Offshore News Digest for Week of November 4, 2002

ERODING RIGHTS

FBI Enlists Bankers to Track Terror Funds.

Assaults on liberties a growing concern.

More surveillance on the way in pending bill.

TOP PANAMA OFFICIAL ATTACKS O.E.C.D.

Panama’s Minister of Foreign Relations strongly attacked what he said is the OECD “imperialistic agenda” and called for a “level playing field” between OECD members, all other nations, and offshore havens.

THE BAHAMAS FACE MAJOR RECESSION

Huge drop in direct foreign investment a major cause; radical curbs on offshore financial sector another source of trouble.

Still more laws promised, but what about repealing the old ones?

BERMUDA FRAUD TANGLE LEFT BY MISSING SCOT

HAMILTON: Police lead cash hunt as creditors line up.

CAYMANS TO ADOPT STILL MORE ANTI-MONEY LAUNDERING LAWS

SNIPER CASE LATEST ANTIGUA SCANDAL

ST. JOHN’S: Bank failures, OECD blacklisting, now passport fraud.

CHANNEL ISLANDS PUSHING POST-ENRON OFFSHORE TAX SCHEMES

Still advocating offshore, off balance sheet corporate vehicles.

Angola oil millions diverted to jersey accounts.

Jersey may shift financial work to Dubai.

E.U. TOLD TO STOP PICKING ON SWITZERLAND

Global tax experts attack EU bullying of Swiss bank secrecy.

EU plans coordinated, 15 nation tax evasion crack down.

GIBRALTAR JOB WORRIES

Financial sector jobs may be lost if Barclays cuts back operations.

MALTA TOUGHENS FINANCIAL LAWS

VALETTA: To please the EU and gain EU membership, the Mediterranean island shakes off a “tax haven” image.

SINGAPORE HELD UP AS FREE MARKET, EXAMPLE IS ANYTHING BUT

$200 BILLION IN MUSLIM FUNDS FLEE U.S, WESTERN BANKS

KUALA LUMPUR: New Islamic bank rules claim to end West’s “debt slavery” as anti-terrorism pushes cash to Muslim nations.

CAN’T GO OFFSHORE? TRY AN EMBASSY TOUR IN WASHINGTON, DC.

HOW DO YOU MEASURE FREEDOM?

Pierre Lemieux questions accuracy of recent freedom rating indexes.

Hubert Jongen’s International Libertarian website here.

EUROPEAN UNION POLICE MAY RAID PRIVATE HOMES

Price fixing probe rules allow raids on employees homes.

CANADA DEMANDS EXTRAORDINARY POLICE POWERS

OTTAWA: Liberals push controversial “security” law.

Canada angry over new, stricter US visa, border policies.

IRS COMMISSIONER ROSSOTTI ENDS HIS FIVE YEAR TERM

Departing chief says IRS is losing war on tax cheats, especially the wealthiest and most sophisticated among them. Claims up to 80% of cheats in some categories will not be punished because the IRS lacks the resources to investigate documents, primarily from partnerships and similar entities that are used mostly by wealthy investors, which do not match up with reports on individual tax returns. IRS consultant has estimated that offshore evasion alone costs the government $70 billion annually.

Nixon administration commissioner Donald Alexander comments on Rossotti’s term: “Rossotti has this survey showing everyone loves the I.R.S. now and everyone hated it five years ago. The reason the I.R.S. was hated in 1997 and 1998 was that the Senate held those hearings to blast the I.R.S. and most of the media went right along with it. Rossotti placated Congress very well when they were in that idiot mood in 1997 and 1998, but he should have shifted much more quickly into addressing cheating, which he started on 18 months later than he should have.”

IRS report to GAO on combatting “abusive tax cheats” here. (PDF file.)

Cato Institute comments on the latest IRS fishing expedition, targeting Americans who use credit cards issued by foreign banks. It is demanding that credit card companies violate the privacy rights of their customers because the IRS thinks that some taxpayers might be using their cards to access money in foreign bank accounts - money that some taxpayers might not be reporting to the IRS. It is not illegal to hold an offshore account in a tax-free Caribbean country, nor is it against the law to use a credit card issued on that account in the United States. The IRS handbook for special agents says that most taxpayers use havens to avoid taxes and for tax-planning purposes - not to evade taxes. High taxes - and a tax code that punishes saving, investment, and work - give taxpayers an incentive to shift their activities to low-tax countries. That is the real problem. But the IRS has no interest in tax reform because tens of thousands of bureaucrats would lose their jobs if we had a simple and fair flat tax.

E.U. TAX INFORMATION SHARING PLANS COLLAPSE

With the US and SWITZERLAND refusing to go along with European Union demands to end financial privacy, it finally dawns on EU politicians and tax collectors they are not going to get what they want.

Swiss and British lock horns over banking secrecy.

AUSTRIA says EU tax deal near collapses.

E.U. PLANS FOR ALL-EUROPE TAX BLOCKED

Ireland, UK join other EU members in stopping EU “tax harmonization”.

JERSEY SIGNS TAX INFO SHARING AGREEMENT WITH U.S.

WASHINGTON: Largest Channel Island signs agreement with the US to share information on taxes, in the latest in a series of agreements being negotiated by the US Treasury with major offshore money centers.

For full TIEA text, see link at bottom of this page.

Jersey fund assets up 14% in 2001.

U.K. COMPANIES IN IRELAND CHALLENGE TAX RULING

LONDON: Lawsuit considered against UK Revenue tax haven rule.

20,000 TO VOTE IN GIBRALTAR REFERENDUM

Sovereignty is the question in British colony claimed by Spain.

NEW U.S.-CANADA BORDER CROSSING RULES

Canadians claim discrimination; US claims needed anti-terrorism.

PANAMA GOVERNMENT IMPOSES PHONE MONOPOLY

Protecting telecom deals, government blocks Internet ports.

RICH AUSTRALIANS TREATED LIKE CRIMINALS

Tax collectors force total information disclosure for wealthy and all their family members. The details required from the wider family include their interests in unlisted companies; whether they are named in a trust; where they have power to control the family trust; any partnerships; any association with partnerships; any joint ventures; any association with superannuation funds and any association with any entity whatsoever. “Rich 200” list members are beginning to get more angry and are planning to fight tax commissioner in the courts.

Most Australians would cheat on taxes if they could.

NIGERIA TOLD TO END FRAUD NOW

US, EU give African nation December 15th deadline to end e-mail scams.

BANKRUPT ZIMBABWE TRIES TO IMPOSE EXPAT TAXES

HARARE: Mugabe out of funds; wants to tax 3 million expatriates.

MAJOR BANKS TRY TO CURB SHELL BANKS

A group of leading financial institutions, including Citigroup, set out new global guidance for anti-money laundering controls in the settlement process between banks. The Wolfsberg Group’s private sector and voluntary principles bar doing business with shell banks and espouse a risk-based approach to evaluating clients, designed to ascertain the appropriate level of due diligence a bank should conduct on a client. The principles also deal with the identification and follow-up of unusual or suspicious activities.

OFFSHORE FUND MANAGERS WARNED ON SARs

US may try to extend suspicious activity reporting to US persons who invest offshore, fund managers told. “Red flags” which could signal money laundering activity include clients who are reluctant to answer questions, investors that regularly pull out of funds, regardless of the penalties, and inconsistencies between the originator of money invested, and the named fund investor.

“BEHAVIOR DETECTION” SOFTWARE TO SPY FOR MERRILL LYNCH

Program works by analyzing every transaction within the firm and looking for behavior - including single occurrences and patterns - within an account or among various accounts that may indicate illegal or unethical behavior. Money Laundering Monitor application alerts users to staged deposits or withdrawals of mixed monetary instruments, foreign electronic transactions, changes in inactive account behavior, transactions in accounts without investment activity, rapid movement of funds, transfers between unrelated accounts, hidden account relationships, and other behaviors that could indicate illegal activity.

NEITHER EQUALITY NOR PROSPERITY

US tax policies drive wealthy individuals and corporations offshore.

BEIRUT REAL ESTATE BOOMS WITH SAUDI CASH

Lebanon enjoys high priced real estate building boom as Arab cash flees US, Western banks and investments.

Rich and poor live in stark contrasts in Lebanon.

VOTERS SET REPUBLICANS LOOSE ON THE WORLD

White House basks in historic triumph. Election may seem to indicate listless drift, but it reaffirms the conservative majority. In tone, it returns US to the Eisenhower ‘50s. Republican control of the Senate goes a long way toward removing the Democratic rear-guard action against Bush’s judicial appointees.

U.S. ELECTIONS IMPACT OFFSHORE FINANCIAL WORLD

Dan Mitchell of the Heritage Foundation predicts Republican control of US Congress will ease pressure on the offshore financial world. Anti-offshore Democrats out; pro-tax competition in.

Dan Mitchell on the developing “European cult of multilateralism”.

E.U. DESPERATION: ANTI-SWISS TAX AMNESTY PROPOSED

Last ditch attempt to force expatriate funds from secret Swiss accounts.

THE SWISS INSURANCE BUSINESS, ALWAYS ROCK SOLID, IS NOT ANY MORE

GIBRALTAR VOTE EMBARRASSES COLONIAL MASTERS

Thursday’s vote overwhelming for continued British control

U.S. FREEZES ISRAELI BANK MILLIONS AT J.P. MORGAN CHASE

NEW YORK: Fraud suspected in Israeli accounts at JP Morgan.

CANADA FREEZES $100 MILLION; 4,000 SUSPICIOUS ACTIVITY REPORTS IN 5 MONTHS

OTTAWA: FINTRAC files first report on suspicious activity reports; millions grabbed by anti-money laundering agency.

MISC OFFSHORE NEWS

Bahamas tax revenues show major drop; budget deficit grows.

Barbados tax reforms may hurt offshore corporate sector.

Australia steps up anti-money laundering pressure.

Labuan, Malaysia haven boosts 18 trust companies, new banks.

HEDGE FUND INVESTORS MAY FACE LARGE BACK TAXES

WASHINGTON: IRS private ruling calls into question life insurance wrappers said to be “tax free”. SEC also investigating hedge funds.

OFFSHORE INVESTMENT FUNDS BOOMING

Tax haven equity funds show big increases; up 35% in Ireland.

Fitzrovia Research latest information on offshore funds growth here.

Annuities get more complex and expensive.

TWO INDICTED FOR OFFSHORE TAX EVASION

DENVER, Colorado: Two Denver-area residents plus a Florida-based associate allegedly set up shell corporations used to hide roughly $9 million in taxable income. The defendants also allegedly made it look like offshore transfers were payments for their consulting services, the indictment said. They provided the services to “members”, who paid an initiation fee of $50,000. “Members” allegedly used debit cards and loans to spend the money they hid offshore. Formal charges include 26 counts of aiding in the filing of false income tax returns, and filing false bank reports.

BLACK MARKET ECONOMIES GROW WORLDWIDE

Within most economies, there are large portions that work outside the law called shadow economies. Participants in the shadow economy neither pay taxes nor obey regulations. A recent study finds that taxes and burdensome regulations push people into the shadow economy. Average shadow economy 16.7% of GDP in the 21 OECD nations, vs. 38% in 22 nations making the transition to capitalism. A one percent increase in the marginal federal personal income tax results in the shadow economy increasing by 1.4 percent. Greece, Belgium, Italy, and Sweden all have tax burdens larger than 70 percent of GDP and have shadow economies larger than 20 percent of their official GDP. The United States and Switzerland have extremely low tax burdens [sic] and extremely low shadow economies (8.8% and 7.5% respectively).

British red tape strangling UK small business.

PHONY EXPORT-IMPORT PRICES EVADE TAXES

Among the 2001 government trade data are thousands of wildly mispriced transactions, and those trades may hint at corporate tax evasion and criminal money laundering on a grand scale, according to two academic researchers who have been mining the data for more than a decade. In 1998 the US imported nearly 602,000 single-lens-reflex cameras from Japan for an average price of $239. That same year, the US exported to Japan 240,000 single-lens-reflex cameras, over one-third of which were priced at an average of $11.39. They estimate that corporations manipulated international trades last year to shave $53.1 billion from their tax bills. Overpricing imports or underpricing exports is a relatively easy way to shift large amounts of taxable income out of the United States, or ill-gotten gains into the country.

FAMILY LOANS HAVE U.S TAX IMPLICATIONS

Simple rules to avoid having loans to relatives create more taxes.

AMERICANS QUESTION GROWING GOVERNMENT POWERS

Sharp questions about government intrusions in private lives.

US may create domestic spy agency.

CHRISTIAN RIGHT WORSHIPPING CAESAR

True conservatives fight government civil liberties violations.

SOUTH AFRICAN SNOOP LAW OKed

CAPE TOWN: New law allows secret police monitoring of telephone calls and e-mails. Back to apartheid police tactics?

BRITISH HOUSE OF LORDS DEFENDS LIBERTIES

LONDON: Left and right join to oppose Labour backed change.