February 2009 Archives

First Deputy Head of the Federal Financial Monitoring Service, Yuri Korotky, stated in an interview with the Rossiyskaya Gazeta daily that they forecasts an outburst of pyramid schemes and scams, as well as a worsening of the criminal situation related to currency speculations, speculative deals with precious metals, money surrogate and cash out operations and transferring money to offshore bank accounts.

According to the interview there's a distinct threat of criminal groups grabbing assets and strengthening their control through financial scams.

"Taking into account the difficult financial situation of many our banks and enterprises we forecast the growth of deliberate bankruptcy and open raider attacks on the most liquid assets and property." "There is a high risk of devalued assets to be bought out by organized criminal groups. This is fraught with property redistribution in favor of criminals. It is very dangerous, as in fact, it means the risk of legalizing criminal money."

Now that the threat has been identified and the risks to the stability of the Russian society have been publicly disclosed, Yuro Korotky went on to describe some of the measures the government would take to reduce money-laundering in order to combat criminal groups from siphoning money offshore via credit deficit pyramid schemes and scams built on bogus credit swaps of rogue investment projects.

"We have to sharpen instruments of fighting financial fraudsters. It is expedient to submit amendments to the anti-laundering law that would make budget fund operations subjected to obligatory control. Moreover, it would be useful to mark special accounts through which budget funds flow."

The bottom line is that Yuri Korotky's agency, Rosfinmonitoring, forecasts the worsening of the criminal situation as it concerns currency speculations, speculative deals with precious metals, money surrogate and cash out operations and transferring money to offshore bank accounts.

At a Tax Council Policy Institute conference the IRS 'comissar' Douglas Shulman has reiterated his desire to target individuals and companies with secret offshore bank accounts,

''Clearly there have been some high profile cases in the
news recently. We have been steadily increasing pressure on
offshore financial institutions that facilitate concealment of
taxable income in the U.S...That pressure will continue under my watch,"

Although he would not comment on the UBS case, Mr.Shulman urged US citizens with offshore bank accounts to utilize the IRS's Voluntary Disclosure Program and thereby 'most of the time' avoid criminal prosecution or worse.

Despite already reaching a first settlement with UBS, the US goverment is now suing the Swiss Bank to reveal even more offshore account holders, clearly not satisfied with its current share of the estimated 52,000 American offshore accounts held at the bank.
 
It is not clear whether the IRS really hopes to get them all or if they are just using the threat of litigation on such a giant scale to encourage US clients at UBS (and offshore account holders worldwide) to start reporting.

Shulman said US authorities were scoping out "a wide range
of options to address offshore tax abuses," without going into further details.

It is thought that possible measures could include economic sanctions against tax haven countries, given that many are highly dependent on high-tax countries for their own livelihood.

UBS for its part has sworn to fight back against these latest charges.

PriceWaterhouseCoopers updated an analysis of lost tax revenue from On-line Gambling (originally published in 2007) and released the updated findings yesterday through the Safe and Secure Internet Gambling Initiative, a Washington DC lobby group. The latest report indicates that the Unlawful Internet Gambling Enforcement Act of 2006 has done very little to slow the growth of i-Gaming in the U.S. More glaringly evident however, are the facts and figures related to the loss of potential tax revenue. The lost dollars are mounting to the point where, given the current economic situation, it's becoming irresponsible for Congress to not seriously consider regulating and taxing Internet Gambling.

Internet Gambling Regulation Provides Opportunity to Generate Tens of Billions for Government Programs - Projections Reflect Increased Gambling by Americans Despite Attempts to Prohibit the Activity

An updated analysis found that the U.S. could receive as much as $51.9 billion in federal revenue over the next decade if Internet gambling is regulated as proposed in legislation introduced by Representatives Barney Frank (D-Mass.) and Jim McDermott (D-Wash.). The new revenue estimates are approximately 22 percent larger than those of an earlier analysis prepared by PricewaterhouseCoopers in 2007, reflecting the increased online gambling activities of Americans despite attempts to prohibit activity through passage of the Unlawful Internet Gambling Enforcement Act of 2006.

"This analysis further illustrates that the U.S. is missing the opportunity to collect billions of dollars in federal revenues," said Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative. "We are optimistic that the Obama Administration and Congress will pay closer attention to this issue as they seek to find new revenues that can be generated without raising taxes for critical federal, state and local government programs. Regulation is also needed to ensure there are safeguards to protect against compulsive and underage gambling, money laundering, fraud and identity theft."

The Swiss Government is assembling a team of lawyers diplomats and experts to help defend its banking industry as pressure to prize open its bank secrecy grows.

The taskforce is to be led by Finance Minister Hans-Rudolf Merz, Justice Minister Widmer-Schlumpf and Foreign Minister Calmy-Rey , according to the Finance minister himself.

"The mandate of the committee is to protect the interests of our country in the case of UBS and in the context of bank secrecy and Switzerland as a financial center," Merz said.

The committee will seek to respond to claims that Swiss bank secrecy if folding under US pressure, after it gave UBS the greenlight to disclose 250 US clients last week.

The banking industry amounts to around 15% of Swiss GNP and bankers warn that the loss of banking secrecy could cut the financial sector in half.

Despite a settlement already agreed by UBS with the American government the US is still looking for further details of american offshore bank accounts holders and the government needs backup to put a positive spin on its privacy laws.

Among Swiss bankers themselves nothing is certain.

"Politicians tend to talk a lot. Banking secrecy is of course not safe: it is threatened." said the chairman of the Swiss Private Banker's association.

European Leaders have engaged in yet more sabre rattling over offshore banking, with a seven-point plan agreed in Berlin calling for ''sanctions'' against ''uncooperative jursidictions''.
At a meeting of G20 Nations the European representatives pledged to end tax havens by applying uniform rules to the worldwide financial markets.

French President Nicholas Sarkozy affirmed that he wanted to ''put a stop to tax havens''. Furthermore he unveiled plans for the next G20 summit in April to ''overhaul the system'', with sanctions to reign in non compliers.

It remains to be seen whether other nations in the G20 group including Brazil, India and China will be as enthusiastic as the Europeans in this latest crusade.

For some this latest bout of verbal swordplay is just a way of sidestepping the main issue at hand: mismanagement of the global financial crisis. Frederick Erixon, director of the European Centre for International Political Economy reckoned the antics were little more than finger pointing.

"They are pointing the finger at tax havens but the problems we're having in the financial system have very little to do with tax havens..They couldn't agree on something more substantial so they went for the easy targets: tax havens and hedge funds. It's all a smokescreen."

The British delegates must certainly have felt like fat kids caught with their finger in the pie since is former British colonies (and some still under direct control) which are hoarding the vast majority of offshore monies.

UK chancellor of the Exchequer Alistair Darling held hands with German Chancellor Angela Merkel in calling for the  Swiss government stop allowing foreigners to hide their wealth and avoid tax, yet made little mention of tax havens linked to the British.

"If it wants to be part of the international community, it's got to be open," Darling was quoted as saying.

With each government going for its own slice of the pie and personal 'most wanted' list, it may be hard for a group with such disperse motives to reach a meaningful agreement any time soon.

The Vatican is expected to demand the closure of all tax havens in its official statement, the encyclical, which is released March 18th. The paper has been long awaited but was postponed last year in order to conduct further research into the reasons for the financial crisis. Last December a Vatican issued policy paper blamed the financial crisis on offshore banking centres such as the channel islands The paper also blamed offshore banking for its contribution to the global deficit, and for its use in transferring money from poverty stricken to rich countries. According to the Vatican, if taxed at source these funds could be much better utilized in helping the citizens of these underdeveloped countries The pope's move coinncides with momentum from developed countries for greater regulation of offshore banking, with Barack Obama in particluar calling for an end to widespread tax evasion by US citizens Obama's campaign has been hurt by allegations of tax avoidance by his nominees. It remains to be seen whether the Pope's squeaky clean image will not likewise be damaged by his lieutenants. It is hard to imagine that that not even a single Cardinal has an offshore company or bank account.

The following Q&A is from the Jacobs Report with permission from Vernon K. Jacobs

QUESTION: Hello, how do I disclose an offshore account to the us government? I know
you are probably very busy but I was hoping you could give me a couple pointers.
Any help appreciated. Thank you so much. Warmest Regards,

REPLY: The first step is to get a copy of the form and instructions at
http://www.irs.gov/pub/irs-access/f90221_accessible.pdf
The IRS provides answers to a number of questions at
http://www.irs.gov/businesses/small/article/0,,id=148845,00.html

This form was modified as of Dec. 31, 2008 and includes a little bit of additional information from the previous form.

The instructions explain that the form is not required if the total value of all foreign financial accounts combined is $10,000 or less during the prior calendar year. Additional exceptions are described in the instructions to the form.

A more detailed discussion of the various exceptions is available for $16 at
http://www.rpifs.com/fbar.htm.

You can also find my response to dozens of questions about this form at this Yahoo Group. Click on "Messages" and then use the search tool.

Vern

As required by U.S. Treasury Regulations governing tax practitioners, any written tax
advice contained herein cannot be used by any taxpayer for the purpose of avoiding
certain tax penalties that may be imposed under the Internal Revenue Code. For further
details see http://www.offshorepress.com/vkjcpa/disclosurerules.htm

AiG as it's become known, is the Asian i-Gaming Conference and Expo, is hosting it's 7th annual event from February 24-26, 2009, at the Venetian Macau Resort-Hotel in Macau. OffshoreNet has associates attending this event, if you are planning to attend and require assistance with offshore banking, please enquire.

AiG has become the definitive conference in Asia focusing on i-gaming. The 2008 edition welcomed just under 400 attendees an increase of 230% on PCiG 2007 with just under 500 attendees enjoying three days of conferencing and a sold out exhibition.

The Asian i-gaming industry continues to grow at an exponential rate with more companies setting up operations there. This conference is perfectly placed for all parties interested in the region. The conference program will have something for everyone, whether you are already established in Asia or view the region as the next opportunity for your company, you will find the event gives you the information you need for your business to succeed.

AiG will consist of two full days of keynotes, plenary sessions and streams to ensure you can tailor the event to your needs. In addition, this year, there will again be two pre-conference strategy days with the first looking at Mobile Gaming and the second being an Asian Marketing Masterclass.

Visit the official Asian i-Gaming Congress website to learn more.

Swiss banking secrecy has come under fire recently because of the media focus on UBS, Credit Suisse and their US clients. With the volume of news dedicated to the subject you could be forgiven for thinking that bank secrecy in Switzerland is a thing of the past, that Switzerland has handed over the keys to the castle, defeated.

Most media would like to suggest that some great development has occurred and their output reflects this, but if you take a second look you will find that relatively little has actually happened.

The IRS has been campaigning since last July to prize open details of US account holders at UBS and what has it got to show for it? Out of a suspected 52,000, just 12 names have been promised them. Even these 12 aren't for sure, because they still have the right to appeal the decision under Swiss law.

Of course its in the interest of the US government to keep this issue in the news because it gets people scared about using offshore accounts, and may even result in some UBS account holders handing themselves over . Tax Lawyers too have a field day letting it be known that they are the only solution for these luckless UBS types. Bu is it not just a case of smoke and mirrors concealing the fact that, despite everything, Swiss bank secrecy hasn't changed, and violation of the law still carries a prison sentence?

UBS and Credit Suisse have made themselves targets by opening offices in the US and therefore making themselves subject to US law. The Swiss Federal Council simply
acknowledged that when it agreed to allow the US Customer information to be
given to the IRS. For those banks without a US presence there has been no operational change - Switzerland will still put people in jail for violating bank secrecy.

In fact private banks and trust companies have been reminded by authorities that they will be prosecuted if they violate the Secrecy Act.

It is no more in Switzerland's interest to start unraveling client confidentiality than it is in the interests of those American UBS clients to have their personal details revealed. Although it may have to walk a fine line in order to keep the US from swallowing it whole, bank secrecy remains intact and there are no plans to change it.

Gordon Brown is planning to spearhead a global crackdown on offshore tax havens and tax evasion using offshore bank accounts. A tough 'worldwide' regulatory tax and banking system is the pipeline that aims to cover every country.

Speaking at a downing street press conference he said "We want the whole of the world to take action. That will mean action against regulatory and tax havens in parts of the world which have escaped the regulatory attention they need. The changes we make will have to apply to all jurisdictions around the world."

While the US is more concerned about tax losses in the Cayman Islands, the tip of Brown's lance appears to be aimed at Switzerland, and especially at individual tax avoiders in that country. The government claims that investigations into tax avoidance frequently led to Switzerland, but others may view the decision as rather more political.

Brown is shying away from attacking British tax havens and big business, instead focusing on easier targets such as rich people and foreigners. Targeting the island havens like Jersey or the Isle of Man would be attacking the cozy links he has developed with corporate UK over the past 10 years. He may also be wary of damaging the competitiveness of UK companies which is actively maintained by their low tax base.

Even so, its smacks of hypocrisy may well be a case of riding on the coat-tails of the UBS scandal to go for individual Swiss bank account holders in this way.

The knives are out....
SEC Release: The Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program.

Stanford's companies include Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management. The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), in the enforcement action.

Pursuant to the SEC's request for emergency relief for the benefit of defrauded investors, U.S. District Judge Reed O'Connor entered a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets.

The SEC's complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act, and registration provisions of the Investment Company Act. In addition to emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.

With Stanford's attorney already bailing this one looks a dead cert. This question is, how did he keep is a secret for so long?

Investors looking to avoid the EU Savings Tax Directive by moving to Singapore may have pulled the short straw. Under pressure from OECD countries over its impressive bank secrecy, Singapore has looked to buckle up with its senior finance minister denying that it is a tax haven, and encouraging further OECD cooperation.

The mininster for Finance and Transport Lim Hwee Hua has said that although the Republic has low taxes, it has a strong rule of law and is looking to adopt the Organisation of Economic Cooperation and Development (OECD) standard for transparency and effective exchange of tax information.

'We will be engaging the OECD and the industry to study this OECD standard with a view to endorsing it,' said Lim.

This news may frighten many investors who have invested in Singapore offshore banking following the introduction of the EU Savings Tax Directive in 2005. It requires countries that are signatories to either deduct withholding tax at source or disclose details of foreign depositors to their home jurisdictions.

The directive caused many investors to flee out of havens that were affected by the measure such as the Channel Islands, Switzerland and the Cayman Islands to farther fields such as Honk Kong and Singapore.

Singapore saw a huge expansion of its wealth management business due to its perceived independence from the EU. Total assets in the Singaporean banking system grew from $150 billion in 1998 to $1.173 trillion by the end of 2007 reports citynewswire.

Countries which have agreed to comply with the EU directive are Andorra, Anguilla, Aruba, Austria, Belgium, British Virgin Islands, Cayman Islands, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Isle of Man, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Montserrat, Netherlands, Netherlands Antilles, Poland, Portugal, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turks and Caicos, the UK - but up until now, not Singapore or Hong Kong. See OECD website for recent bilateral tax agreements

Both are huge banking centers in their own right and attractive to foreign investors - but for how long?

FBI agents are investigating Antigua-based Stanford International Bank, owned by Texan billionaire Sir Allen Stanford.

The bank has come under scrutiny because it offers CD's with returns at twice the rate of 'conventional' banks. Former employees have also witnessed ''unethical and illegal practices'', reports the times of London.

Mark Tidwell and Charles Rawl alledge that the bank gave clients false indications of investment performance and destroyed documents during a previous investigation by the SEC.

Although it acknowledges an investigation by the SEC is underway, the bank declined to comment on reports of FBI and IRS investigations started months ago. 

Stanford International Bank has an impressive track record, and currently has $8.6 Billion under management. It has succeeded in attracting at least 30,000 depositors in recent years, the majority Latin American. 

The Flamboyant Financier

This is not the first time financier Allen Stanford has courted controversy. The billionaire Texan was also famous for financing the twenty20 cricket tournament between England and the West Indies that promised a prize of $20 million, announcing his arrival in the UK by landing at Lord's cricket ground in a golden helicopter. During a promotional photo-shoot the divorced father of six caused outrage by posing with one of the England player's wives on his lap.

The Queen's office in Buckingham palace recently asked him to change a page on his website which said that he had been knighted by the Earl of Wessex, when it was in fact the Antiguan government which had conferred the honor.

The Isle of Man Government and the private sector have worked very hard to ensure that the island has a world class infrastructure and full range of Support Services in place for the e-gaming industry. Recently a new survey of leading e-Gaming companies in the Isle of Man has estimated its online gaming sector grew by 30% in 2008, and has forecast growth to accelerate to 40% in 2009.

There are 14 license holders at the moment. Eight new licenses were issued in 2008 with two more to go live shortly and this past week Asian bookmaker SBOBet's subsidiary Celton Manx has become the first Isle of Man-licensed operator to be granted approval to launch a live dealer casino from the island.

Liechtenstein's ultra secret bank secrecy has come under renewed attack from the EU.
It was a hard nut to crack. Eventually Liechtenstein's bank secrecy was broken by a rogue bank employee paid handsomely by the German government. But now the EU's blood is up it wants its pound of flesh in the form of new information exchange agreements.
What's in store for Liechtenstein's secretive offshore banking?

With a bewildering number of offshore jurisdictions out there, how do you find one that can suit a broad range of investment objectives?

What sets the Seychelles apart from the others?

A remote group of Paradise Islands somewhere in the Indian Ocean, at first glance the Seychelles don't appear to break any tax haven stereotypes. Yet with the global economic climate changing, and tax and privacy issues with it, that tax haven stereotype is itself in motion.

Financial Times Article Concludes Momentum is Building to Regulate Internet Gambling

This is an issue of the Safe and Secure Internet Gambling Initiative's Public Affairs Newsletter; an update on legislative and media activity about regulating Internet gambling.

Financial Times reports ("A better hand") that support is growing for the regulation of Internet gambling. "Industry experts think the new Congress will respond more favorably to renewed efforts by Democrats, notably Mr. Frank, to allow regulated online operations. The administration of President Obama, while unlikely to advocate that change, is expected to play the role of passive bystander." The article points out that the Bush administration, motivated by a desire "to appease the religious right," pushed through hastily written, burdensome and unrealistic prohibitions on Internet gambling that only serve a purpose of harming American consumers and burdening an already overloaded and struggling U.S. financial institutions tasked with enforcing the rules.

Today the Guardian published an article by William Brittain-Catlin, he's the author of Offshore: The Dark Side of the Global Economy, and an investigator with the risk consultancy Kroll. The insightful report was titled:

How offshore capitalism ate our economies - and itself

Convoluted networks of tax havens became a model for the abstract financial wizardry that led to the current crisis

In many ways it's an excerpt from his brilliant book but it does shed some light on what we could see in the future. Here's an excerpt:

The new offshore wizardry soon had an impact on the wider world. Up until this time, nation-states had complete control over their economies and finances. That changed. Offshore tax havens put enormous pressure on domestic banking systems to deregulate and liberalise. In turn, onshore banks and monetary authorities tried desperately to control and regulate the new international capital markets that were based offshore. But it was an unequal struggle; governments across the industrialised west eventually repealed their own regulations and let offshore finance wash up and make a home onshore.

Buy the Book Here: Offshore: The Dark Side of the Global Economy

Excerpt from an interesting article posted on the Economix Blog of the NY Times:

Given that the likelihood of being caught is relatively low, says Daniel N. Shaviro, a tax professor at New York University School of Law, most people comply with tax laws because of a "sense of good will, the sense that others are complying and the fairness of the system." The perception of the likelihood of being prosecuted for tax fraud may also be higher than the actual likelihood of being prosecuted, Mr. Shaviro says -- perhaps because the I.R.S. regularly goes after high-profile defendants like Leona Helmsley, who is said to have once proclaimed that "only the little people pay taxes."

Continue reading How Common Is Tax Evasion?

QUESTION: I subscribe to a variety of financial newsletters. Several have suggested for more then several years that it would be "prudent" to open a foreign bank/brokerage account so as to move a portion of one's liquid assets "offshore" (out of USA). The thinking is that the US dollar is going to flat line at some point in the not too distant future...and that ownership of certain investments (such as gold, gold stocks, foreign currencies, etc) might be outlawed by a us congress/administration that was implementing currency exchange controls, etc. While they also mention trusts as another vehicle to consider, the emphasis is not on protection from creditor lawsuits, etc. It is protection from US govt interference in one's investment decisions.