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"Enron paid no income taxes in 4 of the last 5 years, using almost 900
subsidiaries in tax-haven countries & other techniques, an analysis of its financial reports to shareholders shows. It was also eligible for $382 million in tax refunds." 1.17.02 NYTimes
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… even though the oversight ability of the IRS has been emasculated, large blue chip
corporations blatantly cheat on taxes, the largest accounting firms push extremely dubious tax
schemes, and the offshore tax haven of the Cayman Islands has become a major world money
center. Forbes magazine 3.5.01 points out that, since 1995, the number of IRS enforcers has declined
21% your chance of being audited in person has declined % & the percent of property
seized by the IRS from delinquents has plummeted 99%. The IRS says illegal offshore
schemes cost the nation $70 billion a year.
But I am appealing to common sense. You can find Web sites, often set up by lawyers &
accountants, promoting seemingly bullet-proof tax schemes in remote tax havens. Go to
www.quatloos.com, a Web site maintained by Irvine atty Jay Adkisson. When you set yourself up
with certain dubious offshore schemes, "you have committed tax evasion, and at least one person
(the tax attorney) and probably several persons (your offshore trustee or banker) are also
knowledgeable about the transaction," Adkisson says on the site.
"If, for whatever reason, they get tight for money (say, their license is suspended or their cocaine habit gets worse), you & your offshore money are going to be at the top of their list of funds to tap. You can't say anything about
it without revealing that you have committed tax evasion."
Even though its powers have diminished, the IRS watches the promoters of sleazy offshore
schemes. Usually, you can find them putting on seminars, as well as putting garbage on Web
sites. If they provide services to you, and they get caught, watch out; you might be next.
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The IRS is on the lookout for abusive domestic as well as foreign trusts. Promoters may charge $5,000 to
$70,000 for these packages. Trusts can be perfectly legitimate, of course, but many of the dubious
ones are vertically layered, with each trust distributing income to the next layer. "Bogus expenses
are charged against trust income at each trust layer," the IRS says. That fraudulently reduces
taxable income to nominal amounts.
In abusive domestic and foreign trusts, taxpayers are told to create an asset management
company. The next step is to form a business trust, of which the company is trustee. In a domestic
scheme, the company and the business trust might be followed by an equipment or service trust,
which holds equipment that is rented or leased to the business trust at inflated rates. There also
can be family residence and charitable trusts.
Offshore trusts also begin with the asset management company and business trust, but those will
be followed by two foreign trusts. Income from the business trust is dumped into the first, and then
into the second. Because there is a foreign trustee, promoters of such schemes say the income is
foreign, and there are no U.S. filing requirements. There are all manner of tax protesters, hate-radio talk show hosts, Common Law Movement wackos and others who will tell you that the 16th Amendment to the Constitution (establishing the income tax) was not properly ratified; that the Internal Revenue Code does not define "income," ad nauseam. Such arguments are fallacious, says Daniel B. Evans, who also has a Web site. It's true that only four states approved the 16th Amendment exactly as Congress had worded it; the other states made slight errors of diction, capitalization, punctuation and spelling. But the argument is nonsense, Evans says. The amendment was ratified.
10.13.09 Stuart Pfeifer L.A. Times
Wealthy U.S. taxpayers, concerned about an Internal Revenue Service crackdown on the use of secret overseas bank accounts as tax havens, are rushing to meet a Thursday deadline to disclose those accounts or face possible criminal prosecution. Concern was triggered this summer when Switzerland's largest bank, caught up in an international tax evasion dispute, said it would disclose the names of more than 4,000 of its U.S. account holders.
Under an amnesty program, the IRS is allowing taxpayers to avoid prosecution for having failed to report their overseas accounts. As a result, tax attorneys across the nation have been besieged by wealthy clients who are lining up to apply even though they will still face big financial penalties. Tax lawyers in Southern California say they've encountered an array of clients concerned about international bank accounts: Hollywood producers, immigrants who left behind foreign accounts and business owners who have stashed money overseas to avoid taxation.
Some 3,000 U.S. residents have voluntarily disclosed their foreign bank accounts to the IRS this year, compared to fewer than 100 in 2008, said one U.S. govt official who asked not to be identified. Demand for the amnesty program exploded in August 2009 when Swiss bank UBS agreed to settle U.S. criminal charges that it had engaged in a "multibillion-dollar scheme" to help U.S. taxpayers hide assets from the IRS.
Century City law firm TroyGould intl tax atty Shahzad Malik said a wide variety of clients were coming forward. "You have a lot of people in the entertainment industry, movie producer types; they do business everywhere and have royalties coming to them internationally. I've had to clean up a lot of those," he said.
Among Malik's clients is one who received notice from UBS that his name was one of those that would be forwarded to the IRS. Some calls have come from holders of accounts with other foreign banks who don't know whether their bank will start cooperating with the U.S.
In August, Malibu resident John McCarthy agreed to plead guilty to a felony charge of failing to disclose his UBS account to the IRS. He has yet to be sentenced and is free on $50,000 bail. UBS, meanwhile, has taken steps to cease efforts to attract American clients to its private bank in Switzerland. The bank shut down its cross-border division, but it still operates a brokerage in the U.S. It purchased PaineWebber in 2000. The changing landscape in Switzerland may not spread worldwide, he said. "As long as the world consists of different nations with different laws, there will always be countries that follow the rules more strictly than others." |
Own bank in Nauru ¹ & Vanuatu Bacard's Global Investor newsletter incl. Offshore Investing FAQ & Offshore Referrals for Global Investors latest intelligence uncovered about various offshore investment scams Intl Business Guide Intl drivers license for use as ID
from private correspondence
Basically, I found it nigh impossible to do that, it was a common thing that people did in the 80's as a tax evasion
and from a corporate perspective, and so the govt clamped down on the islands.
It costs as much to get to the islands by air/ferry as it does to get to the States. People renting a property need
proof of job on the island. To open a bank account it usually starts at £10,000, alongside proof of residence on
the island. Investigator vanishes after Cayman fiasco 1.31.03 Karen Mcveigh The Scotsman
Tarred by its role in far-reaching scandals such as the £10 billion collapse of the Bank of Credit and Commerce
International & LtCol Oliver North, who set up a dummy corporation there while orchestrating his arm-for-
hostages deal, its reputation as a money-laundering haven is one that officials have been trying to shake off for
decades. But the latest scandal to hit the tiny British overseas territory has left its image once again in tatters and
the British govt with a lot of explaining to do, after an MI6 scheme to penetrate organised crime instead enabled
defendants in a £15 million money-laundering trial to walk free.
Yesterday, following crisis talks between the two govts after accusations that Britain was conducting a "cold war"
against the territory, it emerged that the Briton at the centre of the fiasco had resigned. However, former Scotland
Yard officer turned Cayman official Brian Gibbs has now also vanished. He was last seen 2 weeks ago leaving the
islands on a flight to Miami. The governor's office, which confirmed his resignation, said Mr Gibbs felt threatened
and left "because of a potential risk to his personal safety".
Mr Gibbs, who was the lead investigator on the long-running case against 4 managers of Euro Bank, disappeared
shortly after admitting that he had shredded evidence on instruction from a "controlling agent" of the British govt,
believed to be MI6. Following Mr Gibbs' admission, the chief justice on the islands threw out the case and issued a
47-page judgment criticising Mr Gibbs' relationship with an unnamed "UK govt agency".
The trial followed 3 year investigation into the collapse of Euro Bank, which was suspected of laundering money for
organised crime gangs in U.S. Its 1.14.03 collapse, which caused Baroness Amos to dispatch a Foreign &
Commonwealth Office official to the far-flung island this week, has shed unwelcome light on to MI6's supposedly
secret operation there, code-named Operation Victory.
During the trial, the prosecution wanted to see documents & transcripts that Mr Gibbs had sent to London, but,
unbeknown to the judge, this request was blocked. Mr Gibbs' MI6 controller, who was forced to testify to the
Cayman court under the pseudonym "John Doe", conceded that Mr Gibbs had destroyed evidence "completely
& unquestioningly" on MI6 orders. The judge then ruled that efforts by Mr Gibbs & MI6 to hide intelligence
files fatally prejudiced the case against the defendants.
"The decision to allow Gibbs to inhabit the shadows without ever having to appear in the searching light of this
case, encouraged, and indeed, in my view, emboldened him in his misplaced sense of priorities for his relationship
with the UK govt agency to the point … of placing his position and that of the UK govt agency above his duty
to this court and above his duty to ensure that the defendants received a fair trial."
The saga has caused fury in the Cayman govt, with 5 of 8 cabinet ministers demanding resignation of atty general
David Ballantyne and all members of the FRU. Yesterday, the Foreign & Commonwealth Office (FCO) refused
to comment on this week's meetings between its official, Ian Hendry, and the Cayman govt to discuss the affair. "Mr
Hendry is not yet back in his office and we do not have anything to add to our earlier statement," a FCO
spokesman said.
In a statement last week, Baroness Amos has said that British intelligence agencies may have helped but had not
interfered in the investigation. "It is quite untrue to suggest, as some have done, that UK agencies have been
operating in the Cayman Islands with the intention of interfering with, and causing damage to, its finance industry"
she said.
She defended Mr Ballantyne, who "did all he could to ensure that the trial could be conducted fairly. He has served
the govt & people of the Cayman Islands well and should continue to command their trust." Cayman Islands'
govt leader McKeeva Bush, who has called on the British govt to "pay for what it had done", was not available for
comment.
The British Overseas Territory, a collection of 3 islands 180 miles north-west of Jamaica, is home to just 40,000
people, mainly living on Grand Cayman, with considerably fewer on Cayman Brac and only 115 on Little Cayman.
However, thanks to the continued tax-free status accorded to the territory, the GDP per head equates to $41,200
(£25,000), a figure considerably higher than some Gulf states. |
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IRS cracking down on wealthy tax cheats Meanwhile, Congress may make it more difficult to hide money overseas. 10.27.09 Karen Datko MSN
The IRS offered amnesty to those hiding money in offshore accounts. The IRS has formed the Global High Wealth Industry Group, which will delve into complicated finances of the very rich. A small number of audits targeting those with tens of millions in income or assets will begin next month, The Wall Street Journal reports. |
The House Ways and Means Committee and Joint Committee on Taxation today introduced the Foreign Account Tax Compliance Act of 2009. The bill intends to close loopholes that allow foreign assets to be hidden from the Internal Revenue Service. The White House also supports the measure. If it passes, this bill would make it more difficult to avoid paying taxes by using fancy offshore trust schemes.
This new legislation is coincidental to the IRS ramping up its staff to investigate tax evasion by wealthy individuals.
This bill is not the far more controversial proposal that sought to increase the taxes of multinational corporations through eliminating tax deferrals on foreign income. As I mentioned earlier in the month, that proposal has been set aside for now. Today's legislation mostly goes after individuals who are using foreign tax havens to avoid paying taxes.
From the House Ways and Means Committee website:
If you are rich enough, and determined to disregard the law, then you can still probably avoid paying taxes. That's always true, no matter what rules are in place, since you're intent on breaking the law. But most of these rules would do a pretty good job of closing loopholes and making it harder to act like techniques for evading taxes are simply smart personal financial management.
Music, dancing but no religious police on sun-splashed Kish 3.12.02 Jahangir Jahanbagloo MSNBC Now the island has been established as a free-trade zone, providing a respite for well-heeled Tehran residents who are weary of the restrictions imposed by the Islamic Republic through religious police who scour the city for signs of deviance. Religious police are non-existent on Kish and the regular police are rarely seen. Meantime, retail outlets are plentiful. "I told my boss in Tehran that if you want to attract tourists here you still have to lift some restrictions. Why not somebody having a beer on the beach or during his meal," said one local official, who spoke on condition of anonymity.
Such ideas would be heresy on the Iranian mainland, but on Kish, it's indicative of the sentiment on this island
paradise which wants to become the tourist & business center of the gulf. Partly, of course, its distance from
the capital makes it easier to experiment on Kish. It's also a matter of income level. Unlike most other Iranian cities,
Kish has the air of prosperity. The taxis are all new model Mercedes & Toyotas. Vehicles are air conditioned
and drivers wear their seat belts, again a rarity in other cities.
Wooing Expatriates |
The off-shore shell game 7.19.02 Bill Moyers Now Moyers: Employees of the Stanley Works Corporation gather outside the company's gates in Connecticut. They have come to protest the company's plans to register as a corporation overseas....In a popular off-shore tax-haven: Bermuda. Dennis O'neil: It's, in my opinion, immoral, if not illegal. I pay taxes here in the United States of America. I can't move anywhere and get out of my obligation to pay. Moyers: You may not have heard about the Bermuda move, but you've heard of Stanley - it's the world famous tool and hardware maker - an American company that has called Connecticut home for almost 160 years. Now it wants to move its headquarters to Bermuda. The reason? To avoid an estimated 30 million dollars a year in U.S. taxes. Brian Anderson: I'm here because I'm disturbed that Stanley would move out of the United States when our country, and particularly this community, New Britain, Connecticut, has been so good to Stanley over the years. Moyers: The implications for America's ability to collect revenue are enormous. Stanley will be joining a growing list of big American companies which have established off-shore headquarters to avoid corporate taxes. In fact, in just the last few years, an estimated 25 companies - many of them fortune 500 firms - have reincorporated off-shore for just that reason. And it's all perfectly legal. Robt Willens, managing dir., Lehman Bros: It allows them to reduce the amount of U.S. taxes they pay, and the reduction in U.S. taxes increases their profits dollar for dollar - it's that simple. Moyers: Robert Willens has advised companies on relocating off-shore. He's a Managing Director at the Lehman Brothers investment house, one of many firms that advise companies on tax strategy. Although Willens doesn't always recommend an off-shore move, he says the benefit to the bottom line can be hard to resist. Willens: It's hard to argue with the numbers because you do see dramatic improvements in profits immediately. Stanley has advertised an annual tax reduction of $30 million dollars, and I think that might even be a little low. Moyers: So how is it that a big company like Stanley can avoid taxes simply by changing its address to Bermuda? The answer begins with U.S. tax law and the practice known as "Worldwide Taxation." Pamela Olson, acting asst treasury sec. for tax policy: Well, the big difference is that the U.S. system taxes on a worldwide basis. So it doesn't matter where you're earning your income, we're going to tax it here in the U.S. Moyers: In other words, if Stanley sells a hammer in Europe, that sale, or at least a portion of it, can be subject to tax here in the U.S. But Stanley also pays tax on that income in Europe. So under U.S. law, companies like Stanley sometimes end up paying tax on their foreign income twice. But Bermuda has no income tax. So if Stanley makes Bermuda its home, it only pays tax on that sale once, in Europe, where it sold the hammer. So if you're like Stanley, and selling a lot of products overseas, you can save money by getting yourself an off-shore address. Willens: Every multi-national company that does this will experience an immediate and substantial reduction in taxes. Moyers: But here's the fiction behind these relocations: Companies don't actually move any workers off-shore, or even set up an office there. Willens: In fact, nothing much of substance happens at all. A post office box is obtained in Bermuda, a modest fee is paid to the Bermudan government for the privilege of incorporating there. But no change whatsoever occurs in the company's business operations. Moyers: Companies like Stanley create the off-shore corporation in name only. That off-shore company - with no workers, and no office - is then made the parent of the American company. Willens: The U.S. company, the original parent of this worldwide group of corporations, is now becoming a subsidiary. It's literally being stood on its head, so that it is now a subsidiary of this new shell company that's formed in Bermuda. Moyers: Stanley declined to be interviewed for this story, but in a press release about its proposed move, admits, quote, "Corporate operations will continue to be managed from our current headquarters in New Britian, Connecticut, and these changes will not affect day-to-day operations." You get the same candor from the giant equipment maker, Ingersoll-Rand, about the Bermuda address it recently set up. The company freely admits it simply hires a service in Bermuda to collect its mail - when its real headquarters is in Woodcliff Lake, New Jersey. Willens: It is perfectly proper within the law naturally to take steps to avoid taxes. And to play devil's advocate for a second, there are a lot of people who would argue that this is exactly what management is supposed to be doing. Sen. Chas Grassley, (R-IA): Now these things really are not illegal, but they're surely immoral and unethical. Moyers: Iowa Sen. Charles Grassley is no fan of the taxman. A prominent Tepublican, he has often criticized the IRS. But even he says this use of off-shore shell companies is nothing more than a scam. Grassley: We have the Stanley Corporation, for instance, going to Bermuda, setting up a shell corporation to avoid millions and millions of dollars in taxes in the United States, outright - in fact, they're very candid about it - outright tax avoidance. And that seems to me to be wrong. Particularly other corporations stay here, pay their fair share, and the poor and the middle class working man and woman is going to end up paying for the bill that Stanley, for instance, doesn't pay. Moyers: Senator Grassley is leading an effort to outlaw the loophole that allows this use of off-shore shell companies, arguing that a company must have "real & substantial" operations where it is incorported. Since the terrorist attacks of September 11th, his campaign has taken on a new urgency. Grassley: You know, American corporations would have never done this in World War II. And we're in the biggest war and threat to security of the United States since World War II, and it seems to me we ought to be pulling together in the same way and that includes all the major corporations. Eric Schlecht, National Taxpayers Union: They are working within the framework of the existing tax code to the best benefit of their corporation and their corporation's employees. Why is that unpatriotic? Moyers: Eric Schlecht works for the National Taxpayers Union, an anti-tax organization. He says that avoiding taxes by any legal means possible is not only good business, it's a well-established legal right. Schlecht: To suggest that you're unpatriotic to attempt to keep as much of your hard-earned money suggests that the money you earn belongs first to the government and second to you. Which I doubt very much many taxpayers would agree with. Moyers: As Schlecht points out, the Y.S. is almost alone among nations in its practice of taxing worldwide income. He says that creates the double taxation that motivates companies to move off-shore. He's not alone in that opinion. Dan Mitchell, sr fellow, Heritage Fdtn: Businesses choose to incorporate where you have the best set of laws to govern the corporation. The problem is that our Internal Revenue code makes American-based companies very uncompetitive. Moyers: conservative think tank well-known for its anti-tax views Heritage Fdtn Mitchell argues: don't outlaw the loophole, re-write the tax code. Mitchell: Let's fix the problem in our tax code. Let's not blame the victims who are simply trying to compete on a level playing field. Moyers: The Bush Admininstration has been listening. The Heritage Foundation and the National Taxpayers' Union have been granted several meetings with key administration officials, including Treasury Sec. O'Neill and Chief Economic Adv. Lawrence Lindsey. One anti-tax advocate characterized them as "sympathetic to our ideas." But there's more to this story than first meets the eye. As we heard, the ostensible reason that companies locate off-shore is to avoid taxes on income earned outside the U.S. They're still supposed to pay taxes on income earned within the U.S., but once they get off-shore, some companies find a way to beat those taxes, too. Bob Mcintyre, Citizens For Tax Justice: The companies are trying to tell anybody who will listen, who's naïve enough to believe them, that they're trying to avoid taxes on their foreign profits. That's just a lie. Moyers: Bob McIntyre runs Citizens for Tax Justice, a liberal organization that studies tax revenues. He says the real story here is not that companies are moving off-shore to just avoid taxes on foreign income. He says they're moving in order to get out of paying taxes altogether - even on income earned in the U.S.A. McIntyre: The problem is these are American companies doing business in America who ought to be paying American taxes, and they'd just as soon not, so they are trying to find a way around it. Moyers: In one scheme, the off-shore shell company loans money to the American sudsidiary. The interest the subsidiary pays on that loan can then be claimed as a deduction on its U.S. tax return. Critics say it's like you lent yourself money, charged yourself interest, and then wrote the interest off on your taxes. In a second scheme, the American subsidary pays the off-shore shell company for the use of the company's trade name. In other words, the company is charging itself for the use of its own name. That creates another tax deductible business expense in the U.S. Yet a third scheme involves the paper shuffle of merchandise. The American subsidary manufacturers a product. It then "sells" the product to the off-shore shell company at a rock bottom price. Remember the off-shore shell exists in name only, so no products are actually shipped. The shell company then makes the final sale to the consumer. So, most of the profits appear to have been earned by the off-shore company, free of U.S. taxes. Pamela Olson: Yes we do view that as inappropriate... Moyers: Pamela Olson is the Acting Assistant Secretary of the Treasury for Tax Policy. She says the Treasury Department does want to eliminate these schemes to beat taxes on American income. It's writing new rules to clamp down on them and directing auditors to keep companies in line. Olson: I think it's very troubling to think you can file a few pieces of paper, and by filing a few pieces of paper, drastically alter the way you business is taxed. Moyers: But while off-shore incorporation is "troubling," Olson says, simply slamming the door shut on the right to do it - as Senator Grassley wants - is "shortsighted." Olson: We don't think you can erect a Berlin Wall and keep companies in the U.S. We think you have to address the underlying problems that are causing companies to go, and that's going to be a more effective and direct approach. Moyers: This whole debate over off-shore shell companies, and how they're used to avoid taxes, is taking place against the bigger backdrop of an overall decline in the amount of taxes paid by U.S. Corporations. In 1960, corporations paid 24% of all federal taxes. In the 1970's, that share fell to 15%. As recently as 1996, it was 12%. Now, corporate taxes make up only about 8% of U.S. revenues. That, Bob McIntyre says, is the result of all sorts of loopholes and laws, written by politicians friendly to corporations. Reform, he says, must come from the top. McIntyre: The President ought to step up to the plate and say it's not patriotic for big American companies not to pay any taxes on their American profits. Until he says that, well, he's on the other side and that's too bad. Moyers: McIntyre has also found that in recent years, some of America's biggest companies - household names like Texaco, Goodyear, and General Motors - actually got tax rebates, even though they turned a profit. Grassley: For the middle-class American primarily, but any wage earner, salaried person, there's a real feeling out here that very wealthy people, as well as corporations, have breaks that other Americans don't. And consequently, people are cynical about taxes. Richard Trumka, AFL-CIO sec. treasurer: The CEO & the rich always figure out ways to avoid taxes. It's the workers who don't get that chance. Moyers: You hear that a lot among the workers back at Stanley. The company's move may not be threatening their jobs, but they fear it could be the beginning of a slippery slope. Also, they say they are fed up with a system that is rigged in favor of big corporations. These workers want corporatons to be good citizens of the country that has enabled them to flourish. Trumka: They want to take the advantage of all of the advantages that the American market has to offer, and think that they have no responsibility. No responsibility to the workers, no responsibility to the shareholders, no responsibility to the community, no responsibility to the state and no responsibility to the country. Moyers: And in perhaps one of the few instances in which a powerful Republican agrees with a high level union leader, Senator Grassley concurs. Grassley: After all, it's because of America and the freedom, the economic freedom that we have and the political freedom that we have, that these corporations have done so well in the first place. |
July 2002 Bill Moyers Now
"Well, the big difference is that the U.S. system taxes on a worldwide basis. So it doesn't matter where you're earning your income, we're going to tax it here in the U.S." --Pamela Olson, acting asst Treasury sec. for tax policy
July 2002 Bill Moyers Now Citizens for Tax Justice has compiled the U.S. profits, federal income taxes and taxes paid for 10 major American corporations. Click to compare 1999-2000 American family of 4 tax rate and corporate tax rates of some of country's largest companies for 1999-2000. Of course, stimulus packages, off-shore tax havens, and other breaks are not isolated to U.S. 6.25.02 Financial Times (London): "The Isle of Man yesterday unveiled plans to cut its main business tax rate to zero, while insisting that it was not trying to lure companies away from mainland Britain." Evidentally, the move comes in response to EU efforts to "eliminate harmful tax competition." In just the last 2 years official (pre-break) corporate tax rates have dropped throughout the developed world. Maximum rates will more than likely be lowered again in 2002, incl stimulus bills, tax breaks and other reductions.
July 2002 Brian Myers, producer Now Bill Moyers: Daniel Bullock learned that the hard way. His recent appearance before a Congressional panel investigating tax cheating was a brief respite from his normal routine these days, sitting in a federal prison in Atwater, CA. Bullock: People still believe, even though the law's been around this way for a hundred years. "Hey, it's my money that I earned with my labor, and I ought to be able to keep it." Moyers: Bullock was an successful orthopedic surgeon, even doing a stint as the senior physician for the U.S. Olympic cycling team, treating patients like Lance Armstrong. But, after a dispute with the IRS over some back taxes, he went looking for a way to hide the income he earned from his medical practice. BULLOCK: I believe the lure to be, as it is for all people, and that is, a little bit of greed. MOYERS: A friend introducted Bullock to this man, Lonnie Crockett. Crockett is what's known as a tax scheme promoter, someone who claims he can save you money by manipulating tax law. Crockett told Bullock he could get out of paying income taxes. Part of the plan? Launder his earnings thru an off-shore bank account. BULLOCK: What ended up being done was unlawfully evading taxes by sending money that should have been taxed in U.S. off-shore and then bringing back.
DENNIS CRAWFORD, acting chief IRS criminal investigations: Basically, they take the money they've earned out
of their left pocket with their left hand, it goes off-shore and it comes back into the right hand, they put it in their right
hand pocket and spend it as they so choose. |
MOYERS: So how is it that people like Bullock send their money off-shore, and then get it back? In his case, he
gave his money to the tax scheme promoter, Lonnie Crockett. Crockett put the money in an account here in
America and then began a series of wire transfers.
BENJAMIN WAGNER prosecutor, Justice Dept: He would then route the money sort of around the loop,
through foreign accounts and back in a sort of serpentine fashion back to a separate account, and in that fashion, it
would be very difficult to follow the money. The money would wind up back in the control of the client who sent it,
minus a fee of course, and then be free for them to use without having paid any taxes on it.
MOYERS: Bullock, and two friends, were able to move millions of dollars that way. But plain old cash smuggling,
simply carrying money overseas, also remains a popular way to get money off-shore. That way, there's no record of
wire transfers.
IRS AGENT on tape: You got $100,000 in here, and they're $10,000 bundles.
MOYERS: You're listening to an undercover recording of a sting operation. At a diner in California's Central Valley,
an IRS agent is meeting with a promoter of tax evasion schemes. This promoter often moves cash.
AGENT: I think we're all working towards the same thing here, and that's what's important.
MOYERS: The undercover agent is posing as the owner of a chain of fast food restaurants who wants to send
money off-shore. Fast food generates a lot cash. The promoter has a name for the service he's selling...
PROMOTER on tape: I call it one word, 'Freedom.'
AGENT: There you go.
PROMOTER: There is a man who said without financial freedom, there is no freedom. If we've got an Internal
Revenue Service, a Federal Reserve, there will be no freedom.
MOYERS: And at the deal's completion in the parking lot, where the hand off occurs, the agent and promoter even
share a lighter moment.
AGENT: Given to Wayne, February 1st, as a donation to further the cause of freedom.
PROMOTER: Isn't that what it's for?
MOYERS: That promoter, his name is Wayne Anderson, was eventually arrested and convicted. The govt
estimates that his operation shipped $50 million off-shore before getting caught. Benjamin Wagner is a prosecutor
for the Justice Dept. He handled the Wayne Anderson case. He also had a hand in putting Daniel Bullock in jail. He
says that tax cheats, like Bullock, increasingly fit a pattern.
WAGNER: They were people who either owned their own businesses, people who had a small practice, a lot of
professional type people who were dentists, doctors, architects, consultants, people like that who had some degree
of control over the way they steered their income.
MOYERS: The reason is simple, says Wagner. Unlike salaried workers, whose employers withhold taxes from their
paychecks, professionals and small business owners report their own income to the government. In other words,
the IRS has only their word for how much money they make. That make's it easy to skim money to send off-
shore.
BOB MCINTYRE, Citizens For Tax Justice: We have a mandatory tax system that works really well, and we
have a voluntary one that works terrible.
MOYERS: Bob McIntyre runs Citizens for Tax Justice, a liberal watchdog group that studies tax revenues. He says
leaving it up to small business owners to report their own income is one reason cheating is so widespread.
MCINTYRE: Small business people are supposed to file honestly and they don't. So voluntary doesn't work too
well.
WAGNER: The vast majority of taxpayers are honest, good Americans who play by the rules. But it's surprising and
shocking at the numbers of people, and people that you would think would know better, who are involved in these
schemes.
MOYERS: But Wagner told us, simple greed alone can't explain why so many people like Daniel Bullock are now
breaking the law. The urge to cheat on taxes is as old as...taxes. Nowadays, though, it's encouraged by marketing,
advertising, and technology. All of which puts the once underground world of secret off-shore banking within easy
reach of people who have the money...and the urge.
CRAWFORD: There definitely has been an increase in these schemes. And the Web has been a way for them to
reach more individuals and really to promote and advertise their tax scam and scheme packages.
MOYERS: The IRS has identified many companies, and their Web sites, which it suspects of promoting tax
evasion. Along with the smaller promoters, are the names of some of the world's biggest banks, names like
Barclays, HSBC, and the Royal Bank of Canada. The IRS says they offer services that may enable tax
evasion.
CRAWFORD: It's broad, and it indicates that a lot of the tax paying public have access to those accounts and are,
in fact, being pursued to spend their money to buy a scheme like that.
MOYERS: This marketing of off-shore accounts directly to the public by banks isn't the only thing that worries the
IRS. It's thought that big accouting firms also sell a whole array of questionable tax advoidance schemes to the
wealthy.
MCINTYRE: The fault is, of course, for the tax evaders, but also the accounting firms. I mean, this stuff wouldn't
happen unless you had advisors willing to do it. You know, the Mafia had lawyers and the rich people have
accountants.
MOYERS: According to the IRS, the suspicious services are packaged under the banner of "Wealth Protection," or
"Private Banking," and they promise "anonymity." But the one hook that always appears is an offer for a debit or
ATM card - usually a Visa or Mastercard - which allows the user to withdraw the money from his account any
time, anywhere in the world.
WAGNER: Using debit cards drawn on off-shore banks is a hugely popular way of repatriating tax evasion
funds.
MOYERS: Where once it might take a series of wire transfers for a tax cheat to get his money back, now it's as
simple as walking into the local bank.
WAGNER: The beauty of the debit card is you don't need any of that stuff. You have a card, and you can walk into
an ATM and you have your money like that. So it's a very easy way of getting your money like that.
MOYERS: These debit cards also provide another benefit. Because the card is issued by an off-shore bank, there's
no record of the transactions in a bank office here in the U.S. And what if the IRS tries to get the records from the
bank off-shore?
CRAWFORD: By definition, it's going to be in a tax haven country with bank secrecy laws, or else there would not
really be a reason to do it. They want to get it in a location where it's difficult for us to find it and to unravel their
scheme.
MOYERS: Tax haven countries, he says, won't cooperate with the IRS.
CRAWFORD: If the money came from a tax evasion scheme, and not from some other illegal activity, then they
simply refuse to share the records with us for tax purposes.
MOYERS: The IRS believes that what's called 'transparency' - breaking down this wall of secrecy and getting
access to banking records in tax haven countries - would go along way to ending off-shore tax evasion. But tax
haven nations have refused to play ball. So in the late nineties the united states joined with other industrial nations
to try and crack down on offshore tax havens.
MCINTYRE: The United States and the European countries worked in the second half of the Clinton administration
to try to crack down on some of the secrecy laws of these tax havens which facilitates the tax evasion by saying,
'Look, if you don't shape up, we are going to impose some sanctions on you.'
MOYERS: Thirty countries in all...members of the Organization for Economic Cooperation and Development, or
OECD, thought they had a plan to get rid of dirty money. It involved transparency - forcing tax havens to start
sharing bank and other information about suspicious accounts. It was a united front - until, suddenly, the Bush
administration pulled out and the campaign came to a screeching halt. . .
A coalition of conservative think tanks and bankers had got to the White House. The agreement, they argued,
would mean Americans woldn't be free to take advantage of lower tax rates elsewhere in the world. Some powerful
Republican politicians weighed in.
In this letter to Treasury Secretary Paul O'Neill, House Majority Leader Dick Armey says the agreement's stated
goal of reducing tax evasion is a "red herring," and is an effort to establish, "a global tax police."
House Majority Whip Tom Delay also wrote Secretary O'Neill. He said the agreement and others like it are,
"assaults on financial privacy." The conservative think tank The Heritage Foundation also lobbied the
administration. It said the agreement would be hypocrtical, and would prevent foreigners from investing their money
strongly in the United States - itself a very big tax haven.
DAN MITCHELL, sr fellow, The Heritage Fdtn : If you're a foreigner, you can invest your money in the U.S.
and by and large, earn income tax free and not have it reported to our home government. And this has been a
successful strategy for the American economy.
MOYERS: Mitchell says if the U.S. forces other countries to share financial records, Americans would have to
abide by the same rules, and with that, all those foreign investors would pull their money out of America.
Pamela Olson says the Bush administration agrees with many of those criticisms of the OECD agreement - she's
the Acting Assistant Secretary of the Treasury for Tax Policy. But, she says, although the us has pulled out of the
OECD effort, Washington does intend to press for agreements on transparency - on getting countries to share
information - one tax haven at a time.
PAMELA OLSON, acting asst sec. of Treasury for tax policy: I think what we did was to strip off the parts of
the project that were objectionable and that allowed the project to focus on what was really important. And what
was really important was getting agreements with Carribbean countries and other tax haven countries to
information exchange and transparency.
MOYERS: The U.S. has signed transparency agreements with several tax haven nations, but they don't take effect
until 2004. Critics say this gives everybody - governments, tax cheats and their accountants - plenty of time to
figure out other ways to foil the revenue agents.
KEN RIJOCK: Oh yes, from now on we're going to be fine. We'll tell you what you want. Meanwhile, I guarantee
you that there are going to be many tax professionals in that jurisdiction who will be constructing alternative
methods where by you still won't be able to get what you want.
MOYERS: When Ken Rijock talks about the underworld of tax havens, he knows wherein he speaks. The
Caribbean was his second home.
RIJOCK: When I was involved in money laundering activities, I would sit out in one of these tax haven restaurants,
having done my illicit work, I used to wonder when are the Marines going to land? When are they going to close
these institutions?
MOYERS: Rijock was once a big time money launderer, hiding millions on behalf of his clients. Now, he advises
law enforcement agencies. The economies of these tax haven countries, he says, have made dirty money a growth
industry.
RIJOCK: What the off-shore laws allow is the creation of an entire class of financial service professionals. It's the
golden cow. They will ensure that in one way or another, it will survive.
MOYERS: What's needed, he says, is tough prosecution.
RIJOCK: The only way the tax havens will go away tomorrow is if our government finally decides to arrest the
presidents of those tax haven banks, try them in federal court in Miami, and close them down.
MOYERS: Rijock says, until there is real reform, the clever people will keep laughing all the way to the off-shore
bank.
AGENT: Given to Wayne, February 1st as a donation to 'Freedom.'
PROMOTER: Isn't that what it's for? (BIG LAUGH)
… TIME magazine blew the cover of this in a brilliant expose last fall by Donald Bartlett & James Steele.
Looking into why the Bush administration queered the international effort to clean up dirty money, they found that it
wasn't just ideologues who pressed their case on the President; it was influential bankers, incl some of the
President's banking friends from Texas. It had nothing to do with principle and everything to do with profit; they
didn't want to lose any lucrative business from people evading taxes or law. As for fairness, well, you may want to
know that the Internal Revenue Service has been cutting back on audits of people earning over one hundred
thousand dollars. Those audits hit an all-time low last year, while audits of people at the low end of the totem poll
increased by almost 50%
9.2.02 Jeremy Scott-Joynt BBC
The fight to choke off terror funding is being put at risk by a dispute between
international organisations. The International Monetary Fund's move to share the spotlight with the existing intl
experts on money laundering & terrorist finance, the Paris-based Financial Action Task Force (FATF), is
triggering tensions which threaten to overturn some of the key techniques developed over the past decade.
Sources close to both organisations told BBC News Online fundamental differences between the 2 groups'
practices & philosophies may delay at best and handicap at worst further progress in making sure countries
around the world keep their defences up.
The revelations throw into sharp relief warnings leaked from a UN report, that the fight against terror funding had
run into the sand. The report, due out 9.5.02, suggests al-Qaeda continues to have no trouble raising money, with
private donations of perhaps $16m a year "continuing unabated" and investigators finding it "exceedingly difficult"
to stop the flow of funds.
Known as the Non-Cooperating Countries & Territories (NCCT) process, the current list includes 15 places,
and the "naming & shaming" with accompanying stigma has encouraged a dozen more to clean up their act,
London law firm Philippsohn Crawfords Berwald' Steven Philippsohn, told BBC News Online. But several IMF
board members, particularly from developing countries, are strongly opposed to it, accusing the FATF of punishing
poor states while letting its richer members off the hook.
Culture clash is also causing problems, not least because officials at the IMF say that labelling anyone as "non-
cooperative" runs counter to the way the Fund works. "Everything we do is uniform, it's voluntary, and its co-
operative," one senior IMF adviser on money laundering & terrorist finance told BBC News Online. Hopes in
some quarters that backsliders would find their loan deals with the IMF in jeopardy have been scotched. "Current
policy doesn't allow that," the IMF adviser said.
The upshot is likely to be that while FATF members, predominantly richer countries, assess one another, non-
members get their rules & practices assessed by the IMF & World Bank. "This could turn into a classic
case of too many cooks spoiling the broth," one expert in intl money laundering told BBC News Online.
Since 1990 the FATF, a tiny outfit with fewer than 10 staff and a budget of less than 1m euros, has set the intl
standards. Its "40 Recommendations", supplemented by 8 Special Recommendations on terrorism published late
last year, are the acknowledged rulebook on fighting money laundering & terrorist finance. The immense budgets, plush offices and well-paid staff at the Bank & Fund are in sharp contrast to the FATF's establishment. The intl financial institutions' stature & clout, it was hoped, would enhance the reputation of the push against terrorist finance and money laundering. But ironically, it is the smaller organisation that has so far proved more effective. |
Cleaning up after terror funds 9.4.02 Jeremy Scott-Joynt BBC
For one thing, the client list at the software co. he runs is
expanding rapidly, and not all the big-hitter financial institutions he deals with are ready to go public about the
relationship just yet. But as we sit in Mantas's office in leafy Fairfax, just outside Wash.DC, an office which,
incidentally, is being rebuilt and extended around us to cope with extra demand, it's obvious that there's another
reason: that a spot of circumspection is simply the only decent way to proceed.
It's not a matter of capitalising on tragedy. It's simply that the financial world has finally woken up to the reality of
dirty money, and is desperately seeking experts to help it cope with a flood of new rules, regulations &
practices. Banks which hitherto paid little more than lip service to the need to "know your customer", a mantra in
the anti-funny money business, suddenly find they need to prove just how much they care.
Unsurprisingly, Simon Moss is at pains to stress the business benefits beyond complying with the law.
The software, he says, gets a business more in touch with its clients, more aware of their needs as well as
snooping on their potential for illicit dealings. But he cautions that simply buying in expertise is no magic bullet.
It can take months or even years to see the true benefits, to train the software which scans every single transaction
a bank makes. Using thousands of "rules", it looks for patterns, unusual links between names & accounts, and
behaviour which diverges from past experience. "We're in the slightly dubious business of managing expectations,"
he says. "We're a linchpin component (in an overall strategy) but we're no panacea."
Managing expectations is pretty much all that many organisations are after. As well as Mantas, there are an army
of companies offering rapid searches of databases both public & private, to reassure an institution that its
customers are indeed who they say they are. This is not a cheap business, of course. An annual spend of more
than $1m is the norm, according to 27-year FBI vet Ted Fraumann, now NY based Business Integrity International
partner, firm involved in business intelligence, investigations and security matters.
"It's a huge industry," Mr Fraumann says. "But we question whether it's enough." In other words, he fears
complacency which predominated before 9.11.01 has now turned to a "check-box" approach. Ex-agents like
himself, not to mention ex-spies & ex-customs officers to name only a few, have been snapped up at an ever-
increasing rate to serve as Chief Security Officers. The title is not
a new one, and has traditionally gone to the boardmember responsible for background checks on sensitive staff,
securing computer and phone networks, and keeping an eye on financial crime. Now, though, it means that an institution can tell the govt they have a person in place to watch over their compliance with the new rules, a key requirement of USA Patriot. A CSO sufficiently senior in his old job will bring added benefits. "They want your Rolodex," says Mr Fraumann. But not for your underworld contacts, your line into the terrorists' organisations, but for your ability to get a heads-up from ex-colleagues about upcoming issues. That allows the institutions to make sure they don't have to go any farther, spend any more money, than they need to.
10.16.02 AP
FDIC spokesman Phil Battey said the proposal grew out of ongoing discussions among administration officials and
others in government on regulatory issues. "I believe we should work together to recommend to Congress a new
bank regulatory structure,'' Powell said in his remarks to the Exchequer Club. "We should design a regulatory
system that looks like our modern marketplace. We should have 3 federal regulators'' for banks, securities firms
and federally-regulated insurers, he said.
Powell called the long-prevailing system inefficient & out of sync with the sweeping changes in the banking
industry, such as the numerous big mergers of financial institutions. Sweeping legislation enacted in late 1999
overturned the Depression-era laws that prohibited banks, brokerage firms and insurance companies from getting
into each other's businesses.
"All too often, when we engage in turf warfare, the ultimate loser is the industry and the marketplace,'' Powell said.
"The price is paid in lost opportunities and lost competitiveness.'' The Federal Reserve, which like the FDIC is
independent from the administration, oversees bank holding companies such as BankAmerica & Citigroup.
The Treasury Dept, on the other hand, has responsibility for nationally chartered banks through the U.S.
comptroller of the currency.
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An A-Z of money laundering
ß 3.15.02 Jeremy Scott-Joynt BBC
… Laundering money and financing terrorism may share some techniques - but they are still very different
activities. Money laundering is all about hiding the proceeds of criminal, or at least illegitimate, activity. The biggest amounts, probably hundreds of billions of dollars each year, stem from the global narcotics trade, but bank robbers, embezzlers, fraudsters, tax dodgers, corrupt public servants & politicians all need some way of making their money look legal when its origin is otherwise.
Generally speaking, it's a 3 stage process.
Many crooks prefer dealing with the big places, where the sheer volume of money changing hands covers their
tracks. Island territories often like to point out that the $1.6bn found to have been looted from Nigeria by the family
of the late dictator Sani Abacha was found, not in the Caribbean or the Pacific, but in reputable banks in the UK
& Switzerland. Looted cash of Raul Salinas, brother to the ex-president of Mexico, ended up in the world's
then largest banking group, Citibank.
With millions of wire transactions a day, and with enough stages to the process, law enforcement agencies rely on banks, insurers, bureaux de change and other financial institutions to tip them off through suspicious transaction reports (STRs). In most developed countries, all transactions above a certain margin, usually around $10,000, although some set it much, much higher, have to be reported to the authorities.
Many small players are now reforming, partly because of pressure from industrialised countries and an organisation called the Financial Action Task Force. The FATF is a small group in Paris tasked by Western govs to come up with strategies for tackling money laundering. It recommends best practice, backs research into typologies, techniques the crooks use, and audits the performance of its 30-odd members. Now it has a new task: helping its members track terrorist financing.
Problem here is that while money laundering has to start with a crime, much of the money thought to be used by
terrorists comes from legitimate sources, although drugs, kidnapping, bank robberies, extortion and other crimes
are sources of funding as well. There may not always be evidence to alert the investigators. That makes the task
more difficult for law enforcement & financial institutions, which are worried that they could run into a legal
minefield if they are asked to extend their definitions of "suspicious behaviour" too far. Sums required for terrorism are often relatively small when compared to the multi-billion-dollar global laundering industry. $50,000 are relatively easy to hide in a legitimate business's accounts. Widespread suspicion charities are abused to act as conduits for terrorist funding. Many groups on US & UK watch-lists published after 9.11.01 are Islamic charities. Many of them are protesting loudly that not only are they unjustly accused, but that the accusation is stopping them from serving the needy they are set up to help. |
Neither involve records that can be traced; instead, tokens, now no more than often passwords in an email,are sent from one country to another, telling a trusted confederate to deliver a given amount of local currency to its
destination. In all such systems, the original sum delivered to the hawala broker never actually leaves the country
of origin. The whole system relies on trust between brokers, rather than paper records or third party guarantees,
with any shortfalls between what goes out and what comes in settled periodically.
The systems are hundreds of years old, and are used entirely legitimately by, say, people working abroad and
sending money home to relatives who may not have a bank account. They are also a godsend to crooks &
terrorists and a huge headache for those who try to catch them.
Midnight traders come out in a crisis
To act instantly on breaking news, investors tap after-hours markets; buying in New Zealand
3.20.03 Jeff D. Opdyke & Tom Herman Wall St Journal
pgD1
If encouraging or discouraging news in the middle of the night about conflict is an irresistible urge to trade stocks.
around the world and around the clock, you can buy IBM shares in Zurich, trade various Dow Jones index contracts in Paris, or sell Standard & Poor's 500-stock index exchange-traded funds in Singapore. Many developments take place after U.S. markets close and when most Americans are in bed. … When Wall St wakes, numerous markets have already spent a day trading on the latest developments, leaving U.S. investors last to react.
To get a jump on the crowd, trade after hours. When the Persian Gulf War began in January 1991, trading soared
in various after-hours markets for stocks, bonds, commodities and currencies. Online site Interactive Brokers
provides U.S. investors access to trading in overseas markets; it often sees its volume surge off hours when
investors try to take advantage of news like unemployment data or earnings releases or unexpected events
happening anywhere in the world, says firm spokeswoman Carla Cavaletti.
"The whole idea is to try to beat everyone else to the punch," she says.
Midnight trading is fraught with risks & difficulties. Volume is often much thinner, meaning prices can swing
wildly. You face currency risks. There are hassles in setting up accounts in overseas markets. Some of the most
convenient options in the U.S. are available only to extremely wealthy investors. Many market experts advise
against it. After-hours trading is "for professionals, not individual investors," warns former SEC chair Arthur
Levitt.
Time zones pose few problems for many institutional investment firms; they have traders based around the globe to
swap stocks at odd U.S. hours. From Anchorage AK HQ, McKinley Capital Management traders trade London's
afternoon, New York's entire day and Tokyo's tomorrow morning in 12 hours. "We can trade tomorrow today," says
firm president Bob Gillam.
For individual investors, late-night trading is substantially harder but it can be done. The easiest way, ultimately, to
trade in overseas markets on a live basis is to open an account in the market where you wish to trade. This can be
time-consuming, and at times frustrating, since you're dealing with a firm as many as 17 hours ahead of New York.
You may need to open a separate bank account for your brokerage account. You'll have to wire money to that
account, which can take several days.
You'll have to trade in the local currency, adding another complication and another risk.
Benefit of trading through a foreign online firm, though, is buying & selling in the middle of the night as easily
as you trade online in the U.S. You pay local prices, not marked-up prices of securities trading overseas through
U.S. brokerage firms, which tack on extra fees to cover their costs. The challenge is finding overseas firms that
take U.S. customers, since not all do. Best is to search Internet for online brokerage firms in the country where you
want to trade, then contact them directly.
A number of U.S. securities trade in a variety of overseas markets. Anheuser-Busch shares trade in Frankfurt.
Sears Roebuck trades in Zurich. A host of Dow Jones indexes that track everything from the world's 50-largest
companies to an energy index trade in Paris. Singapore Stock Exchange is home to several exchange-traded funds
for the S&P 500 & Dow Jones U.S. Technology Sector indexes, among others. You can trade many of these
securities at various times of the night through a specialty online firm such as Interactive Brokers.
Easier for American investors are so-called E-mini futures, which represent a fractional piece of the S&P 500. They
trade 23 hours a day in the U.S. Charles Schwab provides futures investors a phone number to call to trade E-mini
contracts at odd hours through futures broker Lind-Waldock, or go directly through a futures broker such as New
York's E-Brokerage, which, through a toll-free number, will provide access to trading E-minis throughout the night.
However, many big brokers, such as Fidelity and E-Trade, don't provide trading in E-minis.
Wealthy investors have it much better. J.P. Morgan Chase private clients, those with a minimum net worth of $10 million, can ring up the firm's London trading desk directly and execute trades elsewhere around the globe after Wall St closes or before it reopens. Variety of other criteria is needed such as proving you have some experience with overseas investing before J.P. Morgan will set you loose on the world.
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