Offshore News Digest for Week of July 21, 2003

IBM CAUGHT PLANNING TO MOVE WHITE-COLLAR JOBS OVERSEAS

An unusually candid exchange surfaced when a conference call at very high levels of IBM leaked to the New York Times:

“...two senior I.B.M. officials told their corporate colleagues around the world in a recorded conference call that I.B.M. needed to accelerate its efforts to move white-collar, often high-paying, jobs overseas even though that might create a backlash among politicians and its own employees.”

Time Computers looks to India for call center pilot.

UK-based Time Computers 200 call center staff in Burnley, England were told that the PC maker is to use workers in India to handle calls as part of a six month pilot to test the scheme. Currently, Time provides customer support during office hours. By using staff in India, the company says it will be able to provide around-the-clock support for its customers.

AUTO-ID: TRACKING EVERYTHING, EVERYWHERE

Supermarket cards and other retail surveillance devices are merely the opening volley of the marketers’ war against consumers. If consumers fail to oppose these practices now, our long term prospects may look like something from a dystopian science fiction novel.

A new consumer goods tracking system called Auto-ID is poised to enter all of our lives, with profound implications for consumer privacy. Auto-ID couples radio frequency (RF) identification technology with highly miniaturized computers that enable products to be identified and tracked at any point along the supply chain. Analysts envision a time when the system will be used to identify and track every item produced on the planet.

Since the Auto-ID Center’s founding at the Massachusetts Institute of Technology (MIT) in 1999, it has moved forward at remarkable speed. The center has attracted funding from some of the largest consumer goods manufacturers in the world, and even counts the Department of Defense among its sponsors. In a mid-2001 pilot test with Gillette, Philip Morris, Procter & Gamble, and Wal-Mart, the center wired the entire city of Tulsa, Oklahoma with radio-frequency equipment to verify its ability to track Auto-ID equipped packages.

Now that shopper cards have whetted their appetite for data, marketers are no longer content to know who buys what, when, where, and how. As incredible as it may seem, they are now planning ways to monitor consumers’ use of products within their very homes. Marketers are not the only ones who want to watch what you do in your home. Enter again the health surveillance connection. Some have suggested that pill bottles in medicine cabinets be tagged with Auto-ID devices to allow doctors to remotely monitor patient compliance with prescriptions.

Retail radio tags should have an off switch.

One of the hottest topics among the fearmongering press lately is RFID tags, or Radio Frequency ID tags. These come in a wide variety of shapes, sizes, capabilities and costs, but generally do one thing, identify an object uniquely. How uniquely? If they have a 128-bit code in them, they can identify billions and billions of items for every person on earth. How is this useful? The most immediate way is to replace barcodes, making sales better, faster and more accurate. The big players in the retail world are drooling over this technology.

A problem is that the tags themselves are passive devices, they never turn off, or on for that matter, they just are. With the proper device, you can read them now, or in 5 years. Think bar codes. This problem lead Benetton to kill a plan to RFID tag all the clothing they sell. Massive public outcry shelved that idea because they could not promise a way to turn the tags off. So what you say, who cares if the next time I walk into a Benetton store, they know that I bought something there 3 months ago, if they even keep the records. Well, the problem is much worse than you think, and it all has to do with a technology called data mining.

There is only one way to deal with the problems that will come about from RFID tags, turn them off, and give you a way to verify that they are off. There is no other choice. Everything else is subject to greed. If they do this, it will become a useful technology that benefits us all. Prepare for a fight.

US NAMES THE DAY FOR BIOMETRIC PASSPORTS

Frank Moss, deputy assistant secretary for Passport Services, presented his organization’s plans to evolve to a new, more secure “intelligent document” from today’s paper-based passports. “Our goal is to begin production by October 26, 2004,” Moss announced.

Under the US Enhanced Border Security and Visa Entry Reform Act of 2002, countries whose citizens enjoy visa-free travel to the United States must issue passports with biometric identifiers no later than October 26, 2004.

Quite how effective biometric passports will be in frustrating terrorist activity is a completely different matter...

US passports to carry digitally signed images.

Not everyone is convinced that digital passports are a good idea. Civil liberties groups fear that the introduction of such international identity schemes could permit governments to monitor the activities of citizens in unprecedented detail. But Moss says the US passports have been designed with these concerns in mind. “They will include no information other than that on the basic passport information page,” Moss told New Scientist.

Some technical experts also warn that such systems cannot guarantee complete security. “Never forget that everybody behind September 11 was using photo ID,” says Richard Clayton, a hardware security expert at Cambridge University in the UK. “It will raise the bar considerably,” he says, but will only identify known suspects or those with forged passports.

Security experts have also demonstrated that smart cards designed to be tamper-proof can be vulnerable to interference.

ID THIEVES RIP OFF 7 MILLION US ADULTS A YEAR

Seven million US adults,were victims of identity theft in the 12 months ending June 2003, according to Gartner. Gartner says its figures represent a 79% increase in people affected by ID theft since its last survey in February 2002.

It takes issue with a common misconception about identity theft -- that it is a Net crime perpetrated by anonymous, career criminals. “More than half of all identity theft -- where the method of theft is documented -- is committed by criminals that have established relationships with their victims, such as family members, roommates, neighbours, or co-workers,” said Avivah Litan, vice president and research director for Gartner, citing numbers published by the Federal Trade Commission.

REPORT ON USA PATRIOT ACT ALLEGES CIVIL RIGHTS VIOLATIONS

A report by internal investigators at the Justice Department has identified dozens of recent cases in which department employees have been accused of serious civil rights and civil liberties violations involving enforcement of the sweeping federal antiterrorism law known as the USA Patriot Act.

The inspector general’s report, which was presented to Congress last week and is awaiting public release, is likely to raise new concern among lawmakers about whether the Justice Department can police itself when its employees are accused of violating the rights of Muslim and Arab immigrants and others swept up in terrorism investigations under the 2001 law.

The report is the second in recent weeks from the inspector general to focus on the way the Justice Department is carrying out the broad new surveillance and detention powers it gained under the Patriot Act. The first report, which was made public on June 2, found that hundreds of illegal immigrants had been mistreated after they were detained following the attacks.

Communities shun Patriot Act.

About 165 communities nationwide have passed resolutions condemning the USA Patriot Act. But one little city in northern California has taken its opposition a step further, making it a misdemeanor for city employees to cooperate in enforcing the federal antiterrorism measure.

Critics say that the reason so many communities are denouncing the Patriot Act is because they believe the measure vastly expands the power of federal investigators, not only for investigating terrorism suspects, but also for probing into the lives of ordinary Americans.

An ACLU July 3 report says “more than 16 million people in 26 states have passed resolutions” condemning the Patriot Act, and that among them are some “traditionally conservative locales, such as Oklahoma City ... Alaska, Hawaii and Vermont.”

Is MIT a security risk?

Today, 37% of MIT’s graduate students and 9% of its undergraduates come from abroad. Under the slew of recent laws and presidential directives, these students and potential new ones could face delayed approval or even denial of their visas. The penalties for violating either act are stiff, including immediate deportation, heavy fines, and even criminal prosecution. These facts have increased anxiety among faculty and students on campus. There is concern that faculty will stop staffing their labs with graduate students and postdoctoral scholars from countries that have a history of significant delays or a high incidence of denials. And as security increases, says Provost Robert Brown, international students may head for more welcoming countries. “If the top talent in the world starts shying away from MIT,” he says, “our impact on science and technology will decrease.”

Post-Sept. 11 security laws have colleges scrambling.

US college officials are struggling to meet an Aug. 1 deadline to register all foreign students with federal authorities under post-Sept. 11 security laws, but they complain many innocent foreigners could be denied an American education or even be deported due to computer glitches in the registration system.

Campus offices that deal with foreign students are cutting back day-to-day services and working 14-hour days, but administrators say they still are stymied in trying to load information into the Student and Exchange Visitor Information Service, known as SEVIS.

Military tribunals drawing few attorneys.

GUANTANAMO BAY, Cuba -- The rules have been drafted, critiqued and revised. A courtroom has been built. The first candidates have been selected. But as the Bush administration prepares to try some of the 660 terror suspects held at the U.S. Navy base here in the first tribunals of their kind since World War II, officials are having difficulty finding attorneys willing to participate. Nearly two months after the call, only 10 lawyers have submitted credentials. Many more have said they will not.

Lawyers say preparing a meaningful case becomes impossible under rules that allow evidence they may never be allowed to see, that permit the government to eavesdrop on their conversations with clients, and that require them to get official permission before discussing the case with witnesses or other attorneys.

“The rules have been crafted in such a way that civilian defense lawyers will find it almost impossible to effectively participate in military tribunal cases,” said Miami attorney Neil R. Sonnett, chairman of an American Bar Association task force on the treatment of enemy detainees. “And, in fact, there are many fine lawyers who believe it would be unprofessional and even unethical for a lawyer to get involved under the circumstances the government is laying down.”

Homeland security sales pitch.

The flap over how the falsehood about uranium purchases from Niger made it into the president’s State of the Union message should not obscure what for me is the most troubling fact: Key members of the Bush administration, convinced in their hearts that America needed to destroy Saddam Hussein, thought it reasonable to exaggerate the threat and deliberately stretch the facts in order to sell the American people on that necessity.

The cleanup, fix-up, coverup effort now underway is an attempt to say to the electorate: This was an aberration; we do trust you with the truth.

Except they don’t. The Justice Department is in the midst of a mighty campaign to blunt criticism of the Patriot Act, the key legislative response to 9/11 and, according to civil libertarians of various stripes, a major incursion on our constitutional rights.

CHINA’S LEADERS SHOW SUPPORT FOR HONG KONG’S CHIEF EXECUTIVE

China’s top leaders declared their “firm support” for Hong Kong’s embattled chief executive, Tung Chee-hwa, but reserved judgment on the recent mass demonstrations in the city demanding democratic reform. The statements suggest that China’s Communist leadership has decided to close ranks behind Tung despite the risk of being tainted by public anger in Hong Kong against the former shipping tycoon who has presided over a severe economic slump.

NEW GROUP TO OVERSEE COOK ISLANDS FINANCIAL PRACTICES

A new body to monitor financial practices in Cook Islands is seeking a commissioner to oversee its operation. It has been set up in an effort by the government to lift the standard of supervision and regulation of financial institutions. Chairman Trevor Clarke says that could lead to the Cooks’ removal from the FATF’s international blacklist.

Cook Islands CIA World Factbook 2002 here.

New Zealand told to be frank at forum over Pacific poverty and corruption.

A former associate foreign affairs minister said hosts New Zealand should not let Pacific Islands Forum -- which opens on August 14 in Auckland for 16 Pacific countries -- leaders shield themselves behind the so-called “Pacific way” to defeat efforts to tackle cronyism, poor democracy and extreme poverty levels in the region.

BOLD RUSSIAN PRIVATIZATION AGENDA SET

The government intends to sell most of its minority stakes in companies from 2004 to 2006, starting with the sale next year of its last stake in LUKoil, the country’s No. 2 oil producer.

The government plans to raise 35 billion rubles ($1.1 billion) per year from state asset sales in 2004 to 2006, according to a draft program from the Property Ministry posted on the government’s web site. The government approved plans Thursday to sell its 7.6% of LUKoil, a stake worth about $1.1 billion at current market prices.

Russia will sell assets both to raise cash, which the state will use to pay debts, and to improve efficiency by reducing the government’s role in the economy.

ISRAEL’S EFFORTS TO REVERSE AN ECONOMIC SLIDE DRAW PRAISE AND PROTESTS

In just over four months as Israel’s finance minister, Benjamin Netanyahu has cut the top income tax rate to 49% from 60%, winning cheers from the wealthy. He is making sweeping reductions in social programs, provoking protests from the poor. He is trying to raise the retirement age to 67 for all, from the current age of 60 for women and 65 for men, prompting demonstrations by older workers, and he has revamped the pension system, drawing praise from economists. The national airline, El Al, is being privatized, and Mr. Netanyahu plans to reduce greatly the state’s role in the telephone, electricity and banking industries.

Israel is enduring its third year of economic turbulence, one of the worst downturns in its history, and the finance minister is drawing mixed reviews.

“We are doing two things -- making drastic reductions in the public sector and stimulating the private sector,” Mr. Netanyahu said in an interview. “The country will undergo a short period of hardship as we decelerate from the old system and then there will be a great spurt of growth.”

Report: A half million Israelis live in United States.

More than 650,000 Israelis, equal to about a tenth of the country’s population, live abroad, according to an Israeli Foreign Ministry study. The study shows the vast majority, almost a half million, live in the U.S.

Of the 650,000 Israelis living overseas, the Foreign Ministry study found that most were permanent emigrants -- defined as people who have lived outside Israel together with their families for at least four years.

IRELAND RESISTS EUROPEAN UNION MOVE TO SCRAP TAX VETO

Ireland has raised the temperature in its attempt to quash moves towards tax harmonisation in the EU before Dublin assumes the EU presidency next January. The Irish government is upset at provisions in Valéry Giscard d’Estaing’s draft EU constitution that would make it easier to scrap national vetoes on tax: The draft constitution says that when all member states agree that an EU proposal relates to “administrative co-operation or to combating tax fraud”, they lose the right to individual vetoes.

Ireland has signalled its opposition to such provisions for some time. Last month, it joined several other countries, including the UK, Spain and Sweden, to warn that the end of the veto “in this apparently limited area could affect the right of member states to control much of their own tax policy”.

Ireland’s recent economic record has been largely based on its low corporate taxes, currently set at 12.5%, which have encouraged inflows of foreign investment in sectors such as information technology and biotechnology.

The fight over taxes mirrors a larger battle over a “bridging” clause in the draft constitution which would make it easier to abolish specific vetoes if all national leaders agreed. This would avoid prolonged international negotiations and the need to make further revisions to the EU treaty.

THE CHALLENGES OF GLOBALIZATION TO CARIBBEAN STATES’ SOVEREIGNTY

It may be argued that from the first intervention of European states into the Caribbean that the states of the Caribbean have suffered from the impact of globalisation. It may be further argued, that even at the time of the granting of independence, the entire process of independence, the development and creation of the constitutions, and the granting of statehood, were all illusory indulgences with the Caribbean States having little or no real sovereignty.

Today the challenges of globalisation, the institutions of the World Trade Organisation, the World Bank, the International Monetary Fund, and their implications on the ability of current Caribbean states to manage their affairs have brought into focus once again issues of sovereignty.

BAHAMAS INVESTMENT ACT WAITING FOR SECURITIES COMMISSION ACTION

Enactment of the new Investment Funds Act is critical to establishing an efficient and competitive financial services sector, but everybody’s waiting for the Securities Commission of The Bahamas to sign off on it, according to the chairman of the Financial Services Consultative Forum.

The Investment Funds Act was part of a package of radical financial bills passed three years ago in the wake of The Bahamas Financial Services blacklisting by the OECD’s FATF. The FATF labeled the jurisdiction and others uncooperative in efforts to fight money laundering.

One objective is to put The Bahamas ahead of its main regional competitor, the Cayman Islands, which is demonstrating innovative product development, promotional flair, professional competence, and legislative and regulatory support.

WEALTHY FAMILY IS SUING LAWYER OVER TAX PLAN

LOS ANGELES: A wealthy real estate family that bought a high-priced insurance plan to shelter millions of dollars from gift and estate taxes is suing the prominent New York tax lawyer who devised the plan, his law firm and his associates for fraud. After an article in The New York Times last July about this type of shelter, the Treasury Department announced that such shelters would not be allowed.

The plan involved paying a high price for insurance, but for gift tax purposes reporting to the I.R.S. the lowest price at which such a policy could be sold. It was not necessary that any policies were actually sold at the low price; the rate just had to be on file in some state regulatory office. The difference between the low price reported to the I.R.S. and the high price actually paid was intended to be untaxed. The insurer invested the excess premium for the benefit of the heirs.

Other than disallowing this type of shelter, the I.R.S. has taken no action against the lawyer who devised the plan or his law firm. Federal laws governing tax-shelter registration apply only to income taxes, not to gift and estate taxes.

TAX EXPERTS SAY IRS HAS IMPROVED SERVICE

Five years after Congress ordered a kinder, gentler Internal Revenue Service, the agency has improved customer service and compliance but halfway through its 10-year reorganization still has a ways to go, experts say.

Nina Olson was a Richmond, Virginia, lawyer representing low- and middle-income taxpayers with problems when she testified in 1998 at televised Senate hearings remembered for tearful taxpayers and ex-IRS agents testifying with bags over their heads. Olson recalled being “no one” when she started doing battle with IRS regional “fiefdoms”. Now she is IRS national taxpayer advocate, an office created by the IRS Restructuring and Reform Act of 1998 to improve service and run interference for aggrieved taxpayers when the system breaks down.

The IRS continues to be plagued by computer modernization troubles that left systems unable to talk to each other, answer taxpayer questions or tell them their tax status. “The computer problem was enormous 20 years ago; it is enormous today,” said veteran IRS chief counsel B. John Williams, who retired this week.

Washington tax lawyer Martin Lobel said Congress shares blame for a tax evasion explosion in which offshore tax frauds alone cost Uncle Sam $40 billion a year. “Congress has passed a tax code that’s unenforceable,” said Lobel, who likens tax bills to “an auction system” with lawmakers shaking down contributors for special-interest tax breaks. “We had good tax simplification in 1986, but it’s hopeless unless Congress simplifies the system again.”

DELAWARE CORNERS LEGAL RESEARCH MARKET

Behind every headline-grabbing merger, there is an army of people doing legwork for the companies’ lawyers -- from searching court records to the creation of the company that handles the acquisition. While the work might lack the drama of a courtroom battle, these specialty legal research businesses are a critical piece of Delaware’s economy, employing more than 1,000.

Nationwide, the industry -- which generally falls under the rubric of “registered agent” -- has estimated annual revenues of more than $1 billion. Delaware companies have a corner on the national market because of CSC and CT Corp. The two companies have combined annual sales of more than $400 million and hold more than 70% of the country’s market share.

THE AVERAGE LIFE EXPECTANCY OF A COMPANY

The average life expectancy of companies in Europe and Japan is 12.5 years, according to a recent Dutch survey. Arie de Geus, author of The Living Company: Growth, Learning and Longevity in Business, believes that the average life expectancy of a multinational is between 40 and 50 years. One third of 1970’s Fortune 500 had disappeared by 1983. So why do firms like Sumitomo Group, Procter & Gamble and Shell appear to go on and on? One reason is that they learn -- and change -- effectively.

U.S. SEC CONSIDERS HEDGE FUND REGISTRATION ORDER

The U.S. Securities and Exchange Commission is closely studying a plan requiring hedge funds to register with it and submit to regulation, sources close to the SEC said last week. As it moves toward reining in the loosely regulated investment pools popular with financial institutions and the wealthy, the SEC is also edging toward ordering hedge funds to begin satisfying basic disclosure standards, the sources said.

Hedge funds boast about $600 billion in assets -- small compared with the $6 trillion mutual fund business -- but growing fast. This has been fueled by their superior performance over other investment vehicles, including mutual funds, as hedge funds can invest in almost anything.

At present, only individual investors with net worth of at least $1 million or annual income of $200,000 or more for two years running are eligible to invest in hedge funds. But financial firms have recently begun marketing “funds of hedge funds” that allow less well-to-do investors to put money into pools of hedge funds.

ARGENTINA CRACKS DOWN ON TAX EVASION

Argentina’s new president, Néstor Kirchner, has made recovering at least part of the estimated $7 billion to $9 billion in taxes evaded each year by Argentines his first major fiscal reform since his inauguration in May. Argentina is South America’s second-largest economy. In late 2001 it declared the largest foreign debt default in world history and is just now showing signs of recovering from a brutal five-year recession, its worst economic bloodbath ever.

The economic crisis, in fact, increased tax-evasion rates, already high because of the country’s oddly circular reasoning: keep tax rates exorbitantly high in order to make up for its toleration of one of the highest rates of tax avoidance in the Western Hemisphere.

BUSINESS WEEK’S RETIREMENT GUIDE

A series of articles, with descriptions such as “Disinflation and subsequent falls in interest rates especially hurt retirees”, “Is it time to lock in profits from your house?”, and “Sleep Soundly without Stocks: Author Zvi Bodie says the safest possible approach to retirement savings is to stick closely to TIPS and I-Bonds”.

WHY DEFICITS MATTER

When Bush administration officials discuss the deficit, they make it sound like a problem on the scale of a particularly persistent case of fiscal dandruff. “Manageable,” Office of Management and Budget Director Joshua B. Bolten told a House hearing. Let us depart from our usual style on rendering numbers to consider exactly what “manageable” looks like. This year’s deficit is projected to be $455 billion. That is $455,000,000,000. Over the next five years, the administration estimates, the cumulative deficits will total $1.9 trillion. That is $1,900,000,000,000.

Deficits such as these matter because the increased government borrowing creates a drag on the economy; it reduces the amount of capital available for private investment and consequently the increased national income that would result from greater investment. The problem occurs because -- as the administration, which tried for a while to argue this Economics 101 point, now concedes -- the greater competition for capital drives up interest rates.

Most worrisome -- these structural deficits are being put in place at precisely the wrong time: when we ought to be socking money away (or at least paying down the existing debt) to pay for the soon-to-explode costs of Social Security and Medicare.

ISSUE OF LAWYER-CLIENT CONFIDENTIALITY

To lawyers, protecting clients’ confidentiality is a cornerstone of the practice of law. So it is with considerable anxiety that they are watching a brewing battle between one law firm and the government over the confidentiality of the firm’s client list. The I.R.S. issued a court-approved summons last month to the law firm of Jenkens & Gilchrist, seeking the names of about 600 clients who invested in specific types of tax shelters. The transactions may have been abusive, according to the I.R.S.

Jenkens & Gilchrist, which is based in Dallas, has refused to turn the names over to the government, saying that would violate the privilege that protects the confidentiality of communications between lawyers and clients. The firm’s action sets the stage for a legal battle -- though a spokesman for the I.R.S. did not comment on the agency’s plans -- over just what the privilege protects and what it does not.

The issue turns on a series of exceptions to lawyers’ rules of professional conduct, according to lawyers not involved in the dispute. Communications between lawyers and clients generally are protected and may not be disclosed unless the client permits, said Roger C. Cramton, a law professor at Cornell University. There is an exception: The fact that a particular person has hired a particular lawyer and the amount the lawyer is paid are not privileged, he said.

THE DEATH OF PRIVACY -- AGAIN

The death of privacy has been predicted many times before, most notably with the growth of private and government databases that cross-reference vast amounts of data about individuals. What is different now is a wave of technologies, including Webcams, RFID tags, and location-based services in phones, that add the potential for “front-end” privacy intrusions that are immediate and personal, to add to the “back-end” intrusions (ranging from large databases of your spending habits to rogue employee abuses of driver records) that are largely offline and aggregated and that we have grown used to. These new technologies also empower individuals to violate each other’s privacy, something we had to rely on governments and unscrupulous companies to do for us in the past.

This is not just a question of individuals taking unwanted pictures of celebrities in public or of retailers actually being able to answer the question, “Nice pants -- where have they been?” Many businesses will need to pay closer attention to what employees, customers, and visitors alike are doing with intrusive technologies such as camera phones inside their facilities and on their property.

Echelon: It can see us, but not as clearly as we thought.

The almost mythical Anglo-American global listening system -- Echelon -- really does exist, it really does listen to phone conversations, and it really does read your emails and faxes. According to a preliminary report, Echelon snoops on private and business communications, and not military ones as originally suspected, and everyone is now being advised to encrypt all emails as a safeguard.

In spite of the fear that any unencrypted private communications can be intercepted and read, the report does admit there is no evidence to suggest Britain and the US have abused information gained. It also admits that Echelon is not as powerful as was feared.

IT Myths: Who is analyzing our trans-Atlantic phone calls?

Who is listening to your phone calls? One of the most commonly heard IT myths has it that governments and large telcos are in cahoots, tapping calls, especially those between the US and other countries, listening for key incriminating phrases.

The idea of blanket monitoring of thousands of calls in real time, coupled to real time analysis of what is being said, isn’t likely. It is far more likely a suspected wrong-doer is the subject to someone “listening in”, in classic spy story style.

TRACKING CHIP LAUNCHES IN MEXICO

Borrowing from technology for tracking pets, a U.S. company has launched Mexican sales of microchips that can be implanted under a person’s skin and used to confirm health history and identity. The microchips, already available in the United States, could tap into a growing industry surrounding Mexico’s criminal concerns. Kidnappings, robberies and fraud are common here, and Mexicans are constantly looking for ways to protect themselves against crime.

The microchip, the size of a grain of rice, is implanted in the arm or hip. Hospital officials and security guards use a scanning device to download a serial number, which they then use to access blood type, name and other information on a computer.

SWISS BANKERS ASSOCIATION SURVEY SHOWS OVERWHELMING SUPPORT FOR FINANCIAL PRIVACY

This year’s survey clearly shows that the Swiss attach great importance to the protection of financial privacy. The overwhelming majority -- 90% -- of those questioned believe that protecting bank clients’ financial data vis-à-vis third parties to be “very important” (2002: 87%). 80% said they were in favour of maintaining bank customer confidentiality (2002: 73%). This view also holds in an international context: 74% believe that the present international pressure on Swiss bank client confidentiality must be resisted and that Switzerland must not sacrifice this confidentiality (2002: 69%). This year there was a more positive judgement of banks’ efforts to fight money laundering and to prevent funds of criminal origin from entering the banking system.

U.K. WEALTHY GROW WARY OF TAX REFORM SPECTER

Some of the wealthiest people in the UK fear the government is about to end their cherished ability to pay little or no tax. Their concern is well founded. Although the government has played down the issue, the Treasury and the Inland Revenue are quietly working on plans that could lead to significant tax increases for wealthy UK-based foreigners.

The work is supervised by Gordon Brown, the chancellor, who knows reform is likely to be controversial even if it is popular with some voters. One obvious consequence could be an embarrassing exodus of wealthy foreigners. Another is the risk of lasting damage to the economy and therefore also to the Labour party’s already tarnished pro-business credentials.

Under rules that date back to 1914, wealthy individuals who are resident in the UK but claim their domicile is overseas pay tax on their worldwide income and capital gains only if they bring the money into the UK. These “non-domiciled individuals” can also avoid capital gains tax on UK assets by holding them in a foreign company or trust.

The government is considering giving new tax incentives to skilled workers from abroad in a general review of the fiscal treatment of foreigners in the UK.

OECD EXPRESSES MORE COOPERATIVE TONE TOWARDS JERSEY

In a marked change of tone since the OECD placed Jersey onto its blacklist of harmful tax havens back in 1998, the Paris-based organisation is now offering to assist the jurisdiction in its proposed tax reforms.

“All we would ask is that there is transparency and co-operation between jurisdictions,” commented Jeffrey Owens, head of the center for tax policy and administration at the OECD while speaking at a conference this week. “The Island is leading the move away from competition based on secrecy towards competition based on skills and services in a well-regulated environment. We support this and are happy to offer our knowledge and experience as Jersey changes its tax regime to remain competitive,” he added.

TAX AND REGISTRY COMPETITION PRAISED IN PANAMA LAWYERS’ FORUM

On July 15 some of competition’s greatest advocates -- and a representative of Panama’s greatest competitor in the ship registry field -- talked public policy and international economics before an audience of admiralty lawyers. This was an occasion to bash the OECD and the EU over policies that arguably run counter to Panama’s interests. Basically the OECD, largely at the behest of European countries, has a “Harmful Tax Competition Initiative” that would blacklist countries deemed “tax havens”. Moreover, within the OECD and the International Maritime Organization there are proposals for changes in ship registry laws, ostensibly for protection against the fleet said to be owned by Osama bin Laden’s outfit, which would discourage ship owners from using Panamanian or Liberian flags of convenience.

“The OECD is trying to force all countries to share information... to everybody to pay tax back to their home countries,” the Center for Freedom and Prosperity’s Andrew Quinlan explained. He detailed the history of the CFP, a small think tank and lobbying outfit spun off from the larger American conservative movement and specializing in international tax issues.

BANK OF BERMUDA IS CONSIDERING A TAKEOVER BID BY THE HSBC

Bermuda’s main union chief has claimed that the Bank of Bermuda is considering a takeover bid by the multinational Hongkong Shanghai Banking Corporation. And Bermuda Industrial Union (BIU) president Derrick Burgess said sources told him Bermuda’s most successful bank had approached Government to ask for permission to strike a deal but that it was denied following a Cabinet meeting.

Mr. Burgess said he was worried that, should the United Bermuda Party (UBP) win this Thursday’s election, the new government would allow the proposed deal to go ahead. Mr. Burgess pronounced himself “alarmed” over the consequences of such a deal, and added: “Undoubtedly this will result in the loss of hundreds of jobs held by Bermudians.”

Bermudian work permit term limits could force firms off the island.

A recent report in the Royal Gazette has revealed that many Bermudian based firms are considering leaving the island as they become ever more exasperated by the work permit term limit rules, with Dublin, which enjoys a corporate tax rate of 12.5% and work permits without term limits, emerging as a popular alternative location.

From 2001, the government required all foreign workers in Bermuda to obtain a work permit, which has a limitation period of six years, with the possibility of three year extensions for certain key personnel. However, as the 2007 cut-off date fast approaches, many firms are considering drastic measures as they cope with a potential recruitment crisis and loss of highly trained and experienced employees.

U.S. INTERNET GAMBLING CRACKDOWN SPARKS WTO COMPLAINT

The World Trade Organization said it will appoint a three-member panel to determine if U.S. efforts to crack down on offshore Internet gambling operations violate international trade accords.

The WTO announcement comes in response to a challenge filed by Antigua and Barbuda, a Caribbean island nation that is a major nexus for the Internet gambling industry. U.S. laws that ban the transfer of funds to offshore gambling operations and make it difficult for non-U.S. firms to obtain gaming licenses violate trade agreements ensuring market access to “cross-border services”, the complaint said.

Internet gambling became a major part of Antigua and Barbuda’s economy during the 1990s, when up to 100 different online gaming companies employing more than 5,000 people operated in the island nation. Today, there are fewer than 40 Internet gambling companies located on the islands employing half as many local residents. Island officials attribute the industry’s decline in part to the U.S. crackdown.

The online gambling industry remains one of the Internet’s few cash cows, with much of its success owed to an increase in demand from U.S. consumers. Global revenues from Internet gambling are projected to exceed $5 billion this year, with 50 to 70% of that revenue from U.S. customers, the U.S. General Accounting Office said.

SURVEY: RICH NOT GETTING RICHER

A new survey shows the world’s billionaires and millionaires lost almost $2 trillion in wealth in 2002 as economies slowed and markets declined. According to the Boston Consulting Group’s Global Wealth 2003 survey, those same investors have seen their holdings tumble by almost $5.3 trillion in local currency terms since early 2000, when the equities markets were near their collective peak. The total increases to $6.4 trillion if investors with holdings of $250,000 to $1 million are included.

Not only are the rich getting poorer, they are getting fewer. According to the BCG survey, in 1999 there were about 36.5 million households around the world who met the criteria of “wealthy” -- assets under management of $250,000 or more. In 2000 that number slipped to 35.3 million. In 2001 it was down to 33.3 million and last year it fell again to 33.0 million, made up roughly of 13.6 million in North America, 9.2 million in Asia-Pacific and the Middle East, and 9.1 million in Europe.

Canada’s wealthy see assets slashed.

Canada’s richest investors lost $106 billion (U.S.) last year, or nearly 12% of their managed assets, as they fell prey to a persistent bear market that has wreaked a “global destruction of wealth”, according to a survey released by Boston Consulting Group.

The dwindling portfolios are wreaking havoc at investment firms, which have endured four successive years of declining sales and are now 25% below their peak revenue levels during the tech-giddy days of early 2000.

U.K. millionaires now worth £240 billion less.

There are an estimated 350,000 households in the UK with assets in excess of £1 million. Between them, they suffered a financial loss of about £240 billion in 2002 -- about four times the GDP of Scotland.

Yet according to the authors of the report -- financial management firm Boston Consulting Group -- some of the losses could have been avoided. They say Britain’s financial elite suffered last year because of their obsession with shares. The typical rich German household, they point out, invests most of its money elsewhere - and has gained as a result.

Australian wealthy households see gain in assets, numbers.

The assets of local wealthy households rose from US$333 billion in 2001 to US$347 billion last year. The number of wealthy Australian households also rose slightly to about 340,000. The figures do not include assets such as property, superannuation and private business assets.

Like investors, Australian private banks and wealth management businesses have fared better than most of their global counterparts, experiencing a revenue slide of 8% at a time when the worldwide industry lost 25% of their revenues.

BCG director and vice-president Andrew Dyer, one of the report’s four authors, says the positive overall results from the Australian market relative to the rest of the world demonstrated the more robust business model that has evolved here. “[P]rice erosion hasn’t been as great in Australia as it has been elsewhere, [and] the asset mix held by Australians has not changed to the extent of other countries,” he said.

IRS GOES AFTER TAX SHELTER PROMOTERS

The I.R.S. has recently stepped up its campaign against tax sheltering arrangements and the promoters of such schemes, issuing new registration, reporting, and list maintenance rules for financial service providers. Under the terms of the new registration rules, advisers are obliged to report to the IRS any tax minimization products and services offered which the tax agency has dubbed “abusive tax shelters”.

Michael Salzman, head of White & Case’s New York tax controversy practice, observed that: “The IRS has had some difficulty in articulating the exact type of tax shelters they want to eliminate. [But...] All tax professionals are now much more wary of getting involved in something that might be considered an abusive tax shelter and firms are focusing largely on internal compliance with the new regulations.”

TAX CUTS SET TO MAKE TAX FILING MORE COMPLEX NEXT YEAR

A look at an early draft of next year’s tax return form recently published by the IRS confirms that the process will be even more time-consuming next time around. Taxpayers will need to calculate and retrospectively apply new share dividend rates, and capital gains rates, not to mention the hideously complex alternative minimum tax which will catch more people in its net next year. This is likely to lead to an increase in the use of tax preparers and tax software such as Turbo Tax, as people turn to the experts for help.

INVESTIGATIVE REPORT: IRS COMPROMISES TAXPAYER PRIVACY

Duane Horton knew there was something strange about the tax-preparation software he received in the mail from H&R Block. On its face the pitch looked like one of the normal solicitations from software companies. But it was not the package itself that raised his suspicions so much as the address to which it had been sent.

Horton did not receive the mailing at his home in Portsmouth, R.I. Instead, in 2000 he pulled it out of his postal box in the nearby city of Middletown, where he receives important mail. Then he noticed the package also was addressed to his wife, Josephine, who never received business mail at the box. There was only one exception to this rule: Horton and his wife both received their tax documents there from the Rhode Island Department of Revenue and the IRS.

The more he thought about it, the more Horton, a civilian mechanical engineer for a U.S. Navy laboratory and a self-described libertarian who takes privacy very seriously, became convinced that someone at the IRS was behind this mailing of the product from a private company.

NEW MEMBERS’ TAX RULES “HARMFUL” TO EU

Harmful tax schemes are widespread throughout the 10 countries due to join the European Union next year and Poland, Lithuania and Malta have not done enough to phase them out, the European Commission has concluded. In a report to EU governments, the Commission argues that all of the new members except Estonia and Latvia have corporate tax breaks that could frustrate the EU’s internal market.

The Commission asks EU governments to draw up a definitive “list of harmful measures of each acceding state to enable the respective countries to take the appropriate steps to roll back their harmful measures at the latest upon [their formal] accession [to the EU on May 1 2004].”

The EU has lost its chief source of leverage to ensure its new members speedily comply, since it reached a binding deal with the 10 new entrants last December.

Many countries have agreed to phase out special deals for offshore companies or to clear up rules for investment promotion schemes, but the Commission notes that Poland disagrees with its assessment of its 14 special economic zones.

FIRSTRAND MAY SELL OFF TROUBLED OFFSHORE PRIVATE WEALTH OPERATION ANSBACHER

Ansbacher was bought by FirstRand in 1993 but became embroiled in controversy after an inquiry ordered by the Irish high court in 1999 found that customers of Ansbacher -- which operated in the Channel Islands, the Cayman Islands and the Bahamas -- were allegedly involved in tax evasion from the 1970s to 1996.

Ansbacher has been a consistent drag on earnings; it delivered a R65 million loss in the year to last December. Ansbacher was expected to lose money again this year because of the write-off of corporate debt following loans to Enron and WorldCom.

APPLICANTS MAY BE DETERED IN SOUTH AFRICAN FOREX AMNESTY

Some provisions of the South African government’s recently introduced legislation granting amnesty for individuals having contravened foreign exchange controls could deter potential applications, according to Liesl Kruger, international tax manager at accounting group KPMG in South Africa.

In the first case, she said, due to the leviable amount being based on the current market value of the foreign assets, the anomaly may arise that a taxpayer has, for example, illegally transferred 1 million rand offshore, which over time had increased to 5 million rand. “The levy will be based on the current market value (5 million rand), although the actual contravention only amounted to 1 million rand,” she noted.

“In my view, another anomaly may also arise where the taxpayer has borrowed funds to acquire assets offshore. The amnesty does not recognise the existence of the debt.”

Irrespective of constraints referred to above, she concluded, the amnesty remained a “golden opportunity” for miscreants to put their fiscal houses in order.

U.K. CASH LAUNDERING CURBS HALTED

The Financial Services Authority is set to scrap proposals that would have forced 10,000 financial companies to carry out anti-money laundering checks on millions of customers, after it emerged that the move could cost the industry £170 million. Such measures would have provoked a backlash from the financial services industry, which has complained about the growing cost of regulation being introduced by the FSA.

The National Criminal Intelligence Service, which investigates suspicious financial transactions, indicated that it did not object to the decision. It said: “We recognize that the needs of business must be balanced with the needs of law enforcement.”

ROYAL CANADIAN MOUNTED POLICE WANTS PHOTO ID ALONG WITH CELLPHONE PURCHASE

The RCMP drug squad in Newfoundland and Labrador would like to see people buying cellular phones and other wireless communications devices obliged to present photo identification. Sgt. Greg Smith says officers have a hard time investigating some drug dealers because they can buy many phones and remain anonymous.

Defence lawyer Bob Simmonds says he does not care about the challenges faced by police. “I am not going to feel very happy if I want to go in and buy something at Radio Shack, and they say, ‘you’re going to fill out this information.’ Perhaps it’s just me, but I have a real aversion to providing the state or Big Brother with information... because they say they have a certain concern.”

REP. RON PAUL, THE GOP’S LONER FROM THE LONE STAR STATE

A strict opponent of almost everything government undertakes, the Texas Republican congressman usually finds himself on the losing end of legislative battles. No more so than this year, in which the United States fought a war he did not support. Congress, meanwhile, enacted a tax cut he feels is too small, returned to deficits, expanded the role of government through the Department of Homeland Security and is poised to pass a Medicare reform package he abhors.

On July 10, he underscored why he is often a thorn in his own party’s side as much as in the Democrats’. In a lengthy floor speech dubbed “Neo-Conned”, he lambasted the administration and its philosophical bedfellows. Picking up on the same themes, he told The Hill, “I don’t think [the administration is] conservative at all. I think they talk conservative, but the government spending continues to go up. It seems like there’s no hesitancy to spend anything that anybody asks for, whether it’s guns or butter.”

Paul is confident that his views will prevail on issues both foreign and domestic: “I’ll probably win this argument. The reason is not because anybody’s going to pay any attention to what I say. But what’s going to happen is we’re going to run out of money. It happens to every empire, throughout all history.”

It’s tough to believe that Paul is not frustrated. No, he says, “In spite of my short-term pessimism, I’m optimistic about some of the changes that are happening in the country. This is really the beginning of an intellectual revolution that has to occur.”

The Ron Paul Freedom Principles here.

Ron Paul’s House web page here.

JUST HOW CONSERVATIVE IS THE BUSH ADMINISTRATION?

This is a question liberals have no trouble answering. They point to many items on an agenda long associated with the activist wing of the Republican Party: a parade of ideologically driven judicial nominees, a tax plan that rewards the rich even as the working poor are being lopped off employment rolls and, above all, a go-it-alone America-first foreign policy.

But one notable group of critics has serious doubts about the administration’s commitment to conservative ideals: American conservatives. What alarms them, young and old, is not so much the specific policies of the Bush administration as its appetite for an ever-enlarging, all-powerful government, a post-9/11 version of statism, the bête noire of conservatism and the subject of one of the movement’s founding texts, Albert Jay Nock’s Our Enemy, the State.

BERMUDA PROGESSIVE LABOUR PARTY CLINCHES SECOND TERM IN GOVERNMENT

The PLP claimed victory in Bermuda’s general election on Thursday night, winning in 22 seats to the United Bermuda Party’s 14. By 11 p.m. (Bermuda time), the PLP had polled 15,061 votes, or 51.9%, to the UBP’s 13,853 votes, or 47.7% of ballots cast. PLP leader, Premier Jennifer Smith held her St. George’s North seat by only eight votes in St. George’s North, polling 423 votes against a strong showing by the UBP’s Kenny Bascome, who polled 415 votes.

The Progressive Labour Party was fighting for a second consecutive term while the United Bermuda Party was bidding to return to power after a decisive defeat ended a 30-year term of power.

BRITISH VIRGIN ISLANDS CHIEF MINISTER DISCLOSES STATE OF THE TREASURY

As at May 31st, 2003, there was approximately $50 million in the treasury, but the majority of it is committed for capital projects, leaving very little in the reserves, it was reported last Thursday. “This begins to illustrate the difficult nature of the path ahead,” declared Chief Minister Dr. the Honourable D. Orlando Smith, as he addressed the 1st sitting of the 1st session of the 15th Legislative Council of the Virgin Islands. The sitting was the first since the National Democratic Party (NDP) was sworn in following victory at the polls on June 16th.

LATEST LETTER FROM PANAMA

Derek Sambrook’s latest report on the state of affairs in Latin America here.

UK’S TAX LEAD UNDER THREAT

The British corporation tax of 30% since 2001 is now only just below the average for the EU and for the member countries of the OECD, and the advantage is continuing to be eroded. The global trend to falling tax rates is caused by a growing competition to attract business. Belgium and Ireland are at the forefront of such cuts, with the Irish tax down last year from 16% to 12.5%.

Average corporate tax rates in the study by accountancy firm KPMG have fallen from last year’s 31.4% to 30.8% now for OECD countries, and from 32.5 to 31.7% for European Union nations.

INLAND REVENUE REGARDS IRELAND AS HAVEN

The Revenue has a list of countries where British businesses can own subsidiaries which are taxed by the local authorities and do not attract attention from the UK. All other countries not specified are unapproved tax havens and subsidiaries there are taxed at UK rates. Ireland has been removed from the approved list because Ireland has negotiated with the EU that it can reduce its corporation tax level to 12.5%. The result is that Irish subsidiaries would have to pay additional tax to bring them up to the UK rates.

CRITICISM FOR BROWN OVER TAXMAN FOUL-UPS

GORDON Brown will face criticism from a powerful Commons committee today over the “shambles” that has engulfed the Inland Revenue. The Treasury Select Committee will expose serious failings in the management of the tax-collecting agency.

A string of scandals has left the Inland Revenue’s reputation at rock bottom. They include chaos in the payment of child tax credits and a massive failure in the collection of National Insurance, which has left millions facing a pension shortfall. The Inland Revenue’s poor record will be laid firmly at the Chancellor’s door because it is part of his Treasury empire. Having been in the post for six years, Brown will not be able to blame the failure on previous governments.

MANX INSURANCE EXPERT CITES REGULATION AS KEY TO ISLAND’S POPULARITY

Speaking following his return from the sixth annual IBC wealth management conference in Bermuda, Isle of Man-based insurance expert, Nick Verardi suggested that the Island is well-respected internationally as a result of its highly regulated life insurance sector.

TONY BLAIR: HONG KONG “BOUNCING BACK” AFTER DIFFICULT YEAR

Mr. Blair said Britain’s commitment to the region remains and will never disappear. The Prime Minister made his comments during a speech to the British Chamber of Commerce in Hong Kong.

Blair Urges Hong Kong to Preserve Stability.

Prime Minister Tony Blair gave a cautious endorsement to Hong Kong’s democracy movement during a stopover in Hong Kong. Speaking at a lunch sponsored by the British Chamber of Commerce, Mr. Blair said he believed that Chinese leaders were dedicated to Hong Kong’s constitutional development and stability.

Some local advocates of democracy were unimpressed by Mr. Blair’s caution. “If he had wanted to reassure Hong Kong people, he would have been more forthcoming,” said Audrey Eu, a member of the Legislative Council.

BRUNEI HOPING TO CREATE A MARKET IN BONDS

Brunei has little chance of unseating global bond capitals like London, New York or Tokyo. Especially when you consider Brunei does not even have a bond market; it only recently launched an equity exchange. Its vast oil wealth left the government little incentive to create financial markets. It is now building them.

Brunei may provide an intriguing test case of a Southeast Asian economy building a market from scratch. It needs to create a debt department, form a group of bond dealers to bid on and distribute debt. From there, Brunei needs to develop a vibrant secondary market to pave the way for corporate, mortgage-backed and asset-backed securities.

Like its peers in the region, Brunei ends up shipping large quantities of its financial reserves overseas. Its economy would be better off if that money stayed here and were put to productive use. The money could be aimed at economic development, which might boost consumer and business confidence.

Oil and gas account for 94% of exports. Yet the source of the nation’s wealth could vanish in 20 years if predictions about Brunei’s wells running dry come true. Efforts to fill that void are intensifying.

SOUTH AFRICA GOLD MINES FACE FIRST LARGE-SCALE STRIKE SINCE 1987

South Africa’s three major gold miners -- AngloGold, Gold Fields and Harmony -- all face a strike from Sunday, while two of the country’s coal miners -- BHP Billiton’s Ingwe and Kuyasa -- also remain on course for strike action, National Union of Mineworkers (NUM) spokesperson Moferefere Lekorotsoana said on Wednesday.

The news should not impact on the rand according to foreign currency traders, as gold now makes up far less of South Africa’s foreign exchange earnings than in 1987. “Gold amounts to less than a eighth of South Africa’s exports, whereas in 1987, when we had the last major gold mining strike, gold was around half of exports. I think the strike has already been priced in,” a currency trader said.

SUSPECTS NAMED FOR VATICAN BANKER’S DEATH 21 YEARS AGO

One of modern Italy’s greatest unsolved murder mysteries was reopened on Thursday after investigators named four people suspected of killing Roberto Calvi, a banker linked to the Vatican, freemasonry, the Mafia and illegal political party funding. Twenty-one years after his corpse was found hanging under Blackfriars Bridge in London, his pockets stuffed with bricks and wads of Swiss francs, prosecutors in Rome said Calvi had been murdered partly because he had mishandled funds given to him by Cosa Nostra, the Sicilian Mafia.

In addition, Calvi had known too many secrets about how Mafia money had been laundered through the Vatican’s bank and Banco Ambrosiano, the private bank of which he was chairman, they said. Finally, his murder had served as a warning to others caught up in his shady transactions, from the world of politics to Italy’s Propaganda 2 (P2) masonic lodge and the Vatican’s bank, to keep their mouths shut, the prosecutors alleged.

Calvi’s body was found shortly after Banco Ambrosiano, which had a close relationship with the Vatican, had been taken into compulsory liquidation. More than $1 billion was missing from Banco Ambrosiano’s subsidiaries in the Bahamas, Luxembourg, Nicaragua and Peru.

U.S. HOUSE OF REPRESENTATIVES TAKES AIM AT PATRIOT ACT SECRET SEARCHES

The House voted overwhelmingly to roll back a key provision, which allows the government to conduct secret “sneak and peek” searches of private property. The House voted 309-118 to attach the provision to a $37.9 billion bill funding the departments of Commerce, State and Justice. It would be the first change in the controversial USA Patriot Act since the law was enacted in October, 2001.

The move would block the Justice Department from using any funds to take advantage of the section of the act that allows it to secretly search the homes of suspects and only inform them later that a warrant had been issued to do so.

Supporters of the change say that violates both the U.S. Constitution and the long-standing common law “knock and announce” principle -- which states the government cannot enter or search private property without first notifying the owner.

House efforts to curb library and book purchase snooping stymied by technicality.

Rep. Bernie Sanders (Independent-Vermont), an arch-liberal of the Democratic caucus, had hoped to defund Section 215 of the USA PATRIOT Act, which gave FBI agents broad powers to search a citizen’s library or bookstore records without probable cause that a crime has been committed or that the information sought is related to a crime.

But the effort was stymied by technical errors associated with the amendment to the Department of Justice Appropriations Bill.

INTELLIGENCE OFFICIALS: TIA IS TOO BROAD

As if the prospect of getting its funding stripped by the Senate was not a big enough problem for the Terrorism Information Awareness program, intelligence leaders told an oversight committee today that the project is too ambitious.

“I welcome the tools, investment and experiments, but it is unbounded,” said Maureen Baginski, the FBI’s executive assistant director for intelligence, adding that the information awareness group needs a more specific goal than stopping terrorism.

Alan Wade, chief information officer at the CIA, said the tools the Defense Advanced Research Projects Agency (DARPA) is developing for the TIA program are valuable. But, he said, integrating the tools is a very hard task. “The scope may be too big” he said.

Senate seeks TIA halt.

The Senate’s Defense appropriations bill, passed July 17, contains an amendment preventing DOD from spending any more money on TIA research and development. Sen. Ron Wyden (D-Oregon) proposed the amendment in May. The project involves collecting and storing myriad data on individuals, then scouring it for patterns or activities that might relate to terrorism. It has spawned congressional and public opposition.

US PASSPORTS TO CARRY DIGITALLY SIGNED IMAGES

Frank Moss, deputy assistant secretary for Passport Services at the US Department of State, says the first digital passports will be issued in the US by 26 October 2004. Moss announced details of the plans at the Smart Card Alliance Government Conference and Expo in Virginia last week.

Not everyone is convinced that digital passports are a good idea. Civil liberties groups fear that the introduction of such international identity schemes could permit governments to monitor the activities of citizens in unprecedented detail. But Moss says the US passports have been designed with these concerns in mind. “They will include no information other than that on the basic passport information page,” Moss told New Scientist.

Some technical experts also warn that such systems cannot guarantee complete security. “Never forget that everybody behind September 11 was using photo ID,” says Richard Clayton, a hardware security expert at Cambridge University in the UK. “It will raise the bar considerably,” he says, but will only identify known suspects or those with forged passports.

Security experts have also demonstrated that smart cards designed to be tamper-proof can be vulnerable to interference.

GOVERNMENT OF PAKISTAN TO STORE FINGERPRINTS OF EVERY CITIZEN

ISLAMABAD: The government has decided in principle to launch a nation wide campaign aiming to store fingerprints of citizens for which law enforcing agencies have been assigned various tasks. According to reliable sources, the first phase of the campaign would be launched across all jails of the country so that fingerprint of prisoners could be taken. The campaign would be supervised by Federal Intelligence Agency (FIA) whose officials are getting trained by American experts.

Sources also revealed that modern computer surveillance systems have been installed in all airports of the country where American experts are training Pakistani officials, which are now storing the bio data and fingerprints of citizens themselves. Sources gave another reason for the implementation of these measures that it would stop terrorists and other criminals from changing their names as done in the past enabling such people to escape from the law.

A CONSUL’S HONORARY LIFE IN THE CARIBBEAN

“Funny, Serious and Just Plain Stupid”, reads the title of the manuscript detailing Ian Court’s experiences of 15 years on the “391st rung of the British diplomatic ladder”. This book-in-the-making is an irreverent and hilarious collection of stories, incidents and sagas from Ian’s stint as an Honorary Consul in San Juan, the capital of Puerto Rico.

Although many countries employ honorary consuls, the post is a peculiar one. As unpaid and untrained representatives of the British Government, in case the Royal Family or official visitors turn up, it used to be held by a shipping agent but is now a prominent individual.

“When I told new employees that I couldn’t possibly prepare them for the strange requests they would receive, they all thought I’d been in the sun too long,” chuckles Ian. “But they soon came to realise that the reality of their daily work was far more bizarre than I could possibly have described.”

U.S. ELECTION FRAUD RISKS ATTRACT WIDE NOTICE

Black-box voting machines have gotten mainstream press coverage for the first time, following an earlier Inquirer story here.

Dan Gillmor, the Electronic Frontier Foundation award winning technology columnist for the San Jose Mercury News, devoted his column last Sunday to the topic, and concluded that voting machines ought to have paper trails, if we are to trust them.

Then MSNBC ran the story, “E-voting flaws risk ballot fraud”. That article describes the study (PDF file) of a group of computer security researchers at Johns Hopkins University, whose findings describe a variety of ways in which Diebold Election Systems machines and software are vulnerable to major vote-tampering mischief before, during and after elections.

Several interesting links are given at the end of the article, such as “Origins of American Vote Fraud”.