Special News - Archive #1 Return to News

Banker's Money Laundering Conviction Tossed Out
Sharon Harvey Rosenberg
Miami Daily Business Review
July 20, 2000

There will be no prison term for Esperanza de Saad, the South Florida banker who was the target of a sting in Operation Casablanca, the three-year international money laundering investigation that was run by federal agents in Los Angeles. A U.S. district judge in Michigan has set aside de Saad's December conviction for money laundering.

Although a good deal of the money involved in Casablanca -— the government's largest-ever laundering probe —- went through Miami and agents seized millions of dollars from local accounts at numerous banks, de Saad was the only South Florida banker named in the 100 indictments.

But U.S. District Judge Bernard A. Friedman ruled that not only was the Miami banker entrapped, but the government failed to prove that she accepted money she believed to be derived from drug trafficking. "No rational jury" could have convicted her, he wrote.

Friedman's ruling on July 13 came in response to a motion filed by de Saad's legal team, Miami attorneys Joseph Beeler and H. Eugene Lindsey. Beeler said Wednesday that de Saad and her family were "relieved" by the judge's ruling.

A source familiar with the proceedings said that de Saad could face other criminal charges, possibly involving Florida laws.

De Saad, who ran the Miami office of Banco Industrial de Venezuela, is a member of a politically connected family in Venezuela and the sister of a former finance minister in that country.

Her five-week jury trial took place late last year in Los Angeles, and de Saad could have been sentenced to up to 10 years in prison for 10 counts of money laundering, a process in which money from allegedly illegal sources is churned through the financial system until the illegal origin of the money is obscured.

In November 1997, an undercover U.S. Customs Services informant contacted de Saad, asking her to accept transfers of "hot money" from "financially uneducated Colombians."

In setting aside the conviction, the judge ruled that the undercover informant never made it clear to de Saad that drug money was involved in the accounts he had de Saad set up in the Miami office of her bank.

For instance, the informant referred to his need to move "hot money," but used that phrase in a context that could have applied to other situations, such as avoiding currency controls in Colombia, Friedman found. Moreover, in setting up his accounts, the undercover agent produced documents, including a letter from Bank of America, which attested to the legitimacy of his sham business. Bank of America worked with the government on the sting operation.

Duane Lyons, an assistant U.S. attorney in Los Angeles, said his office is "strongly considering" an appeal.

"Obviously, we felt -— and a jury agreed with us -- that she believed that the funds we were asking her to handle were the proceeds of narcotics trafficking."

Cayman's Secrecy Folding
The Cayman Islands have agreed in principle to sign up to the OECD standards of transparency and information exchange . It is assumed that the legislative framework will follow at some stage. From a UK perspective, legislation is going through Parliament which will likely be passed by August to allow the UK to enter into exchange of information treaties. Given the high political profile, the UK government will try to put a couple of these in place as soon as possible. Since the Caymans and Bermuda were among the first to agree with the OECD, expect them to be first.
JERSEY TO DEFY OECD ON TAX
Date: June 20, 2000
Source: The Times

Although some offshore jurisdictions have given in to international pressure, Jersey and the Isle of Man have no plans to cooperate with the OECD and thereby avoid being listed as an uncooperative tax haven in the upcoming 'naming and shaming' release. Refusing to conform to the regulatory and disclosure standards demanded by the OECD will undoubtedly land these two islands in the report. If there is continued refusal to comply with the proposed measures by July 2001, they may face punitive measures such as the revocation of double taxation treaties or other economic sanctions.

CRACKDOWN ON TAX HAVENS GETS BOOST
Date: June 20, 2000
Source: The Washington Post

Six offshore centres have agreed to cooperate with the OECD to put an end to certain practices which authorities have identified as encouraging harmful global tax competition. The Caymans, Bermuda, Cyprus, Malta, Mauritius and San Marino have each pledged to join the Paris-based organization in targeting abusive and criminal tax-avoidance schemes.

These announcements came before the release of the highly publicized "black list", published the following week by the OECD, listing jurisdictions whose financial industry standards are judged to be harmful to the global economy. The OECD has said that it may use this list as a basis for economic sanctions or other financially damaging actions.

These six countries have until the end of 2005 to make changes in their tax policies, bringing them into line with international standards.

ISLAND TO USE LURE OF TAX CUTS
Date: June 21, 2000
Source: Financial Times

The Isle of Man introduced a tax package with the intention of attracting more business to the offshore centre, particularly e-business. The island's Treasury cites competition with the UK as a major factor in the reduction of its rates. The Manx corporation tax of 20 percent has been constant since 1975 while over that same period, the UK rate fell from 52 to 30 percent.

Both personal and corporate taxes will be reduced. The new scheme will see most businesses paying ten percent while insurance, shipping and fund management companies will be exempt from corporate tax. Internet companies are also likely to enjoy this tax-free status which will be announced in the island's upcoming e-commerce strategy.

IN SURPRISE, EU REACHES SHAKY DEAL ON TAX DATA
Date: June 21, 2000
Source: International Herald Tribune

At the Feira Summit in Lisbon, EU member states reached an agreement in principle to pursue a strategy for the exchange of information on non-resident investment income. Previous efforts at tax harmonization in Europe met with bitter opposition from the British government. This time around, however, all parties were able to agree that exchanging information on non-residents would be an effective means to curb tax evasion through foreign investments and secret accounts.

There was doubt as to whether Austria would go along with the proposal, but in the end, it too endorsed the plan. This was crucial since tax initiatives in the EU require unanimous consent. Although Austria suggested that it might one day do away with its banking secrecy regulations for non-residents, it said that there would be no change to the constitutional rights of its own citizens to hold anonymous accounts.

The International Herald Tribune quotes Portugal's Prime Minister Antonio Guterres as saying that this tax agreement was "absolutely necessary for the credibility of Europe". Also, for EU hopefuls, compliance with this scheme is now a prerequisite for admission into the Union.

For the next two years officials will be in consultation with third countries such as the US and Switzerland as well as prominent European tax havens. If these encounters prove successful and there is unanimous agreement among EU members by December 2002, the second phase would begin giving countries seven years in which to implement an exchange of information strategy. Countries could choose between disclosing investment income or applying a withholding tax and sharing the revenues with the investor's country of residence.

FRANCE TO PROPOSE SANCTIONS ON FINANCIAL DELINQUENCIES AT G8 SUMMIT
Date: June 22, 2000
Source: Worldsources Online

French Finance Minister Laurent Fabius plans to make a proposal at the upcoming G8 summit for the sanctioning of countries identified as money-laundering havens. Though no specific details of the proposal were revealed, the Minister says that they could go so far as cutting off financial relations with the offending jurisdictions.

"We have been engaged for several years in the fight against money laundering," said Fabius, "and we will do our best to have sanctions against those countries which don't respect the normal international rules." France's initiative on this issue coincides with a report released by its Government accusing Monaco of taking part in money-laundering activities. France will also be taking over the rotating EU presidency from Portugal in July.

The Group of Eight will be meeting in July in Okinawa, Japan.

OECD "Harmful Tax Havens" List Out
The OECD has named 35 "harmful tax havens" which must, in the words of the Financial Times' editors, "co-operate with a global crackdown on tax evasion" or else they "risk incurring economic sanctions" by the major industrialized nations.

The jurisdictions include (there are more listed):

  • Antigua
  • Bahamas
  • Barbados
  • Belize
  • British Virgin Islands
  • Channel Islands (Guernsey, Sark & Alderney)
  • Cook Islands
  • Gibraltar
  • Isle of Man
  • Isle of Jersey
  • Liechtenstein
  • Panama
  • St. Kitts & Nevis
  • Turks & Caicos
  • U.S. Virgin Islands
  • Vanuatu
Left off the list was Switzerland. According to the Financial Times: "Switzerland's first reaction [to the OECD's Feira summit agreement] was to reject the idea of information exchange, but analysts doubt it can resist EU pressure over time because of its growing economic interdependence with the EU."

Apparently, the EU knows that Switzerland must eventually come around, so it is taking a soft approach to Switzerland and not attempting to bully it, like the EU (and US) is presently bullying (probably successfully) the micro-nations which are included in its list.

Anyhow, with the release of this list, the nations on it now have one year to divest themselves of their tax-haven activities. Some will undoubtedly do so (last week six nations, including Bermuda and the Caymans, sent letters to the OECD promising full cooperation, and the Isle of man made a similar public statement), but other nations which might not have close economic ties to the industrialized nations, and which rely on their "offshore centres" as a significant part of their economy, may decide to resist. Whether we will then see Cuba-embargo type sanctions against these nations is anybody's guess.

Personally, I anticipate that the U.S. Treasury Secretary Larry Summers will initiate severe actions against these jurisdictions well in advance of the 1-year period which the OECD list has set into motion. We got a flavor of what those actions could be when Treasury required enhanced reporting of financial transactions involving Antigua.

Jay D. Adkisson, Esq.
The Adkisson Analysis

Laundering Crackdown Intensifies
(With List of Offending Countries)
By MICHAEL ALLEN
Staff Reporter of THE WALL STREET JOURNAL

A multilateral task force has decided to cite the Cayman Islands, the Bahamas, and about a dozen other banking centers for failing to cooperate in the global fight against money-laundering, in the latest example of an unprecedented effort by developed nations to crack down on the offshore financial world.

The 26-member Financial Action Task Force is expected to release a list of noncooperative jurisdictions as soon as Thursday in Paris after months of often-contentious deliberations. U.S. officials described the exercise as one of the most important yet in a world-wide effort to force changes offshore by "naming and blaming" perceived offenders, although it wasn't immediately clear whether FATF would implement concrete measures against those on the list.

People familiar with the matter said the final list will likely also include Israel, the Cook Islands, Dominica, St. Vincent, Lebanon, Liechtenstein, the Marshall Islands, Nauru, Niue, Panama, the Philippines, Russia and the Seychelles.

Several countries targeted by the FATF process complained they weren't given ample opportunity to make their case to the task force. In a letter to Joseph M. Myers, a Treasury Department official who is chairman of one of the FATF review groups, Cayman Islands Financial Secretary George McCarthy complained of "ample evidence of the absence of due process," and said the reviewers showed "bias." A Treasury department spokeswoman declined to comment.

Diplomatic horse trading appeared to figure in the final list, says one person familiar with the talks. For instance, France pushed hard to get all or most of the British overseas territories named as laundering havens, this person said, and Britain was forced to focus its efforts on keeping the Channel islands of Jersey and Guernsey off the list, leaving little capital to defend other territories and former colonies such as the Caymans.

One country that didn't appear on the list was Antigua and Barbuda, which has had such problems with money laundering in the past that the U.S. and United Kingdom posted advisories warning banks to carefully examine transactions with that country. But U.S. officials said the Caribbean country has made important strides in cleaning up its banking systems and may soon be released from the advisory.

FATF Watch List Out
Here's the list of identified blacklisted countries from the G-7's Financial Action Task Force:

Russia, Bahamas, the Cayman Islands, Panama, the Dominican Republic, Saint Kitts and Nevis, Saint Vincent-and-the-Grenadines, the Cook Islands, the Marshall Islands, Nauru, Niue, the Philippines, Liechtenstein, Israel, and Lebanon.

Dow Jones Newswire quotes Treasury Secretary Larry Summers as saying:

"The United States welcomes this landmark step to limit the capacity of drug dealers, terrorists, organized criminals and corrupt foreign officials to launder their ill-gotten gains through safe havens," Summers said. Summers said the report may also serve as the basis for new guidance for U.S. banks in their dealings with institutions in the blacklisted countries."

Letter of Commitment
From Bermuda Government to OECD
Dear Mr. Johnston,

I am writing in connection with the OECD's project on harmful tax competition. The Government of Bermuda shares the concerns of the OECD about the global effects of harmful tax competition and would like to associate itself with that work. To this end, I am pleased to inform you that the Government of Bermuda hereby commits to the principles of the OECD’s Report, “Harmful Tax Competition: An Emerging Global Issue” (the “OECD Report”).

In fulfillment of this commitment, the Government of Bermuda undertakes to implement such measures (including through any legislative changes) as are necessary to eliminate and harmful aspects of Bermuda’s regimes that relate to the financial and other services (as provided in more detail in the Annex to this letter). The Government of Bermuda commits in particular to a programme of effective exchange of information in tax matters, transparency, the elimination of any aspects of the regimes for financial and other services that attract business with no substantial domestic activities. Details of these steps and a specific timetable have been agreed with the Forum. We understand that the OECD is prepared to assist us in establishing, improving, or maintaining such practices and procedures as are necessary to implement these principles.

Bermuda Level One Commitment :

The Government of Bermuda further commits to refrain from :

1. Introducing any new regime that would constitute a harmful tax practice under OECD report ;

2. For any existing regime related to financial and other services that currently does not constitute a harmful tax practice under the OECD Report, modifying the regime in such a way that, after the modifications, it would constitute a harmful tax practice under the OECD Report; and

3. strengthening or extending the scope of any existing measure that currently constitutes a harmful tax practice under OECD Report.

The Government of Bermuda intends to release this letter of commitment to the public and would welcome the OECD’s release of this letter after the Committee of Fiscal Affairs reports to the OECD Council on the progress of its work, which we understand is expected by mid-June 2000.

Yours faithfully,

Honorable C. Eugene Cox, JP, MP,
Deputy Premier and Minister of Finance.

Six Countries to End Tax Haven Status
By CURT ANDERSON
.c The Associated Press

WASHINGTON (AP) - Six offshore locations popular as tax havens in the United States and Europe have promised within five years to end the practices that gave them that reputation.

Treasury Secretary Lawrence Summers called the announcements an ``important milestone'' in the international effort to curb use of offshore subsidiaries, bank accounts and other arrangements to avoid taxes.

``In today's global economy, it is vital that we put an end to international tax practices that encourage tax evasion and improper tax avoidance and that distort capital flows,'' Summers said in a statement Monday.

The commitments from Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius and San Marino - an enclave within Italy - came in letters to the 29-nation Organization for Economic Cooperation and Development, a Paris-based body of developed countries that next week is expected to release a list of jurisdictions identified as places that offer laws ``to be used by nonresidents to escape taxation'' in their home countries.

This list could eventually be used as the basis for international sanctions or other punitive action against identified tax havens and private companies operating there. The commitments mean these six countries won't be on that list - and Bermuda and the Cayman Islands are considered two of the ``most notorious'' tax havens worldwide, a senior treasury official said.

Each of the six letters pledges that by the end of 2005 harmful tax practices will be eliminated, that international standards for fair tax competition, transparency and disclosure will be adopted and that no new harmful tax regime will be imposed.

``The government of Bermuda shares the concerns of the OECD about the global effects of harmful tax competition and would like to associate itself with that work,'' wrote Bermuda Deputy Premier C. Eugene Cox to top OECD officials.

Due to their secretive nature, there are no firm estimates of U.S. tax losses caused by offshore havens. Britain estimated recently that it loses about $1.6 billion a year, and much concern has been raised about the $500 billion deposited by foreign financial institutions in the Cayman Islands.

Bermuda, which has no income tax, has figured prominently in several recent tax controversies, including a decision last year by the Tax Court that United Parcel Service's creation of a subsidiary there to insure packages amounted to a ``sham transaction'' intended to avoid U.S. taxes. UPS was ordered to pay millions of dollars in back taxes and penalties.

More recently, some U.S. insurance companies have begun transferring investment earnings to Bermuda-based operations that offer ``reinsurance'' services - thus avoiding the 35 percent federal corporate income tax and possibly state taxes as well. Reps. Richard Neal, D-Mass., and Nancy Johnson, R-Conn., have introduced legislation in Congress aimed at halting that practice.

``The company is simply moving money from one pocket to another pocket within the same corporate entity,'' Neal said in a recent House floor speech. ``If we do not stop this practice, then other U.S. companies will be forced to relocate to Bermuda, or be bought by a Bermuda-based parent, in order to stay competitive.''

ISLE OF MAN TO INTRODUCE RADICAL FINANCIAL REFORMS
From the International Services Division of the Isle of Man Treasury, 20 June 2000:

- new economic strategy
- new tax strategy
- new e-commerce strategy
- new banking initiatives

The Isle of Man Government plans to embark upon one of the most radical programmes of financial reform ever undertaken by an international financial centre.

The aim is to build on the Island's current achievements of combining the fastest growth of any European economy with Triple A ratings for stability from Moody's and Standard & Poor's. It has also combined the winning of several major awards in the past year - including being voted the world's number one international financial centre - with powerful endorsements from the UK Government's Edwards Report on financial regulation and, last month, from the Financial Stability Forum set up by the G7 Group, comprising the world's seven major economies.

Now the Manx Government proposes a phased overhaul of the three crucial areas of e-commerce, taxation and banking to meet the rapidly changing needs of the global economy. The proposals are designed to create the most supportive business environment of any international financial centre while maintaining internationally acknowledged standards of supervision and transparency.

The taxation reforms have already been announced with a Ministerial statement to Tynwald, the Island's Parliament, this Tuesday, June 20.

The e-commerce strategy is scheduled to be announced to Tynwald in July. This will build on the significant initiatives already taken in this field by the Manx Government. Finally, the new banking initiative will be launched in August.

- the new tax strategy

Here the Island's objective is to combine an overall tax share of GDP in line with the European average along with a fair and competitive tax regime as it interfaces with the international economy.

Thus one aspect of the modernised tax system will focus on consideration of an updated Double Taxation Agreement with the UK which can apply equally to any other jurisdiction wishing to enter into constructive discussions. The Government is already in talks with the UK Inland Revenue on the question of a modernized double taxation agreement to support the new business strategy.

Addressing another international issue, the Island plans to remove the ring-fence regime around exempt insurance and shipping companies. Both categories of company will be brought within the domestic tax system, at a zero rate.

On the wider issue concerning the OECD Forum on tax competition, the Isle of Man expects that this will ultimately contribute to the establishment of new international standards and has a standing commitment to work with the OECD and its members in carrying out reform.

The tax reforms which the Island is planning should, in fact, go a considerable way to meeting a number of concerns of the OECD forum.

The Hon. Richard Corkill, MHK, Minister for the Treasury, said:

"We are sending a clear message on our overall strategy, so as to set the scene for the next five years and prevent any uncertainty on international tax issues.

Our strategy for companies is one of low rates of tax linked into the introduction of the new corporate tax system, with incentives for new investment and a simplification of the overall tax system. Similarly, our strategy for individuals is to have a simple, low tax system which lends itself to the service efficiencies to be gained from the use of new technology.

The Isle of Man will be pro-active in both encouraging international business in the new global economy and contributing to the establishment of new international standards by the G7 and the OECD."

Tax proposals include:-

reduction in the corporate tax rate from 20% to 10% for trading companies over a three to five year period, with a deadline of 2005. Exempt insurance companies and ship management companies will be brought within the domestic tax system, but at a zero rate simplified approach to capital allowances whilst retaining 100% relief where necessary a similarly simplified approach for taxation of individuals by having all income assessed on a current year basis reduction in the top rate of income tax from 20% to 15% reduction in the standard rate from 14% to 10% special treatment for short term contract executives for up to three years so that they will only be taxed on their Manx sourced income personal allowances will be available for non-residents as well as residents a new tax credit system for distributions will ensure that tax neutrality is preserved for the investor, whether resident or non-resident. incentives for business start-ups and venture capital initiatives.

The Hon. Richard Corkill, MHK, Minister for the Treasury, said:

"It is many years since we last overhauled our tax and economic strategy. Our present strategy has enabled us to enjoy unprecedented economic success.

But e-commerce and globalisation are changing the world economy out of all recognition. Companies expect jurisdictions to be competitive and international authorities expect them to compete fairly.

We believe that our reform programme strikes the right balance between these twin requirements. We will now open a dialogue on our programme with Tynwald, with business and with our international partners."

U.S. Pushes Tax Program for Exporters in Face of EU Objections
Washington - May 29, 2000

The Clinton administration plans to press Congress to change a popular offshore U.S. corporate tax benefit even as European governments protest that the proposed change violates international trade rules.

Deputy Treasury Secretary Stuart Eizenstat said the administration will forge ahead with its plans in an effort to satisfy a World Trade Organization decision against an existing law that saves U.S. exporters, including Microsoft Corp. and Boeing Co., billions of dollars each year.

``It is the administration's intention to move forward to pass legislation based on our approach,'' Eizenstat told reporters in a conference call. ``It is absolutely clear that'' the proposal would be consistent with WTO rules, he said. The WTO gave the U.S. until Oct. 1 to amend the current law to remove what it deemed an illegal export subsidy.

Earlier today, the European Union criticized the U.S. proposal for failing to eliminate offshore tax shelters for exporters and it threatened to file a new complaint with the WTO if the proposal is enacted into law.

Video producer admits tax evasion in Cayman bank case
Date: Fri, 28 Apr 2000 15:16:09 +0700

NEWARK, N.J. - A video producer pleaded guilty Friday to using a Cayman Islands bank to evade taxes, the first of a potential flood of such cases since a massive breach of the British colony's vaunted bank secrecy was exposed.

Michelle A. Pruyn admitted she concealed $240,000 at the now-defunct Guardian Bank & Trust Ltd. of Grand Cayman by working with its chairman, John M. Mathewson. As a result, Ms. Pruyn evaded about $40,000 in taxes from 1991 through 1993, prosecutors said.

Mathewson opened an account for her in the name of Cogan Corp. about 1991, and she deposited income from her video production companies. No evidence exists that Cogan conducted any business, prosecutors said.

Ms. Pruyn, 45, admitted that with funds from the Cogan account, she bought a building and had the property held in trust for her children. She filed for bankruptcy in 1996, but did not disclose her interest in the building or the offshore Cogan account, she admitted.

Ms. Pruyn, who pleaded guilty to bankruptcy fraud and tax evasion, faces up to five years in prison and $250,000 in fines, as well as an order to pay back taxes and penalties, at sentencing Dec. 21.

Citing Mathewson's "unparalleled'' cooperation, a federal judge in August sentenced him to six months under house arrest, a $30,000 fine and 500 hours of community service.

The sentencing revealed that Mathewson had pleaded guilty in March 1997 to charges including conspiracy, money laundering and aiding income tax evasions as part of plea bargains with federal prosecutors in Florida, New Jersey and New York. He could have faced nearly five years in prison.

Because of Mathewson's help, the U.S. government has recouped $50 million in back taxes and penalties, and can expect to get a total of $300 million, his lawyer has said. Authorities have not confirmed those figures.

His case, and all that may follow, developed through a stroke of luck.

Mathewson was arrested in 1996 as part of a nationwide Investigation into cable piracy. FBI agents did not know he had more than a year's worth of records from Guardian Bank, including computer backup tapes and a list of names linking 2,000 depositors to the bogus corporate names on the tapes.

Mathewson immediately offered the records, leading to a continuing investigation that has brought 1,500 cases in about 20 states.

The Caymans, with just 40,000 residents, are home to 580 banks, whose deposits make it the world's fifth-largest banking center. Its secrecy laws make it a haven for shelter money, whether legitimate income or ill-gotten gains, U.S. officials maintain.

TAX NEWS - IRS TAX PRACTITIONER NEWSLETTER
April 17, 2000, Volume 2000, Issue 7
To Trust or Not To Trust?
That is the Question!

A trust is a form of ownership, which completely separates responsibility and control of assets from all the benefits of ownership. Trusts are used in such matters as estate planning; to facilitate the genuine charitable transfer of assets; and to hold assets for minors and those unable to handle their financial affairs.

Under a trust arrangement, you must give up control over income and assets. An independent trustee is designated to hold legal title to the trust assets, to exercise independent control over the trust, and to manage the trust. Taxes must be paid on the income received by the trust, including the income generated by property held in trust. The responsibility to pay taxes may fall to the trust, the beneficiary, or the grantor.

A trustee is designated to hold legal title to the trust property, to exercise independent control over it, and is responsible for its management.

All trusts must comply with the tax laws as set forth by the Congress in the Internal Revenue Code, Section 641-683. Trusts established to hide the true ownership of assets and income or to disguise the substance of financial transactions are considered Fraudulent/Abusive Trusts.

Too Good to be True...

Promoters of fraudulent trust arrangements use a variety of methods to advertise their schemes. They may include seminars, flyers, and even the Internet. The main selling point of fraudulent trust arrangements is that the paperwork will look like you are giving up control of your assets and money; when in reality you still control how your money and assets are used.

A fraudulent trust only has the appearance of a trust. It is typically promoted by the promise of tax benefits or avoidance with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets.

Using the name "trust" in association with financial arrangements does not make it a legitimate trust. No matter how carefully written the trust documents are, if the intent is to evade taxes, the trust will be treated as fraudulent.

Fraudulent trusts are illegal and are a specific area of concern for IRS Criminal Investigation.

The Jungle of Fraudulent Trust Schemes-

Currently, there are two prevalent fraudulent arrangements that are being promoted: The "domestic package" and the "foreign package." The domestic package involves a series of trusts that are formed in the US, while the foreign trust packages are formed offshore and outside the jurisdiction of the US. Further, trusts involved in the schemes are vertically layered with each trust distributing income to the next layer. The goal of this layered distribution of income is to fraudulently reduce taxable income to nominal amounts.

The Business Trust-

Some trust promoters are advising taxpayers to transfer their on-going business to Business Trusts. This scheme gives the appearance that the taxpayer has given up control of his/her business to a trust; however, in reality the taxpayer is still running the day-to-day activities of business and is controlling its income stream. This is accomplished through trustees or other entities controlled by the taxpayer.

The Equipment or Service Trust-

The Equipment or Service trust is formed to hold equipment that is rented or leased to the business trust, often at inflated rates. The business trust reduces its income by claiming deductions for payments to the equipment trust.

The Family Residence Trust- Taxpayers are being advised to transfer family residences, including furnishings, to trusts. These trusts sometimes rent the residence back to the taxpayer. They also deduct depreciation and the expenses of maintaining and operating the residence, such as gardening, pool service, and utilities.

The Charitable Trust-

Taxpayers are receiving advice to transfer assets or income to trusts claiming to be charitable organizations. These trusts or "charitable organizations" pay for personal, educational, or recreational expenses on behalf of the taxpayer or family members. The payments are then claimed as "charitable" deductions on the trust tax return.

Foreign Trusts-

These trusts are often domiciled in a foreign country that imposes little or no tax on trusts and also provide financial secrecy. Typically, abusive foreign trust arrangements enable taxable funds to flow through several trusts or entities until the funds are ultimately distributed or made available to the original owner, purportedly tax-free. These trusts are usually used in combination with a foreign corporation and foreign bank account.

Buyer Beware! Recognizing a Fraudulent Trust.

Common Warning Signs:

- A promise to reduce or eliminate income and self-employment tax;
- Deductions for personal expenses paid by the trust;
- Depreciation deductions on an owner's personal residence and furnishings;
- High fees for trust packages, to be offset by promised tax benefits;
- Use of back-dated documents and post office boxes for trust addresses;
- Unjustified replacement of trustee;
- Lack of an independent trustee;
- Use of terms such as pure trust, constitutional trust, sovereign trust, or unincorporated business organization.
Just the Facts

It is estimated that $4.8 trillion in wealth will be inherited or transferred from one generation to the next by 2015, with much of it transferred through a variety of trusts. Filings of trust returns (Form 1041's) are now the third most frequently filed income tax return behind individual and corporate returns. Although the vast majority of these transfers are legal, there is widespread potential for fraud.

In Fiscal Year 1999, Criminal Investigation elevated abusive foreign and domestic trusts from an emerging issue to a program area. This elevation was due to the proliferation of abusive promotions in the US. These promotions are targeted towards wealthy individuals, small business owners, and professionals such as doctors, lawyers, and dentists. The promotions, which are in some instances distributed by a national network of promoters, promise taxpayers substantial tax reduction and asset protection. In reality, these promotions are nothing more than complex tax evasion schemes.

The IRS takes fraudulent trust arrangements seriously. It is a matter of maintaining public confidence in the fairness of the tax laws. Recommending prosecution of those who violate the tax laws demonstrate the IRS' commitment to ensuring all taxpayers pay their fair share of taxes.

Civil and Criminal Outcomes

If a taxpayer chooses to participate in a trust that improperly avoids or evades income tax, that person will not be shielded from payment of taxes, interest, and penalties due. Evasion of income taxes may result in a civil fraud penalty or criminal prosecution:

- Civil fraud can include a penalty up to 75 percent of the underpayment of tax attributable to the fraud in addition to the taxes owed.
- Criminal conviction may result in fines up to $250,000 and/or up to five years in prison for such offenses.

Since the 1990's there has been a substantial increase in both civil examinations and criminal investigations. The tax court has consistently found against abusive schemes, deeming them shams or simply grantor trusts that do not deliver the promised tax benefits.

Following false, misleading, or unorthodox tax advice is seldom free. Upfront you pay fees or commissions to subscribe to fraudulent trust schemes and in the end; unfortunately, you pay even more in penalties, interest and fines for following bad advice.

Knowingly participating in fraudulent trust arrangements has led to the incarceration and/or financial ruin of many taxpayers.

The bottom line is Don't Buy In!

Too Good - Exhibit A

A physician was sentenced to 37 months imprisonment followed by 3 years supervised release, and ordered to pay $414,819 in restitution to the IRS for tax evasion for the years 1992 through 1996. The physician created trusts, including one for his family residence, that he controlled and used to conceal his taxable income. In addition, he transferred funds between trusts, offshore corporations, and their corresponding bank accounts located in the US, Bahamas, and the Channel Islands in order to conceal taxable income.

Too Good - Exhibit B

A father and his sons were sentenced to 60, 57, and 46 months imprisonment followed by three years of supervised release, respectively, for conspiracy to defraud the IRS and for failing to file tax returns. A Federal jury found them guilty in an attempt to conceal income, assign their income to several nominees and purported irrevocable trusts that that had no economic substance. As part of the conspiracy, they used several bank accounts opened in trust and other names to conceal insurance commission receipts and proceeds from the sale of certificates of deposits and coins. They also attempted to conceal their assets from the IRS by the conveyance of real property from their names to purported trusts and nominees. In addition to their imprisonment, the judge in the case ordered them to pay fines of $413,500 and restitution in excess of $635,000 to the IRS.

Too Good - Exhibit C

A former CPA was sentenced to 87 months imprisonment for defrauding the IRS by promoting bogus trusts. In addition, an attorney and a former legislative aide were sentenced for their involvement in the scam. The men sold packages of bogus trusts to clients and advised them on how to use trusts to generate fraudulent tax deductions. Clients of these individuals put businesses, homes, and other assets in trusts, but in fact continued to control those assets. Clients claimed various personal expenses related to the bogus trust on their tax returns including depreciation of personal residences, house cleaning, lawn care, and scholarships for their children. The judge in the case found that the trust scheme cost the federal and state government more than $2.5 million in lost tax revenue.

For more information about what the Federal Courts REALLY say about fraudulent trusts...

See Criminal cases United States v. Scott and United States v. Noske at - www.findlaw.com.

US AGREES TO KILL TAX BREAK FOR OFFSHORE SUBSIDIARIES
Date: Apr. 8, 2000
Source: International Herald Tribune

The US has decided to comply with a World Trade Organization ruling stating that the multi-billion dollar tax breaks given to offshore subsidiaries of American companies violated global trade accords.

Some of the biggest names in corporate America, including Boeing, Microsoft, Ford and Exxon, have used the tax break, called the "foreign sales corporation tax," to benefit from tax exemptions on export sales. The tax break amounts to a five per cent cut in tax rates for US exporters.

European Union officials argued that the tax break amounted to a massive subsidy giving US companies an unfair advantage in export markets. The EU estimates half of all US exports are funneled through foreign sales corporations.

The US is expected to change its tax law to comply with the ruling, although US officials say an October 1 deadline set by the EU seems unrealistic.

OECD ISSUES BANK SECRECY REPORT
Date: Apr. 13, 2000
Source: Tax-News.com

The OECD has issued a unanimous report on improving access to bank information for tax purposes.

The report, approved by all 29 member states, contains only statements of intent, because of the wide divergences over how to improve tax collection in general.

The report does not call for any general opening-up of banking affairs or for the end of bank secrecy. However, it calls for giving greater access to national tax authorities to obtain information about specific individuals or companies suspected of engaging in tax evasion or criminal activity.

Some of the desired measures would include: the proper identification of all bank customers and beneficial owners of accounts, the elimination of the "domestic tax interest" requirement for exchanging information (some countries won't obtain bank information for a treaty partner if they receive no tax benefit), and improving information exchange in both criminal and civil tax cases.

AUSTRIA WON'T RELAX BANK SECRECY
Date: Apr. 7, 2000

Austria is not prepared to relax its bank secrecy laws to unblock an impasse over tax harmonization in the 15-member European Union.

"That's a constitutional principle which we shall hold on to," said Austrian Finance Minister Karl-Heinz Grasser recently.

Britain has already vetoed a proposed common withholding tax on savings.

Portugal is set to propose a short-term solution based on the coexistence of a withholding tax and the exchange of information between tax authorities. The idea would be to move to a system based purely on information exchange, which the British strongly support, at an unspecified future date.

Abuse By Offshore Companies
The major crackdown of which I am aware is a component proposed in the latest UK budget to crack down on bank secrecy and money laundering in the British Overseas Territories (BVI, Cayman Islands, Isle of Man, Gibraltar and Channel Islands). The territories all have bank secrecy now, and the UK wants them to get rid of it. It also wants them to consider tax evasion in outside jurisdictions to be deemed criminal activity in these territories.

The Overseas Territories complain that getting rid of bank secrecy will only push clients to move their money to other havens such as Bahamas and Cook Islands which are independent countries and thus not directly under the UK's control. So the net effect would be to wipe out large portions of the financial services industries in the Overseas Territories - but not to impact tax evasion in the UK because the "hidden" funds will just go into hiding somewhere else.

The protests of the Overseas Territories are most likely doomed to failure. The only question is when they will have to tow the line. The EU and OECD are doing their own crack down on tax havens, whether or not they are governed by UK. These actions are fully supported by the USA. The USA, EU and OECD want everyone to get rid of bank secrecy. And it appears that they are beginning to consider tough actions against "rogue" countries. Actions such as cutting off aid, cutting off the countries from IMF and World Bank programs, cutting off the countries from or highly taxing use of international banking/wire transfer services, etc. If these measures are implemented then many tax havens will be forced to capitulate. Probably this crackdown will be implemented and then the EU, OECD and USA will discover that there is always some poor country willing to buck the trend and accept international opprobrium if it means trillions of dollars of foreign capital will flow into their banks. After a few years of this and the economic carnage it causes small countries - with no impact on curbing tax evasion in large countries - the big guys will then turn their attention to other matters.

IRS CLAMPS DOWN ON ABUSIVE TRUSTS
Date: Mar. 25, 2000

The Internal Revenue Service says it is going after both the buyers and the sellers of what it calls "abusive" trusts - those that purport to eliminate income tax obligations.

Legitimate trusts are a cornerstone of sophisticated estate planning and can be used to minimize estate taxes. However, with rare exceptions, trusts cannot provide a shield from income taxes.

Federal income tax must be paid on income generated within a trust, generally at a rate of nearly 40%. Income taken out of a trust is taxed at the rate of the individual.

Anyone caught abusing a trust is liable for penalties, often up to 75% of the value of the tax underpayment, plus taxes owed and even criminal penalties up to $250,000 and five years in prison.

The IRS says it will crack down on abusive trusts being peddled at seminars and increasingly over the Internet. Experts say many heavily promoted trust packages are right on the edge of legality.

Many of these trusts consist of several layers of trusts that often rent or lease assets to an underlying unincorporated or common-law business trust, usually at false or inflated rates.

Turn and run if someone offers you a trust that promises to reduce or eliminate income taxes, or claims it will make personal expenses deductible. Neither is legal. Other warning signs of fraudulent trusts include non-disclosure agreements, backdated documents, post office boxes for trust addresses and high fees. Any trust drafted or sold by someone who is not an attorney, or not licensed in your state, is also very suspicious. [attribution: Source: Financial Times]

Foreign Assets in U.S. May Not Be Frozen by Creditor
Upholding two centuries of American legal tradition -- and declining to follow the lead of English courts -- the New York Court of Appeals held in an international debt collection case that an unsecured creditor is not entitled to preliminary injunctive relief to prevent the debtor from asset-stripping prior to judgment. The first-impression ruling, of major importance to worldwide financial markets, establishes that New York courts cannot be used by creditors to globally freeze the assets of a debtor.
Bank Has Duty To Probe Lawyer's Suspicious Trust-Account Activity
By Michael Booth
New Jersey Law Journal
March 30, 2000

When lawyer Joseph Caputo cashed over a quarter million dollars from his client trust account with little explanation, officers at New Jersey National Bank may have been suspicious, but they didn't question Caputo about where the money was going.

As it turns out, the funds, and Caputo, were bound for the gaming tables in Atlantic City. And while the bank didn't necessarily know that, its failure to investigate the unusual transfers may make it liable to the third-party beneficiaries, New Jersey's Supreme Court ruled March 22.

"It is bad faith to remain passive and not inquire further because such inaction amounts to a deliberate desire to evade knowledge," Justice Virginia Long wrote for the unanimous Court in New Jersey Title Insurance Co. v. New Jersey National Bank, A-108-98.

The Court used the opportunity to order the Professional Responsibility Rules Committee to recommend changes in reporting requirements for lawyers under Rule 1:21-6 to help prevent abuses. The Court also instructed the committee to suggest action bank officers should take when they suspect misappropriation of client funds by lawyers.

The Court reinstated a title insurance company's suit against Caputo, a since-disbarred solo practitioner who cashed 52 checks from his trust account at the New Jersey National Bank in Summit totaling $291,350 between November 1993 and February 1994. The money belonged to clients involved in real estate deals with New Jersey Title Insurance Co.

Some checks were cashed by the branch manager or the assistant manager at the bank; others were certified and cashed at Trump Taj Mahal casino. In some cases, he cashed two checks a day. In a three-day period in January 1994, he cashed a total of $242,150 in checks, according to briefs filed in the case.

There was evidence that the two bank officials -- branch manager Veronica Kane and assistant branch manager Kathy Martin -- knew Caputo was a big gambler and that it was improper to cash trust checks. When Kane asked about the withdrawals, Caputo said it was for a client or a closing.

Sussex County Superior Court Judge Karen Russell dismissed the complaint against the bank. She said "fragmentary knowledge" did not prove actual knowledge, a requirement that must be met if a bank is to be held liable for damages under the Uniform Fiduciaries Act. The Appellate Division agreed.

Long said the Uniform Fiduciaries Act, N.J.S.A. 3A:41-1 to -14, should be read more liberally than called for by Russell and the Appellate Division.

Specifically, the statute says a bank cannot be held liable unless it pays a check with "actual knowledge" that the fiduciary committed a breach of his or her fiduciary duty by cashing the check. That precept has been around for seven decades, Long said.

Long wrote that a key case to consider was Maryland Casualty Co. v. Bank of Charlotte, 340 F.2d 550 (Fourth Cir. 1965). There, a corporate secretary converted to her personal use 19 corporate checks totaling $18,000. The checks were cashed, credited to her account or applied to loans she had at the bank.

The 4th Circuit concluded that "the bank's personnel had before their eyes clear evidence of a probable misappropriation." Even giving banks the most favorable benefit of the reading of the federal fiduciary statutes, the court held that while the bank was not liable for cashing the first check, it was liable for the second and subsequent checks because it should have been known that the secretary was misappropriating money.

Wrote Long: "Under Bank of Charlotte, where circumstances suggestive of a fiduciary's breach become sufficiently obvious, a duty to act is created." She also quoted a ruling by the 7th Circuit in Appley v. West, 832 F.2d 1021 (1987), which held that at "some point, obvious circumstances become so cogent that it is 'bad faith' to remain passive."

Long said that "actual knowledge of and complicity in the fiduciary's misdeeds is not required. However, where facts suggesting fiduciary misconduct are compelling and obvious," it is bad faith not to inquire further.

Russell erred when she dismissed New Jersey Title's suit on summary judgment, Long said. "The test for good or bad faith is a subjective one to be determined by the trier of fact ... It is for a jury to decide whether the Bank recklessly disregarded or was purposefully oblivious to the facts suggesting impropriety by Caputo," Long continued.

Long added that not every incident of an improper withdrawal constitutes a breach of a bank's fiduciary duty. In this case, however, a reasonable jury could hold the bank liable.

New Jersey Title's lawyer, James Cutler, a partner at Livingston, N.J.'s Stern, Lavinthal, Frankenberg, Norgaard & Kapnick, says the Court opted against taking the restrictive view of the Uniform Fiduciaries Act suggested by Russell and the Appellate Division. "The Court seems to have brought New Jersey more in accord with a broader standard," he says.

The bank's lawyer, John North, a partner at Woodbridge, N.J.'s Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, did not return a telephone message left at his office.

Anderson case update
The present situation is as follows:

  • The Andersons have been purged of their contempt. The trust fund remains with the Cook Islands Trustee although the Registrar of the Cook Islands High Court is now a co-signatory. The US District Court is yet to hand down its judgment on the allegations made against the Andersons. The FTC's Cook Islands proceedings alleging fraudulent conveyance are currently pending the US District Court's judgment.
Future developments in the matter will, it is submitted, depend upon the outcome of the proceedings against the Andersons in the US District Court. If the District Court finds that the Andersons have committed the offences alleged by FTC, the Cook Islands High Court will then need to consider whether any fraudulent dispositions were made to the Trust.
Tax threats
According to Robert Hartwig, Vice President and Chief Economist at the Insurance Information Institute, if Congress does pass the threatened "protectionist" legislation (see earlier BerBiz), it will apply to all other offshore financial jurisdictions and not just Bermuda. He added that other places such as Cayman, Guernsey and the Isle of Man will also be hit. The measures are intended to ensure that Bermuda-based insurance companies pay tax on business conducted on American soil - a move prompted by the action of four US insurance companies - Chubb, Hartford, Kemper and Liberty Mutual. The effect will be to prevent US insurance companies re-locating to Bermuda for tax advantages. [attribution: Bermuda Royal Gazette]
BAHAMIAN IBC's FACE INCREASED DISCLOSURE
Date: Mar. 25, 2000

The Bahamian government is considering forcing international business companies to become more transparent.

Sir William Allen, the Bahamian minister of finance, said recently that rules governing IBCs in the Bahamas "do not allow sufficient regulation and control."

That means once closely guarded information such as the identity of major company stakeholders could soon become public.

Allen said he has asked the financial services sector and the central bank to review IBC legislation and expects to have recommendations shortly.

There are currently more than 106,000 IBCs in the Bahamas, and 16,000 are added every year, according to the country's registrar-general. The offshore financial sector represents about 15% of the Bahamas gross domestic product.[Attribution: Montrealgazette.com]

Caymans issues code to counter money laundering
GEORGE TOWN, Cayman Islands, March 30 (Reuters) - The Cayman Islands, one of the world's leading offshore money centers, issued a code of conduct to financial institutions on Thursday to stem money laundering.

The Caymans, a British colony in the western Caribbean with 590 banks and trust companies that have more than $500 billion in assets, agreed last year to a United Nations review of its financial systems to help dispel the idea that the island group is a haven for money laundering.

The code outlines for Cayman financial institutions the colony's money laundering laws, proper procedures to identify clients, how to document evidence, methods for staff training and how to keep records to international standards.

``The role of the Cayman Islands as a leading international finance center requires vigilance,'' Caymans Financial Secretary George McCarthy said. ``The issuance of this code reflects the common goal of preventing the laundering of criminal proceeds in the Cayman Islands.''

A government statement said the Cayman Islands Monetary Authority will expect all licensed financial institutions to observe the code as a matter of business practice. It applies to traditional financial service providers and anyone involved in relevant transactions, including the real estate industry, company managers and trust companies.

The code was issued as the Cayman Islands hosts a two-day United Nations forum on money laundering for financial regulators from some 37 countries and territories.

UK TARGETS OFFSHORE TAX EVASION
Date: Mar. 20, 2000
Source: Financial Times

Britain is looking for agreements with its offshore territories - including the Channel Islands, Isle of Man, Bermuda and the Cayman Islands - aimed at clamping down on tax evasion worth $1.6 billion a year.

UK finance minister Gordon Brown wants to stamp out "designer taxation," whereby offshore centers tailor tax rates to help individual companies avoid UK tax.

Brown wants more international exchanges of information between tax authorities. Agreements with the offshore territories would help Brown resist a proposed 20% European withholding tax on non-resident savings, which could damage the London bond market.

Bermuda has already indicated a willingness to negotiate, and UK authorities are confident the other centers will fall into line. The centers are desperate to keep off a list of non-cooperative tax havens being prepared by the Organization for Economic Cooperation and Development, to be released in June. It would hurt the offshore centers' case to be seen resisting an agreement on tax transparency with the UK.

ISLE OF MAN WINS FINANCE AWARD
Date: Mar. 20, 2000
Source: Tax-News.com

The Isle of Man has received the award for the "Best Offshore Financial Services Center" at the International Money Marketing annual awards ceremony held recently at Vinopolis in London's South Bank.

The island also won the Best Offshore Location for Life Assurance Business award and the Best Offshore Location for Investment Business award at the Offshore Financial Review Awards for Excellence at the end of 1999.

"This…along with the other awards we have won, confirms our position as a world class international financial center," said Sir Charles Walker, who accepted the award on behalf of the Isle of Man.

US PRAISES ANTIGUA FOR ANTI-MONEY LAUNDERING EFFORTS
Date: Mar. 24, 2000
Source: Antigua Sun

The US is lauding recent cooperation by Antigua and Barbuda in anti-money laundering initiatives. US Department of Justice Under Secretary James E. Johnson praised the island for its cooperation in recent criminal investigations as well as its implementation of the new extradition and mutual legal assistance treaties with the US. This is the same official who issued last year's advisory warning American citizens about engaging in offshore financial transactions in Antigua.

Johnson also applauded recent changes to Antigua's International Business Corporations Act which seek to eradicate conflict of interest. The changes prevent any shareholder, director, officer or employee of a financial institution licensed under the Act from serving on the board of directors of the island's International Financial Sector Regulatory Authority.

OFFSHORE SECTOR UNDER THREAT: BARBADOS PM
Date: Mar. 23, 2000
Source: Barbados Nation

The offshore financial sector in Barbados and other developing countries is facing a grave threat from developed countries, said Prime Minister Owen Arthur recently.

Arthur accused developed countries, members of the Organization for Economic Cooperation and Development (OECD), of unlawfully trying to reshape the sector. The OECD is preparing a list of offshore jurisdictions that do not cooperate with international efforts to reduce money-laundering and tax evasion.

He said that Barbados has signed the General Agreement on Trade in Services and that any action should take place under that agreement.

Nevertheless, Barbados is working on a new securities act to strengthen financial services regulation and to make sure Barbados's name remains clean, said Arthur.

BARBADOS UNIT WILL MONITOR FINANCIAL MOVES
Date: Mar. 23, 2000
Source: Barbados Nation

Barbados will soon have a Financial Investigations Unit to monitor transactions in the fast growing offshore financial sector.

Attorney-General David Simmons has introduced an amendment to the Money Laundering Prevention and Control Act to set up the unit, using assistance from the United Nations Drug Control Program.

Consultants from Australia will help the government set up the unit beginning in May.

IRS MOVES TO TIGHTEN CURRENCY RULES
Date: Mar. 22, 2000
Source: New York Times

The Internal Revenue Service is moving to change foreign currency rules that let some businesses create artificial losses through transactions with their overseas subsidiaries.

The IRS and the Treasury Department are concerned that businesses can create large foreign currency paper losses via a "circular flow of funds" - short-term transactions based on currency fluctuations that lack any underlying business reason other than tax avoidance.

Government officials say they are considering eliminating the rules that allow the losses to be figured on a daily basis. The new rules would only allow gains and losses to be recorded on real business transactions.

Banks in Grenada
NEWSFLASH (26 Mar. 2000): "Offshore Alert" magazine reports of receiving further confirmation today that a meeting took place in Grenada at 7.30 a.m. on Thursday, March 24, 2000 at which the Grenada government and offshore regulators decided to give the First International Bank of Grenada the following ultimatum:

Allow a government-appointed British auditor who is currently in Grenada to examine its financial records or, if it refuses, be closed down immediately. The auditor has been flown to Grenada specifically to carry out the audit. Since it is inconceivable that FIBG, which reported a phony profit of $26 billion for its first 15 months of operation, can pass a bona fide audit, businessmen in Grenada expect the bank's closure to be imminent. Once FIBG is closed down, it seems probable that sister companies such as Wellington Bank & Trust, Crown Meridian Bank, Sattva Bank and the World Investors' Stock Exchange will also be closed, since they are inextricably linked to FIBG. The closure of the entities is likely to lead to a legal scramble among depositors trying to get their investments back. The FIBG group is believed to have taken in over $40 million of deposits. The current action by the Grenada government comes 14 months after Offshore Alert first exposed the fraud being perpetrated by FIBG and related entities. Our previous articles on the bank and the people behind it are available by clicking on the 'Story Library' link. [attribution: subscribe to David Marchant's Offshore Business & News Alert here.]

New York Bank Account Suffices for Jurisdiction Over Foreign Corporation
By Cerisse Anderson
New York Law Journal
March 27, 2000

Funds flowing through New York bank accounts from a British Virgin Islands corporation to its alter ego, a Brazilian-based Panamanian company can be attached in New York to satisfy a judgment against the Virgin Island debtor, a New York state appellate court ruled yesterday.

The Appellate Division, First Department, in Georgia-Pacific Corp. v. Multimark's International Ltd., 2750, unanimously affirmed Justice Charles Ramos's grant of Georgia-Pacific Corp's motion to confirm ex parte orders of attachment against an account held by the Virgin Island corporation, Multimark's International Ltd., at Bank Audi in New York, and against another account at the same bank maintained by Republican Ltd. of Panama.

Georgia-Pacific, an Atlanta-based corporation, sold pulp products to Multimark for resale to third parties in several Latin American countries. Multimark owed Georgia-Pacific $822,599 in July 1998, and informed the creditor that it had no funds available for payment.

Georgia-Pacific obtained an ex parte order of attachment against Multimark's assets in the Bank Audi account in New York, and when it was determined to have insufficient funds to satisfy the debt, the forest products company added Republican, a Panamanian corporation based in Sao Paulo, Brazil, as a defendant on the ground that Republican was the alter ego of Multimark. Georgia-Pacific obtained an order of attachment against Republican's New York account and moved to confirm the two orders.

Republican argued that the order seizing its assets should be dismissed for lack of personal jurisdiction -- the company is not authorized to do business in New York and it does not solicit customers or maintain any employees here -- and on grounds of forum non conveniens.

Justice Betty Weinberg Ellerin, writing for the five-judge panel, noted the general rule was that the "mere maintenance of a single bank account in New York does not ... constitute 'doing business' in the state so as to subject a defendant to personal jurisdiction ...."

However, "the use of a bank account 'for the receipt of substantially all of the income of a foreign corporation and for the payment of substantially all of it business expenses' does" constitute doing business, she said, citing decisions from the U.S. District Court in Manhattan and the New York Court of Appeals.

"The fact that no Republican employees were situated in New York does not alter that finding, since it is the ready availability of the various cable and satellite communications media that enables a corporation to direct all uses of the bank from a foreign office without the need for sending an actual agent to New York," the judge wrote.

NEW YORK EVENTS

The appellate panel agreed with the lower court's denial of the motion to dismiss on forum non conveniens grounds, "since significant events took place, or were to take place in New York, namely, Multimark's was to make payments to plaintiff's account at a New York bank, Multimark's utilized its account at Bank Audi in New York as a 'clearing agent' to effect those payments, and Multimark's and Republican allegedly conspired to divert funds from Multimark's Bank Audi account by instructing Multimark's customers to send their payments to Republican's account at that same institution. Clearly, key witnesses and documents are located in New York."

Justice Ellerin concluded by observing that no other forum would be more convenient since all three parties were organized under laws of different countries.

Dominion of Melchizedek
A letter to the Editor.
[Ed. comment. In the interest of providing a forum for diverse opinions, we are publishing a letter to "arnie..." to share with our readers. In fairness to Dr. Korem, it is being published as received granting him his equal time in this forum and for comment and response by you, our readers.]

From: Dr. Tzemach "Ben" David Netzer Korem, PhD (h.c.)
[mailto:tzemach@email.msn.com]
Sent: Friday, March 24, 2000 12:14 AM
To: offshore@DNAI.COM
Subject: Melchizedek

Shalom Arnold:

I was surprised to see you on TV talking about DOM, and now to see your offshore-net site.

You have falsely protrayed DOM in both cases.

First, your only research is what you read in the WSJ regarding the existence of Karitane. In fact the acticle did not say that it is a seamount, but that it appeas [sic] our web site is pointing to such.

Remember that case involving Phoenix Summus, a DOM corporation? Are you aware that a Federal Bankruptcy Court in a published opinion recognized both the DOM bankruptcy that Phoenix completed, and Karitane and the Dominion of Melchizedek as well? And that Phoenix Summus past through the SEC and is now a full reporting company on the NASD BB traded at $7 per share as I-transaction (ITNI)? This is a form of defacto recognition for DOM since those filings with the SEC repeat more than once that Phoenix Summus was incorporated in the Dominion of Melchizedek, and that fact is also carried in the footnotes of two reputable CPA firms also in the filings with the SEC.

Furthermore that the OCC in their most recent release about a DOM bank classified DOM as a bank licensing "sovereignty" and the man that wrote that DOM is a "bank licensing sovereignty", was John Shockey's boss, and that John Shockey retired two years ago so he wasn't an assistant as you falsely stated at the time he is reported to have made the slanderous statement about DOM?

Are you aware that DOM received official recognition from a UN member state before DOM had any presence on the Internet, so it is completely false to state that DOM only exists on the Internet.

After I met you in person, DOM has since acquired a 50 years sovereign lease on Taongi in the North Pacific. The existence of Taongi is indisputable and always above sea level.

Your quote from Adkisson that the SEC has recognized DOM as a major criminal scam is completely false. DOM has received defacto recognition in various forms from various state and federal departments of US governement, but the SEC has made not such statement. Please see the debate between my self and Adkisson at: click.

The DOM is what it has always claimed to be, and that is, an ecclesiastical sovereignty. DOM has never claimed to be a "country".

Let me hear or read from you,

David

Bermuda Tax Incentives for Insurance Companies
Four large and well-established U.S. insurance companies have asked Congress to fix the "Bermuda loophole" -- the provisions in the U.S. tax code that allow U.S. property and casualty insurance companies to move their headquarters to Bermuda and avoid paying most U.S. taxes. This loophole has been around for at least 10 years, but the four insurance companies have challenged the provisions only as of late.

The U.S. insurance companies, which cannot themselves easily become organized under a Bermuda parent corporation (and, thus, take advantage of the loophole), have not argued that smaller U.S. insurance companies that have made the switch have done anything illegal. What they are most concerned about, of course, is the competition the Bermuda companies' U.S. subsidiaries are giving them in the United States. "Our laws discriminate against the U.S. companies, and if the laws remain the way they are, we are forced to expatriate ourselves," said the chief tax executive at Chubb, one of the four insurance companies.

What the four companies have proposed (and what has fallen on the sympathetic ears of at least some U.S. House Ways and Means members) is to require foreign-controlled domestic insurers to pay tax on an "imputed income" amount. Will this work? As Sheppard points out, competition for the U.S. reinsurance business is also coming from Europeans, who happen to view income imputation with a "sense of horror." There's also the "pesky little matter" of tax jurisdiction - - the United States doesn't have tax jurisdiction over Bermuda parent corporations. Most importantly, Sheppard says, the proposal doesn't address the larger issues of Bermuda being a widely recognized tax haven. [attribution: Tax Bits International].

First International Bank of Grenada
First Internationall Bank was closed this week (Mar. 2000) after a high level meeting in Grenada took place among prominent bankers and regulators on this Eastern Caribbean Island. All are concerned about the poor image the bank has created and the Grenada Government needed to finally act. First Bank officially opened more than 2 years ago but has yet to submit a credible audit to the Government. Grenada banking law requires that an audit be performed annually.
Cayman Islands Monetary Authority Sudden Resignation
GEORGE TOWN, Cayman Islands, March 20 (Reuters) - Neville Grant, head of the powerful Cayman Islands Monetary Authority, has resigned his post, the Cayman government said.

The government gave no explanation for the abrupt resignation, saying in a statement Grant had left his post effective Friday afternoon and thanking him for his contribution.

As head of the authority, Grant oversaw Cayman's offshore financial industry of some 592 banks and trust companies along with the Cayman Islands Stock Exchange, which lists more than 150 mutual funds and other stock instruments.

Grant has been the authority's only director since it opened in April 1997.

UK to target offshore tax havens
By Brian Groom in London - 20 Mar 2000 02:36GMT
From the London Financial Times (online)
Britain is to seek agreements with its offshore territories - including the Channel Islands, Isle of Man, Bermuda and the Cayman Islands - aimed at clamping down on tax evasion estimated to cost the country £1bn ($1.6bn) year. The move will be part of a "prudent and cautious" budget on Tuesday from Gordon Brown, the finance minister. He will announce plans for UK tax authorities to reach agreements with British dependencies and overseas territories on exchanging tax information. Mr. Brown has made clear his determination to stamp out designer taxation", whereby offshore centres tailor rates to help individual companies avoid UK tax. He respects the islands' constitutional autonomy over tax matters, but will not "defend the indefensible" in artificial tax arrangements.

A further motivation is the minister's belief that international exchanges of information are needed between tax authorities in a globalised economy. Agreements with the offshore territories would help Mr. Brown to resist a 20 per cent European withholding tax on non-resident savings, which could damage the London bond market.

Britain has proposed international information exchanges as an alternative to the withholding tax. The UK dependencies are sometimes accused by other EU states of creating unfair competition through low-tax investment vehicles.

Bermuda has indicated willingness to negotiate a deal on exchanging information. Others may be reluctant to compromise the confidentiality on which they have built offshore finance industries, but Britain's Treasury believes it has considerable leverage.

The islands, which consider themselves well regulated centres, are desperate to keep off a list of tax havens the Organisation for Economic Co-operation and Development is due to publicise in June. It would not help their case if they were seen to resist an agreement on transparency with the UK.

Mr. Brown wants the Budget to reinforce his reputation for economic competence and prudence. That suggests he will resist temptation to plunder his estimated £8bn surplus for tax cuts or spending increases.

Sources of money laundering
U.S. Treasury Secretary Larry Summers singled out certain countries as alleged sources of money laundering including Russia, Colombia and Nigeria. He also named the islands of Antigua and Dominica (not the Dominican Republic), in the Caribbean and Nauru, in the south Pacific as among the biggest "dirty money" destinations.
Vanuatu Trading U.S. Dollar Ban Expected to End Soon
Vanuatu bankers expect a ban on trading in U.S. dollars will be lifted soon, after U.S. State Department officials agreed to visit Vanuatu to inspect its banking system.

The ban follows Russian and U.S. statements that more than $70 billion of Russian mafia money has been laundered in the south Pacific small country banking system.

The claim was made by the Governor of Russia's Reserve Bank, and included in a State Department report claiming that offshore banks in Vanuatu, Palau, Niue and Nauru were being used by the mafia and South American drug cartels to launder money.

The claim has been denied by all four countries.

A Vanuatu delegation has just returned from New York and Washington, saying it was successful in pointing out that its local banking laws are tougher than America's and that the offshore banks most likely to be laundering money were operating not in Vanuatu but the United States.

U.S. State Department officials have now agreed to visit Vanuatu later this month (Feb. 2000) to see first-hand the country's banking system.

February 4, 2000 -- FRB Press Release
The Federal Reserve Board today voted to request comment on a new regulation implementing the privacy provisions of the Gramm-Leach-Bliley Act. Regulation P (Privacy of Consumer Financial Information) would apply to institutions regulated by the Board, including bank holding companies, financial holding companies, state-chartered banks that are members of the Federal Reserve System and uninsured state-chartered U.S. offices and branches of foreign banks.
"Body Scanners To Be Used as Alternative to Strip Searches"
Customs officers now have an alternative to strip searches and other high-contact pat searches while patrolling U.S. borders, according to Ralph Sheridan of American Science and Engineering. In an effort to respond to travelers' concerns regarding privacy, yet continue to enforce the law, officers can use new technology to scan a person for illegal substances before requiring them to submit to an invasive search method. U.S. Custom's commissioner Ray Kelly commissioned the design of the new technological device in an effort to address a public relations problem. Using profiling techniques, officers found drugs on 20 percent of the people they searched; however, many individuals who were concerned about the ethics of such a method contacted their lawyers and congressional representatives about its legality. Sheridan says the use of this user-friendly technology provides travelers with a choice and officials a reason to move forward with a particular inspection. [attribution: CTV Television]
A Taxing Problem
During 2000, numerous studies will be released principally from European governments putting tax or money laundering pressure upon the offshore tax havens. Firstly, a copy of a report which is due to go before the finance Ministers of the IMF policy setting Committee in April. This report, chaired by Andrew Crockett, has identified 72 offshore centres ranging from Delaware (U.S.); Caymans; Channel Islands and Cyprus which could result in sanctions being applied because of money-laundering.

There are also a number of other EU or UN government reports either completed or due to be published which seem to be determined to close down all offshore activities; including those designed to help those centres raise themselves out of low GDP per capita basis. There is the European Union: Code of Conduct (Business Taxation) Report - but no publication date yet; and the OECD Harmful Tax Systems due to be made public in June 2000.

Swiss Anti-money laundering efforts slow
GENEVA, Nov 24, 1999: Swiss efforts to crack down on money laundering have got off to a slow start because of legal loopholes and an apparent reluctance of bankers to report suspect transactions, experts said on Wednesday.

Nearly 20 months after a new law was introduced obliging banks and other financial institutions to report suspicious clients and freeze their accounts, the number of tip-offs from banks remained small, legal specialists told a conference.

"...We are talking about 160 money-laundering tip-offs a year. That is tiny," said Daniel Thelesklaf, head of the Berne-based Money Laundering Reporting Office of Switzerland.

Nov. 19, 1999 - FRB Wants Banks To Gather Racial Data
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This is a free email list of news items, commentary and opinions about various financial, tax and legal issues with an unabashed Libertarian (pro-Freedom) perspective. To subscribe send an email to fsol@rpifs.com with the message "Subscribe FSOL". To sign off the list send an email to fsol@rpifs.com with "Remove-FSOL" in the subject header. We welcome news items and announcements that will be helpful to our subscribers. They should be sent to NEWS@rpifs.com.

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I received the following news item from the Libertarian party and thought it would be of interest to many of you.

Vern Jacobs

Federal agency wants to encourage banks to ask customers about race, gender

WASHINGTON, DC -- The Federal Reserve Board is quietly trying to enact a proposal called Regulation B, which would encourage banks to label customers by race, gender, and ethnic background before approving their loans, the Libertarian Party warns.

"There's only one way to describe Regulation B: Backward," said Steve Dasbach, national director of the Libertarian Party. "Race should have no more to do with who gets a loan than it once did in deciding where people could sit on a bus. This embarrassing throwback to the Jim Crow era should be withdrawn immediately."

Regulation B would amend the Equal Credit Opportunity Act to "encourage" banks to collect data on the race, religion, gender, and national origin of anyone applying for an auto loan, credit card, or personal loan. The collection of such data has been illegal since 1976, but the Federal Reserve is trying to reverse that policy.

"In a colorblind society, banks judge people not by the color of their skin, but by the content of their credit application," Dasbach said. "But that's not what's going to happen the next time you apply for a loan if Regulation B goes through.

"Instead of discussing whether you're financially qualified, be prepared to explain whether you're racially qualified. You could also face questions about your religious views and ethnic background, such as whether you're Asian, a Pacific Islander, or an Eskimo. "Perhaps the most repugnant part is that if you refuse to answer, the loan officer would be required to make their own assessment 'based on skin tone and facial characteristics.' "

Ironically, Dasbach said, the driving forces behind Regulation B are some of the same groups that once opposed such racial profiling, such as the National Black Chamber of Commerce and the ACLU. Egging them on are trial lawyers, who stand to reap millions by using the racial data to show that banks have discriminated by awarding a disproportionate number of loans to certain groups.

"Program by program, quota by quota, politicians keep trying to pit Americans against each other by race -- and greedy lawyers are only too happy to cash in," Dasbach said. "In the aftermath of the attack litigation against tobacco companies, gun makers, and Microsoft, there's blood in the water -- and banks are the next likely target."

Fortunately, it's not too late to kill Regulation B, Dasbach said. After a brief public comment period, the Federal Reserve Board remains undecided, and a final decision is expected by early Spring. The Libertarian Party is fighting the proposal along with some of the same organizations that helped it quash the FDIC's so-called Know Your Customer rule earlier this year, including the Free Congress Foundation, Eagle Forum, U.S. Rep. Ron Paul (R-TX), the Independent Community Bankers of America and other banking organizations. "Now's the time to bury Regulation B," Dasbach said. "Let's inundate Congress and the Federal Reserve with letters, faxes, and phone calls in opposition to this pernicious proposal.

"Regulation B isn't only unjust; it's unnecessary. In a free market, the only color that matters is green. Any bank foolish enough to discriminate virtually guarantees that qualified minority applicants will take their business elsewhere, and even invites massive consumer boycotts.

"In other words, the free market already imposes a stiff price for racism -- without dragging America backward on civil rights."

The Libertarian Party http://www.lp.org/

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URGENT FORFEITURE ALERT
RE: Foreign Narcotics Kingpin Designation Act, H.R. 3164

Last Thursday, October 28, 1999. H.R. 3164, the Foreign Narcotics Kingpin Designation Act, was introduced in the House, and it was passed by the House on Tuesday November 2 -- just four working days later!

This horrible bill (read the complete text for yourself and see-- it's now up on the FEAR website) authorizes federal law enforcement agencies to create a black-list of foreign drug traffickers (no due process is given to those whose names are placed on the list). And then it imposes lengthy felony sentences, huge fines and property seizures for anyone who does business with those persons -- even the totally innocent provision of goods or services to those blacklisted persons.

A companion bill has already been introduced in the Senate, as S. 1009, and is being hotly fought in the Senate Intelligence Committee. The Senate bill is not yet published on the Thomas website, so we don't know what's in it.

Somehow this bill slipped past us and was passed in the span of only four working days! The speed of passage alone should raise suspicions. We'll report more as we find out what happened.

The only reason the Foreign Narcotics Kingpin Designation bill came to our attention at all is because the New York Times published a story today "Fierce Debate Over Attempt to Amend Drug-Traffic Bill," by Tim Weiner and Tim Golden, over the lambasting Senators Shelby and Kerrey are taking from other politicians for trying to inject due process into the bill. The article quotes Rep. Bill McCollum (R. Fla.) as saying "We have discovered in this Congress that we are not insulated by the efforts of the kingpins to buy influence and corrupt our political institutions. . . Their narco-lobbyists were paid well to try and shape and gut this bill."

Rep. McCollum's comment shows how rabid the law enforcement lobbyists and their allies in Congress have become. Trying to defend the Constitution -- that each Congressman and Senator swore to uphold and defend -- now results in being branded as collaborating with drug kingpins! A FEAR-List member commented today: "This definitely enhances McCollum's status as one of the most dangerous men in America. He is charging his colleagues with bribery and treason."

We must not let this tyranny on Capitol Hill continue. The law enforcement bureaucracy does not need the power to name "drug kingpins" and punish them and those they do innocent business with, by seizing their assets without any finding of guilt by a court of law. Any student of history would know that this is the recipe for tyranny. Congressmen and Senators who stand up for Constitutional rights amid the Drug War hysteria should be applauded, and supported, and re-elected.

Please write your Senators now, and urge them to oppose S. 1009 (unless due process is injected into the bill) and to oppose the Sessions/Schumer (DOJ forfeiture un-reform bill) S. 1701 as well.

Watch the FEAR website and FEAR-List for updates on these pending bills. The FEAR Website address is: www.fear.org.

Brenda Grantland
President, FEAR Board of Directors

Russia - Travel Warning (October 29, 1999)
The Department of State has made a decision to authorize the voluntary departure of eligible family members and employees who can be spared from duty from the U.S. Embassy in Moscow and the U.S. Consulates in St. Petersburg, Yekaterinburg and Vladivostok prior to January 1st due to potential Y2K-related disruptions. In particular, we are concerned about potential disruptions in energy supplies that may impact the health and safety of U.S. citizens residing or traveling in Russia, the duration of which is unknown.

U.S. citizens should consider deferring travel to Russia until the extent of Y2K-related disruptions, which may begin on January 1, becomes clear. U.S. citizens in Russia should consider their personal situations and take those actions they deem appropriate to ensure their well-being, including departure. When making such plans, it is prudent to take into account the potential for diminished availability of seats on commercial airlines as January 1, 2000 approaches.

Prolonged disruptions in energy supplies in Russia could put other systems dependent on electrical power at risk. In practical terms this could mean disruption of basic human services such as heat, water, telephones, and other vital services. The U.S. embassies and consulates in Russia will remain open and available to provide emergency assistance for U.S. citizens. However, U.S. embassies and consulates abroad do not have facilities to provide private U.S. citizens overseas with food, water, fuel, medicines, shelter or other equipment and supplies in the event of disruptions of essential services in foreign countries.

Americans living in or visiting Russia are encouraged to register at the Consular Section of the U.S. Embassy in Russia and obtain updated information on travel and security within Russia. The U.S. Embassy is located in Moscow at Novinskiy Bulvar 19/23; tel. (7-095) 252-2451; Fax (7-095) 956-4261. After hours tel. (7-095) 956-4422. Also, please monitor the U.S. Embassy¹s web site at www.usia.gov/posts/moscow.html or e-mail at Consulmo@state.gov.

U.S. Consulates are located at:

St. Petersburg: Ulitsa Furshtadskaya 15; tel (7-812) 275-1701; fax (7- 812) 110-7022; after hours (7-812) 274-8692. The e-mail address is Acs_stpete@state.gov.

Vladivostok: Ulitsa Pushkinskaya 32, tel (7-4232) 268-458 or 300-070; fax (7-4232) 300-091; after hours (7-4232) 471-644 and (7-4232) 287-290. Monitor the Consulate¹s Internet home page at www.vladivostok.com/usis/visaeng.htm.

Yekaterinburg: Ulitsa Gogolya 15a, 4th Floor tel (7-3432) 62-98-88; fax (7-3432) 564-515. Monitor the Consulate¹s Internet home page at www.uscgyekat.ur.ru or e-mail at cgyekat@uscgyekat.mplik.ru.

For further information on travel to Russia, please consult the latest Department of State Consular Information Sheet on Russia.

Identity theft
The FDIC has prepared guidance for bankers who suspect their customers may have been victims of identity theft. This crime was addressed with the October 30, 1998, enactment of the attached "Identity Theft and Assumption Deterrence Act of 1998" (Act), which in part amends 18 U.S.C. §1028 ("Fraud and related activity in connection with identification documents"). The FDIC Letter regarding the Act can be read here.
World-Wide Money-Laundering Bill May
Affect Bank Dealings With Foreign Clients
By MICHAEL ALLEN
Staff Reporter of THE WALL STREET JOURNAL
September 21, 1999

The nation's banks could face sweeping changes in the way they deal with foreign customers under an anti-money-laundering bill slated for introduction Tuesday.

U.S. Rep. James Leach, (R., Iowa), chairman of the House Banking Committee, will propose legislation Tuesday prohibiting U.S. financial institutions from maintaining transactional accounts for a range of "brass plate" banks that operate in offshore jurisdictions. The bill, which will be released in connection with a two-day hearing on the Russian money-laundering investigation at Bank of New York Co., also would require firms to identify the ultimate owner of any account established in the U.S. by a foreign entity that isn't publicly traded.

In prepared remarks, Mr. Leach said the bill "would significantly increase the transparency of the international-banking system and pierce the veil of secrecy that for too long has made it possible for institutions and individuals operating in largely unregulated offshore jurisdictions to gain unfettered access to the U.S. financial system for purposes of legitimizing the proceeds of illegal activity."

An important part of the legislation would toughen "know your customer" rules for U.S. banks and other financial institutions handling the accounts of foreigners. Firms would be required to obtain basic information about the owners of any accounts maintained in the U.S. by foreign entities, piercing the secrecy surrounding accounts held, for instance, by shell corporations formed in offshore jurisdictions that don't normally release such information. Publicly traded companies would be exempted from the requirement.

Many U.S. banks already insist on beneficial ownership information before opening accounts. But some regulators are concerned that many banks continue to give only cursory attention to such due diligence, particularly when it comes to foreign depositors, whose identities can be difficult to determine. The bill stops short of requiring that banks obtain such information about U.S. citizens who want to establish accounts, although most, under pressure from regulators, already do so.

The provisions on brass-plate banks could have far-reaching consequences for dozens of offshore jurisdictions around the world. The law would bar U.S. institutions from providing correspondent banking services for a whole class of banks that are licensed in offshore jurisdictions but have little or no physical presence there. The law would apply to banks that aren't licensed to provide services in their home countries and which "are not subject to comprehensive home-country supervision on a consolidated basis," according to a draft of Rep. Leach's statement.

Some aspects of the bill address the Bank of New York probe. Investigators suspect that at least some of the billions of dollars that moved through nine accounts at Bank of New York during the past several years derived from organized-crime activities abroad. Bank of New York hasn't been accused of any wrongdoing, and is cooperating with the investigation.

It isn't clear whether any offenses qualify for prosecution under current money-laundering laws. The Leach bill would substantially broaden the list to include money obtained through bribes or fraud against a foreign government, as well as by pilfering foreign-aid money.

Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.

KNOW YOUR TAXPAYER:
IRS EYES E-DISCLOSURE OF TAXPAYER DATA
In a move that likely will raise privacy concerns, the Internal Revenue Service has announced it wants to test a new system that allows taxpayers to electronically authorize the release of their tax records to third parties, like mortgage companies and credit bureaus.

The IRS said it expects to launch a pilot project in California designed to transmit a consenting taxpayer's records -- possibly over the Internet -- to a third party within 24 hours, rather than the seven- to ten-days it takes under the current, paper- based system.

To read the complete article, click here.

U.S. SENATORS OFFER BILL
TO LIMIT OFFSHORE BANKING
WASHINGTON, Oct 21 (Reuters) -- Two senators -- one from each party -- teamed up Thursday on new legislation to make it more difficult for U.S. residents to keep their money in secret bank accounts outside the United States.

Sen. Charles Schumer, a New York Democrat, said he and Sen. Paul Coverdell, a Georgia Republican, wanted to ``highlight a problem that we believe is growing greatly, the proliferation of offshore locations where people can open secret bank accounts and shell corporations to hide, launder and move money.''

Coverdell said their joint bill would help ``stem the flow of illegal monies'' to accounts in other countries.

The bill would require U.S. banks to determine who the real owners were when the banks open foreign accounts, to stop criminals from using false identities. It would also bar offshore banks with few regulatory requirements from participating in the U.S financial system.

Schumer objected that a number of countries impose no capital requirements and ``rarely cooperate with international law enforcement.''

It can also be easy to open a new bank on the Web. Schumer demonstrated Web sites that permit anyone to open a bank almost as easily as a bank account -- if they're willing to pay the price. They showed a Web site -- www.offshoresecrets.com -- that makes it easy to open a bank.


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