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Gaskill and Goodrich case | 
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This is a July 2000 appellate decision involving tax evasion by way of an offshore trust. People who improperly use offshore trusts for tax evasion are indeed convicted. An interesting aspect is that the Ninth Circuit rejected the "I may have set up the trust, but I didn't file the tax return" argument. It is also worth noting that the Ninth Circuit also dismissed offhand defendants' evidence that they lacked formal control over the trust's funds, essentially stating that it was obvious from the purpose of the scheme that defendants had effective control over the funds at all times.
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A British overseas territory. The developed nations (high tax nations) of the EU are putting enormous pressure on such tax haven countries to curtail what they have labeled as "unfair" tax competition. As a territory of the UK, Gibraltar will be particularly vulnerable and will eventually fail as the tax haven we now know.
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A transfer of property or money for less than the fair market value of the property with the intent to make a gift.
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A U.S. gift tax does not apply to cash transfers to U.S. persons by non-citizens and non-residents (NRA). (See IRCode Section 2501 and Reg. 25.2501-1(a)(3)). But, a gift tax does apply to gifts by non-citizens and non-residents (NRA's) for real estate located in the U.S. or tangible personal property located in the U.S. to U.S. persons. (IRCode Sections 2501(a) and 2511)
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Given in Freedom Trust |
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An Internet pyramid scheme which promises to return thousands of dollars with little or no money invested as a down payment and is in our opinion a scam.
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Glass-Steagall Act |
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The Repeal of Glass-Steagall and the Advent of Broad Banking, by James R. Barth, R. Dan Brumbaugh Jr. and James A. Wilcox (4/2000). Enactment of the Gramm-Leach-Bliley Act (GLBA) in November 1999 effectively repealed the long-standing prohibitions on the mixing of banking with securities or insurance businesses and thus permits "broad banking." Since the barriers that separated banking from other financial activities
have been crumbling for some time, GLBA is better viewed as ratifying,
rather than revolutionizing.
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Gramm-Leach-Bliley
Financial Services Modernization Act |
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The signing of the Gramm-Leach-Bliley Financial Services Modernization Act on November 12, 1999 lays a solid foundation for the future. The legislation blends the needs of consumers and financial services providers with key safeguards for safety and soundness. It should improve market efficiency and benefit consumers with greater choice and competition.
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The person who creates and funds a trust, usually for the benefit of another.
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1) A trust in which a U.S. person is the settlor/grantor/creator, and that person creates an APT. The income of the APT is reported on the personal tax return of the settlor.
2) Trust promoters wrongfully make claims of tax benefits from one grantor trust (the transferor trust) transferring assets to another offshore trust, called the "transferee trust". The IRC rejects that position. If the first offshore trust makes a gratuitous transfer to another offshore trust, the grantor of the transferor (the first) trust is treated as the grantor of
the transferee trust. However, there is an option. If the transferor trust
grants a general power of appointment to another person, who in fact
exercises the power in favor of another trust, the appointee (the power
holder) is treated as the grantor of the transferee trust.
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An alien and individual holding a U.S. green card is considered to be a permanent resident of the U.S. (IRC Sec 7701(b)(6)). As such he or she is taxed as is a U.S. Citizen on his or her world-wide income. Pre-residency tax planning is essential before residing in the U.S.
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A tax haven in the Eastern Caribbean. Home of too many unsavory banks and it is tainting their reputation in the international financial community. Among the better banks in Grenada is Swedish owned Bank Crozier, one of the few legitimate banks in Grenada. [attribution: www.goldhaven.com]
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The Group of 10 is made up of eleven industrial countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States) which consult and co-operate on economic, monetary and financial matters.
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Group of Eight (G8) |
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The G8 comprises the following countries: United States, Japan, Germany, Britain, France, Italy, Canada and Russia. The G-8 convenes periodic summits.
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Grupo Mexicano case |
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A 1999 U.S. Supreme Court case where the majority of the Court held there was nothing wrong with using "foreign judgment proofing strategies" since the fraudulent transfer and bankruptcy laws would handle any such problem.
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A former (in liquidation in 1995) Cayman Island bank nefarious for its money laundering at high fees and encouraging U.S. persons to practice tax evasion. Over 1,000 names of their customers were turned-over to the U.S. Attorney by its former owner, John Mathewson in a plea bargain. The records provided to the U.S. were encrypted under Cayman Island (CI) encryption protocol and the CI government was unsuccessful in preventing the unauthorized use of that protocol by the U.S. government. How the U.S. government obtained the decryption software was never revealed. Hundreds of U.S. tax evaders are being investigated. |
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Guaranteed funds |
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Guaranteed funds are issued by the leading UK institutions (all S&P rated) via their offshore arms and are available only to offshore investors. They provide a contractual guarantee of principal plus a lock-on of income earned, and have yielded solid double digit returns consistently. They provide, in a sense, the best of both worlds -- stability of bonds ... and most of the upside of an equity portfolio. These guaranteed funds are therefore ideal for cautious investors seeking superior returns in the medium term (5 yrs) with no volatility. Significant features include:
(1) carrying a contractual principal guarantee;
(2) earned income locks onto principal and is also subject to that
guarantee (the so-called "ratchet effect");
(3) availability is through the offshore arms of several of the largest
European banks, which are highly rated by Standard and Poors and/or
Moody's and provide the guarantee;
(4) the investor becomes a direct participant in an institutional
portfolio run by the world's leading managers;
(5) the funds are designed to provide a steady, secure and non-volatile
return over the medium term; and
(6) effectively these funds offer the best of both worlds: the downside
protection of bonds and the growth normally associated with a balanced
diversified portfolio.
[attribution: APF list, rpi@sky.net]
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The Hague Convention on Trusts |
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Italy is one of very few European civil-law countries that have ratified The Hague convention on trusts such that a foreign trust, for example an APT, will be recognized there.
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Harmful or preferential tax regimes |
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The UN and the OECD (see this Lexicon) have taken the controversial position that a country that has no or low tax rates to encourage business development is wrong. Their position is that the offshore tax regimes are not done with the intent to attract real business and direct foreign investment. Their position is that these lower or non-tax regimes are predatory tax policies that divert business from another country. The OECD will exert tremendous pressures upon the British overseas territories to implement international standards with much local opposition. The opposition will eventually fail. The new standards will apply to various sectors, such as banking, insurance and the securities field. Standards will also be implemented in the areas of company formation and management, trust administration and anti-money laundering programs. The quest for high tax revenue drives this effort.
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Harpe, Richard case |
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Richard Harpe case was a joint RCMP-Turks & Caicos Islands police investigation of a British West Indies Trust Company and the seizure and private copying of the documents in the TCI office by the RCMP.
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No longer the sole domain of the very wealthy, an expanding number of 'enhanced' mutual funds are using strategies pioneered by hedge funds to offer investors the best of both worlds; superior returns in both bull and bear markets typical of hedge funds combined with the stricter regulatory characteristics of regular mutual funds.
The catalyst for the creation of these funds was a 1997 decision by the IRS to allow mutual funds to generate more of their gross income from short sales or from stock held for less than three months. As a result, mutual funds can now use many of the specialized hedge fund investing techniques such as leverage, the purchase of options and warrants and short selling.
Such methods, although risky, provide the potential for higher returns.
Research by Professor Matthias Becker of St. Gallen University in Switzerland suggests that hedge funds produce long term returns of 17-20 percent, compared to nominal equity returns of 10 percent for most mutual funds. They also allow astute managers to build portfolios that have a low correlation with the wider stock market. This is an excellent method of diversification that can help protect a portfolio in a bear market. [attribution: Offshore Finance USA]
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High yield investment program (HYIP) |
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1) Another version of the prime bank guaranty high yield scam program. We received some interesting comments from a prospective clients that bear reporting. "I have the opportunity to participate in a HYIP. For this HYIP a bank guarantee or a CD is required. My Bank (DEUTSCHE BANK) refused to issue the guarantee because she told me those programs are not working." Even Deutsch Bank agrees with our Web page.
2) Con artists are marketing bogus "prime bank" investments that promise
"risk free" annual returns of 20% to 200% or more. The schemes go by many
names: bank-secured trading programs, high-yield investment programs,
standby letters of credit, prime bank notes. The common denominator? All are
supposedly debt obligations guaranteed by the world’s top 100 banks, or
"prime banks." Con artists claim only big corporations, foreign banks or
ultra-wealthy investors know about them. They’re pitched as secret trading
programs that the Rothschilds and Rockefellers set up years ago, which are
only offered to the elite. Often, investors are told not to investigate the
offering independently or risk being permanently expelled from participating
in these markets. [attribution: http://moneycentral.msn.com/articles/ ]
3) "There is no such thing as a legitimate guaranteed high yield investment
program. They are simply invented products used to part the gullible from
their funds." [attribution: David Marchant, www.offshorebusiness.com]
4) Stay very clear of these types of programs. Check with the debt recovery department of the US Treasury Department and other federal agencies as to what they state regarding these HYIPs. They don't exist in the manner that the promoters state and investors claim they do. For example, consult anyone who has tried their hand with First Bank of Grenada and see how they and others feel about these alleged HYIP schemes now. [attribution, in part: www.goldhaven.com ]
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Historical bonds |
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(Typically worthless bonds sold by scam artist of defunct company (such as Houston Railroad Company bonds) or even nation (pre-Mao Chineese government bonds).
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(1) cross between a corporation and a trust;(2) technical term used by the IRS to describe and classify any entity which is otherwise not technically defined in the IRC.
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Now you can insure against the damages from identity fraud. Travelers Property Casualty Corp. announced that they will provide coverage for victims of identity fraud up to $15,000 for the expenses in clearing your financial records. Coverage includes legal expenses, telephone, lost wages, to name a few items.
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ICC Commercial Crime Bureau and Cyber crime Unit |
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Polices all financial and intellectual property rights breaches on the Internet.
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A new threat to your financial privacy. The process starts with your name, Social Security Number, date of birth and other easily ascertainable basic information such as where you live, or what vehicles you drive. With this information, identity thieves can acquire IDs such as a voter registration card, Social Security card, and other similar non-photo ID Cards. From these documents they begin the process of obtaining
government photo IDs such as the driver's license.
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Imminent risk of dying |
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This means there is at least a 50% medical probability that the annuitant will survive for at least a year.
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Impossibility defense for contempt charges |
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U.S. judges can use their powers to incarcerate anyone for contempt of court as a way to "encourage" someone to comply with their orders or as a form of
punishment for failure to comply. As a general rule, if the person subject
to an order of the court is totally unable to comply, that should be a
defense against any contempt charges. The following are interesting comments by attorney Richard Duke about the Lawrence case (page 5) and about the impossibility defense vis-a-vis contempt charges.
"The impossibility defense can only be alleged on a legal basis if the
action (required by the court) is impossible. This removing of the U. S.
person as co-trustee or the resignation of the U. S. person as co-trustee
is going to be classified by most U. S. courts as a charade. This charade
will be met by most U. S. courts as the creation of the impossibility
defense upon the removal or resignation of the co-trustee (too late!). The
same is going to be true of the appointment of a U. S. person as trust
protector. Let's ask the question of why a U. S. settlor wants a U. S.
trust protector? The answer is to oversee the trustee. And even with narrow
powers and negative powers, this resignation by the U. S. trust protector
or this removal of the U. S. trust protectors is going to be classified as
a charade by U. S. courts. Most U. S. courts are going to say that the U.
S. trust protectors can remove the trustee and exercise other controls over
the trust (according to foreign trust law and the trust instrument) and the
resignation or removal of the U. S. trust protector created the
impossibility defense (too late!). If the U. S. settlor is not going to
give up real control to the trust assets (required for the trustee to be
the legal owner in a trust relationship), then don't go offshore. This
"game playing" and "cute" planning is dead. Serious practitioners cannot be
"yes" persons to clients when we know that we are "playing games." Is it
honest for a practitioner (a promoter) to tell his or her client what the
client wants to hear when in reality the planning is just plain game
playing or silly cutesy planning?" [attribution: asset protection strategies, rpi@sky.net]
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Imputed interest rates |
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Interest rates that are assumed when there is no explicit rate in a specific transaction. For this purpose, the amount of an annuity payment includes an imputed interest factor similar to the interest rate on an installment sale. The applicable interest rate is prescribed by the tax code in section 7520 and it changes each month.
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Income, source of |
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Many IRS tax issues arise on the question of what is U.S. source income or income effectively connected with the U.S. One new issue that has come up is in the context of taxation of electronic commerce on the Internet, that is, the determination of the source of income in the global e-commerce realm.
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1) Payment of premiums is no longer a test for ownership of the policy and does not create incidents of ownership.
2) Offshore life insurance offers superior asset protection. It is extremely difficult for someone onshore to sue you and attach a judgment against your offshore life insurance policy. Insurance is big business in the Isle of Man.
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Insurance securitization |
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Securitization is a process whereby claims capital is paid into a financial institution at the start of the policy. The policy is designed for low-frequency, high-dollar value occurrences such as earthquakes and hurricanes.
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Interbank Rate of Exchange |
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The rate at which banks deal with each other in the market.
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International business company (IBC) |
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1) Created under a special act. Abbreviated as IBC and the equivalent of an "exempt" company in other jurisdictions. Generally, it may not carry out business with residents of the jurisdiction in which it was created. It may not own real property except by leasehold. It is prohibited from carrying on businesses providing banking, insurance, reinsurance and trust services-- which require a special license. Also, it may not act as a registered office for other IBC's.
2) A term used to define a variety of
offshore corporate structures, alternatively called exempt companies. Common
to all IBC's are the dedication to business use outside the incorporating
jurisdiction, rapid formation, secrecy, broad powers, low cost, low to zero
taxation and minimal filing and reporting requirements. An increasing number
of offshore jurisdictions are permitting the use of nominee shareholders,
directors and officers.
3) When a U.S. person forms a foreign corporation in a favorable no-tax
jurisdiction, the U.S. law will recognize that corporation, for legal purposes, as a corporation. However, for tax purposes (not legal purposes), the U.S. may classify that legal corporation for tax purposes as something else, such as a disregarded entity (one owner) or a partnership (two owners). [attribution: Offshore Tax Strategies, rpi@sky.net].
4) The only real opportunity for U.S. tax avoidance and deferral is in the business arena rather than in the investment arena. To the extent that a non-U.S. based business can operate without having any employees or agents in the U.S., the profits are not subject to U.S. taxes. That is true even if the products are sold to U.S. customers via the Internet.
5) Offshore corporations can either issue bearer shares or issue
registered shares. It is important to understand the distinction
between the two. Bearer shares are similar to cash; whoever holds
them owns them. Bearer shares are generally turned in to the company
secretary prior to the annual meeting and exchanged for voting
certificates. After the meeting, the certificates are re-exchanged
for the shares. Oftentimes, to maintain confidentiality for the
beneficial owner, an attorney votes the bearer shares. Registered
shares require the disclosure to the company (and often to the local
government) of the legal owner of the shares. In most countries
where offshore companies are established, nominee corporate
shareholders are employed to shield the identity of the beneficial
(actual) owner of the shares. The nominee shareholders vote the
shares according to the instructions of the beneficial owner, with
whom they have a contract setting forth, the client's beneficial
ownership of the shares.
6) IBC shareholders are in many instances exempt from local income
taxes, capital gains taxes, corporate taxes, inheritance, succession
and gift taxes, stamp duties with reference to transfers and very
importantly, foreign exchange control regulations in most offshore
jurisdictions. To this end, an IBC should be incorporated in an
offshore jurisdiction that either exempts or minimizes tax liability
on the corporation's worldwide income. The corporation should be
recognized both locally and internationally, allow for bearer shares
and confidentiality of shareholders and allow for corporate directors
and officers who can reside anywhere.
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International Chamber of Commerce (ICC) |
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Located in Paris, France. The institution that issues the rules governing Demand Guarantees, including SLC’s. The International Chamber of Commerce has no affiliation with the local Chamber of Commerce offices.
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International Depositor Insurance Corporation (IDIC) |
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1) A knock-off of the U.S. term Federal Depositors Insurance Corporation (FDIC). IDIC was closed down in 1999 in two Caribbean jurisdictions, having never been granted an insurance license in any jurisdiction and having no audited financial statements (by a major Chartered accounting firm) to show reserves and assets.
2) A check on October 12, 2000, revealed that the IDIC does not even
have an address, phone or fax number on their web-site and will not tell the public where they are based.
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International driver's license |
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Legitimate and authentic international driver's licences can be obtained in about 5 minutes time for about $20 Canadian at most branches of the Canadian Automobile Association.
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International Financial Center (IFC) |
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An international financial center is the professional name increasingly used to identify a legal tax haven. An IFC is a nation or independent legal jurisdiction that has passed important legislation to protect
and attract international clients. At present there are about sixty-five jurisdictions throughout the world that have taken steps to be known as an IFC.
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International Offshore Financial Centre (IOFC) |
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Another name for an offshore financial jurisdiction, or what used to be called a tax haven.
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International Transfers |
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By the nature of offshore banks being offshore, these banks are more geared to making international transfers compared to the average domestic bank, which can usually execute such transactions as well. They have the systems and staff in place to effect payments rapidly
on location, as opposed to many domestic banks, which normally pass
everything through to an international department at a separate location. This added link in the chain can add several days to the transfer.
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Investment in the contract |
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For tax purposes, this is the amount that is paid by the buyer of the property for the property, plus or minus various adjustments. This is generally equal to the tax basis of the property being sold, plus any gain that may be recognized on the transaction.
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Investment Trust |
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1) A company whose sole business consists of buying, selling and holding shares.
2) A structure set up for the sole purpose of buying, selling, and
holding shares. This is often referred to as a passively managed
entity.
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Internal Revenue Code or tax code.
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Irrevocable Life Insurance Trust (ILIT) |
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Insurance trusts are formed to own insurance policies and to receive the proceeds outside the taxable estate of the decedent. Sophisticated investors with large estates may consider foreign trusts and insurance plans to maximize tax planning benefits, investment flexibility, and asset protection..
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Filed with the IRS by non-resident aliens with U.S. source income. Must be renewed every 3 years.
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U.S. companies don't issue Form 1099 to non-U.S. persons. Instead, they issue Form 1042, but only if the payment is on U.S. source income subject to reporting.
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IRS Forms 3520 and 3520A |
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1) Form 3520 is filed with the IRS in the Philadelphia office upon formation of the offshore trust to advise of each transfer of assets to the trust. There is a public misconception that it is filed only upon asset transfers to the trust. It is filed annually whether or not there are any transfers. Form 3520-A is the annual report of the trust to be filed every year while the trust exists.
2) Form 3520 also applies to distributions from offshore trusts. A U.S. recipient has to file this form when they receive more than US$10,000 from a foreign trust (APT, FAPT, etc.).
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Filed upon the transfer of assets to an offshore entity. A loan or capitalization of an offshore IBC would be a reportable event.
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IRS Form 990-PF |
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A new form making U.S. private foundations more transparent. Discloses officers, directors, their pay and the recipients of grants. Open for public viewing.
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Internal Revenue Service. The IRS operates under the U.S. Treasury Department. It currently has about 102,000 employees and it is the largest law-enforcement agency in the United States.
The U.S. federal income tax is constitutional. Past arguments that it is not have consistently failed, as will future ones. Moreover, the courts are responding to these arguments with $5,000 frivolous claim penalties. Unless you have $5,000 to throw away, plus court and legal fees, stay away from this one -- it's a clear loser! [attribution: moneycentral.msn]
"The IRS, (having been) burned once, never engages in (collection) lawsuits and bankruptcy proceedings abroad." Key citations:
United States of America v. Harden, [1963] S.C.R. 366, 41 D.L.R.2d 721, 44
W.W.R. 630; comment, Recent Case Note, 77 Harvard Law Rev. 1327 (1964).
[ABA-TAX list]
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Israeli trust law is very new and not well-developed; trusts are not commonly used in Israel. There have been proposals in Israel to tax worldwide income of
all residents and this would probably cause trusts to be included.
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Almost 10 years ago, the Italian government enacted a law to curb the
misuse of tax havens. Unfortunately, the statute has generally been viewed as ineffective. Luca Dell'Anese with the Institute of Tax Research in Milan writes that the Italian Parliament has adopted a much stricter anti-deferral regime to remedy the problem. The new law features a controlled foreign corporation (CFC) section, analogous to the CFC provisions in subpart F of the U.S. Internal Revenue Code. Italian lawmakers were influenced by the OECD's 1998 report on harmful tax cooperation.
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Jersey, Island of |
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A very stable international financial center. Jersey's basic fiscal structure was established in 1940 under German occupation and has changed relatively little since its implementation. Jersey has been responding to attacks that the island operates unfair tax laws from the EU. They have been responding that the converse is true, they blame the high tax structures of other nations that have made the island attractive to non-residents. It is not, they argue, changes made to Jersey's tax laws, that have enticed investors to leave their respective domestic jurisdictions, but rather tax law changes in those respective jurisdictions.
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Joint annuitant |
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A person who is one of two or more people who will receive annuity benefits in a joint and survivor annuity contract.
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Joint and survivor annuity |
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An annuity in which the payments continue after the death of the first of two or more annuitants until after the death of all the annuitants who are parties to the contract.
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In the whimsical sense, a necessary delay occasioned by using island time.
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Jurisdiction, Web |
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Pa. Lays Down Web Law
Personal jurisdiction requires more than access to a Web site, two federal court rulings held.
By Robert L. Sharp
The Legal Intelligencer
September 16, 1999
Merely having an interactive Web site that is accessible to Pennsylvania residents does not
make a defendant subject to general jurisdiction, according to two recent rulings in federal court.
Rather, the Web sites must provide the defendant with a continuous, systematic and substantial business contact in Pennsylvania, the rulings stated.
The rulings dismissed for lack of personal jurisdiction a patent infringement action against a Canadian company and a personal injury lawsuit against a Georgia travel agency.
Both defendants solicit online sales of goods and services.
U.S. Senior Judge Marvin Katz held that "the establishment of a Web site through which
customers can order products does not, on its own, suffice to establish general jurisdiction."
Otherwise "any corporation with such a Web site is subject to general jurisdiction in every state," Katz wrote in deciding Molnlycke Health Care v.Dumex Medical Surgical Products. The ruling was filed last week.
"While personal jurisdiction and other legal doctrines must obviously evolve in light of new
technologies, the court does not believe the time has yet come to abandon personal jurisdiction altogether," Katz stated.
Similarly, U.S. Judge Harvey Bartle III wrote that general jurisdiction "requires more than a recognition that a nonresident corporation has an 'interactive' Web site."
Instead, there must be some proof the defendant made "deliberative contact" with Pennsylvania through the Internet, stated Bartle's opinion in Hurley v. Cancun Playa Oasis International Hotels, filed Aug. 31.
In Molnlycke, Katz ruled that an Internet offering "cannot be deemed to be purposefully directed at Pennsylvania even if some Pennsylvania residents respond to that campaign."
While the defendant's Web site is available in every state, the plaintiff failed to show that the site targeted Pennsylvania, Katz ruled.
The defendant's sales in Pennsylvania from its Web site were neither systematic nor central to its business, Katz found.
"The growing case law in this circuit's districts ... has established a 'sliding scale' of jurisdiction based largely on the degree and type of interactivity on the Web site," Katz wrote.
Simply posting information on the Internet for access in foreign jurisdictions is not grounds for the exercise of personal jurisdiction, according to the case law cited by both Katz and Bartle.
However, the knowing and repeated transmission of computer files over the Internet would clearly constitute doing business, the cases from the past three years hold.
In the middle of the sliding scale, according to the case law, is an interactive Web site which allows a user to exchange information.
The level and commercial nature of the interactivity will determine the exercise of
jurisdiction, the case law holds.
"The 3rd Circuit and its district courts have typically required a very high showing before
exercising general jurisdiction, and the court sees no reason for the Internet to change this approach," Katz wrote.
In Hurley, Bartle also noted the lack of deliberative contact by the defendant, a travel
agency which acted as agent for a Mexican resort hotel where the plaintiff allegedly suffered a personal injury.
There was no evidence the defendant travel agency "has done anything to encourage residents of Pennsylvania to visit its Internet site or that the Web page was directed at
Pennsylvania more than any other state," Bartle wrote.
Neither did the plaintiff show that he purchased his travel arrangements via the Internet.
"On the contrary," Bartle wrote, the plaintiff argued only that the defendant's Web site had the potential to reach and solicit Pennsylvania residents.
Such reasoning would confer personal jurisdiction over any foreign defendant who could reach
residents and solicit business in a forum state by using the telephone, television or mail, Bartle noted.
Wrote Katz: "For the court to hold that general personal jurisdiction could be established solely by the existence of Web sites such as those at issue here would deal a serious blow to the concept of personal jurisdiction."
Also, in neither case could the plaintiffs convince the courts that their claims were related to or arose from the defendants' contacts with Pennsylvania. Thus the courts chose not to exercise specific personal jurisdiction, as well.
In Oct. 1999, subcommittee chairman Howard Coble (R-NC) introduced a new cybersquatting bill, H.R.3028, the "Trademark Cyberpiracy Prevention Act."
[In a decision in September 1999, a U.S. district court ruled that mere
interaction between residents of Pennsylvania and a Web site located outside that state does not bring the web site within the jurisdiction of local courts for purposes of being sued. The court sited two recent U.S. court cases that held no general jurisdiction is created by Web site's Internet availability to residents of other states. - Source: LawNes]
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Key tested telex (KTT) |
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An older form of transferring funds between banks, using telex machines in addition to verification of messages through the use of key code numbers.
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Kingdom of Enenkio |
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The fictitious Kingdom of Enenkio is not recognized in any international forum as a sovereign state nor is it a corporate or statutory entity.
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"Kiwi loan" case |
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Canada's Supreme Court ruled on the Shell case, better known as the "kiwi loan" case, in June 1999. The court held "Using literal interpretation and the mantra that taxpayers are entitled to arrange their affairs to minimize tax, the Supreme Court has decided that taxpayers can structure any transactions they want to achieve tax benefits unless there is a specific statutory provision that prohibits them from doing so -- in short, whatever is not expressly prohibited is permitted." Conversely, see the definition of anti-avoidance rules. Who know what is acceptable any longer?
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"Know Your Customer" rules (KYC) |
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1) Banks use their KYC system, inquiring of existing and potential clients about where they got their "unusual" money deposits and what they intend to do with them. The bank then decides what is "normal" for each bank customer. Any substantial deviant banking transactions are noted and the customer is asked to explain. Where the explanation is inadequate, the bank issues a suspicious activity report to FinCEN.
2) The original Know Your Customer regulation was withdrawn by the
Federal Deposit Insurance Corporation in March 1999, after Americans
flooded the FDIC with more than 300,000 anti-Know Your Customer e-mails
and letters. The regulation was also opposed by pro-privacy groups and
bankers.
"Know Your Customer would have required banks and other
financial institutions to monitor every American's bank account," said
Dasbach. "Banks would have been required to develop customer profiles
and report any 'unusual activity' such as large cash deposits or
withdrawals to the government -- in effect turning every bank teller
into an informer and everyone with a bank account into a criminal
suspect."
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Labuan International Financial Exchange |
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Labuan is planning to establish an international Islamic money market and e-commerce gateway called the Labuan International Financial Exchange.
The Exchange, a subsidiary of the Malaysian Kuala Lumpur stock exchange,
would provide listing and trading facilities for investment funds and
structured debt instruments based on both Islamic and conventional
principles. The new exchange would be Internet-based and trade in U.S.
dollars. Company listings would begin in April 2000, and the Islamic money market is expected to start in October.
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Laundering, money |
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1) Money laundering is the process of cleaning illicitly gained money or money on which taxes have been evaded so that it appears to others to have come from, or to be going to, a legitimate source.
2) The process of manipulating the proceeds from criminal activities or money from which taxes are unpaid and converting it into what appears to be clean, tax neutral money. To succeed in a money laundering case in the U.S., prosecutors must demonstrate that the funds are ill gotten proceed from a specific criminal enterprise.
3) The activity necessary to convert "black" money into clean money, called washing. Starting with a "front company", the money flows through a complex network that whisks money electronically until washed. Laundering is intended to avoid taxes on the money or to conceal criminal activity. Criminal activities include drug trafficking, ransoming and concealing money stolen while in political power or other positions of government influence. Corrupt banking officers are a usual ingredient to look the other way for a fee. Money laundering significantly undermines the
integrity of the world banking system to the extent that certain countries
are high profile and identified as sources of laundered money. Money
laundering is not a crime in some countries such as Israel making it a prime locale for Russian money laundering. While in the Caribbean, lax banking laws in Antigua and Grenada taint their banking reputation. Banks chartered in the South Pacific in Vanuatu and Nauru are also used as easy vehicles for laundering.
4) "Front companies" are often formed to allow ingenious schemes to funnel
money from one country to another avoiding the attention of the taxing and
customs officials. Funds may end-up in a "pocket bank", one belonging to a
single person or company or a "political bank", for the partial benefit of a corrupt bureaucrat.
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Lawrence, Stephan Jay (Lawrence case) |
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The subject of the "Lawrence case", a Florida bankruptcy case in 1999. Held in contempt of court and jailed for failing to turn over $7 million in an offshore (Mauritius Island) trust to the federal bankruptcy court. This was Lawrence's retirement account. Lawrence set up the trust for himself, his two sisters and his mother. He lost $50 million in his trading account at Bear, Stearns & Co. on Oct. 19, 1987, leading to a nasty dispute with the investment firm. The trust was established a few months before a securities industry arbitrator ordered him to pay $20.4 million to Bear, Stearns for his colossal losses. Lawrence filed Chapter 7 bankruptcy to try to avoid the arbitration debt.
In August 1998, another bankruptcy judge, Thomas Utschig, found that
Lawrence set up the offshore trust to protect himself from the judgment won
by Bear, Stearns in March 1991. In effect, it was a sham, prohibited under
Florida law. Utschig ordered him to turn over the trust's assets and an
accounting of its investments. But Lawrence claimed he lost controlling
interest in the trust when he was removed as a beneficiary in 1995. As a
result, he claims he was unable to turn it over to the court. This so-called "impossibility defense" left the bankruptcy court incredulous. Chief Bankruptcy Judge A. Jay Cristol said Lawrence, 54, won't be released unless he turns over the trust assets. Lawrence claimed he was powerless to hand over the money because he had lost control over his family trust. Cristol mocked that excuse, called his attempts to turn over the trust lame and tossed him in jail for contempt of a civil court order. "The time has run out, it's over," Cristol said. "He has the key to the dungeon door in his own possession."
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A Singapore-based rogue trader in derivatives who, in 1996 single-handedly lost US$1.33 billion (yes, that is not a typo, it was billion). The losses caused the failure of the venerable Barings Bank. His unmonitored conduct resulted in Britain's High Court banning the former deputy chairman of Barings, Andrew Tuckley, and others from the financial industry for a determinate period.
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Liechtenstein offers a number of structures, which are unique and
versatile. There are a variety of Companies, Trusts, Foundations and
Establishments. Foundations [the Stiftung] and Establishments [the Anstalt] are perhaps the most valuable for a U.S. or Commonwealth citizen regarding privacy and control. These are both separate legal entities, but without traditional share or equity holders. This lack of direct ownership provides for their special stand-alone structure. And once properly funded, there is no trace back to its creator.
A Foundation does not engage directly in commercial activities. It acts as a de-facto holding or investment vehicle. It can however, form and hold shares in other business entities which do directly engage in commercial activities.
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Letter of Wishes/Memorandum of Wishes |
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A document prepared by the settlor or grantor of a trust providing guidance on how trustees should exercise their discretions.
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The grand old dame for offshore tax haven companies going back to the 1950's. Over 50% of the world's ocean liners are registered in Liberia, perhaps tied with Panama as the No. 1 for this purpose. Of course not many documents are even kept in Liberia and the registered offices in Monrovia does the administration in New York and Zurich.
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Life expectancy tables |
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The Internal Revenue Service has published tables of the average life expectancy of single annuitants and joint annuitants at various ages as set forth in the IRS regulations 20.2031-7A.
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Life income annuity |
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An annuity that ceases at the death of the annuitant, with no further obligation to the estate or heirs of the annuitant.
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Limited liability company (LLC) |
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1) Currently we have identified four offshore jurisdictions with LLC types
of acts, consisting of Nevis, Anguilla and the Isle Of Man. St. Kitts
achieves protection of the shareholders with their "company limited by
guaranty".
2) A SEP/IRA can hold a member interest in an offshore LLC without any negative
U.S. tax or legal ramifications. It is imperative that you locate a
cooperative IRA trustee/custodian. Consider having a C-corporation as the
sole passive member of a manager-managed LLC. The manager has a contractual
rather than ownership relationship with the LLC. Check the box to have the
LLC treated as a disregarded entity for tax purposes.
3) From a business purpose standpoint, it is difficult not to appreciate the limitation of liability for all members and managers. The LLC has more flexibility than the limited partnership, the clear separation of the
management from membership (a manager may, but need not be, a member) would
make it more difficult for the IRS to argue for a control premium. Members
may gift away all of the membership interests but still retain control as
managers. Users of the LLC may form member-managed LLCs with two or more
children, and where permitted by statute, each member has one vote on
management decisions regardless of percentage ownership-- so that they
divest themselves of control on formation and maximize the discount.
[attribution: ABA-TAX list]
4) Single-member LLC can create asset protection problems. The concern is
that, although the statute may or may not discuss it, a creditor would argue
something like "Judge, charging order protection exists
only to protect the other members from having another member forced upon
them, and this doesn't make sense where the debtor is the only member." This
makes pretty good "horse sense" irrespective of what the statute says --
keeping in mind that an asset protection case is not a friendly case or a
case hinged upon some technical matter, but a "nuclear meltdown" case for
your client who by this time has already had a jury decide against him or
her with a judge who has already entered judgment and will be looking for
ANY way to find for the creditor and thus satisfy the judgment he/she just
entered.
A like concern is alter ego theory -- even if a statute states that a single
member entity should be respected, your typical trial judge will look at
this and say or think something like "B.S. -- He owns 100% of it, that's him
and I'm going to find a way to get at those assets".
The niceties of corporation and partnership statutes do not translate well
into "hot" controversies before hostile judges, and even if you win on
appeal it doesn't necessarily mean that the creditor will give the assets
back.
Since it is very easy to include another person or entity as a small
interest owner, I think a planner would be remiss in forming a single-member
LLC if asset protection is any concern.
[attribution: Jay D. Adkisson, Esq., jay@falc.com]
5) It is becoming apparent that the IRS is consistently victorious
in FLP and LLC cases where the owners do not respect the form of the entity. An FLP or an LLC needs to be treated as any other valid business entity, and during the stage of formation, the individual owners should take back an equal interest to their contribution.
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Limited liability limited partnership |
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An excellent asset protection vehicle for partnerships in some states. For example, Colorado has a very strong limited partnership law. It also allows electing to be treated as a limited liability limited partnership (LLLP), which avoids personal liability of the general partner, as well as the limited partners.
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Litigation trust |
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These structures enable a defendant to move liabilities associated with a public demand off their balance sheet, and then realize income if the ultimate settlement is less than the public demand. The theory is the removal of assets from a company balance sheet is treated as a deduction at that time and any recovery after the settlement is treated as income.
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Lome IV Convention |
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One of the major advantages of investing in The Bahamas is the privileged access Bahamian products have to the world's largest markets. The Lome IV Convention is a comprehensive trade agreement between the African-Caribbean-Pacific (ACP) States and the European Union (EU). The Agreement was ratified by The Bahamas government December 15, 1989. The agreement between The Bahamas and the EU for the second Financial Protocol of Lome was signed February 24th, 1997. For additional information contact the Ministry of Finance and Planning P. O. Box N-3017, Nassau Bahamas.
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