Asset Protection BLOG - Mark Nestmann

UBS Reaches Agreement with USA on Unreported Accounts

On July 29, the United States and Switzerland reportedly agreed to settle criminal charges brought by the U.S. Department of Justice against Swiss banking giant UBS.

While details of the settlement haven't been released, it appears likely that the Department of Justice will receive account details of at least 5,000 American clients of the bank.  The IRS was seeking account details of many times this number—52,000 depositors.

It's not clear which accounts will be turned over.  According to the existing U.S.-Switzerland tax information exchange treaty arrangements, U.S. authorities must present evidence of "tax fraud" committed by a specific identified taxpayer in order for Switzerland to release the information.  Tax fraud is a more serious offense than ordinary tax evasion: it means taking affirmative steps, such as submitting false documents, to avoid disclosing an offshore account.  It seems highly unlikely that the United States would be able to achieve this burden of proof for this many taxpayers. 

A new treaty—which Swiss voters must approve via referendum to go into effect—lowers the burden of proof from "tax fraud" to "tax evasion."  However, U.S. authorities still must present evidence of tax evasion from specific taxpayers in order to receive information from Switzerland.  In this case, the only basis U.S. authorities have to support their demand for disclosure of account data is a 2004 internal UBS document stating that U.S. depositors held 32,000 accounts with cash and 20,000 with securities with a total value of US$14.8 billion. 

Based on this slim evidence, it will be very interesting to see what rationale Swiss authorities came up with to satisfy U.S. demands, while upholding Swiss law.  Unless the IRS has substantially more information than this, it again seems unlikely that the IRS could identify 5,000 or so of these individuals suspected of tax evasion.

Under whatever veneer of legality the data transfer occurs, it probably won't happen until after Sept. 23, the deadline for the IRS "voluntary disclosure" program that U.S. taxpayers with unreported offshore accounts to pay taxes and reduced fines in hopes of avoiding criminal prosecution. 

If you have an unreported offshore account at UBS—or any other offshore financial institution, my recommendation is to contact a criminal tax attorney immediately to determine if you should take advantage of this program.  My colleague Bob Bauman has written why you might NOT want to enroll in it—but in any event, you need professional advice to determine your best option. 

Copyright © 2009 by Mark Nestmann

The Unacknowledged Implications of Obama's "War on Offshore"

Although the war of words between the United States and Switzerland has calmed down in recent days, the U.S. criminal case against Swiss banking giant UBS is still very much alive. 

As matters now stand, the IRS is demanding that UBS turn over banking records on more than 52,000 U.S. depositors.  It's waiting for the U.S. District Court in Miami to issue an order to UBS requiring compliance with its demand. On the other side, the Swiss Ministry of Justice has stated that it will block UBS from handing over the information, no matter what the court decides.

The latest news is that Micheline Calmy-Rey, Switzerland's Foreign Minister, will meet with U.S. Secretary of State Hillary Clinton on July 31 to discuss a settlement.  I expect that Calmy-Rey and Clinton will both want avoid a showdown between the United States and Switzerland.  The most likely outcome will be that UBS pays a hefty fine, releases a few thousand account records (but far fewer than 52,000), and then retreats to lick its wounds. 

However, the implications of this high-stakes financial drama go beyond UBS and indeed, beyond Switzerland. Looking at the bigger picture, it's obvious that the Obama administration wants to discourage Americans from investing outside the United States.  In recent months, the Obama administration and the IRS have launched a series of initiatives that if fully implemented will make it much more difficult for Americans to deal offshore. 

This isn't the place to discuss these plans in depth, but in addition to the criminal action against UBS, they include:

• A bill now before Congress establishing a presumption that any U.S. person with offshore dealings is guilty of tax evasion.  The taxpayer could rebut this presumption by presenting sufficient evidence to the IRS that he or she is in full compliance with U.S. law.
• An expansion of the IRS "qualified intermediary" requirements that would make it much more cumbersome for foreign banks and investors to invest money in U.S. securities.
• A dramatically expanded role for the SEC in policing investments of U.S. residents in non-U.S. securities, even for unsolicited purchases.

These initiatives aren't only designed to frustrate U.S. persons from investing abroad.  They're also designed so that foreign banks and brokerages will refuse to do business with them.  Indeed, a Deferred Prosecution Agreement that UBS signed in February 2009 to end an earlier lawsuit by the IRS requires the bank to terminate all cross-border business with U.S. clients and close their accounts.   

But it's not just UBS that's closing the door to U.S. clients.  In the last few weeks, I've received dozens of e-mails and phone calls from U.S. clients with bank accounts in Switzerland, Liechtenstein, Singapore, England, and other countries.  All have been informed that their accounts are being unilaterally closed or severely restricted. 

The situation is particularly serious for U.S. citizens living abroad.  In one case, a woman who's lived in Switzerland for 40 years had her Swiss account closed when her bank decided it would no longer service U.S. citizen clients.  This woman then contacted a U.S. bank to open an account.  The bank informed her that new due diligence rules from the U.S. Treasury no longer permitted it to provide banking services outside the United States. 

But the true implications are even broader, and affect the entire country, not just Americans who wish to invest internationally, or live abroad.  The U.S. government is now running multi-trillion-dollar annual deficits.  A large portion of this deficit is financed through foreign investments.  Given the protectionist barriers the U.S. government is erecting, it seems likely that at least some foreign investors will grow frustrated at being presumed to be criminals when dealing with U.S. financial institutions. 

In the short term, the U.S. actions may generate a modest amount of tax revenue—although far short of the US$100 billion in annual revenue postulated by IRS apologists.  But in the longer term, these protectionist measures are bound to make it more difficult for the United States to finance its gargantuan debts.  And this in turn could lead to a rise in interest rates and even greater erosion in the value of the U.S. dollar.

(The Nestmann Group, Ltd. can assist individuals whose offshore banks have severed account relationships in setting up alternative accounts.  Contact us at info@nestmann.com for more information.)

Copyright © 2009 by Mark Nestmann

Your Safe Deposit Box is a Crime Scene, Even if There's No Crime

Over a year ago, I reported here on a police raid on three private safety deposit vaults in London.  

In a meticulously orchestrated operation, more than 300 heavily armed police simultaneously raided the vaults, all owned by Safe Deposit Centres Ltd.  Subsequently, police arrested two of the South-African born owners of the company on suspicion of money laundering and related charges.

Police confiscated the contents of more than 3,500 safety deposit boxes and claimed that more than 90% of them contained criminal assets.  Indeed, police linked the box-holders to organized crime syndicates dealing in drugs, child pornography, human trafficking, prostitution, and the catchall crime of money laundering. 

I thought it might be interesting to go back a year later and find out just how many of these boxes actually contained "criminal assets."  Keep in mind this phrase has a very expansive meaning—it naturally includes obviously illegal items such as narcotics, but could also encompass, e.g., untaxed currency.

At the time of the raid, London police said each of the more than 3,500 boxes would be treated as "a crime scene in its own right."  For 90% of the boxes to contain criminal assets, as police claimed, 3,150 of them would need to be linked to crime.  For 10%, police would have needed to find evidence of criminal wrongdoing in 350 boxes.  And for a mere 1%, 35 boxes would need to contain "criminal assets." 

Well, in this case, police have brought a grand total of 11 prosecutions against the owners of assets out of the more than 3,500 boxes raided (about 0.3%)—although another 700 box-holders are under investigation for tax evasion. And guess what?  Numerous innocent box-holders, upon having their belongings returned, have discovered that items—cash in particular—is missing.

One elderly box-holder survived the Nazi Holocaust, and kept several thousand pounds in the heavily guarded Safe Deposit Centre in case his family needed to flee their home once again.  I suspect he may already be making plans to leave England.  If I were in his shoes, I certainly would.

This incident illustrates several important lessons that I described a year ago, but will repeat here.

1. Never trust media reports of sensational crimes when busting the wrongdoers involves the wholesale violation of privacy rights.  In this case, the media simply repeated the lurid accusations of the police, without asking critical questions such as, "Where's the evidence?" 
2. You can forget about any cash you keep in a safety deposit box.  If police don't steal it, they'll use sniffer dogs to identify drug residues on the cash.  Tainted cash is presumed to represent the proceeds of drug trafficking.  It doesn't matter that drug residues are present on more than 95% of circulating currency. 
3. Precious metals or jewelry might be a little safer if you can produce an invoice that police can tie to a specific bar, coin, or item of jewelry.  But, if you've simply stored away gold coins that you purchased with cash, without an invoice, you can kiss them goodbye.   
4. Don’t forget that the main outcome of the London raid was an investigation of 700 box-holders for tax evasion.  If there's even a scintilla of evidence that you purchased valuables found in your box with untaxed funds, you can probably kiss them goodbye.  And, you can look forward to a tax investigation. 
5. If you keep important papers in your safety deposit box, police and tax authorities will copy them before you receive them back.  If those papers show evidence of anything illegal—or untaxed income—once again, you can look forward to an investigation.
6. Based on the bounty confiscated by London police in this operation, you can count on many more of them, and not just in England.  Safety deposit boxes anywhere in the world are at risk. 
7. Remove your valuables and store them in a floor safe in your home.  If the vault is in a foreign country, and it's not practical to relocate your valuables to your home, make certain that you can prove beyond a reasonable doubt that you legally own every item in the box.  You should have a receipt describing the property in detail, along with a record of how you paid for it.  Ideally, you should also have records proving that you used legally earned, after tax funds to pay for the items in the box.
8. Don't delay.  The "success" of the London operation, and the fawning media attention accompanying it, will surely spur similar efforts in other countries.  Time is not on your side.

Copyright © 2009 by Mark Nestmann

Britain Imposes Direct Rule on Turks & Caicos

While it's not well known, the British Empire isn't dead.  It's only in hibernation.  Occasionally, Britain awakens from somulence and exercises long-forgotten "retained powers" that give it essentially dictatorial powers over the remnants of its colonial empire.

This legacy of colonial rule re-emerged earlier this month when Britain's Foreign and Commonwealth Office (FCO) took the first steps toward imposing "direct rule" over the Turks & Caicos Islands (TCI).  All this happened in a very British way: before the government imposes direct rule, committees of experts prepare detailed reports detailing the problems in a particular colony or colonies (now reborn as "overseas territories").  The reports recommend a solution to the problems found, which inevitably involve a loss of privacy or autonomy in the territory in question.  Then the FCO or other government office issues a thinly veiled warning to the territory about the consequences of neglecting the recommendations. 

This was the pattern in the TCI, and in its case, the problems are very real.  Several months ago, former Lord Justice Sir Robin Auld's Commission of Inquiry issued a still-unpublished report into "possible corruption or other serious dishonesty in relation to past and present elected members of the Legislature in recent years."  Among other conclusions, the report found:

• There were "clear signs of political amorality and immaturity and of general administrative incompetence"
• The TCI government is "at a near standstill" with its "financial position so bad that the Government cannot pay many of its bills as they fall due"

The Auld Commission recommended that the TCI's governor (naturally appointed in London) suspend the constitution "for an indeterminate period."   In place of elected representatives, Auld recommended replacing the local government with direct rule from London.  Finally, Auld recommended the U.K. government aggressively prosecute alleged wrongdoers, in some cases without a jury trial. All these initiatives are perfectly legal under the "Westminster Constitutions" governing U.K. overseas territories.

This process is now underway, although in slow motion.  A team of British investigators, lawyers and administrators is ready at a moment's notice to travel from London to the TCI to replace the elected Parliament.  A British naval frigate is on patrol in the Caribbean to provide military support if recalcitrant TCI politicians don't fall into line. 

And fall into line they have, at least in part.  The elected government now says it will push forward with at least some of the reforms in the Auld Commission report.  But if they fail to do so, the British government, backed by military force, is ready to do so.

Let me be very clear.  For more than a decade, I've heard numerous reports of systemic corruption and cronyism in the TCI.  For this reason, I've avoided recommending it (although its captive insurance laws and infrastructure are reasonably good).  It also seems very likely that the only way corruption can be brought under control is with outside intervention.

However, it's important to realize that several other British overseas territories with significant offshore sectors have precisely the same—or a very similar— constitutional status as the TCI.  These jurisdictions include Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, and Gibraltar.  In all of these territories, the British government can—and on occasion has—imposed legislation on the inhabitants over the head of the elected legislature. 

For instance, in recent years, Britain has "encouraged" its overseas territories to sign Tax Information Exchange Agreements with high-tax countries.  These agreements require the territories to release financial information on clients of banks and trust companies upon request to tax officials in the signatory countries.  Britain is now "encouraging" those same territories to comply with the information-exchange provisions of the European Savings Tax Directive, which essentially eliminates financial privacy in nearly every European Union country. 

For many investors—myself included—there's a certain comfort knowing that Britain stands behind its overseas territories.  Yet this comfort comes at a terrible price to democratic rule and financial privacy.  Before you invest or do business in any of these jurisdictions, be aware of what you're dealing with. 

Copyright © 2009 by Mark Nestmann

International Man Interviews Mark Nestmann

I’ve long been an admirer of Doug Casey, author of The International Man and Crisis Investing for the Nineties.  Doug’s unapologetic libertarian philosophy and his refusal to bow to conventional thinking has led me to read just about everything he’s written over the past two decades.

Doug’s well into his sixties now, but he has a lot of much younger men and women following in his footsteps.  One of the savviest is Simon Black, who publishes a blog called International Man. It’s a little hard to describe International Man, but perhaps the simplest characterization is that it combines a travelogue and investment recommendations overlain with an unabashed capitalist outlook.

In any event, I was pleased when Simon’s partner Matt, who happens to be a client of mine, contacted me and asked if he could interview me for Without Borders.  We conducted the interview earlier this week and you can listen to it free by clicking here—--scroll down for the interview. 

Matt’s a pretty bright guy and caught me a little off-guard with some of his questions.  I think you’ll enjoy listening to our give and take.  Again, here’s the link.

Australia is Cracking Down on Expats, Too!

It's nice to know that you're not alone.  And courtesy of Australia, U.S. citizens living abroad no longer need to feel they're the only ones being discriminated against by their government. 

The United States is the only major country that imposes tax on its citizens regardless of where they live.  Even if you've never lived in the United States, or left decades ago, if you're a U.S. citizen, you're liable to pay the same income, capital gains, gift and estate taxes as someone who's lived here all their life.   (There's one major exception—the Foreign Earned Income Exclusion—but this program is far from perfect, and every year bills are introduced in Congress to end it.)

Now, Australia has made it more difficult for its citizens living there or anyone else "tax resident" in Australia to become a "foreign resident" for Australian tax purposes.  On June 23, the Australian Senate enacted legislation that imposes Australian income tax on most Australians working abroad for periods under two years.

Australian exapts can reduce this assessment if a tax treaty permits offset of any foreign taxes paid against Australian tax, or if they can otherwise prove they already paid tax on the same income in another country.  They may also be able to reduce it if they can demonstrate a "permanent abode" in another country.  But that may not be easy to do for an assignment of only two years, particularly if they leave family members behind and make regular visits to Australia. 

To add insult to injury, Australia also imposes an "exit tax" on the unrealized gains of any long-term resident who becomes permanently non-resident for tax purposes.  The only way to avoid paying the exit tax is to elect to treat all assets you own when you leave Australia, anywhere in the world, as remaining in the Australian tax net. 

I suspect many other high-tax countries will join in war on expats in the near future.  Germany already taxes former long-term residents living in low-tax countries who retain substantial contacts in Germany.  Canada imposes an exit tax on the unrealized capital gains of long-term residents when they leave.  And of course, the United States now has its own exit tax, courtesy of the "conservative" President George W. Bush.

None of these ideas are that new.  Nearly a decade ago, a committee appointed by the United Nations published a report that proposed that governments permanently tax the income of emigrants.  In other words, if an Australian businessman moved to Dubai permanently, Australia would have the right to tax his income for the rest of his life.  The U.N. report also helpfully proposed an "International Tax Organization" that would essentially function as a global tax collector.  Its job would be to continue collecting taxes from pesky emigrants seeking to avoid them by living in a low-tax or no-tax jurisdiction.

I suspect that as time progresses, U.S. citizens won't be alone in needing to give up their citizenship to avoid the global tax net.  Whether or not high-tax governments will create an International Tax Organization to pursue them remains to be seen.

The Nestmann Group, Ltd. can assist individuals seeking alternative citizenship and tax-advantaged residence. For more information, click here.

Copyright © 2009 by Mark Nestmann

Nothing Like Giving Us Plenty of Notice…

In case you haven't noticed, there has been an unprecedented amount of publicity in the financial media about tomorrow's date, June 30, 2009. Forbes, The Wall Street Journal, and many other financial publications have devoted a surprising amount of coverage of this date.

What's the fuss?  Well, it turns out that June 30 is the deadline for filing the Treasury's annual foreign bank account reporting form (FBAR), Form TD F 90-22.1.

The IRS has issued numerous warnings to taxpayers and their advisors letting them know it's "really serious" about enforcing this report filing obligation.  It's even announced a sort of "amnesty" to encourage people who haven't previously filed the FBAR to become compliant.  (The IRS calls this "voluntary disclosure," as if we really voluntarily bare our souls to the tax man).  But unfortunately, the IRS keeps changing its mind over who has to file the form, and when it's really due.

First, a little background: Back in the "good old days," i.e., before 2009, the IRS defined U.S. persons subject to filing the FBAR as:

1. A citizen or resident of the United States
2. A domestic partnership,
3. A domestic corporation, or
4. A domestic estate or trust.

Those of us fortunate enough to be "U.S. persons" must report the existence of all “foreign bank, securities or ‘other’ financial accounts” if the aggregate value of those accounts exceeded US$10,000 at any time during the preceding year.  Failing to do so may result in a fine up to US$250,000, imprisonment up to five years, or both.

Anyway, these were the filing requirements in the good old days.  Then, in October 2008, the Treasury Department unveiled a new FBAR form that significantly expanded the reporting requirements for foreign accounts.  It also helpfully extended the definition of a "U.S. person" to foreign persons "in and doing business in the United States." 

Not surprisingly, this change led to consternation among some foreigners.  They were, to put it mildly, nonplussed by the new requirement to reveal the name, address, account number, and highest value in the preceding year of each non-U.S. account over which they had signature or "other" authority. 

"We hear your pain," said the Treasury.  And so a few weeks ago, the IRS announced that it would revert back to the previous definition of "U.S. person."  You could almost hear an audible sigh from those foreigners "in or doing business" in the United States. 

Now, in its latest missive, the IRS has issued a new "frequently asked questions" explanation of its latest offshore voluntary disclosure initiative.  Among other changes, it extended the June 30 deadline to Sept. 23, 2009 for the FBAR form for "…taxpayers who reported and paid tax on all their 2008 taxable income but only recently learned of their FBAR filing obligation and have insufficient time to gather the necessary information to complete the FBAR." 

If you're in this situation, the IRS says you should file the delinquent FBAR report according to the instructions and attach a statement explaining why the report is filed late.  (How about, "I had no f___ing idea I needed to file it?"  But then again, that might not be the best choice of words.) 

Then you send a copy of the delinquent FBAR, together with a copy of your 2008 tax return, by September 23, 2009, to what the IRS calls its "Philadelphia Offshore Identification Unit."  Under these circumstances, says the IRS, you won't have to pay a penalty for failing to file the FBAR on time.

This story has more twists and turns than a mountain road in my home state of West Virginia.  And here's the last one: if you're not eligible for an extension of the June 30 deadline, make sure the Treasury office in Detroit designated in the FBAR instructions receives your FBAR by tomorrow.  Unlike most tax forms, you can be penalized if the Treasury doesn't receive your FBAR by the deadline.  It's not sufficient that it's postmarked June 30.

Copyright © 2009 by Mark Nestmann

The Justice Department Plan to Maximize Asset Forfeiture

I've written many times in this blog on the abominable practice of "civil forfeiture," a legal procedure in which prosecutors can seize your property without accusing you—much less convicting you—of any crime.

The civil forfeiture racket raises billions of dollars for federal, state, and local governments.  Most of the time, the seizing agency gets to keep the money it confiscates, creating a bounty hunter mentality throughout the law enforcement system.

But that's not enough, according to the U.S. Department of Justice.  The DOJ is now implementing its first-ever National Asset Forfeiture Strategic Plan, with the goal of ensuring that prosecutors recover every last dollar of potentially forfeitable assets.  That's a big job, because more than 300 federal laws authorize civil and/or criminal asset forfeiture.  Not to mention tens of thousands of state, local, and county asset forfeiture laws and ordinances.

According to former assistant Attorney General Alice S. Fisher:

"Today, there is legal authority to forfeit the proceeds of virtually all serious offenses including terrorism, drug trafficking, organized crime, child pornography, alien smuggling, human trafficking, white collar crime, and money laundering. The National Asset Forfeiture Strategic Plan seeks to develop and implement policies and procedures to ensure that asset forfeiture is an integral part of every investigation and prosecution."

In other words, the government wants to make absolutely sure that no forfeitable assets slip through the proverbial cracks.

How might this affect you?  Well to begin with, consider what might happen if you have undeclared monies outside the United States and have used a structure such as an offshore trust or international business company (IBC) to hold those funds. 

It would be difficult for prosecutors to claim that mere failure to disclose a foreign account constitutes money laundering.  However, what if prosecutors discover you've formed a bearer share IBC, and you've used it to operate a bank account that has generated hundreds of thousands of dollars in untaxed profits? 

Under that scenario, prosecutors could argue that you're using "sophisticated means" to defraud the government.  This elevates a relatively mundane reporting violation into a tax fraud case involving money laundering.  And in a money laundering prosecution, the government can confiscate not only the proceeds of a crime, but all assets "facilitating" that crime.

A jury might or might not agree that your domestic bank accounts, your home, your vehicle, and your business "facilitated" a money laundering violation, but that doesn't prevent a prosecutor hunting for scalps from alleging that they did.  And in many cases, prosecutors can freeze your assets pending trial.

There's no question that the Obama administration and is determined to go after tax evaders who move their money offshore.  Nor is there any question that the Department of Justice wants to maximize forfeiture revenues by any means necessary.  That makes it more important than ever to be 100% compliant in your offshore dealings—or face the consequences.

Copyright © 2009 by Mark Nestmann

What's Next for Caribbean Offshore Centers?

The global recession and the U.S. crackdown on offshore jurisdictions have seriously affected Caribbean economies.  One of my colleagues recently returned from a two-week visit to several Caribbean countries.  Here's his report:

Panama: Real Estate Boom Ending

A year ago, the real estate boom was in full swing.  About 17,500 units—mostly high-rise condos—were ready to come on the market.  In some cases, a condo would double in value during the time it was being built.  Some developers even sold the same unit twice.  For instance, a developer would sell a unit for US$500,000, and then sell it a second time for US$1 million.  If the first buyer complained, the developer would refund his or her deposit.

Fast forward 12 months…prices are in free-fall.  Many buyers who put down deposits are simply walking away from their units.  Numerous high-rise condo towers are empty.  Foreclosure is inevitable, and several complete towers are now up for auction.  You can buy a nice apartment or condo in Panama City for US$80,000 today that a year ago cost US$500,000. 

The cash fueling the boom was primarily Venezuelans fleeing with their money to Panama, but those with real money arrived years ago.  Venezuelan men often seek out Panamanian women to date, but these women joke among themselves that if a Venezuelan man arrived in the last three years, he probably has no money.  Local real estate developers hope for an influx of American expats—but it can't happen soon enough to unload the thousands of unsold condos on the market. 

On the political front, Ricardo Martinelli won the latest presidential election.  His election platform was essentially, "I own lots of grocery stores and since I'm already wealthy, I don't need to steal from the people or the government."  About as effective as a platform I have heard anywhere in the world.

Panama hopes to join the North American Free Trade Agreement in the next few years.  That could spell major benefits of Panama's economy, but the price may be relaxation of the country's famous bank secrecy laws.  Still, Panama has the canal, and that may give it enough leverage to push through NAFTA and keep bank secrecy intact.  The next few years should be very interesting!

Bahamas: Demise of the US$10 Million Yacht

It's spring and the US$100 million yachts are in the harbor of the Atlantis Hotel, but the US10 million ones are in foreclosure.  And so it goes: the mega-rich haven't been affected—yet—by the recession, but those who can only afford a small yacht have had to sell it to pay the bills. 

Nearly a decade ago, the Bahamas shot itself in the foot by enacting a series of laws and regulations that satisfied U.S. government demands, but also resulted in the loss of most of its offshore business.  Since then, the Bahamas has tried to reinvent itself by catering to Latin American and European clients.  Unfortunately, this effort hasn't been particularly successful.

In the meantime, violent crime is becoming an increasingly severe problem.  The murder of Hywell Jones, a longtime Bahamian offshore services provider is a recent example.  Late in April, Jones was shot in the back of the head execution-style as he exited his car at his office.  Before his murder, Jones told friends he feared for his safety after being badly beaten and left severely injured in an attack at his home.  Perhaps coincidentally—or not—Jones was engaged in ongoing litigation with local businessman Lester Turnquest, a former member of Parliament. 

Jones's death marks the 25th homicide in the Bahamas in 2009.  This grim statistic underscores the reality that the Bahamas has become one of the most violent locations in the western hemisphere.  On an annualized basis, there more murders per capita in the Bahamas than in the most violent U.S. cities.
 
Turks and Caicos Islands: Is Captive Insurance Enough?

Still recovering from two Category 2 hurricanes last year, the Turks & Caicos Islands (TCI) faces a major challenge in restoring its infrastructure.  And it doesn't help that the U.K. government doesn't want to invest more money in a dependent territory with massive corruption problems.  Indeed, the U.K. government recently suspended the constitution to deal with corruption issues.  A governor appointed in London now rules the island.

One of the few sources of hard currency for the TCI is tourism.  However, the government recently announced that it planned to ding departing tourists US$100 for the privilege of leaving.  Come back soon, now!  Meanwhile, import duties are to increase as well to raise revenue.  While the TCI was never a low cost jurisdiction, it's quickly getting even more expensive.

On the offshore front, the TCI is best known as a haven for captive insurance.  This industry remains relatively healthy, but the real question is whether this one trick pony is enough to make the TCI a viable offshore jurisdiction.  There simply isn't much else here, with banking and Internet infrastructure years behind what other offshore jurisdictions offer.

Copyright © 2009 by Mark Nestmann

IRS Backs Down on Foreigners' Obligations to Report non-U.S. Accounts

A few weeks ago, I described a new requirement from the IRS that requires foreigners "in or doing business" in the United States to report details of all their non-U.S. financial accounts to the U.S. Treasury.

I also described the downside of this obligation as it relates to foreign persons, especially if the information they provide finds its way to organized crime syndicates in their own countries.  This is hardly an unforeseeable consequence, as data from the Treasury's "Foreign Bank Account Report" form (FBAR) is widely shared with authorities in other countries.  And in some of these countries, government corruption is rife.

Not surprisingly, this new obligation led to an outcry by those affected by it.  And some of those persons hired the requisite legal talent in Washington, D.C. to persuade the IRS to temporarily suspend the reporting requirement for foreigners "in or doing business" in the United States.  As a result, the IRS has reverted to the narrower filing obligation that existed prior to the October 2008 revision of the FBAR.

Under those prior requirements, now reinstated, a "U.S. person" subject to filing the FBAR is defined as

(1)    A citizen or resident of the United States
(2)    A domestic partnership,
(3)    A domestic corporation, or
(4)    A domestic estate or trust.

Just as a reminder, if you or your partnership, corporation, estate, or trust is a "U.S. person," you must report the existence of all “foreign bank, securities or ‘other’ financial accounts” if the aggregate value of those accounts exceeded US$10,000 at any time during the preceding year.  Those failing to do so face a fine up to US$250,000, imprisonment up to five years, or both.

The report for 2008 is due June 30, 2009.  You can download the FBAR here.

Copyright © 2009 by Mark Nestmann