According to Bloomberg, HSBC is being sued by the trustee liquidating the Madoff businesses, Irving Picard, who claims $578 million in fake profits. It names among others HSBC Securities Services (Luxembourg) S.A.
The case is filed at the U.S. Bankruptcy Court of lower Manhattan.
Another lawsuit, filed in Luxembourg earlier this year by Herald Fund against HSBC Securities Services (Luxembourg) S.A. claims €1.6 billion ($2.24 billion).
Through this claw back action the trustee seeks to recuperate fake profits distributed to Madoff investors.
Go to: http://www.bloomberg.com/apps/news?pid=20601103&sid=ap_IrHXWzEFk
Egide Thein
feierwon.blogspot.com
peckvillchen.blogspot.com
Tuesday, July 14, 2009
Monday, July 13, 2009
Switzerland, Luxembourg, Other Offshore Centers on Alert
Remember this name: Steven Michael Rubinstein.
Steven Michael Rubinstein, age 55, of Boca Raton, FL, a wealthy accountant at a yacht building company was the first US citizen to be arrested on 2 April 2009 for tax evasion, linked to the new war on tax havens. He is accused to have established an offshore corporation in the BVI to hide his identity as the beneficiary of an account at Swiss bank UBS, holding about $6 million. His trial in the US District Court of South Florida is scheduled for September 30, 2009. He has pleaded guilty and will pay a fine equal to 50% of the highest balance on the account. If convicted he faces total loss of his property and, up to five years in prison for tax evasion and three years for filing false tax returns. He is currently free on bail of $12 million.(1)
UBS, in the context of its assistance to that type of US client, paid a fine of $780 million. Earlier this year Raoul Weil, who was a senior executive at UBS was charged with conspiracy to hide $20 billion from thousands of US customers from the IRS. UBS, agreed to communicate a small number of names of their 52,000 US customers, thereby breaking Swiss secrecy laws. UBS and the Swiss Government are still fighting a US request to communicate the remaining 50,000(+) names.
Any offshore center should be aware that this latest episode is the end of banking secrecy and of the type of tax evasion it encouraged. A US citizen would be out of his mind to go that slippery slope from now on. Swiss banks actually too, and they shun the American client like fire. This development will not stay confined to the only Swiss and US parties. The operation is on its way, OECD providing the vehicle.
But the question remains for the existing client, still hiding from the tax man, and who gets caught in this storm. He is guilty of course, and will get caught. But what about the bank, which encouraged this, the jurisdiction which advertised the scheme and protected it by its own laws, supervision and regulations?
I would not be surprised to see legal actions from both sides: the US Government as it did already with UBS, and the clients who were falsely promised no taxes, secrecy, shelter and impunity. Those clients are mad as hell. Offshore centers beware!
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
(1) http://www.usdoj.gov/usao/fls/PressReleases/Attachments/090402-01.ComplaintAndAffidavit.pdf
Steven Michael Rubinstein, age 55, of Boca Raton, FL, a wealthy accountant at a yacht building company was the first US citizen to be arrested on 2 April 2009 for tax evasion, linked to the new war on tax havens. He is accused to have established an offshore corporation in the BVI to hide his identity as the beneficiary of an account at Swiss bank UBS, holding about $6 million. His trial in the US District Court of South Florida is scheduled for September 30, 2009. He has pleaded guilty and will pay a fine equal to 50% of the highest balance on the account. If convicted he faces total loss of his property and, up to five years in prison for tax evasion and three years for filing false tax returns. He is currently free on bail of $12 million.(1)
UBS, in the context of its assistance to that type of US client, paid a fine of $780 million. Earlier this year Raoul Weil, who was a senior executive at UBS was charged with conspiracy to hide $20 billion from thousands of US customers from the IRS. UBS, agreed to communicate a small number of names of their 52,000 US customers, thereby breaking Swiss secrecy laws. UBS and the Swiss Government are still fighting a US request to communicate the remaining 50,000(+) names.
Any offshore center should be aware that this latest episode is the end of banking secrecy and of the type of tax evasion it encouraged. A US citizen would be out of his mind to go that slippery slope from now on. Swiss banks actually too, and they shun the American client like fire. This development will not stay confined to the only Swiss and US parties. The operation is on its way, OECD providing the vehicle.
But the question remains for the existing client, still hiding from the tax man, and who gets caught in this storm. He is guilty of course, and will get caught. But what about the bank, which encouraged this, the jurisdiction which advertised the scheme and protected it by its own laws, supervision and regulations?
I would not be surprised to see legal actions from both sides: the US Government as it did already with UBS, and the clients who were falsely promised no taxes, secrecy, shelter and impunity. Those clients are mad as hell. Offshore centers beware!
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
(1) http://www.usdoj.gov/usao/fls/PressReleases/Attachments/090402-01.ComplaintAndAffidavit.pdf
Monday, July 6, 2009
Luxembourg, OECD and Madoff: The Question of TJH
Luxembourg’s Minister of the Treasury, Luc Frieden, gave an interview recently at Bloomberg (1), in which he discusses the ins and outs of the Madoff case in Luxembourg. Referring to disputes between investors in Luxembourg investment funds linked to Madoff, and custodians, he has something to say to everyone:
1. “The principle is very clear: the custodian bank has to indemnify investors,”
2. “An international arbitration will be a more professional and fast solution that is probably more satisfactory to all,” said Frieden, who may become Luxembourg’s finance minister after the June 7 elections. “I prefer an arbitration of two, three years than having 100 court cases decided in 10 years.”
I wholeheartedly agree. That is what I thought myself, but here it is confirmed, clearly and frankly by the Minister of the Treasury and Justice, and according to some, future Minister of Finance.
By subscribing to the minister’s opinion, I would also assert some personal expertise in these areas, and certainly also similar objectivity in my comments. They are based on my unique perspective of a former "insider," now fairly distant geographically from Luxembourg for the last twenty years, which makes me a neutral observer. At the same time, at this very moment, unfortunately, I am also a “consumer” of Justice in Luxembourg, which provides me with another unique expertise.
Both statements by the Minister implicitly are a diagnosis of TJH, tax and judicial haven.
The tax haven attracts capital, clean and unclean, and those attract all kinds of Madoffs. Madoff operations in the world can only work in specific ecosystems, where those favorable legal, regulatory and financial environments meet. At this intersection we find money searching for easy income, tax exemption, lax regulations, secrecy and indeed vulnerable investors. Fraud quickly takes on its own momentum with handlers and facilitators, who often will be locals and will be inadvertently or willfully blind.
The Luxembourg judicial haven reduces the risk of consequences if ever someone gets caught. There is no doubt that we are in a judicial haven, if the Minister of Justice says that it is best to resort to private arbitration, rather than the formal justice of his own country, because it will take 10 years to reach a conclusion. He does not exclude that justice could be called biased, which I don’t think it is so far. We know there are other criteria by which the OECD defines a judicial haven, but they are minor compared to such a candid statement.
What are the risks to the participants in the Luxembourg Madoff scenario? It depends on which actor is considered, and there are three categories: the investor, the fraudster and Luxembourg State.
1. The investor of course, loses all, his capital, his sleep and his quality of life. A lawsuit in his home jurisdiction is precarious, especially when it comes to "black money" hiding in the tax haven. The gangsters know that. Luxembourg remains the only way to obtain a remedy, but it took already more than six months for any Luxembourg authority to establish clear principles surrounding the Madoff case. The impressionistic blur created by the unfortunate intersection of the rules and regulations of the financial center and Luxembourg civil law does not allow for quick fixes that are essential in such disputes. But the minister said it himself: procedures can last 10 years. This is totally unacceptable, but he spoke the truth. I can personally attest to it by the following:
In 2004 I filed a civil lawsuit against two business associates, two well known characters in Luxembourg, for breach of contract. As there is a suspicion of abuse of corporate assets and fraudulent bankruptcy, a criminal complaint was filed and received by the Luxembourg Court. I was told that Luxembourg curators generally ignore evidence of fraud in bankruptcy, and almost never file criminal charges. Impunity is almost guaranteed! It is also true that courts lack the means that would be commensurate with the size of the financial center. This applies also to an inadequately understaffed Judicial Police, and certainly also the country’s “Financial Investigation Unit”, or FIU. One result is that in my case, justice has yet to be done, whereas we write 2009 already. This starkly confirms the minister's quote that it might take ten years to reach a verdict. Justice is delayed, and as the proverb says: "Justice delayed, is justice denied." (2)
2. The fraudster has a good chance to get away with his crime cheaply. Thus, Madoff could go on until the collapse of his infernal machine, which gave him more than 35 years of impunity. This is not really due to a deficiency of Luxembourg supervision. But let’s admit what stroke of brilliance it would have been, if Luxembourg had unmasked Madoff several years ago! Luxembourg operators, banks and professionals involved had certainly even a higher chance than regulators to uncover the fraud, if only they had considered further that the investment opportunity was too good to be true. And who knows, maybe Madoff has been unmasked, but then the fraud buster became an accomplice, well knowing that he had the same level and probability of impunity than Madoff. I learned from Luxembourg sources that are usually well informed, because information is not publicly available due to the notorious lack of transparency that in a recent case of a financial scandal the local "handler" in chief, who is prominently known, got away with a fine of € 1500 for his personal violations of the law. There is no cheaper lottery in the world, where you win a prize every time. Who says crime does not pay?
In my personal case, described above, the two defendants are conducting a public life without hindrance for more than 5 years already, a bit like Madoff did before his fall.
There is still something to be said about sanctions for fraudsters in Luxembourg: they generally do not exist, because no complaint is filed at all, or a complaint does get filed and sanctions are handed out. But they are anemic in international comparison and in no relation with the extent of the fraud or misconduct committed.
3. Luxembourg is the big loser in these recent incidents, which are real scandals. First there was the loss of reputation for being singled out on the OECD grey list, and then there is the forever brewing Madoff scandal. As investors are feeling betrayed, Luxembourg loses its "friends". Compounded with bad news came a strong loss of tax revenues to which a rich budget was used. Luxembourg also spent several billion Euros on securing two local banks “too big to fail”. And what if all of this was not only due to the economic crisis, but to a general loss of attractiveness? In these times of ongoing negotiations for the formation of a Government coalition, one can only hope that the alarms are seen and heard by the future leaders. The rigors of the law, essential to good governance at the financial center, and adequate means of investigation and the capacity to render justice without delay should be at the top of the list of priorities. This would be an extraordinary achievement, to avoid Luxembourg being included on yet another list that will not fail to come: the list red with shame of the judicial havens. It is a bad omen that the European Commission filed already two complaints against Luxembourg in this year alone: one related to money laundering regulations, another again about tax laws.
Egide Thein
2009.06.23.
(1) Bloomberg article: http://www.bloomberg.com/apps/news?pid=20601087&sid=a8KUxW1cXdvU
(2) A satire of the case is developing: http://peckvillchen.blogspot.com
1. “The principle is very clear: the custodian bank has to indemnify investors,”
2. “An international arbitration will be a more professional and fast solution that is probably more satisfactory to all,” said Frieden, who may become Luxembourg’s finance minister after the June 7 elections. “I prefer an arbitration of two, three years than having 100 court cases decided in 10 years.”
I wholeheartedly agree. That is what I thought myself, but here it is confirmed, clearly and frankly by the Minister of the Treasury and Justice, and according to some, future Minister of Finance.
By subscribing to the minister’s opinion, I would also assert some personal expertise in these areas, and certainly also similar objectivity in my comments. They are based on my unique perspective of a former "insider," now fairly distant geographically from Luxembourg for the last twenty years, which makes me a neutral observer. At the same time, at this very moment, unfortunately, I am also a “consumer” of Justice in Luxembourg, which provides me with another unique expertise.
Both statements by the Minister implicitly are a diagnosis of TJH, tax and judicial haven.
The tax haven attracts capital, clean and unclean, and those attract all kinds of Madoffs. Madoff operations in the world can only work in specific ecosystems, where those favorable legal, regulatory and financial environments meet. At this intersection we find money searching for easy income, tax exemption, lax regulations, secrecy and indeed vulnerable investors. Fraud quickly takes on its own momentum with handlers and facilitators, who often will be locals and will be inadvertently or willfully blind.
The Luxembourg judicial haven reduces the risk of consequences if ever someone gets caught. There is no doubt that we are in a judicial haven, if the Minister of Justice says that it is best to resort to private arbitration, rather than the formal justice of his own country, because it will take 10 years to reach a conclusion. He does not exclude that justice could be called biased, which I don’t think it is so far. We know there are other criteria by which the OECD defines a judicial haven, but they are minor compared to such a candid statement.
What are the risks to the participants in the Luxembourg Madoff scenario? It depends on which actor is considered, and there are three categories: the investor, the fraudster and Luxembourg State.
1. The investor of course, loses all, his capital, his sleep and his quality of life. A lawsuit in his home jurisdiction is precarious, especially when it comes to "black money" hiding in the tax haven. The gangsters know that. Luxembourg remains the only way to obtain a remedy, but it took already more than six months for any Luxembourg authority to establish clear principles surrounding the Madoff case. The impressionistic blur created by the unfortunate intersection of the rules and regulations of the financial center and Luxembourg civil law does not allow for quick fixes that are essential in such disputes. But the minister said it himself: procedures can last 10 years. This is totally unacceptable, but he spoke the truth. I can personally attest to it by the following:
In 2004 I filed a civil lawsuit against two business associates, two well known characters in Luxembourg, for breach of contract. As there is a suspicion of abuse of corporate assets and fraudulent bankruptcy, a criminal complaint was filed and received by the Luxembourg Court. I was told that Luxembourg curators generally ignore evidence of fraud in bankruptcy, and almost never file criminal charges. Impunity is almost guaranteed! It is also true that courts lack the means that would be commensurate with the size of the financial center. This applies also to an inadequately understaffed Judicial Police, and certainly also the country’s “Financial Investigation Unit”, or FIU. One result is that in my case, justice has yet to be done, whereas we write 2009 already. This starkly confirms the minister's quote that it might take ten years to reach a verdict. Justice is delayed, and as the proverb says: "Justice delayed, is justice denied." (2)
2. The fraudster has a good chance to get away with his crime cheaply. Thus, Madoff could go on until the collapse of his infernal machine, which gave him more than 35 years of impunity. This is not really due to a deficiency of Luxembourg supervision. But let’s admit what stroke of brilliance it would have been, if Luxembourg had unmasked Madoff several years ago! Luxembourg operators, banks and professionals involved had certainly even a higher chance than regulators to uncover the fraud, if only they had considered further that the investment opportunity was too good to be true. And who knows, maybe Madoff has been unmasked, but then the fraud buster became an accomplice, well knowing that he had the same level and probability of impunity than Madoff. I learned from Luxembourg sources that are usually well informed, because information is not publicly available due to the notorious lack of transparency that in a recent case of a financial scandal the local "handler" in chief, who is prominently known, got away with a fine of € 1500 for his personal violations of the law. There is no cheaper lottery in the world, where you win a prize every time. Who says crime does not pay?
In my personal case, described above, the two defendants are conducting a public life without hindrance for more than 5 years already, a bit like Madoff did before his fall.
There is still something to be said about sanctions for fraudsters in Luxembourg: they generally do not exist, because no complaint is filed at all, or a complaint does get filed and sanctions are handed out. But they are anemic in international comparison and in no relation with the extent of the fraud or misconduct committed.
3. Luxembourg is the big loser in these recent incidents, which are real scandals. First there was the loss of reputation for being singled out on the OECD grey list, and then there is the forever brewing Madoff scandal. As investors are feeling betrayed, Luxembourg loses its "friends". Compounded with bad news came a strong loss of tax revenues to which a rich budget was used. Luxembourg also spent several billion Euros on securing two local banks “too big to fail”. And what if all of this was not only due to the economic crisis, but to a general loss of attractiveness? In these times of ongoing negotiations for the formation of a Government coalition, one can only hope that the alarms are seen and heard by the future leaders. The rigors of the law, essential to good governance at the financial center, and adequate means of investigation and the capacity to render justice without delay should be at the top of the list of priorities. This would be an extraordinary achievement, to avoid Luxembourg being included on yet another list that will not fail to come: the list red with shame of the judicial havens. It is a bad omen that the European Commission filed already two complaints against Luxembourg in this year alone: one related to money laundering regulations, another again about tax laws.
Egide Thein
2009.06.23.
(1) Bloomberg article: http://www.bloomberg.com/apps/news?pid=20601087&sid=a8KUxW1cXdvU
(2) A satire of the case is developing: http://peckvillchen.blogspot.com
Friday, July 3, 2009
MILITARY TIES BETWEEN MONGOLIA AND LUXEMBOURG TO BOOST
An unusual press article from Montsame Ulaanbaatar. Quietly, unbeknownst to anybody, Luxembourg has achieved the military encirclement of Russia. See for yourself (1):
Мэдээ Мэдээ » English news » Politics
MILITARY TIES BETWEEN MONGOLIA AND LUXEMBOURG TO BOOST
2009-06-30 18:03:09
Хэвлэх Найздаа илгээх
Ulaanbaatar, /MONTSAME/ Prime Minister S.Bayar hosted a meeting Tuesday with a visiting Chief of Luxembourg Army's Headquarters, General Gaston Reinig. Mr Bayar expressed his hope that this visit will play an important role in extending the bilateral relations and cooperation in defense sector enriching them with a new content. He expressed his satisfaction with active promotion of the cooperation in comparatively short term since the establishment of military relationship between the two countries in 2002. "A military contingent of Mongolia's Armed Forces performed a peacekeeping mission in Kosovo together with troops from Luxembourg under the NATO leadership. This is a significant measure for the military relations and cooperation between Mongolia and Luxembourg," he added. "I would like to announce that Mongolia's Government and the National Security Council supported Luxembourg's proposal on joint participation in stabilizing Afghanistan. The suggestion was made during my visit to Luxembourg," Mr Bayar said. Mongolia is interested in cooperating with Luxembourg' Army in renovating and re-organizing a Tavantolgoi-based peacekeeping training center of Mongolia's Armed Forces into Regional Training Center, exchanging international peacekeeping operation experiences, conducting joint military exercises, and in establishing relations between military units of the two countries. S.Batbayar 17.59
(1) http://www.montsame.mn/index.php?option=com_news&task=news_detail&tab=200906&ne=1535
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
Мэдээ Мэдээ » English news » Politics
MILITARY TIES BETWEEN MONGOLIA AND LUXEMBOURG TO BOOST
2009-06-30 18:03:09
Хэвлэх Найздаа илгээх
Ulaanbaatar, /MONTSAME/ Prime Minister S.Bayar hosted a meeting Tuesday with a visiting Chief of Luxembourg Army's Headquarters, General Gaston Reinig. Mr Bayar expressed his hope that this visit will play an important role in extending the bilateral relations and cooperation in defense sector enriching them with a new content. He expressed his satisfaction with active promotion of the cooperation in comparatively short term since the establishment of military relationship between the two countries in 2002. "A military contingent of Mongolia's Armed Forces performed a peacekeeping mission in Kosovo together with troops from Luxembourg under the NATO leadership. This is a significant measure for the military relations and cooperation between Mongolia and Luxembourg," he added. "I would like to announce that Mongolia's Government and the National Security Council supported Luxembourg's proposal on joint participation in stabilizing Afghanistan. The suggestion was made during my visit to Luxembourg," Mr Bayar said. Mongolia is interested in cooperating with Luxembourg' Army in renovating and re-organizing a Tavantolgoi-based peacekeeping training center of Mongolia's Armed Forces into Regional Training Center, exchanging international peacekeeping operation experiences, conducting joint military exercises, and in establishing relations between military units of the two countries. S.Batbayar 17.59
(1) http://www.montsame.mn/index.php?option=com_news&task=news_detail&tab=200906&ne=1535
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
Tuesday, June 30, 2009
Luxembourg: When People Ran Out of Food
An intriguing article for Luxembourg interests and US people of Luxembourg descent.
http://www.winonadailynews.com/articles/2009/06/29/news/01lead0629.txt
The article presents a piece of history, when people in Luxembourg were living in precarious conditions and did suffer from hunger. Many left for the US in the 19th century, possibly 1/3 of the population.
"Marnach House gives glimpse into past" is written by KÄRI KNUTSON / kknutson@winonadailynews.com.
A picture shows a piece of renovated Luxembourg rural architecture in the US, from 1857.
Egide Thein
feierwon.blogspot.com
peckvillchen.blogspot.com
06.29.09
http://www.winonadailynews.com/articles/2009/06/29/news/01lead0629.txt
The article presents a piece of history, when people in Luxembourg were living in precarious conditions and did suffer from hunger. Many left for the US in the 19th century, possibly 1/3 of the population.
"Marnach House gives glimpse into past" is written by KÄRI KNUTSON / kknutson@winonadailynews.com.
A picture shows a piece of renovated Luxembourg rural architecture in the US, from 1857.
Egide Thein
feierwon.blogspot.com
peckvillchen.blogspot.com
06.29.09
Sunday, June 14, 2009
New Luxembourg-American Cultural Center, Belgium, WI.
As a friendly support, to LACC, please spread the following news gathered from a friend on Facebook:
http://www.facebook.com/event.php?eid=90316445841&ref=nf
Dedication of the new Luxembourg American Cultural Center
Host: Luxembourg American Cultural Society, Inc.
Type: Music/Arts - Opening
Network: Global
Date: Saturday, August 8, 2009
Time: 11:00am - 3:00pm
Location: Luxembourg American Cultural Center
Street: 100 Peter Thein Avenue
City/Town: Belgium, WI
http://www.luxamculturalsociety.org/index.html
There are more Americans of Luxembourg ancestry in Illinois, Wisconsin, Minnesota than Luxembourg citizens in Luxembourg. Become a member! Chances are your ancestor is from there.
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
http://www.facebook.com/event.php?eid=90316445841&ref=nf
Dedication of the new Luxembourg American Cultural Center
Host: Luxembourg American Cultural Society, Inc.
Type: Music/Arts - Opening
Network: Global
Date: Saturday, August 8, 2009
Time: 11:00am - 3:00pm
Location: Luxembourg American Cultural Center
Street: 100 Peter Thein Avenue
City/Town: Belgium, WI
http://www.luxamculturalsociety.org/index.html
There are more Americans of Luxembourg ancestry in Illinois, Wisconsin, Minnesota than Luxembourg citizens in Luxembourg. Become a member! Chances are your ancestor is from there.
Egide Thein
egidethein.blogspot.com
feierwon.blogspot.com
peckvillchen.blogspot.com
Tuesday, June 2, 2009
Luxembourg: “Delaware, Delaware.”
In the weeks past, not only in Luxembourg, but also in every other dying tax haven a new battle cry could be heard: “Delaware, Delaware.” It was most intriguing to hear tax havens yelling at the 800 pound gorilla in the room, who was presiding over the death penalty to be pronounced over the yelling crowd. How real are those loopholes called Delaware, Nevada, and Wyoming?
I asked Jeffrey Owens, Director at OECD the very question: “Why is that argument wrong?” The answer was very diplomatic, which means disappointing, because it was a pre-crafted escape answer: “Because they are part of a larger political entity called the United States.” As a former diplomat, I call such an answer a Houdini, after the escape artist.
This answer prompts at least two other questions:
1. Why are there separate discussions with Hong Kong and Macau, which are also part of a larger political entity called China?
2. In that case, shouldn’t the larger political entity be considered as not abiding by the OECD standards?
Senator Levin introduces S 569.
I went then to the horse’s mouth, Robert Roach, Chief Investigator at the US Senate’s Permanent Subcommittee on Investigations, presided by Senator Levin. It appears that the Senator has worked on that very issue since the year 2000. He has recognized the weaknesses in various US jurisdictions and has introduced as a remedy bill “S 569 Incorporation Transparency and Law Enforcement Assistance Act” on March 11, 2009.
Here are the findings as summarized by Senator Levin in his statement on the Senate floor:
“It is a fact that criminals are exploiting this weakness in our State incorporation practices. They are forming new U.S. corporations and LLCs, and use these entities to commit crimes ranging from drug trafficking, money laundering, tax evasion, financial fraud, and corruption.”
He also pointed out that one of the driving reasons behind the bill is the Financial Action Task Force’s notice that “gave the gave the United States two years, until July 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information.”
The bill is co-sponsored by Senators Chuck Grassley (R-Iowa) and Claire McCaskill (D-Mo).
S 569, Requirements.
I would mention 3 main features in the interest of the fact that those are hints for future compliance requirements in jurisdictions that don’t have them yet:
1. Incorporations will require the use of a “formation agent”. A formation agent is any professional who for compensation, assists in the formation of a company.
2. The formation agent has specifically to identify correctly all beneficial owners and obtain a copy of those beneficial owners’ passport with picture. Beneficial owners are persons who can control or manage the corporation directly or indirectly. That information can be retrieved by law enforcement upon presentation of a subpoena. Beneficial ownerships have to be updated in the annual filings of the corporation.
3. The formation agent would be required to comply with an anti money laundering program to be set up by the Department of the Treasury within 90 days. The bill establishes civil and criminal penalties for persons who knowingly provide false, or fail to provide information.
So here is the thought: the battle cry “Delaware, Delaware” is a particularly bad choice. The 800 pound gorilla has been coerced by FATF into doing something right, complying with a FATF demand. He seems to be willing to comply and has a strong project to show that he will. What is the leverage then, yelling “Delaware”, if you show an unwillingness to comply with OECD demands.
Egide Thein
2009.06.02.
I asked Jeffrey Owens, Director at OECD the very question: “Why is that argument wrong?” The answer was very diplomatic, which means disappointing, because it was a pre-crafted escape answer: “Because they are part of a larger political entity called the United States.” As a former diplomat, I call such an answer a Houdini, after the escape artist.
This answer prompts at least two other questions:
1. Why are there separate discussions with Hong Kong and Macau, which are also part of a larger political entity called China?
2. In that case, shouldn’t the larger political entity be considered as not abiding by the OECD standards?
Senator Levin introduces S 569.
I went then to the horse’s mouth, Robert Roach, Chief Investigator at the US Senate’s Permanent Subcommittee on Investigations, presided by Senator Levin. It appears that the Senator has worked on that very issue since the year 2000. He has recognized the weaknesses in various US jurisdictions and has introduced as a remedy bill “S 569 Incorporation Transparency and Law Enforcement Assistance Act” on March 11, 2009.
Here are the findings as summarized by Senator Levin in his statement on the Senate floor:
“It is a fact that criminals are exploiting this weakness in our State incorporation practices. They are forming new U.S. corporations and LLCs, and use these entities to commit crimes ranging from drug trafficking, money laundering, tax evasion, financial fraud, and corruption.”
He also pointed out that one of the driving reasons behind the bill is the Financial Action Task Force’s notice that “gave the gave the United States two years, until July 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information.”
The bill is co-sponsored by Senators Chuck Grassley (R-Iowa) and Claire McCaskill (D-Mo).
S 569, Requirements.
I would mention 3 main features in the interest of the fact that those are hints for future compliance requirements in jurisdictions that don’t have them yet:
1. Incorporations will require the use of a “formation agent”. A formation agent is any professional who for compensation, assists in the formation of a company.
2. The formation agent has specifically to identify correctly all beneficial owners and obtain a copy of those beneficial owners’ passport with picture. Beneficial owners are persons who can control or manage the corporation directly or indirectly. That information can be retrieved by law enforcement upon presentation of a subpoena. Beneficial ownerships have to be updated in the annual filings of the corporation.
3. The formation agent would be required to comply with an anti money laundering program to be set up by the Department of the Treasury within 90 days. The bill establishes civil and criminal penalties for persons who knowingly provide false, or fail to provide information.
So here is the thought: the battle cry “Delaware, Delaware” is a particularly bad choice. The 800 pound gorilla has been coerced by FATF into doing something right, complying with a FATF demand. He seems to be willing to comply and has a strong project to show that he will. What is the leverage then, yelling “Delaware”, if you show an unwillingness to comply with OECD demands.
Egide Thein
2009.06.02.
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