Asset Protection BLOG - Mark Nestmann

“Exit Tax” Apparently Dead for Another Year

Several weeks ago, I described a proposal in the "Small Business and Work Opportunity Act" to impose an exit tax on U.S. persons who give up U.S. citizenship or long-term residence if they have unrealized capital gains that exceed US$600,000. You can read about it here.

On April 20, House and Senate committees reached an agreement on the bill. Among the items stripped out of the bill was the exit tax. The revised package is part of the Iraq supplemental spending bill that is now before President Bush.

While Bush is almost certain to veto this bill, due to the timetable it includes for withdrawal of US combat forces from Iraq, he has indicated his willingness to sign the tax legislation. It’s my guess that when he does so, the tax legislation will be submitted separately, again without the exit tax.

I’ll keep you posted as to the ultimate fate of this ill-conceived legislation. It’s not realistic to expect that the exit tax is dead, because it’s been introduced in some form in nearly every congressional session since 1995. But the chances look very good that it’s dead for at least another year. 

Why might a U.S. citizen want to give up their nationality? Primarily because the United States, alone among major countries, imposes income, capital gains, gift and estate taxes based on citizenship, rather than residence. Giving up U.S. citizenship is the only way to eliminate this tax liability. 

To learn more about exit taxes, click here.

Whither Dominica?

I’ve spent the last two days in Dominica, and I’ve never visited a place anything like it. It has some of the most beautiful scenery in the Caribbean, fertile land that can grow almost anything and some of the friendliest people I’ve ever met. I’ll be back—and if you haven’t already visited Dominica, I highly recommend doing so.

The Commonwealth of Dominica (not to be confused with the Dominican Republic) is a small island in the Caribbean, consisting of 290 mountainous square miles. Unfortunately, Dominica’s 70,000 inhabitants are mostly poor. It has virtually no natural resources other than clean water and air and must import nearly all of its energy and manufactured goods. 

A dependent territory of the United Kingdom until 1978, Dominica emerged from independence poor but proud, and determined to build its economy. But since then, the world has placed many obstacles in its path to prosperity.

Beginning in the 1980s, the Dominican government sought to promote the island as an "eco-tourism" destination. Tourism now contributes millions of dollars to the Dominican economy, but the country’s rugged coastline, lack of sand beaches, and the absence of a large international airport have hindered its growth. 

Dominica’s primary exports are bananas. But starting in 1992, Dominica lost its preferential access for sale of its bananas to Europe, its largest export market. In the meantime, energy prices soared, and Dominica faced a foreign exchange crisis.

Later that decade, Dominica tried to develop an offshore financial sector. But this was of grave concern to international busybodies such as the Financial Action Task Force. And when the International Monetary Fund came calling on Dominica in 2002, it gave the government an ultimatum: shut down the offshore sector, or lose millions of dollars in IMF aid. The government dutifully complied, and there are no offshore banks left in Dominica. 

Yet another initiative Dominica made to generate foreign exchange was an economic citizenship program, which also began in the 1990s. Like just about everything else Dominica has done to improve its lot since independence, this program is controversial. However, it still exists, and according to an official I met in Dominica during my visit, approximately 50 applications are processed each year for economic citizenship. Each application is carefully vetted, and approval comes only after extensive due diligence. 

Dominica remains part of the British Commonwealth, and its passport permits visa-free travel to about 90 countries, including most other Commonwealth members, but not Canada or the United States.

For Americans, the number of countries to which visa-free travel is permitted may appear limited. But for citizens of many other countries, particularly China, Russia, and many jurisdictions in the Mideast and Asia, the options for visa-free travel are even more limited. Economic citizenship and passport from the Commonwealth of Dominica may just be what these individuals require for greatly expanded travel options. 

With a price starting at only US$75,000 for a single applicant (US$100,000 for a family), you don’t need to be wealthy to obtain Dominican citizenship and passport. You just need to have a clean background, a genuine interest in Dominica, and the ability to speak English fluently. 

Non-Machine Readable Dominican Passports Expire June 30

It’s Happy Hour at the Balas Bar at the Fort Young Hotel in Roseau, Commonwealth of Dominica. I’m sitting here enjoying a glass of Kubuli, the locally brewed beer, and talking to an old friend from the United States.

My friend—who gave up his US citizenship some years ago—is here in Dominica to renew his passport. He acquired it a number of years ago under Dominica’s economic citizenship program, which for a minimum fee of US$75,000 will provide qualified and properly vetted applicants Dominican citizenship and passport. 

Until 2006, all Dominican passports were literally handwritten. But in 2006, under pressure from the United States and the EU, the government of Dominica purchased the equipment necessary to manufacture machine-readable passports.

Now, the Commonwealth of Dominica has imposed a deadline of June 30 for persons who are using the old passports to convert to the new ones. After that date, the old passports will no longer be usable as travel documents. The deadline applies even if the old passport hasn’t yet expired.

It’s unfortunate that Dominica is being bullied by U.S. and EU busybodies. But it’s serious about the deadline, and if you have a Dominican passport, you need to renew it immediately, as processing times are lengthening as all Dominican citizens who wish to travel apply for the new machine-readable document. 

ZoneAlarm Free Firewall is No More

The wonderful free ZoneAlrarm firewall hasn't been updated since November 2006. That's a long time on the Internet.

It doesn't look like it's going to be updated anytime soon, either.

A few weeks ago, ZoneAlarm tricked users of the free firewall into downloading what they're told is version 7.0 of the freeware, but is really a 15-day trial version for a paid program, ZoneAlarm Security Suite program. I wrote about it here.

They're still doing this, and the installation still requires you to uninstall any anti-virus you're running, without acknowledging that you're really installing ZoneAlarm Security Suite, which has its own anti-virus program.

That's unethical, and dangerous to boot, if you uninstall your anti-virus program without immediately re-initiating the installation of the Security Suite. That might not happen very often, but if it happens at all, ZoneAlarm will be blamed. 

And it gets worse. I thought I would be sneaky and download a trial version of ZoneAlarm Pro 7.0, wait 15 days and then, instead of paying for ZoneAlarm Pro, have the software revert to the free version. That's what happened in earlier versions of ZoneAlarm Pro.

Not this time. If you choose not to install ZoneAlarm Pro, the firewall simply shuts down—it doesn't revert to ZoneAlarm freeware and doesn't even recommend that you re-install the freeware.

ZoneAlarm has every right to stop offering updates to its free firewall, but it shouldn't pretend that it's still available, and trick users into downloading and installing software without telling them what they're actually installing. 

Easy Ways to Make Anonymous Internet Searches

Several months ago, 658,000 America Online (AOL) customers received a nasty shock. They discovered that their search engine queries, numbering some 20 million, had been posted online for 10 days in August 2006.

While the records were quickly removed from AOL's Web servers, it was too late. The data had already been copied, cached, and "mirrored" on other Web sites.

AOL quickly reassured its subscribers that since the search engine records were labeled only with a numerical ID, not a name, no one would be able to retrieve their real identity.

But that turned out not to be the case. From just one AOL subscriber, a profile emerges of someone who's overweight, likes to play golf, owns or is interested in a 1986 Porsche 944 and 1998 Cadillac SLS, and is a fan of the University of Tennessee. This subscriber also likes young girls, based on repeated searches under the term "lolitas." This word is a slang term referring to a young girl, after the 1955 novel by Vladimir Nabokov about a man who becomes sexually obsessed with a 12-year-old girl. 

What do your search inquiries reveal about you? Quite a lot, actually. According to Michael Arrington, who founded the popular TechCrunch blog:

"Many people often search on their own name, or those of their friends and family, to see what information is available about them on the net.  Combine these ego searches with porn queries and you have a serious embarrassment. Combine them with 'buy ecstasy' and you have evidence of a crime.  Combine it with an address, Social Security number, etc., and you have an identity theft waiting to happen.  The possibilities are endless."

Naturally, AOL swears that it will never again voluntarily release search engine data. And other search engine companies, including market leader Google, make the same promise.

But why trust anyone's promise, when it's so easy to search anonymously? Just use a search engine that deletes your browsing records. 

One choice is http://www.ixquick.com, based in the Netherlands. Ixquick promises to delete all search records within 48 hours. Another is a service called Scroogle (http://www.scroogle.org), which anonymizes searches on Google and Yahoo and destroys its own search records after 48 hours.

It's your choice. But with search engine privacy being this easy, there's simply no excuse for leaving an online trail of your search history, if you'd prefer to keep it private.

Treasury Watchlist Shuts Down Lives

Doing business with someone on a watchlist maintained by an obscure Treasury Department bureau could land you in the slammer for up to 30 years. Not to mention subjecting you to a US$5 million criminal fine, or a civil penalty of up to US$1 million per incident.

Any property "involved in" a transaction with someone on the watchlist t can be frozen. If your assets are frozen, you must apply for a "license" (exemption) to recover them. It can take Treasury Department years to process a claim.

Welcome to the secret world of the Treasury's Office of Foreign Assets Control (OFAC). Its watchlist of suspected terrorists, narcotics traffickers, and other “specially designated nationals" contains more than 6,000 names. (You can download the 250-page list from OFAC's Web site at http://www.ustreas.gov/ofac.)

Those 6,000 names are just the beginning. OFAC also administers and enforces economic and trade sanctions against more than a dozen countries, under executive orders declared under Presidential wartime and national emergency powers, as well as specific legislation.

Deal with any targeted person, entity or country, and you face similar sanctions. Nor is there any threshold; in theory, selling a glass of lemonade to someone on the list could land you in jail for 30 years. The government's refusal to limit the application of OFAC sanctions to specific industries or transactions makes this conclusion inescapable.

Of course, the penalties aren't generally this harsh. For instance, just last month, Guidant Corporation of Indiana paid OFAC US$277,017.00 in a civil settlement because it allegedly sold medical equipment that wound up in Iraq and Iran, in violation of OFAC regulations.

Not wanting to subject themselves to draconian penalties, businesses nationwide are racing to install "OFAC compliance software" to screen scheduled transactions against OFAC targets. Since the software often flags partial name matches, you could still be identified as a potential terrorist, based on your first, middle, or last name.

As a result, an increasing number of people—predominantly men with names like "Hassan" or "Mohammed" are being denied the opportunity to open a bank account, obtain health insurance, buy a home, rent an apartment, or find a new job.

A Sacramento resident whose first and middle names are "Mohammed" and "Ali" found this out the hard way. He contacted a local Western Union agent to collect a $50 funds transfer. For three days, Western Union told him that it couldn't find the record. Then, an employee told him he couldn't get the money because he “had a Muslim name.” While Mr. Ali finally got his money, his first and middle names remain on the OFAC watchlist, so there's no guarantee his ordeal won't be repeated again and again.

Like the other U.S. government watchlists I've written about, this one OFAC administers is basically useless. One screening of 6 million names in a health insurance company's database against the OFAC list resulted in 6,000 false positive matches—and not one real match.

If OFAC's watchlist isn't effective at identifying suspect terrorists, what is it good for? I suspect one thing it's effective at is to keep people with names like "Mohammed" out of the United States, and to encourage them to leave if they're already here. And perhaps, at it's root, that's what the watchlist is really designed to do.

(For more information on emergency financial controls administered by OFAC and other government agencies, click here.)

Copyright © 2007 by Mark Nestmann

Talking CCTV Gives me the Creeps

Don't do anything "anti-social" in Britain, or a talking lamppost might start scolding you--in the voice of a child.

With more CCTV surveillance per capita than any other country, you might think Britain had already reached the saturation point.

But in Middlesbrough, hidden CCTV cameras actually appear to scold you if you litter, are drunk, urinate in public, or engage in other "anti-social behaviors." The unexpected broadcast comes via a loudspeaker controlled by a CCTV control center staff.  And soon, it will come as the voice of a child.  

The Middlesbrough experiment has proven so popular that it's now being expanded to more than 20 areas across Britain. Advocates of the scheme say that it's a way to "embarrass" people committing anti-social behavior without the expense of getting the police involved or taking them to court.

That's a good point, but talking CCTV is an example of "surveillance creep" that, well, gives me the creeps. And it's even creepier that for at least some of these cameras, the scolding voices will be of children. According to Home Secretary Home Secretary John Reid, competitions will be held at schools in many of the 20 areas for children to become the voice of the cameras.

Ten years ago, CCTV surveillance of public spaces was virtually unknown. But today, in Britain alone, there are some 4.2 million CCTV cameras installed, one for every 14 people. In central London, expect to be photographed 300 or more times daily as you carry out your business. 

The city centers of nearly all of Britain's major cities are already under surveillance, as well as airports, railway stations, highways, hospitals, schools, banks, museums, shopping malls and sports facilities. 

The images gathered aren't just seen by scolding schoolchildren. "Smart" CCTV cameras linked to video data mining software can now in some cases recognize individual faces. A similar application  automatically reads vehicle license plates, and thousands of CCTV cameras are being converted to provide 24-hour surveillance of all motorways and main roads.

And…guess what? Bigger Big Brother hasn't cut down on crime. One Home Office study found that CCTV schemes "had little overall effect on crime levels." That's not surprising, because persons who want to rob someone, get drunk, or engage in other anti-social behavior don't want to do it where they'll be monitored. And that's exactly what academic research has occurred, with "displacement effect"—reductions in crime in CCTV-monitored areas have been matched by rising crime in unmonitored areas. 

Another study shows that improved street lighting is a far effective crime-fighter than more expensive surveillance cameras. 

Well, how about that? Improved street lighting is not only less expensive than CCTV, but much less intrusive. But mere facts aren't stopping the proliferation of increasingly intrusive CCTV networks, with the majority of the British population apparently supporting their growth. 

That means, at least in Britain, Big Brother won't only be watching you on CCTV, but speaking to you as well—in the voice of a child. 

Copyright © 2007 by Mark Nestmann

Update: Indiana's Contingency Fee Forfeiture Scandal

Last week I wrote about J. Gregory Garrison, who briefly gained fame for successfully prosecuting boxer Mike Tyson's rape case in Indiana. Garrison now prosecutes civil forfeiture cases for profit, and in 2006 worked out a sweetheart deal to receive up to 40% of nearly US$4 million in assets seized in an Indiana  civil forfeiture.

The civil case is part of a criminal prosecution involving the assets of a former Teamsters boss accused of profiting from a video gambling ring. John L. Neal, who pleaded guilty in 2000 to illegal gambling, money laundering and tax evasion, now faces trial on 71 felony counts under Indiana's racketeering (RICO) act

Unfortunately for Garrison, his deal may disallowed under the same law.

University of Notre Dame law professor Jimmy Gurule, a former undersecretary for the U.S. Department of Treasury and co-author of a book on asset forfeiture law, says that under Indiana's RICO law, the judge decides how the assets are to be disposed, and that the resulting money goes to the state Treasury, not to a private prosecutor.

Speaking of the deal Garrison negotiated with former Madison County prosecutor Rodney Cummings, Gurle says: “Forfeiture money shouldn’t be money in a cookie jar that the prosecutor divvies up as he sees fit, says Gurule. I’m uncomfortable with that. I don’t see that in the statute."

Well said. Let's hope the Indiana courts strike down this corrupt deal.

Copyright © 2007 by Mark Nestmann

Keep Your Hands off my Mail!

Your correspondence reveals a great deal about you, including the identity of your friends, what magazines you subscribe to, what political organizations you support, and a lot of other information you might want to keep private.

That's one reason why it's not a good reason to receive mail at your residential address. And you're a sitting duck if you have an unlocked mailbox on the curb, as do millions of suburban Americans. Anyone who drives by can steal your mail.

Even if you receive your mail at home in a locked mailbox, anyone living there with access to the key can read it. This can result in a real danger, e.g., if you're a battered spouse seeking help and your abusive mate reads your mail as soon as it's dropped in the mailbox.

Receiving mail at home is also a bad idea if you don't trust everyone living under the same roof. Or if someone you live with doesn't like people with your political affiliation, religious practices, lifestyle, or whatever.

A post office box is the easiest and cheapest way to receive your mail outside your home.  In the US, you must complete Postal Service Form 1093 before renting the box. This requires that you submit a valid photo ID and reveal your home address.

Unlike the post office, a mail receiving service (or simply "mail drop") gives you a street address. That makes it easier to receive packages not sent via post. It's also possible to receive correspondence under a pseudonym and, in some states,me states, you can also list the street address on your driver's license. This is a good privacy strategy, if only to prevent someone who steals your license to know your home address.

To rent a private mailbox at a US mail drop, you must complete U.S. Postal Service Form 1583, and again show a photo ID and reveal your home address.

Other than the Postal Service, police, and other law enforcement officials, post office box and mail drop records must be kept private. But for even more privacy, you can receive your correspondence at a foreign mail drop, which can remail foreign correspondence to your domestic mail drop in its own envelope. This delays your mail, but insures that sensitive overseas mail—e.g., account statements from foreign banks, etc.—isn't sent in original envelopes to a domestic address.

Click here for a list of foreign mail drops.

(Copyright © 2007 by Mark Nestmann)

Your RFID-Equipped Passport: A Terrorist Beacon

World governments, with the United States in the lead, are tripping over one another to issue their population passports equipped with radio-frequency identity (RFID) chips.

RFID passports are billed as a breakthrough in border security. But in fact, they're a disaster waiting to happen, and a terrorist beacon for anyone unfortunate enough to be carrying one.

The problem with RFID chips is that the data that resides on them can be read from a distance, without your knowledge or consent. In theory, this makes it possible for terrorists or criminals to scan passports from a distance, identifying prospective targets to rob or attack.

To address these concerns, most countries that issue RFID passports, including the United States, include a radio shield to prevent the chip from being read when the passport is closed. The data on the chip is also encrypted. These innovations are supposed to prevent long-distance surveillance when the passport is closed, and when it's open, since anyone who doesn't have the key won't be able to read the data.

However, in the real world, hackers have already broken the encryption codes used to secure passport data. What's more, hackers have already demonstrated they can read data on an RFID chip from nearly 70 feet away, without specialized equipment. The parts necessary to do this are available on the Internet for as little as $20. With specialized equipment, the eavesdropping range is significantly longer.

It's even possible to clone a RFID passport chip (this has already been done with a U.K. passport). The cloned chip, which contains, at minimum, your name, date of birth, place of birth and your digitized photo, can be used then be used to produce an exact replica of the passport, complete with a digital photograph.

It's a federal crime to tamper with a U.S. passport, but that hasn't stopped some recipients of RFID-equipped passports from trying to deactivate the chip. Placing the passport in the microwave for a few seconds reportedly works, but leaves telltale scorch marks. Naturally, I have to advise you to comply with the law—but I could hardly blame anyone for trying to deactivate the terrorist beacon in their pocket.

(Copyright © 2007 by Mark Nestmann)