forward to sustained economic growth for the rest of this year and into 2007, according to the Eastern Caribbean Central Bank (ECCB). Inflows of foreign direct investment associated with tourism related construction activity were primarily responsible for the strong growth observed in deposits, stated a communique issued by the St. Kitts-based institution following the 57th Meeting of the Monetary Council. This contributed to an above average rate of growth of 11.3% in the broad money supply, comprising currency held by the public and private sector deposits.

The Council said that more favorable lending terms and conditions from commercial banks as well as the upsurge in construction activity in preparation for Cricket World Cup (CWC) 2007 and other tourism related activity were reflected in an increase of 16.4% in domestic credit. The Council noted that the monetary and credit conditions were favorable for sustaining the economic expansion and maintaining exchange rate stability. The Council also agreed to recommend that member governments take a step towards achieving uniform financial legislation throughout the ECCU, by adopting the framework setting out a consultative process among major stakeholders.

The ECCB Council is comprised of the Ministers of Finance from Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.

Link here.


The St. Kitts and Nevis International Ship Registry (SKANReg) is getting worldwide publicity, especially in the Middle East. “As the Middle East’s political situation gets calmer, trade and exports within the region will grow and shipping will carry 80 to 90 percent of that growth in trade,” said SKANReg’s International Registrar of Shipping and Seamen, Nigel Smith.

According to TradeArabia, the St. Kitts and Nevis government is now touting increased inward investment from the Middle East. “With over half our registered ships coming from the Middle East it is our government’s desire to increase investment from the region,” explained Smith. “We already have over 250 ships registered with a total deadweight of over 750,000 tonnes and are acknowledge by some industry experts to be the fastest-growing ship registry by vessel numbers with an average of 14 ships a month registered.”

Link here.


The name Labuan is derived from the Malay word “labuhan” meaning anchorage. It was part of the Hindu Majapahit Empire, came under the rule of the Brunei Sultanate in the 14th century, became a Crown Colony in 1848, and was occupied by Japan during World War II. Today, Labuan is a federal territory, an international offshore financial center (IOFC) and a free trade zone.

This latest chapter in the island’s history is one that has promoted Labuan in the region and globally, particularly in banking and investment circles. The Labuan Offshore Financial Services Authority (Lofsa), in promoting Labuan as an IOFC, continues to offer a wide range of Islamic products and services to enhance integration and international connectivity with the global markets. This effort is complemented by the Labuan International Financial Exchange (LFX), which acts as a focal point for trading offshore Islamic products. Lofsa director-general Datuk Azizan Abdul Rahman says Lofsa is well-equipped to market Malaysia as a leading international financial center.

Lofsa’s plans will be in sync with the Government’s commitment in making Malaysia the leader in Islamic banking and finance as it has all ranges of products and services. “We are serious in pushing Malaysia while we have the lead to continue to be the international main player. Malaysia has been a pioneer in Islamic finance. … We started many years ago. Islamic banking in 1983 and Islamic insurance in 1984. Now, we are facing competition from other countries ... even from Singapore, Dubai and London,” Mr. Rahman said.

Link here.


Singapore and Indonesia endorse plans for Special Economic Zones.

Ministers from Singapore and Indonesia have endorsed plans for training programs to develop the capabilities of administrators and the industrial workforce in the SEZs of Batam, Bintan and Karimun (BBK). The plans place much emphasis on targeted vocational training, which will supply the SEZs with a stream of readily employable workers. The JSC also discussed other issues that would steer the development of the BBK SEZs in the right direction. These included keeping minimum wage increases low, improving the relationship between unions and employers, putting in place business-friendly taxation, customs and immigration measures, and developing legislation that would establish a clear authority to implement reforms in the BBK SEZs.

The creation of special economic zones, agreed by the two governments in June 2006, is designed to attract greater levels of foreign investment with tax breaks and other incentives, as Indonesia seeks to compete more effectively for foreign investment in the face of greater competition from other emerging markets like China, India and Vietnam. To successfully develop Batam and Bintan as SEZs, the Framework Agreement spells out seven key areas where both countries will cooperate to ensure that business, regulatory and labour conditions in Batam and Bintam are favorable to investors – investment, finance and banking, taxation, customs & excise, immigration, manpower and capability development.

Link here.

Hong Kong consults on competition policy.

Hong Kong’s Economic Development and Labour Bureau is gauging views on the way forward for the SAR’s competition policy, including the need for a new competition law covering all sectors of the economy. Financial Secretary Henry Tang stated that high priority should be given to ensuring Hong Kong’s competition policy is modern, serves the public interest and facilitates a business-friendly environment. In the public discussion document entitled “Promoting Competition – Maintaining our Economic Drive”, Mr. Tang said that in the interests of maintaining a high level of efficiency in the city’s economy and promoting market discipline, this is an opportune time to re-examine how best to safeguard competition in Hong Kong. “... we must take care that our response to any perceived weakness in the current arrangements strikes an appropriate balance between allowing the free play of market forces and putting in place the level of regulation necessary to ensure that fair competition can thrive in our city.”

Link here.

WTO approves Vietnam’s membership.

Vienam is set to become the WTO’s 150th member following a decision by the General Council on 7 November 2006 to approve the Southeast Asian country’s membership agreement. The decision ends over 11 years of preparation, including eight years of negotiation.

Vietnamese Trade Minister Truong Dinh Tuyen said the negotiations for WTO membership closely accompanied his country’s economic reforms known as “doi moi”. “It is these reforms that ensure Vietnam’s constant economic growth, forming a firm foundation for the accession as a whole,” he said. “On the other hand, WTO membership also helps Vietnam refine its reform process, creating opportunities for trade expansion, which is an important tool for economic growth.”

Link here.

Financial services key to Mauritius’s economy, says government.

The Mauritius financial services sector remains an important mainstay of the economy and is one of the fastest expanding sectors, with a growth rate of 6.7% in 2006, according to the jurisdiction’s government. For the past three years, financial intermediation has grown at an average annual rate of 6% compared to an average GDP growth of around 4%. For the same period, investment in that sector has increased in real terms by around 60%.

“It is clear that there is a dynamism in the sector and it must be harnessed so as to improve the resilience of our economy in these tough times of transition,” stated Deputy Prime Minister and Minister of Finance and Economic Development, Mr. R. Sithanen last week. As the government implements its economic reform, the financial sector will be called upon to play an even more prominent role over the next years, he added. He stated that the restructuring of the economy of Mauritius will cost some R160 billion ($4.9 billion) over the next 10 years, and that money will have to be raised both on the local and international markets. Financial institutions operating in Mauritius are expected to help mobilize this finance. However, as the economy moves back towards growth of 5%, the Deputy Prime Minister said that the country should not rest on its laurels until annual growth of more than 7% has been achieved.

Link here.

Dubai International Financial Exchange targets retail investors in UAE.

The DIFX held a seminar for brokers, to explain how retail investors in the United Arab Emirates can easily trade securities on the DIFX. The DIFX, which is regulated by the DIFC, is the region’s international exchange, and has attracted 22 listed securities since it opened in September 2005.

Link here.
Dubai Financial Market to become the first international “Islamic” stock market – link.


The online gambling industry is undergoing a seismic shift just weeks after a new law cut off much of the business in the U.S. Big public companies have lost billions of dollars in market value and millions of customers as they shut their U.S. Web sites for sports betting, poker and other games. Those companies are anxiously searching for acquisition partners and new customers. But business is booming at some smaller private companies, which have continued to operate in the U.S. despite the ban.

Britain, meanwhile, is trying to drum up international support for regulation of the industry outside the U.S. As the first large Western government to explicitly allow businesses to set up shop on its soil, Britain has stood to benefit enormously from taxing Internet gambling companies that moved here. Britain, meanwhile, is trying to drum up international support for regulation of the industry outside the U.S. As the first large Western government to explicitly allow businesses to set up shop on its soil, Britain has stood to benefit enormously from taxing Internet gambling companies that moved here.

The British government has been sharply critical of the U.S. lawmakers said they passed the ban out of concern that the online sites would increase gambling addiction and social problems. “The industry has been very hard hit by the U.S. ban,” said Tessa Jowell, Britain’s culture minister. “The Internet is a global marketplace, and that’s why we need action at the global level.”

Bankers, analysts and Internet executives say that online gambling companies are now discussing merging with each other. Meanwhile, private equity companies, which are flush with cash, have been wondering whether they could assemble a few of these companies into one, slash their costs, and reap the profit. Traditional casino companies in the U.S. and Asia are also considering buying up the sites as a way to enter Europe.

The Internet bill has not eliminated online gambling in the U.S., say analysts and players. Instead, small, privately held companies are thriving. Pokerstars.com, for example, had more than 52,000 players participated in games last week. It is unclear how many of those were Americans, but analysts generally estimate that they make up at least half of any online gambling market. In a statement on its Web site, Pokerstars said that after receiving “extensive expert advice” it had concluded that the recently passed provisions related to Internet gambling “does not prohibit you from playing online poker” in the U.S. The company is based in San Jose, Costa Rica, and processes credit card transactions through a subsidiary on the Isle of Man.

Many online gambling executives, however, were spooked by the high-profile arrests of two of their peers, and expressed concerns they would be hunted down by U.S. prosecutors. So far, that has not been the case. While lobbying for regulation rather than prohibition of the industry, British officials that they would not stand in the way of U.S. calls to extradite British citizens or residents.

Link here.

Party Gaming still on acquisition trail.

Gibraltar-based online gaming firm PartyGaming is said to be losing interest in merging with 888 Holdings. Instead it is said to be considering a purchase of part of Austrian Internet betting company bwin.com. Prominent e-gaming firms, many of which lost much of their revenue when the U.S. market folded almost overnight, are likely to consolidate to make sense of their extended cost bases and shrinking revenue streams. London-listed Party Gaming lost 75% of its revenue, and its shares have fallen by 75%.

Support for the embattled gaming sector came last week from UK sports minister Richard Caborn who seemed to tell an Ascot conference that the UK was sympathetic towards Antiugua and Barbuda, which is fighting a WTO case against the U.S. A dispute resolution panel is expected to meet during November, and an outcome is due in the spring of 2007. “It will be a landmark decision,” said Caborn, “We sympathise in the sense we want the WTO to clear up this area. Antigua has made it very clear it welcomes the support of the EU in this. We will find out the WTO’s position in 2007.”

However, Antigua’s case applies only to horse-racing, and almost certainly will not help the pure gaming industry even if the U.S. loses. The U.S. claims it is already conforming with the disputed 2004 WTO rulings (in Antigua’s favor) but that clarifying existing laws on interstate horseracing or federal criminal laws was a possible means of compliance with a further ruling.

Link here.

U.S. Congress forces gambling off line. Why?

Congress purported to act to protect the values of the American people when it passed the “Unlawful Internet Gambling Enforcement Act”. The result has been a serious blow to a growing industry. Whose values was Congress protecting? It had nothing to do with the American people at large. Congress was protecting the "values" of casino owners and those who work in the state lottery racket. This “enforcement act” bans credit card transactions involving internet gambling websites. The bill was added to port security legislation at the last minute giving no one the chance to read it and little political opportunity for Congress to amend it or vote against it. It was the capstone to another very bad session of Congress.

The first fallout from this legislative bombshell was its impact on the major internet gambling companies who lost half their stock market value. Competition between gambling websites had also produced enhanced consumer satisfaction as new safety features were added and copied across the marketplace for internet gambling. These online companies are competition for casinos and state lotteries and because of their lower cost, online casinos can offer their customers a much better payout rate – the percentage of bets that are paid out in winnings.

We are told that families will no longer have to face all the dire consequences and socially destructive forces of gambling via the internet, but internet gambling companies actually solve many of the so-called negative externalities associated with brick-and-mortar casino gambling. Internet gambling does not undermine community values, expose women and children to socially undesirable activities, or introduce prostitution into communities. All of the so-called “unsightly” problems with Las Vegas-style casino gambling are not present with internet gambling. Yes, people still lose money gambling, but that is not unlike “losing” money when I go to the grocery store, the baseball game, or Amazon.com. Many people find gambling fun and rewarding even though they know the odds are against them.

This legislation will not stop internet gambling and will only make American online gamblers less safe. It is nothing more than a cheap election year ploy – covertly enacted – that purports to protect Americans and maintain moral values. The hypocrisy of the legislation goes beyond the exemption for brick and mortar casinos because it also allows internet gambling for horseracing and state lotteries. Do not be surprised if Congress even reverses itself once the overseas internet gambling companies have the opportunity to lobby (i.e., buy off) the Congress. More than anything else, this legislation is the very pinnacle of puritanical nannyism. Here the government is declaring what you do in your home with your own money to be illegal. Even if it did work perfectly, it violates a critical stricture of the free society. If we allow government to regulate such behavior there is nothing to prevent complete tyranny.

Link here.


The clock is ticking faster for those who have kept their monies under the mattress away from the gaze of the country’s fiscal authorities. As Malta gears to adopt the Euro in January 2008, concern is growing on the economic impact of a sudden burst of money laundering, as more people seek to channel their undeclared monies into legitimate activities like property development, economist Professor Edward Scicluna warns.

Data compiled by Prof Scicluna shows that Malta has the highest amount of money in circulation per capita among the 12 new EU member states – an astounding €2912 per person. This amount of cash outside the banks is three times the EU average and more than twice that of Cyprus. Since 1999 the amount of money in circulation has been increasing despite a period of economic sluggishness during the same period, but since last year Malta registered a first ever decrease. The decline coincided with the period following the Maltese government announcement of Malta’s bid to join the Euro.

Converting vast amounts of money into the euro through financial institutions will surely not be an option for those who have kept money hidden from the fiscal authorities. The law clearly states that credit institutions are obliged to enquire on “the provenance of any amount of any sum in excess of Lm 5000 (apx. €11,650)”. Banks are also obliged to enquire on the origins of series of structured transactions below Lm 5000. This could lead many to seek to invest hidden monies into property development and other unobtrusive investments.

But Scicluna warns that this could have negative economic impacts, which the economy can do without at this point in time. “These monies are now fuelling the current inflationary pressures, blowing up further the property bubble and encouraging property speculation, with its needless environmental damage and destruction of our towns and village cores, and leading to downward pressures on the Maltese Lira.” The property boom and the inflation rate are now common knowledge. What is still hidden, but any seasoned observer can sniff out, is the increasing thirst for Euro currency whose value on the streets is tending to supersede the official rate of exchange, effectively devaluing the Maltese currency.

Scicluna thinks that the government has no other choice but to enact a scheme through which the vast amount of money in circulation is mopped up and safely channeled into schemes which do not harm the economy. Cyprus has already opted for a tax amnesty.

Link here.


The political world that George W. Bush inhabited for the last six years – the one he ruled – ended this Tuesday. The new world, in which Democrats have picked up more than the 15 seats needed to control the House while bolstering their ranks in the Senate, will require painful adjustments in the president’s governing style, compelling him to choose between the role of a partisan warrior or a more conciliatory leader who seeks bipartisan accords to get things done.

Bush’s agenda will change, too. He will be under intense pressure to pull troops from Iraq. Defense of his tax cuts will become more difficult. Plans to revamp New Deal-era social programs will be downsized, or ditched. Immigration overhaul, an energy independence plan, and the pursuit of free-trade pacts may be doable goals – if Bush can cut deals with foes he once steamrolled. As Texas governor, Bush worked with a Democratic legislature to improve schools and simplify taxes. As president, he found it far easier to use loyal Republican majorities in the House and Senate to crush Democrats, earning an enmity that may come back to haunt him.

Neither path is without its perils. Bush associates say the president’s instinct is to get things done, and note that he has surrounded himself with pragmatic policy advisers. These officials, and Bush himself, remain interested in revamping federal entitlement programs, taxes, and energy policy, items that could add a heftier domestic component to a Bush legacy dominated by his Iraq venture. These initiatives would be difficult in the best of times. Some, like entitlement overhaul, could require Bush to trade some of his tax cuts – anathema to many Republicans.

“I’m not an optimist about accomplishing much of anything,” said former Minnesota Republican Representative Vin Weber, a now a well-connected Washington lobbyist. “Possibilities for cooperation and bipartisanship are really complicated by congressional Republicans and Democrats, who won’t see much virtue in working with one another.” Hardly anyone in Washington expects Bush to morph into a latter-day version of President Bill Clinton, who reacted to his party’s loss of Congress in 1994 by supporting welfare reform, a balanced budget, and an immigration crackdown backed by Republicans.

Link here.
20 amazing facts about voting in the USA – link.



Just in case you might feel unpatriotic about taking your assets offshore, consider that the U.S. government likely provides significant tax breaks to favored individuals and commercial interests. The U.S. – at the forefront of efforts to curb “offshore tax fraud” – extends huge tax breaks to non-resident investors yet denies those same tax breaks to resident investors.

For example, the U.S. exempts all non-resident aliens and foreign corporations on interest paid by banks, savings, and loan associations and insurance companies. It does the same with respect to portfolio interest and most capital gains. But residents, citizens, and domestic corporations can not take advantage of such benefits.

Canada, New Zealand, Spain and many other high-tax countries permit wealthy immigrants to be taxed only on their income in those countries – not on their foreign income. While these benefits generally expire after a set period of years, residents of these countries are forbidden to take advantage of the same programs.

Link here (scroll down).


South African Finance Minister Trevor Manuel has announced that tough new measures will be introduced as part of the Revenue Laws Amendment Bill to crack down on corporate tax avoidance. Manuel told Parliament last week that a revised general anti-avoidance rule (GAAR) would target the “most serious elements” of schemes devised purely for the avoidance of taxation, and would be supported by an enhanced system of required reporting known as ‘reportable arrangements’ to give the government an early detection system. “At the end of the day, these schemes cost the fiscus billions in tax revenue – money which can be much better spent for society’s benefit elsewhere,” stated Manuel.

Link here.


The Canadian government’s decision to tax income trusts has sparked an angry response from the corporate world and the funds industry, after panic selling wiped billions of dollars off the value of shares in the wake of the shock announcement. In its response to the move, the Canadian Association of Income Funds (CAIF) said that the proposed tax will risk the financial security of millions of Canadians, after the Toronto Stock Exchange (TSX) fell more than 300 points on the back of the announcement, which caught most by surprise.

“The government is directly attacking millions of Canadians who purchased income trusts in good faith based on the Conservative government’s promise to leave these important investment vehicles alone,” argued George Kesteven, CAIF President. “The decision was made without consulting the industry, but we would welcome the chance to meet with Finance Minister Jim Flaherty to express our deep concerns and seek a more equitable solution. The government definitely had other options than to impose this punitive tax,” he added. CAIF is urging Canadian investors to contact their Members of Parliament to register their concerns over the proposed legislation.

Under the proposed legislation, a “Distribution Tax” will be applied to distributions from publicly traded income trusts and limited partnerships in a bid to stem what Flaherty described as a “growing trend toward corporate tax avoidance.” Flaherty has so far ruled out any changes to the proposals and draft legislation is expected to be published by the end of the year and introduced into the Commons early in 2007. However, with the Conservative government unable to count on a majority it is uncertain whether the plan will be approved.

Link here.

Wave white flag, energy trusts told.

A leading income trust fund manager has a blunt message for Canada’s beleaguered energy trusts. Admit defeat.

Cecilia Mo, who manages Fidelity Investments’ top performing Fidelity Income Trust Fund, urged the majority of Canadian energy trusts to pump their existing oil and gas assets dry and feed the profits to unitholders during the four-year tax holiday offered up by the governing Tories. “They should say, for the next four years, ‘I’m going to make as much money as I can and take 100% of that cash flow to pay to unitholders,’” Ms. Mo said in an interview from Calgary, where she spoke to a capacity crowd of brokers and investment dealers at the city’s petroleum club. “But the guys – probably about one-quarter of the oil and gas trusts today – who already have a strong technical team, a good land base and good internal drilling program, it would make sense for them to convert back into an exploration and production company past 2011.”

Fidelity’s Income Trust Fund had chalked up a total return of almost 18% between January through October but about two-thirds of the gains were given back in the two days after the announcement. An organized lobby of more than 40 companies has formed under the banner of the Coalition of Canadian Energy Trusts. Finance Minister Jim Flaherty has insisted its decision to implement change is firm. Group leaders said they would push for a longer window, and bring forward suggestions of ways the trust structure could exist and still allow Ottawa to achieve its goals. Ms. Mo said she sees no chance of a compromise and doubts there is any hybrid trust structure similar to those used in the U.S. that would fly in Canada.

Link here.


Macedonia will become the 10th eastern European country to adopt a flat-rate tax next year. The Macedonian government will introduce a single rate of income and corporation tax of 12% in 2007. It then plans to lower both to 10% by 2008 to attract more foreign investment and reduce tax evasion, according to the country’s finance ministry. The new flat rate would replace a corporate tax of 15% and personal income tax ranging from between 15% and 24%. The tax on reinvested profits will be scrapped and there will be a significant zero-taxed personal allowance. “This step should decrease tax evasion ... It would also encourage foreign investors to put their money in Macedonian businesses, knowing that taxes are low,” a government statement said.

The most recent country to introduce a flat rate was Romania, last year. The other eight countries to operate such a system are Estonia, Lithuania, Latvia, Russia, Serbia, Ukraine, Slovakia and Georgia. Until now, Georgia boasted the lowest flat tax at 12%. The reform will also put pressure on neighbouring countries, including Greece, Albania and Bulgaria, to follow suit.

Link here.


The IRS last week issued the 2007 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning January 1, 2007, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

The new rate for business miles compares to a rate of 44.5 cents per mile for 2006. The new rate for medical and moving purposes compares to 18 cents in 2006. The primary reasons for the higher rates were higher prices for vehicles and fuel during the year ending in October. The mileage rate for charitable miles is set by statute.

Link here.


A tax advantage being used by major retailers such as Tesco and Amazon is to come under the spotlight, ministers have said. The practice, which involves using distribution centers based in the tax haven of the Channel Islands to sell goods such as CDs and DVDs effectively VAT-free to online customers, has sparked protests from smaller competitors.

On Jersey and Guernsey, no VAT is charged on goods costing less than £18 that are imported to mainland U.K. After backbench ministers waged a campaign to cancel the arrangement, paymaster general Dawn Primarolo said last week that the government was deciding whether to cut the tax-free threshold from £18 to £7. This would cut out the benefits for larger companies on most imported CDs and DVDs.

Link here.

HM Revenue and Customs targets football bosses over tax fraud.

Two Boston United FC executives were given suspended jail sentences for tax fraud, after an 18-month investigation by HM Revenue and Customs (HMRC). Former Chairman Patrick Malkinson, and current Manager Stephen Evans pleaded guilty to cheating the public revenue out of £245,188 by the fraudulent evasion of Pay As You Earn Income Tax and National Insurance Contributions over a 4-year period. The fraud involved dishonestly disguising salary and wage payments as untaxed, out of pocket expenses and the submission of false end of year tax returns for the years 1997 to 2001. As a result, the club was able to pay players and managers higher wages securing a competitive advantage over rival clubs.

Statements provided by players indicated the existence of undisclosed contracts, the existence of multiple contracts for the same players covering the same period containing different contractual terms, and the fact that the players had provided no records of mileage which could possibly found the basis for legitimate “reimbursement”.

Malkinson was sentenced to two years imprisonment, suspended for two years, while Evans was sentenced to 12 months imprisonment, suspended for two years. In addition, the judge made a confiscation order for £349,587 against Malkinson, representing the fraudulent amount, plus interest. He must pay this within 12 months or serve three years in jail.

Link here.


China’s tax bureau has announced that high earners, including foreigners, will be required to report their income directly to the tax authorities as the government sends a strong signal that tax avoidance will no longer be tolerated. The new requirement will apply to individuals who earn more than 120,000 yuan ($15,000) per year.

Taxpayers must report salaries, dividends from bank accounts and other investments and gains from property rentals, to authorities within three months after the end of each tax year under the new rules, which will be implemented next year. Those receiving foreign source income, multiple sources of income or who are not paid directly by an employer will have to declare income immediately upon receipt. Even individuals whose tax is deducted at source by their employers but who meet the new criteria will have to declare their income under the new system. The SAT said that the new rules are designed to make it harder for individuals to hide income through various loopholes in the tax laws.

Link here.


Indian financial regulators have been asked to prepare a “negative list” of tax havens as the government attempts to get a better grip on the huge tide of anonymous money entering its capital markets every year. The move is part of a wider policy designed to increase scrutiny of India’s securities markets and reduce their vulnerability to money launderers.

The authorities are paying particularly close attention to the use of Participatory Notes (PNs), a financial instrument which allows the entities holding them to remain anonymous. The government was alerted to the widespread use of these vehicles when the National Security Council revealed that that more than 85% of foreign fund inflows into India in 200–06 were through PNs, up from 20% in 2003/4. The NSC noted that while billions of rupees enters India as foreign investment, hardly any leaves as taxable returns on investment, leading it to conclude that “some other clandestine method is used for this purpose.”

Given the heavy involvement of Mauritius in India’s foreign investment, this jurisdiction is likely to be at the top of the regulators’ list. Reserve Bank of India figures for FDI in 2004-05 show Mauritius as the lead external investor into India, accounting for $820 million out of a total $2,320 million in FDI. In an attempt to head off pressure from India to change the countries’ Double Tax Avoidance Agreement, the Mauritius government announced in October that it will tighten up rules on the issuance of Tax Residence Certificates, and in future will issue them for only one year at a time.

The Indian tax authorities have believed for years that Indian investors “round-tripped” through Mauritius in order to escape capital gains tax on stock market investments. However, their attempts to reinterpret the treaty through the courts have largely failed.

Link here.



Following the various terrorist atrocities across the world in recent years, and partially as a result the on-going global battle against money laundering and drug trafficking, many of the higher taxation countries – such as the U.S. and UK – have begun restricting and eliminating the attractions of tax havens for their citizens.

The ideas behind this move are simple to understand. Removing terrorism and drug trafficking from the agenda momentarily, the higher taxation countries want to stop any potentially taxable money from leaving their shores and they want to retain closer control over their citizens. They want to build greater stability through control.

As a result of the targeted crack down on tax havens and the benefits and attractions they can offer the citizens of various high taxation countries, many former colonies and countries closely affiliated with the UK and U.S. for example, are being forced to refuse entry and even to eliminate tax haven benefits altogether. Particularly affected are citizens of the United States. Why? Because the U.S. is the world’s superpower and exacts such strong power and control over much of the world today and can inflict trade embargos, certain boycotts and the restriction of any international aid to countries it feels are illegally offering tax haven benefits to its citizens. Other high tax jurisdictions, such as the major countries of the EU, are also being excluded from the tax haven benefits available in certain offshore jurisdictions as they have close ties to the U.S. and UK and could also bring about trade isolation, etc.

But Belize is Different. In 1991 Belize began establishing itself as an offshore center of note and introduced offshore legislation designed to establish itself as one of the most attractive tax havens globally. It began by allowing the creation of offshore corporations and it progressed to passing attractive trust law legislation which was developed upon and expanded throughout the 1990s.

In 1996 America began to pressurize Belize into joining a Mutual Assistance Treaty. Such a treaty requires information exchange to exist between the countries involved in it – including the fiscal and banking records of residents and non-residents. Belize agreed to sign an agreement but only agreed to cooperate with the information exchange policy where it would combat the likes of drug trafficking and international terrorism. Belize was not willing to disclose its banking information, nor was it willing to accept the need for disclosure of fiscal information where tax evasion was suspected for example. The U.S. punished Belize by placing it alongside the likes of Columbia on a list of countries unwilling to assist in the global battle against international drug trade and money laundering.

However Belize remained calm, and continued to refuse to give in to the information exchange demands of the U.S. Belize instead passed further offshore legislation to attract international banks to relocate to Belize. At the same time it also introduced new privacy laws for the banks and it also included certain anti–money laundering provisions such as America’s very own “know your client” rule. This meant that Belize fell in step with U.S. home banking policies, which meant America was no longer able to claim that Belize was refusing to assist in the prevention of money laundering. It had to remove Belize from its hit list.

Today, banks and international companies who base themselves in Belize find they benefit from a government committed to a no tax system and they work protected by laws and with infrastructure designed to ensure total privacy and provide complete asset protection. Add to these benefits the fact that Belize’s primary language is English, the laws of the country are based on the British legal system, and property prices and the cost of living in Belize are very low and you can see now why Belize remains one of the best tax havens of the world … even for U.S. citizens.

Link here.


There is a major change coming that will catch most investors by surprise – the end of the U.S. dollar as the de facto world reserve currency. Play it right and you can make life-changing returns. We have often mentioned the inevitable move by central banks to diversify their reserves out of the U.S. dollar. We have noted that, apart from the current situation, there is no precedent for any non-redeemable paper currency being held as the primary reserve of the world’s central banks. That diversification out of the dollar, with a lot going into gold, has begun. A regime change is afoot—though few have yet recognized it.

Recently, Russian President Vladimir Putin ordered the Russian central bank to raise the gold share of its foreign reserves from 5% to 10%. That is no small matter, given that Russia’s reserves have surged to $247 billion. Accomplishing the shift to 10% gold would require purchasing 21 million ounces of bullion, which is about one-quarter of the world’s annual mine production. And thanks largely to oil exports, Russia is accumulating additional foreign currency reserves at a rate of about $100 billion per year. With reserves growing so rapidly, just keeping the gold portion at 5% would require Russia to absorb a big slice of the world’s mine output. Meanwhile, in China, Monetary Committee member Yu Yongding is not alone in calling for Beijing to diversify its $875 billion reserves into gold to protect against a tumbling dollar. It is an idea whose time is coming – soon.

Given the trillions of U.S. dollars washing around the world’s monetary system, these are not inconsequential developments. Quite the contrary. They greatly favor gold and other tangibles. What is the alternative for a dollar-heavy investor or central bank? The Who-Owes-You-Nothing euro? Or the yen, which is the proximate cause of the current bubble? How about the Zambian kwacha or the Vietnamese dong? I think not.

Central banks bailing out of the dollar, the wheels coming off the U.S. economy – the nightmare of every investor. Or maybe not. … If you invest wisely now, the emerging paper bear market will eventually prove in your favor. As foreign governments look to avail themselves of more gold for their reserves, you should do the same. And investing in gold and other natural resource stocks is a strategy that promises even higher returns … if you pick the right companies.

Link here.


A growing wave of high-tech fraud is starting to add up to real losses in the online brokerage business, and sending clear warning signals to investors that they need to protect themselves from cyber-thieves after their cash. Last week, E-Trade said Internet fraud-related scams cost the company $18 million in the third quarter. Earlier this week, TD Ameritrade said fraud cost it $4 million in its fourth quarter. It is the first time either company has disclosed dollar amounts for fraud losses.

The disclosures illustrate a burgeoning cost of doing business in the multibillion dollar online investing industry. For shareholders, they mean a decline in profits. For customers – 10.2 million of whom have traded in the last three months – it is a heart-thumping threat to their savings. No one expects this type of fraud to stop anytime soon.

Regulators say they have seen a particularly strong upswing in theft resulting from two types of scams in the last two months. Both frauds involve thieves snaring investors’ user names and passwords from public computers in places like hotel lobbies or Internet cafes by using keystroke-monitoring “spyware” to grab the information, according to the head of the SEC. One scam involves thieves armed with users’ private information liquidating securities and wiring the money to bank accounts, often offshore. In the second scam – “pump and dump” with a technological twist to it – hackers purchase microcap stocks in an effort to drive up their share prices. The shares, already owned by the hackers, are then sold at a profit.

Consumers can be their own first line of defense from fraudsters. All online brokers provide extensive tips to customers on their web sites. The most common security tips are keeping account information secure, frequently changing user IDs and passwords and using firewalls and other security software on home computers.

Link here.



The federal government disclosed details last week of a border-security program to screen all people who enter and leave the U.S., create a terrorism risk profile of each individual, and retain that information for up to 40 years. The details, released in a notice published in the Federal Register, open a new window on the government’s broad and often controversial data-collection effort directed at American and foreign travelers.

While long known to scrutinize air travelers, the Department of Homeland Security is seeking to apply new technology to perform similar checks on people who enter or leave the country “by automobile or on foot,” the notice said. The department intends to use a program called the Automated Targeting System, originally designed to screen shipping cargo, to store and analyze the data. “We have been doing risk assessments of cargo and passengers coming into and out of the U.S.,” DHS spokesman Jarrod Agen said. “We have the authority and the ability to do it for passengers coming by land and sea.” In practice, he said, the government has not conducted risk assessments on travelers at land crossings for logistical reasons.

Civil libertarians expressed concern that risk profiling on such a scale would be intrusive and would not adequately protect citizens’ privacy rights, issues similar to those that have surrounded systems profiling air passengers. “They are assigning a suspicion level to millions of law-abiding citizens,” said David Sobel, senior counsel of the Electronic Frontier Foundation. “This is about as Kafkaesque as you can get.” DHS officials said that by publishing the notice, they are simply providing “expanded notice and transparency” about an existing program disclosed in October 2001, the Treasury Enforcement Communications System. But others said Congress has been unaware of the potential of the ATS to assess non-aviation travelers.

The notice comes as the department is tightening its ability to identify people at the borders. At the end of the year, for example, Homeland Security is expanding its Visitor and Immigrant Status Indicator Technology program (VISIT), under which 32 million noncitizens entering the country annually are fingerprinted and photographed at 115 airports, 15 seaports and 154 land ports. Stephen E. Flynn, senior fellow for national security studies at the Council on Foreign Relations, expressed doubts about the department’s ability to conduct risk assessments of individuals on a wide scale. He said customs investigators are so focused on finding drugs and weapons of mass destruction that it would be difficult to screen all individual border crossers, other than cargo-truck drivers and shipping crews. “There is an ability in theory for government to cast a wider net,” he said. “The reality of it is customs is barely able to manage the data they have.” [Ed: If someone from the CFR says not to worry everything must be just fine,the DHS said it will keep people’s risk profiles for up to 40 years “to cover the potentially active lifespan of individuals associated with terrorism or other criminal activities,” and because “the risk assessment for individuals who are deemed low risk will be relevant if their risk profile changes in the future, for example, if terrorist associations are identified.” DHS will keep a “pointer or reference” to the underlying records that resulted in the profile.

The DHS notice specified that the Automated Targeting System does not call for any new means of collecting information but rather for the use of existing systems. The notice did not spell out what will determine whether someone is high risk. But documents and former officials say the system relies on hundreds of “rules” to factor a score for each individual, vehicle or piece of cargo. According to the notice, the program is exempt from certain requirements of the Privacy Act of 1974 that allow, for instance, people to access records to determine “if the system contains a record pertaining to a particular individual” and “for the purpose of contesting the content of the record.”

Link here.
Police State, USA update – link.

Business travel to U.S. fell 10% in 2004-05 due to security measures.

The U.S. is losing substantial numbers of business travelers to Europe because of the stringent security measures it imposes on international visitors, according to a report by a tourism industry group. Europe, meanwhile, is failing to fully capitalize on increased interest from Asian travelers because many countries do not have adequate services and infrastructure for that burgeoning market.

The World Travel Market 2006 report – conducted by Euromonitor International – found that total business arrivals to the U.S. fell by 10% to 7 million over the 2004-2005 period, while the number of the business visitors to Europe grew by 8% to 84 million over the same period. EI spokesman Clement Wong said the trend away from North America was likely to intensify as security restrictions continue, making obtaining visas more difficult. “Rather than travel to the U.S., business travelers and leisure travelers are coming to Europe,” Wong said at the opening of the 4-day World Travel Market in London.

More than 48,000 people are attending the event, where some 200 countries are represented by tourism officials, government delegations and tour operators. Fiona Jeffrey, managing director of the World Travel Market, said international tourism spending is now valued at $2 billion per day, with Africa maintaining the fastest growth in 2005 of nearly 8%. Wong said that Europe was failing to capitalize on some of this growth by failing to put in place special services and infrastructure for Asian visitors, whose numbers hit 14 million in 2005.

Link here.


Human beings may be forced to be “microchipped” like pet dogs, a shocking official report into the rise of the Big Brother state has warned. The microchips – which are implanted under the skin – allow the wearer’s movements to be tracked and store personal information about them. They could be used by companies who want to keep tabs on an employee’s movements or by Governments who want a foolproof way of identifying their citizens – and storing information about them.

The prospect of “chip-citizens” – with its echoes of George Orwell’s “Big Brother” police state in the book 1984 – was raised in an official report for Britain’s Information Commissioner Richard Thomas into the spread of surveillance technology. The report, drawn up by a team of respected academics, claims that Britain is a world-leader in the use of surveillance technology and its citizens the most spied-upon in the free world. It paints a frightening picture of what Britain might be like in ten years time unless steps are taken to regulate the use of CCTV and other spy technologies. The reports editors claim that by 2016 our almost every movement, purchase and communication could be monitored by a complex network of interlinking surveillance technologies.

The most contentious prediction is the spread in the use of Radio Frequency Identification (RFID) technology. The RFID chips – which can be detected and read by radio waves – are already used in new UK passports and are also used the Oyster card system to access the London Transport network. For the past six years European countries have been using RFID chips to identify pet animals. Its use in humans has already been trialed in America, where the chips were implanted in 70 mentally-ill elderly people in order to track their movements.

In their Report on the Surveillance Society, the authors now warn, “The call for everyone to be implanted is now being seriously debated.” The authors also highlight the Government’s huge enthusiasm for CCTV, pointing out that during the 1990s the Home Office spent 78% of its crime prevention budget – a total of £500 million – on installing the cameras. This enthusiasm comes despite official Home Office statistics showing that CCTV cameras have “little effect on crime levels.”

The authors write, “The surveillance society has come about us without us realising. ... Some of it is essential for providing the services we need: health, benefits, education. Some of it is more questionable. Some of it may be unjustified, intrusive and oppressive.”

Link here.
England is becoming a “Big Brother” society – link.


Government controls held back cryptography in the past, but today, it is usability that blocks adoption, a panel of experts said Thursday. At an event here celebrating 30 years of public key cryptography, several top minds in the field gathered for a trip down memory lane. Over the years, public key cryptography has grown from an idea in a paper published by Whitfield Diffie and Martin Hellman, both present at the event, to technology used in everyday transactions on the Web.

The U.S. government was a major obstacle in advancing cryptography until it lifted export controls in 1996. As cryptography grew out of the research stage and into actual products, companies such as RSA Security had a tough time establishing themselves. In 1986, Jim Bidzos, then chief executive of RSA, at times, felt his business would not go anywhere. “There was this big monster in Maryland that I discovered that we had to deal with,” Bidzos said. “We found ourselves competing with NSA, especially in the ‘90s.” But that is all history. The Web hit in 1994, erasing borders and giving rise to the need to secure electronic commerce. In 1996, the government eased export controls, clearing most regulatory obstacles for widespread adoption of cryptography.

The government has even made an about-face on encryption. These days, many regulations such as those laid down by HIPAA and the Sarbanes-Oxley Act require encryption, noted Dan Boneh, an associate professor of computer science at Stanford University and co-founder of Voltage Security. “There has been a complete flip recognizing that encryption is here to help us,” Boneh said.

Yet cryptography has not become as commonly used as some might have hoped, the panel noted. Web transactions might be encrypted, but a lot of data and communications still are not. The issue, Brian Snow, a retired technical director at the National Security Agency said, is products. “The remaining issue that is big today on the plate is lack of quality in the products,” he said, adding that security products are poorly designed and often not in a secure way.

Other panelists agreed. “I will fix it all,” Ray Ozzie, Microsoft’s chief software architect. He said he had built security into Lotus Notes and in Groove, a later venture. At Microsoft, he plans to design it into products as well, keeping in mind compliance issues and the realities of enterprise systems, he said. “At this moment in time, it’s laziness on the part of the industry in terms of not embracing architecture and the importance of human interface in design of secure systems.”

Link here.



On October 17, two bills were signed into law. The Military Commission Act, which suspends Habeas Corpus – the federal government can detain anyone without charges, there is federal government sanction torture and the use of hearsay evidence. The MCA was signed with some fanfare, little mainstream media coverage and a lot of alternative media coverage. On that same day, in the privacy of the oval office, a despot who calls himself the president of the United States, signed Public Law 109-364, the “Defense Authorization Act” (DAA). Section 1076 of Public Law 109-364 allows this despot to declare “Public Emergency” and “employ” the military anywhere in the U.S., without consent of the state or local authorities, to “restore public order.” The law allows the Secretary of Defense to “provide supplies, services & equipment to persons affected by the situation.” The law states that the Secretary of Defense “may provide supplies, services & equipment as long as doing so will not interfere with the military preparedness.”

The law permits this despot and any despot in the future, to declare a “major public emergence” which includes “natural disasters, epidemic, serious public health emergences, terrorist attacks or incident” to “employ” the military even the National Guard from other states, to restore order and to supply or not to supply goods and services to the people effected. This law in itself repeals the “Insurrection Act”, “Posse Comitatus Act” and effects Article III of the Bill of Rights, the stationing of military in private homes. The Military Commission Act and the Defense Authorization Act effectively establishes the police state and martial law when it rains too hard. No matter who is in congress these laws will never be repealed, only changed to make them stronger and more powerful.

Are our rights, freedoms and liberties no more?? The United States Constitution and the Bill of Rights have been dismissed and few have noticed, objected or maybe they do not even care. When will the American people wake up to the fact that the president and congress do not care about them? The only thing that most members of congress and those who get into the oval office care about is how to cash in on that office and how to stay in that office as long as possible. What can we do as citizens of this once great country of ours do to stop this madness?

Link here.


China’s top legislature adopted a change to the law on the country’s court system, requiring all death sentences to be approved by the Supreme People’s Court. The amendment to the country’s organic law on the people’s court will come into effect on January 1, 2007. It is believed to be the most important reform on capital punishment in China in more than 20 years.

The amendment deprives the provincial people’s courts of the final say on issuing the death sentence. Xiao Yang, president of the Supreme People’s Court, said the change will separate a review of a death sentence from a convicted person’s appeal of the verdict. The former will be handled by the SPC while the later remains in the jurisdiction of provincial courts. This, says Xiao, is “an important procedural step to prevent wrongful convictions. ... It will also give the defendants in death sentence cases one more chance to have their opinions heard.”

The SPC was responsible for reviewing all death penalty cases until 1983 when, as part of a major crackdown on crime, provincial courts were given authority to issue final verdicts on death sentences for crimes that seriously endangered public security and social order, including homicide, rape, robbery and the criminal use of explosives. Chen Xianming, president of China University of Political Science and Law, said the revision was appropriate in the mid 1980s and helped to lower the country’s crime rate.

However, the practice of provincial courts handling both death sentence appeals and conducting final reviews has encountered increasing criticism in recent years for causing miscarriages of justice. Since 2005, China’s media have exposed a series of errors in death sentence cases and criticized courts for their lack of caution in meting out capital punishment. Law professor Chen Ruihua of the Peking University said provincial courts may have different interpretations of which crimes are worthy of capital punishment. This meant someone convicted in one province may receive the death penalty while in another province the same crime would have resulted in a prison sentence. Chen estimated that the number of death sentences in China would drop by at least 20% after the SPC resumed its power to review and ratify all death sentences.

At present, over one third of the countries and regions in the world has the death penalty, covering half of the world’s total population. Chinese legal professionals believe China will eventually abolish the death penalty.

Link here.


Cybercriminals looking to launder money or finance nefarious deeds via the Internet have a host of tools at their disposal. And they will be able to ply those means with greater skill if governments do not step up policing efforts, warns a new report by the FATF, an international organization based in France that develops recommendations for combating money laundering and terrorism financing. The yearlong study highlights the risks of criminal exploitation of “new payment methods”, many of which have taken hold on the Internet in recent years.

Just what are these methods? Among them are so-called e-purses, cards that let users store funds via memory chips, and Internet payment services that operate outside traditional banks or credit card companies. The biggest online payment brokers are eBay’s PayPal and Neteller, a company based in the Isle of Man that is publicly traded on the London stock exchange. PayPal processed $9.1 billion in transactions in the last quarter alone. Neteller processed $7.3 billion in 2005.

Online payment services are useful to consumers who want to buy and sell over the Internet but are wary about providing sensitive financial information to online vendors. Rather than give an unproven Internet store a primary bank account number, for example, a user can transfer funds to the vendor through an online account. Such accounts can be opened with much less money – sometimes nothing – and therefore pose less risk. They also benefit users who lack the credit to open credit cards or funds to open a bank account. But e-wallets and Internet payments are of particular concern to the FATF because they often let users anonymously open accounts online. Typically, all that is needed is a credit card, bank account number, money wire service, or sometimes just a long-distance calling card. Credit card and bank accounts are easier to trace to individuals and have more identity verification requirements than phone cards, which can be bought anonymously with cash. Once flush with funds, the accounts can be used to make purchases without leaving a paper trail to the user the way a credit card or check would.

More needs to be done to make Internet payments transparent and easily traceable, says Daniel Glaser, the U.S. Treasury Deptartment’s deputy assistant secretary for terrorist financing and financial crimes. The report shows Internet wallets “could be used for a lot of bad things,” he says. “To the extent that they facilitate anonymous transactions, they are very useful for terrorist financiers, money launderers, and others that would obscure their identity.”

Link here.


Apparently Paypal has frozen the assets of science fiction fantasy writer George R.R. Martin. For some unknown reason his name appears on the U.S. Department of The Treasury in the Office of Foreign Assets Control. The total dollar amount that has been frozen by Paypal is around $50 according to Mr. Martin’s blog post. Mr. Martin said, “There have been times in the past when I’ve had as much as thousand bucks floating in my PayPal account. Believe me, if you think I’m honked off now, imagine how pissed I’d be if they were robbing me of a thousand bucks instead of fifty.”

It is unclear what kinds of weapons of mass destruction one could purchase with $50. To unlock his Paypal account Mr. Martin said, “All I have to do is furnish PayPal with several different proofs of my identity. They already have a credit card number and a bank account number, mind you, but that’s not sufficient, now they want copies of my passport, my birth certificate, and a utility bill.”

What about a pint of blood? We have all heard of these kinds of things happening before. From someone you know who is on a no-fly list to something like what has happened to Mr. Martin. Security is an important issue but it becomes absurd when the target becomes an award-winning author with no ties to any dangerous organization or criminal background. Does this make anyone feel safer?

Link here.


Do you live in a blighted home in a blighted neighborhood? You might without even knowing it. But don’t worry, your local politicians will be happy to tell you – as soon as some land developer decides your neighborhood would be a great place to build swankier homes or shops.

Do not want to leave your home? Tough luck. Once the politicians, in their superior wisdom, decide that the development project will produce more tax revenue or jobs than you and your neighbors do, you will have to go. Oh, they will pay you something for your home, maybe less than it is worth – but you will have no right to say no and stay where you are. That is called progress, and it is how things go in America today. The working class is under threat of expropriation for the benefit of the well off.

Shockingly, last year, the U.S. Supreme Court said that was just fine. (Eminent domain is permitted by the Constitution for “public” uses, such as roads or post offices. Using it for private development is a fairly new practice.) After the public backlash against that ruling, over 20 states restricted the use of eminent domain for private economic development. But the protection of homeowners is less than perfect. There is always an exception for “blighted” neighborhoods. But blight is in the eye of the beholder, and the judgment of those beholders who wield power counts more than yours.

According to the Institute for Justice (IJ), the public-interest law firm, “the definition of ‘blight’ has become so broad and unprincipled that governments regularly target perfectly fine homes in ordinary neighborhoods for the wrecking ball.” IJ lawyers are currently defending property owners in Long Branch, New Jersay, whose homes are threatened by politicians and developers who want to build expensive condominiums in their place. A few years ago, Mayor Adam Schneider praised the condition of the beachfront homes in the middle-class MTOTSA neighborhood. Now, all of a sudden, the area needs to be leveled so developers can provided badly needed condos for the rich. The homeowners tried to challenge the legality of the condemnations, but a court dismissed the complaint. Says IJ, “[T]he problem with MTOTSA is not blight; it is that it has 93-year-old retirees, not rich and trendy professionals.”

Homeownership has been seen as the key to the independence and freedom that made America what it is. Now ownership is subject to arbitrary rule by arrogant politicians.

Link here.



I sometimes think that the defects of men, and the virtues of women, are equally understated. An unreconstructed male will say that men have invented all sorts of things and built this and that, which is true. Feminists measure themselves by the extent to which they manage to resemble men, which is a mistake. Both largely overlook the gravest plague to afflict humanity – the infernal and irremediable aggressiveness of males. People do not avoid bar districts in the neighborhoods of the lower classes from wise concern about drunken pugnacious women. Men attack. Women do not.

Physical incapacity has little to do with it. While the average woman cannot beat up the average man, three could, if accustomed to fighting. Women are neither accustomed to fighting nor interested in doing it. It is not by mere extended coincidence that 90% of people in prison are men. The cause is their inherent aggressiveness. Theirs is the behavior of ownerless dogs living in the street.

Men, like street dogs, are both territorial and creatures of the pack. It starts early because it is instinctive. A boy of eleven showing up at a new school will be eyed by the other boys, tested, regarded with initial suspicion – but only by the boys. He earns his place in the pack. The girls are far more likely to say, “Hi, I’m Sally. What’s your name?” The little boys in a neighborhood form gangs, perfectly harmless in suburbs of the middle classes but gangs nevertheless, and guard their territory against intruders. They are playing, as puppies play. They are practicing for more serious times. Come puberty and, in bad neighborhoods, things become ominous. The young males are now propelled by adult muscle and impelled by combative hormones. They are now dangerous. They still closely resemble both street dogs and 11-year-olds in fundamental motivation. They are intensely territorial. The appeal of hostile bands works its sordid magic only on males.

Within a society, the aggressiveness of the males can be moderated by rigorous enforcement of civility. In particular, the unshirted sexual forwardness of the male can be abated. This is why feminists are fools to deride the twin concepts, Lady and Gentleman. But even among the socially elevated, such street-doggery as dueling has often existed. The elaborate ritual of throwing down the gauntlet is nothing more than an elegant form of the gangbanger’s strut-and-holler.

The aggressiveness of males has wreaked unremitting havoc throughout history in the form of war. Women do not do war, do not like war, do not fantasize about war. They put up with it. Lysistrata, though written by a man, captures the distaff mind well. These days every war is said to have some justification of the most solemn import, but it is just Crips and Bloods. Among primitive peoples a young man becomes a warrior through some curious rite, and then goes on raids to steal horses and women. With us it is boot camp, jump wings, Ranger patch, and raids to impose democracy. What we call statesmanship is, emotionally and morally, indistinguishable from gang war in South Chicago. The scale is more imposing and, under some administrations, the grammar better. Aggressive males rise to power in heavily armed countries of many millions. Then they push and shove, bark and bow-wow at others like themselves in other countries. Honor and duty and valor? Nah. Male dogs in an alley.

Women have very little use for it, though there is precious little they can do to change things. Their focus is different. In three decades of covering the military, I noticed that women thought in terms of people. To a male, a firestorm in Hamburg ignited by bombing constitutes a great victory. To a woman, it is tens of thousands of people burned alive. Among men, “anti-war” is likely to be an insult, while among women, a compliment.

Male aggressiveness pervades human life. It fuels the unending drive to found empires. A woman might say, “Look, Alex, you have got a perfectly good palace in Macedon, plenty to eat, a bar on the corner, nice women. Are you quite sure you need to conquer India? What are you going to do with it?” Men are more likely than women to favor capitalism (or “free enterprise” or “unrestricted rapine”, according to your politics) than women because it sanctifies commercial combat. $50 billion is not enough ... I must destroy the competition and eradicate Linux.

What to do about it? Nothing, at least any time soon.

Link here.
The mysterious fate of the great library of Alexandria – link.


The System is not maintained by reason and facts, because these do not support any system based on power and fear. It keeps going by perpetuating myths. These are never really questioned, and become as immutable as the laws of physics. We can break free from the control of the system when we see the lies for what they are. Here are 10 of the best lies.

  1. We are free, not slaves of the government. A free person can come and go as they wish, they can use their money and wealth as they see fit, and they are not monitored and can live a private life and choose to think what they will. A slave is told when and where they will go, what they will do, how they will think, what they can say, and everything they produce is taken off them and given directly to the Master. Where are you on the continuum between free person and slave? I expect now closer to the slave end.
  2. Taxes are a way of “paying our way” and our moral obligation and safety net. Look at the 2006 U.S. Federal Budget, and try to find the expenditure categories that will help you. You probably will not be able to see a connection, and that is because there isn’t one. Do you seriously think that you get anywhere near the amount you pay in taxes in the form of “government services”? I am not saying to evade your taxes, just do not believe the lies that justify confiscation of earnings.
  3. People from different cultures are our enemies.
  4. Individual expression and creativity are available only to a few “talented” persons. The purpose of this myth is to disempower people and make them good consumers rather than self-sufficient producers. I am reassured to see many people pushing back against this – they write their own music, work on their own cars and write open source software. But the masses only know how to keep buying the same old stuff.
  5. News is information rather than propaganda and entertainment. It is supplied so that you watch paying advertisements. Since a lot of news is supplied by the government, it also contains a subtle, sometimes not so subtle twist. It presents what “they” want you to think, and over time this moulds people’s perceptions.
  6. We have no right to privacy. The system is interested in prying into the lives of individuals in order to perpetuate its control. Systems based on power structures are inherently brittle, and those in power know that. The flawed argument that they put out is that if you have done nothing wrong, then you have nothing to hide. When you take away the right to privacy, it is all too tempting to misuse the information. Who watches the watchers? Usually no one.
  7. The end justifies the means. When a criminal acts with an end in mind without being concerned about the consequences, or feeling any empathy for those hurt along the way, we call that person a psychopath, or sociopath. When this occurs in business, government or foreign policy, we call it “strong leadership”.
  8. Education helps us to think clearly and be successful. The purpose of education is to inculcate government-approved core values and provide children with the basic skills needed to become malleable corporate drones and consumers. Fresh young minds with potential to do amazing things in one end, and well trained performing monkeys out the other end of the process.
  9. A good job is the answer to prosperity. That you have a good job is important to the government in the same way that a house full of valuables is important to a burglar. It sets you up as a nice fat cash cow. Prosperity comes from sources outside of a job, such as investments or business.
  10. We can trust those in power, in government and large corporations, and they have the answers. Most people in power are not evil, and most governments in first world countries are generally somewhat less despotic than those found elsewhere due to safeguards that are in place. Nevertheless, power means imposing the will of one person on another. This is generally to the benefit of one person, and the detriment of another. In financial terminology, this is called a conflict of interest. Do not assume that anyone in power will act in your interests. Think for yourself.
Link here.
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