Asset Protection BLOG - Mark Nestmann

Welcome to Panama!

Greetings from the Sheraton Hotel and Convention Center in Panama City. I'm here with The Sovereign Society to speak at the 20th Annual Total Wealth Symposium.

My room is directly across the street from a construction zone.  I awoke this morning at 6am to the sound of jackhammers and trucks rumbling outside my window.

In fact, everywhere you look in Panama City, you see cranes, construction, and new development.  My question is, who is going to buy the thousands of new condominiums, apartments and houses that will come on the market in the next year or two. 

It won't be Panamanians...the average Panamanian earns less than US$5,000 annually, according to the World Bank.  That means the vast majority of the new construction must be sold to expatriate investors...Americans, Chinese, European, and the other nationalities now flooding Panama with their investments.

In the past five years, Panamanian real estate prices have climbed more than 200%.  When I first visited Panama in 2000, you could purchase a nice two-bedroom condo with a view of the ocean for $60,000.  Today, you can't touch a simliar unit for much under $200,000, and often much more.

Can the boom be sustained? I'm skeptical, but I'll be spending a day this week with a well-connected local real estate agent to look at some developments both inside Panama City and in the nearby suburbs. 

One thing is for sure.  If the flow of expats into Panama slows down, the thousands of new housing coming on line in the next few years simply won't be sold at current levels.  That means Panama could potentially experience the kind of real estate slowdown now being experienced in the United States.

Time will tell...

Copyright© 2008 by Mark Nestmann

Is Anything a Secret in the UK?

No, I don't have anything against the United Kingdom.  And I realize that only last week I wrote about how local authorities are using anti-terrorism laws to prosecute dog owners for not cleaning up dog poop.  But a new initiative from the U.K. Office for National Statistics (ONS) takes the proverbial cake.

The intrepid bureaucrats at the ONS have devised a new sex survey.  They're fanning out across the United Kingdom to make random visits to over 200,000 homes.  The survey has 2,000 questions about your sex life.  (No, that's not a misprint.)

Among other minutiae, the government wants to know who you have sex with, what toys you use while you have sex, if you insert any devices into your body cavities during sex, and details of your past sexual relationships.  The cost of this survey comes to a little under US$7 million annually.

And the benefits?  Well, the ONS will be able to release revealing snapshots of British sexual practices, such as this one from the ONS press release that revealed that one in eight women between the ages of 16 and 50 and one in six men under 70 had not had sex in the past year.

Once you answer the 2,000-question survey, there won't be much if anything private in your life if you live in the United Kingdom.  The government knows you name, your address, where you work, your phone numbers, your national insurance number, and your bank account numbers.  It also has the details of your mortgage, credit rating, car registration, and any arrests and convictions you have on file.  Through a nationwide network of closed circuit cameras, officials can follow you pretty much anywhere you go.

And now, thanks to this survey, that includes your bedroom. 

Can the Brits top this?  I don't see how—but I'll be watching, too.  Not your bedroom, but for evidence of the next taxpayer-financed boondoggle.

Copyright © 2008 by Mark Nestmann

A Moment of Panic

I pride myself on being prepared for just about anything when it comes to my laptop PC.  I've successfully my data after dropping it on a concrete floor, shorting out the keyboard, and corrupting the hard drive.

But this morning, I came close to panic.  OK, it was panic, although only for a moment.

Yesterday evening, I installed the newest version of PGP Desktop, the flagship personal encryption product from PGP (http://www.pgp.com).  (The PGP line of encryption products originated in the work of legendary programmer Phil Zimmerman, who almost went to jail in the mid-1990s for creating an encryption product the U.S. government couldn't break.)

Everything went smoothly.  After installing the program, I began what PGP calls "Whole Disk Encryption."  That means that the laptop will start up only after you enter the correct PGP "passphrase" into a dialog box. 

No problem there.  I created a passphrase that was easy for me to remember, and hopefully, hard for anyone else to guess.  Then I did something you're not supposed to do—I wrote down the passphrase on a piece of paper in case I forgot it.  My intention was to shred that piece of paper this morning, after making certain that I had memorized the passphrase.

This morning, after a mug of the overly-strong coffee I'm so fond of, I sat down at the laptop and turned it on.  As I expected, the PGP dialog box appeared and asked me for the passphrase.  I entered it, but the program told me I had entered in an incorrect passphrase.

That's when the moment of panic set in.  I typed every conceivable variation of the passphrase I could think of, at least 30 in all.  None of them unlocked my laptop. 

I knew from reading the PGP user guide that if I couldn’t recall the exact passphrase, the only choice I would have would be to reformat my entire hard drive.  S**t!!!!

And remember that piece of paper?  Apparently, the passphrase I wrote on it wasn't the one I actually used to encrypt the hard disk.  Double s**t! 

What to do?  The only alternative was to keep trying different passphrases until one opened up the disk.  Then I remembered that I had considered—and I thought rejected—a slightly shorter passphrase than the one I actually used to encrypt the hard drive.  Could I have mistakenly used that one?

I entered that combination of letters, numbers, and symbols on the keyboard and briefly held my breath.  The hard drive opened up normally, and I was back in business.

The moral of this story, of course, is do as I say, not as I do, to wit: DON'T FORGET YOUR PASSPHRASE!! 
And of course, don't panic, unless there's a very good reason. 

Copyright © by Mark Nestmann

Bermuda's Squeaky-Clean Image Smeared in Scandals

Bermuda, perhaps more than any other offshore center, has for decades sought to create for itself a reputation as a "respectable" offshore financial center. 

Unlike many competing jurisdictions, Bermuda never enacted a bank secrecy law.  It eschewed the idea of "asset protection trusts," basing its trust legislation on the time-tested provisions of English law, rather than the debtor-friendly legislation of offshore centers like the Cook Islands.  Professional and government fees for offshore services and structures were and continue to be significantly higher than most other jurisdictions. 

Bermuda also remained a British overseas territory, rather than opting for independence.   This provided assurance that British regulators, at least in theory, were overseeing Bermuda's offshore financial industry.

If it were only true.  Events in the last year have exposed corruption and money laundering on an immense scale.  Last month, the head of Britain's Committee of Public Accounts, Edward Leigh, called Bermuda's record "appalling." 

It's not hard to see why:

• In April 2007, authorities in the British Virgin Islands brought criminal charges against IPOC International Growth Fund, Ltd., a Bermuda-registered mutual fund.  The BVI accused IPOC of laundering money for a powerful Russian politician through the Bermuda Commercial Bank, one of Bermuda's largest and most respected banks. 
• In December 2007, the U.S. Securities and Exchange Commission brought securities fraud charges against Lines Overseas Management, headquartered in Bermuda.  LOM stands accused of receiving at least US$5.8 million from two stock manipulation schemes. 
• In August 2007, a local Bermuda newspaper reported that the prime minister, while serving in another ministry, obtained US$150,000 of publicly funded renovation on his home.  In connection with an alleged press leak, police arrested and detained the island's Auditor-General, whose responsibility is to oversee the government's financial affairs.

As a U.K overseas territory, Bermuda is subject to the dictates of the U.K. Parliament and the U.K. Foreign Office.  However, the U.K. authorities have generally not interfered in its offshore sector, as they have historically considered Bermuda to be a well-regulated jurisdiction.  For instance, while most other U.K. overseas territories are subject to the EU Savings Tax Directive, it wasn't extended to Bermuda.

That may now be changing, thanks to the ongoing series of scandals now rocking Bermuda.  I predict a much heavier regulatory hand being extended from the United Kingdom to Bermuda. 

However, there's little doubt that Bermuda's ueber-successful captive insurance, investment fund, and trust management sectors will continue to thrive.  Bermuda's financial infrastructure is also well developed, including numerous international law and accounting firms.

So, don't count Bermuda out of the offshore arena.  But the bloom is definitely off the rose.

Copyright © 2008 by Mark Nestmann

Feds to U.S. Border-Crossers: We Own Your Laptop

It's bad enough that when you cross a U.S. border, you must consent to an intrusive search of your luggage.  But now, courtesy of a decision from a federal appeals court, the government also has the right to copy everything on your laptop—and use it for whatever purpose it seems fit.

I wrote about an earlier decision along these lines over a year ago.  (Click here to read the posting).   As I wrote then, the ways that this new authority can be misused are too numerous to count—whatever information you carry with you on your laptop—banking records, client data, “adult” videos, you name it—now, in effect, must be shared with the U.S. government.

But now it's even worse: the 9th Circuit Court of Appeals has ruled that customs officials don't even need "reasonable suspicion" (much less "probable cause") to "search a laptop or other personal electronic storage devices at the border."  That means in addition to your laptop, customs officials can search and copy data from your cell phone, Blackberry or any other electronic device without any evidence you've done anything wrong.

A search of a laptop is far more intrusive than a search of your luggage.  In some ways, it's even more intrusive than a body cavity search, which customs officials do require "reasonable suspicion" to conduct. 

Your body cavities may (or more likely may not) reveal any contraband.  But examining the data on your laptop may well reveal a detailed picture of your friends, your family, your professional associates, your interests, your financial status, and possibly much more.  As one attorney noted, "It really is like looking into someone's mind, rather than looking into a box or a folder or a purse."

One way to protect yourself from this type of intrusion is to encrypt all the data on your laptop, or even the hard disk itself, using a program like PGP Desktop (http://www.pgp.com). 

Unfortunately, that may not be an ideal solution, because customs officials may demand that you decrypt any encrypted files before they return your laptop.  If you refuse, they can confiscate the laptop and/or detain you until you agree to provide access to the unencrypted files.

A better solution may be to copy all the data on your laptop to a USB stick and send it via a courier service to your international destination.  Encrypt the data, of course, before you send it.  Then securely "wipe" any confidential information off your hard drive, along with the "free space," again using a program like PGP Desktop. 

If you carry your laptop through Customs, be sure to "sanitize" it.  First, encrypt and copy your data to a USB stick, then send it via courier to your destination.  Then, use a utility like Killdisk (http://www.killdisk.com) to securely wipe everything on your hard drive.  Then reinstall the operating system according to the instructions in Killdisk or whatever utility you use for this purpose.  (There are other possible “sanitation” solutions but none as good as this one.) 

If Customs asks you to inspect your laptop, let them.  The inspector won’t find anything but the operating system and standard system files.

(For more suggestions on protecting your privacy and wealth, click here.)

Copyright © 2008 by Mark Nestmann