How To Launder Money THE OFFSHORE WORLD

A P U B L I C AT I O N O F T H E S OV E R E I G N S O C I E T Y
Vol. 3 No. 3
March 2000
A C C E S S t o In t e r n a t i o n a l A s s e t Pr o t e c t i o n a n d Pr i va c y
THE OFFSHORE WORLD
How To Launder Money
Dear Member,
Pssst…want to launder money?
It’s easy. Just form a cash-based business—
almost any one will do—and slip the money
you want to launder into the cash register.
By Mark Nestmann Presto…your business becomes more profitable…the taxman loves you because you’re paying taxes on
your laundered proceeds…and you’ll almost never get caught.
Here’s an example. You own a bookstore—not a very profitable one. To help make ends meet, your friend Guido
installs a few slot machines—illegal where you live—in a
back room you previously used for storage. (Guido could
also be dealing drugs…or running a prostitution ring—the
principle is the same.)
Every day, Guido hands you an envelope stuffed full of
cash—your share of the previous day’s gambling proceeds.
Before you and Guido began doing business, your bookstore
took in an average of US$800/day. But your expenses are about
US$700/day, making the enterprise barely profitable. Guido’s
envelope, which usually contains about US$200, triples your
profit. There no need to “hide” your money offshore, because
it looks completely legit. You deposit it in a local bank, declare
the income to the taxman and go on your way.
Let me be clear. This example isn’t to condone money
laundering. It’s to show you how most money is laundered in
the real world—in the businesses of high-tax countries, not in
offshore banks.
But consider that laundering laws were originally
designed to combat “consensual crimes”—namely, drug
offenses. In a society of sovereign individuals, there would be
no need for laundering laws, because no truly consensual
activity would be illegal. The draconian powers these laws
give governments to seize private property before trial or
without a criminal conviction would end.
What if a money launderer commits a crime with an
identifiable victim? Shouldn’t the victims of the crime have
some recourse? Of course—and over 1,000 years of common
law holds that the proceeds of a crime are not for the criminal
to enjoy, but must be returned to the victim. (The same principal applies in civil law.)
Laundering laws turn this precedent on its head.
Once a “laundering offense” is committed, the monies
involved vest to the government. The government becomes
the new legal owner of the property, retroactive to the time
the crime allegedly occurred. (Some laundering laws include
provisions for victims of fraud or theft to recover their property—but the process is less predictable and more expensive
than more established procedures; e.g., bankruptcy).
The effect is to create a system in which governments
and criminals have a cooperative relationship. In many jurisdictions, these monies may be spent for any “law enforcement
purpose” the agency making the seizure dictates. In the
United States, this has included such items as a new Corvette,
health club memberships and even adult movies.1
It is because of the forfeiture provisions of laundering
laws that governments worldwide are expanding them to
encompass “all crimes.” And given the symbiotic relationship
laundering laws spawn between criminals and the state, the
odds are overwhelming that far from fighting crime, such
laws will facilitate it. (For proof, just look at the history of
the War on Drugs.)
In a community of sovereign individuals, persons whose
money was stolen by force or fraud would have the right to
recover it, through the courts or with the aid of whatever
businesses form to aid the victims of real crimes. And whatever limited government that existed would not profit from
theft and fraud.
Mark Nestmann, Editor, TSI
Inside this edition...
•
•
•
•
An All-In-One Cyber Privacy Solution ........................p. 2
The Sovereign Individual vs. The Sovereign State......p. 4
Going Public: A Unique Perspective ...........................p. 5
Liechtenstein: One of the World’s Oldest Offshore
Centers...........................................................................p. 7
• Looking for a Low-Tax Retirement? ............................p. 9
•
•
•
•
•
Belize—A New Tax-Free Program For Retirees .........p. 10
Feedback ......................................................................p. 11
Sovereign Snapshots ...................................................p. 13
The World of The Sovereign Society ..........................p. 15
Conference Calendar ..................................................p. 16
page 2
PRACTICAL PRIVACY STRATEGIES
An All-in-One Cyber-Privacy Solution
By Mark Nestmann
f you’re worried about privacy on the Internet—and you
should be—you may already be using the programs I’ve
reviewed in TSI and in my special report Practical Privacy
Strategies for Windows 95/98. These programs plug important
gaps in Internet privacy, but none of them presents an integrated solution.
I
But unlike many Internet start-ups, there is substance
behind ZNS. For instance, Ian Goldberg, ZNS’ chief scientist,
is one of the world’s leading cryptographers. Goldberg is
known for cracking “DES-40,” a widely used encryption protocol; breaking the Netscape e-commerce encryption system;
and deciphering the GSM cellular phone encryption standard.
A new program from Zero Knowledge Systems (ZKS)
changes this status. Freedom 1.0, released in November
1999, uses high-grade encryption with key lengths of 128 to
2,048 bits to encrypt the contents of any Internet communication, including e-mail, chat room, Web browsing and newsgroups. It also encrypts data going in or out of your PC.
Freedom 1.0 is available for a 30-day free trial at ZNS’
web site at http://www.zeroknowledge.com. Or you can purchase it for US$50. The trial version expires after 30 days and
provides three online pseudonyms, or “NYMs,” as Freedom
calls them. The commercial version gives you five NYMs.
None of these capabilities are new. The Anonymizer, for
instance, provides anonymous web surfing and re-mailing
capability. PGP provides e-mail encryption capabilities.
PGPNet protects communications in chat rooms and other
point-to-point communications. SSH Tunnel and Terminal
provides an encrypted data channel to and from your Internet
Service Provider. (All of these products are discussed in
Practical Privacy Strategies for Windows 95/98, available for
free downloading in the members only section of
http://www.sovereignsociety.com. A printed version is sold at
http://www.sovereignsociety.com/bookstore.cfm.)
Freedom 1.0 puts all these capabilities together in one
easy-to-use package. It represents a significant advance in
Internet privacy—although you’ll still need to use a program
such as PGP to securely delete sensitive files you no longer
need and to periodically “wipe” free disk space on your PC.
And Freedom 1.0 won’t necessarily protect your computer
against hacker tools such as Back Orifice 2000, Netbus and
commercial software such as WhoWhatWhere and
PCAnywhere that can give a system administrator—or a hacker—control over your computer. To avoid them, keep your
anti-virus software up to date and be wary of opening any file
sent to you by someone you don’t know. Or use firewall software such as BlackICE Defender. http://www.netice.com.
A series of widely publicized Internet security breaches—several of them uncovered by ZKS—made Freedom 1.0
one of the most talked-about product releases in the brief history of the Internet. The company has already raised US$25
million in venture capital—an amount it claims is the most
ever for a “privacy” product.
While web sites can normally trace your travel on the
Internet, when you log in using a NYM, your surfing is linked
to nothing but a number, and ZNS claims that it keeps no
records of who is using those numbers.
This is a better approach than other companies—such as
http://www.privada.com—in that no one holds information
that can compromise your identity. With Freedom, your privacy isn’t dependent upon the assurance of a third-party that
they aren’t maintaining identifying information or that they
won’t disclose it. According to ZNS, the information simply
doesn’t exist in any accessible form.
Freedom 1.0 Encrypts Data From the Moment
It Leaves Your Computer
When you log on to the Internet with Freedom 1.0, messages or data is encrypted from your computer to the Freedom
server that you designate. The encrypted data bounces from
one server to another and eventually arrives at its intended
destination. You control how many intermediaries are used.
The more there are, the greater the security…but adding more
intermediaries slows communications.
I tested Freedom 1.0 on two systems—one running
Windows 95, the other Windows 98, Second Edition. The
software is not compatible with other operating systems. Nor
will it work with America Online or PGPNet.
In Windows 95, installation went smoothly and didn’t
cause any hardware or software conflicts. You create a
passphrase and one or more anonymous identities (NYMs).
Then you create an encryption key, choose a Freedom server
and log on to the Freedom web site for a tour of the system’s
The Sovereign Individual is published monthly (12 times a year) for $250 per year (annual membership $295: $250 publication fees, $45 membership fee) by The Sovereign Society, 5
Catherine Street, Waterford, Ireland. POSTMASTER: Send address changes to: The Sovereign Society, PO Box 1566, Newburgh, New York 12551-9979. For information about your membership in
The Sovereign Society, contact Member Services at +353-51-844-068 or fax +353-51-304-561. Our email address is: [email protected] Editor: Mark Nestmann. Legal Counsel:
Robert Bauman. Contributing Editor: Nicholas Pullen. Managing Director: Erika Nolan. Contact the editor through the Society or by e-mail at [email protected] The PGP public key of
The Sovereign Society is posted at http://keys.pgp..com:11371. Search for [email protected] The PGP public key of the editor is posted at http://pgpkeys.mit.edu:11371. Search
for [email protected] The Sovereign Individual may not be reproduced or place on any electronic medium without written permission of the Society. Other publications may reprint
brief excerpts if the name, address and telephone number for the Society are listed. This publication does not render legal or other professional services or advice. If legal advice or other expert
assistance is required, please consult a competent professional. Your questions, comments and suggestions are welcome. ©The Sovereign Society, 2000.
Chairman–John A Pugsley, US, BVI. Tax Advisor–Vernon Jacobs, CPA, US. Medical Advisor–Jonathan Wright, M.D., US.
Board of Advisors • Mary Anne Aden, Costa Rica • Pamela Aden, Costa Rica • Douglas R. Casey, US • Michael Checkan, US • Jean-Maurice Clerc, Switzerland • James Dale Davidson, US •
Richard Duke, J.D. • Stuart Goldsmith, UK • Ed Gunther, France, US • Julia Guth, US • Adrian Hartmann, Canada • Ron Holland, US • Hubert Jongen, Belgium • Vernon K. Jacobs, US •
Rita Jongen, Belgium • Marshall Langer, UK, Barbados • Jurg Lattmann, Switzerland • Pierre Lemieux, Canada • David S. Lesperance, Canada • Leon Louw, So. Africa • Vince Miller, US •
Brian O’Kane, Ireland Humberto Pacheco, Costa Rica Dr. Jose V. Pascar, Uruguay • Katherine Peddicord, Ireland • Jacob Rees-Mogg, UK • Lord William Rees-Mogg, UK • Norman Rentrop, Germany •
Eric Roseman, Canada • Dr. Erich Stoeger, Austria • Jack Sturgis, Luxembourg • Frank Trotter III, US • Ben Vernazza, US • Robert Vrijhof, Switzerland • Peter Zipper, Austria
page 3
PRACTICAL PRIVACY STRATEGIES
features. You must also provide an e-mail address from a
“POP” server (such as one you can obtain through the
Anonymizer’s dial-up service at http://www.anonymizer.com).
Freedom doesn’t work with web-based e-mail services such as
Hotmail.
It was a different story with Windows 98, Second
Edition. I couldn’t finish the installation because, upon
rebooting, I was informed that a system file had been corrupted. I rebooted step-by-step, skipped the Freedom 1.0 files,
and got back to my desktop, only to find that I couldn’t connect to my Internet Service Provider. Fortunately, ZNS technical support was able to assist me in manually editing the
Windows registry to completely uninstall the program.
It turned out that the problem was on my end. I had
merely disabled PGPNet when I installed Freedom 1.0. I
should have completely uninstalled it—and when I did,
Freedom 1.0 loaded and ran without further problems.
offending address into Freedom 1.0, and any e-mail from
that address will never reach your inbox. You can also automatically subscribe to the “Real Time Black Hole List,” a
database of known spammers, to block e-mail from those
addresses. Similar capabilities are present in Outlook 2000
and newer e-mail programs, but it’s nice that Freedom 1.0
includes them.
The Freedom 1.0 “cookie jar” collects cookies and
allows you to keep them or delete them. (Cookies are tiny
bits of computer language exchanged between cooperating
programs that help track web site visits and eventually build
an online “profile” of your purchases, which web pages you
visit, etc. This profile can be sold without your knowledge
or consent.)
Freedom 1.0 Works Seamlessly With
Your Existing Browser and E-Mail
All of these features worked well. But there was one
important drawback: performance on my Pentium-133
Windows 95 system slowed markedly. The performance
of my 400-MHz Windows 98 system didn’t suffer as much,
but still was significantly slower than when running without
Freedom 1.0.
To load Freedom 1.0, you click on the icon the installation creates on your desktop and enter your passphrase.
A small dialog box appears on your screen, which is present
during your entire session. You then choose your NYM, log
on through your Internet Service Provider and begin using the
system. To send anonymous e-mail, you bring up your e-mail
program, compose a new message and send it. Freedom 1.0
alerts you of an outgoing message, which NYM it is from and
its intended recipient. If you don’t want your messages
anonymized, don’t load Freedom 1.0 before you send them.
Recommendation. Freedom 1.0 is an impressive debut.
While there are kinks to be worked out as with any “1.0”
software product, I am most impressed by its ease of use,
that it uses published encryption algorithms and the forthright manner in which ZNS deals with claimed security
vulnerabilities. For instance, while the source code for
Freedom 1.0 isn’t itself published, the company has hired a
world-class cryptographer—Bruce Schneier of Counterpane
Systems (http://www.counterpane.com/cis.html) to audit it
line by line for back doors or other weaknesses.
Web surfing is even easier. You bring up your browser,
type in a URL and Freedom 1.0 acts as an intermediary to
avoid disclosing your identity from the web site.
As with any technology, there is no question that the
anonymizing features Freedom 1.0 uses could be employed
by criminals just as it can by persons who simply want to reestablish control over their digital identities. I can’t imagine
that the National Security Agency, British Intelligence or the
IRS will view Freedom 1.0 very favorably. But ZNS has
designed Freedom 1.0 in such a way that it can’t be employed
for one very aggravating use—spam. The system will simply
refuse to send excessive amounts of mail from any NYM.
And anyone can go into the Freedom web site and shut
down e-mail from a particular NYM so that it can’t be sent to
their e-mail address. This limitation also makes it impossible
to launch the kind of mass attacks that have recently shut
down many commercial web sites.
To surf newsgroups privately, you use Freedom’s own
web-based newsreader, rather than the one in your browser.
I never got this feature to work on my Windows 95 system—
the web page Freedom 1.0 referred me to never finished loading in my browser. But it worked fine on my faster Windows
98 system.
Freedom 1.0 also supports the popular IRC (Internet
Relay Chat) protocol. To chat privately, you activate your
NYM, and then log on to the IRC server. You will be automatically routed through the Freedom network, with the
route used to the server hidden. If you use an e-mail address,
make sure you use your NYM’s address to protect your real
identity.
A useful utility within Freedom 1.0 is Word Scan, which
allows you to make a list of words that should not leave your
computer—e.g., your real name, address or telephone number. When you activate Word Scan, Freedom 1.0 will scan for
that data and warn you before sending any mail containing it.
Word Scan works for text in web, IRC, e-mail and news connections.
Products such as Freedom 1.0 demonstrate that there are
market solutions to the loss of privacy that is often viewed as
inevitably accompanying the transition to an “Internet economy.” There is no need for a government “privacy commission” or for new laws that prohibit companies from collecting
certain types of information on the Internet. Particularly
when some consumers are willing to disclose information
about themselves in exchange for specific benefits (TSI 12/99)
and when products such as Freedom 1.0 now exist that allow
those who don’t to protect themselves.
Freedom 1.0 can block unsolicited bulk e-mail (spam)
before it even reaches your computer. Simply enter the
For more information: Contact Zero Knowledge Systems
at +1-514-286-2636 or http://www.zeroknowledge.com.
page 4
THE CHAIRMAN’S CORNER
The Sovereign Individual vs. The Sovereign State
K
iana and I have been somewhat out of touch with news
and events in the United States for the past few months
as we’ve been aboard our boat, Eris Island, in the outer cays
of the Bahamas. Our days are so filled with hurricanes, boat
maintenance, reading and sunsets that morning newspapers
and nightly TV newscasts are distant memories.
Not being subjected to the daily roar of the American
media has dramatically reduced our level of anger at bureaucrats and politicians. We simply don’t hear regular reports of
Big Brother’s assaults against individual liberties.
For my own peace of mind, I shouldn’t have read James
Bovard’s newest book, Freedom in Chains: The Rise of the State
and the Demise of the Citizen (St. Martin’s Press, New York,
1999). His chilling catalog of horrors refreshed our memories, reminding us why we became committed to individual
sovereignty.
Bovard does a masterful job of chronicling the widening
plague of abuse of American citizens by the bureaucrats,
police and apparatchiks of the State. Of most interest, however, is his historical review of the way in which the definitions of liberty, sovereignty and rights have evolved.
Bovard notes: “The concept of sovereignty may be the
most dangerous Pandora’s box in the history of political
thought.” The idea that government by its nature is “sovereign” and therefore should enjoy “sovereign immunity” from
the laws that apply to citizens is woven throughout all of the
great bodies of political philosophy. It is an ancient and seldom questioned presumption.
One of the earliest exponents of state sovereignty was
Thomas Aquinas. Writing in the 13th Century, Aquinas’
world was one where secular kings were beginning to usurp
the “divine right” of the Catholic Church. Aquinas accepted
the sovereignty of kings, but argued that they were subject to
divine and natural law, as well as to the customs of the realm.
In Aquinas’ view, the Roman maxim, “What pleases the prince
has the force of law” was valid only if the prince’s command
was reasonable.
English philosopher Thomas Hobbes, writing in the
17th Century, took the concept of state sovereignty further.
Hobbes maintained that in order to survive, the people must
surrender their individual rights and submit to an absolute
sovereign authorized to act on behalf of each of them. The
king was presumed to act in the best interests of his subjects,
subject only to the laws of God.
The 18th-century Enlightenment discredited this concept of “divine right”—but shifted state sovereignty from the
king to a ruling entity called “The People,” which was now to
exercise supreme power—somewhat paradoxically—over
itself. French philosopher Jean Jacques Rousseau was an
exponent of this theory, arguing that subservience to the State
was a moral obligation.
Unfortunately, handing any person the
cloak of sovereignty confers on that individual power over the property and actions of
others. And power tends to corrupt,
whether that person is a king, politician or a
“disinterested” bureaucrat. Self-interest
By John Pugsley
overwhelms good intentions. When the
mantle of sovereignty is accompanied by immunity from
being held accountable for acts of aggression against other
individuals, the outcome is preordained.
Acting under the concept of sovereign immunity, politicians and their appointed agents are literally “above the law.”
They can kill with near impunity. They can make contracts
and break them without threat of paying restitution. They
bluntly claim a prerogative to damage or destroy the property
of private citizens without compensation, during searches for
contraband, or in enforcing environmental edicts.
Government officers at every level run amok over the lives of
citizens, immune from the consequences of their aggression.
As Thomas Paine wrote in his introduction to Common
Sense, in 1776, “...a long habit of not thinking a thing wrong,
gives it a superficial appearance of being right, and raises at
first a formidable outcry in defense of custom.”
Surely, the concept of State sovereignty is a longstanding
custom and rarely examined. But is it right? Bovard raises
the ultimate question: “In the same way that every military
invasion raises questions of national sovereignty, regulatory
incursions by politicians and bureaucrats must raise questions
about the sovereignty of individuals over their own lives.
What pretexts justify government massively transgressing the
borders of the individual’s own life?”
None that I can see. If you and I were cast ashore
on an uninhabited island, by what rationale could I assume
sovereignty over your actions and property, or you over mine?
If there were three of us, would any two of the group be
justified in usurping sovereignty over the third under the
rubric that it was for the good of the group?
Whether it is two others or two hundred million
others, I reject the idea that I should relinquish sovereignty
over my own life for any reason, including the “greater good”
as defined by majority vote. It is the blind acceptance of
this specious argument that fuels the endless growth of
government.
I subscribe to H. L. Mencken’s view: “Government
is actually the worst failure of civilized man. There has
never been a really good one, and even those that are most
tolerable are arbitrary, cruel, grasping and unintelligent.”
This is directly attributable to the primitive belief that the
State should be sovereign—and an affront to anyone
seeking to become a sovereign individual.
page 5
FINANCIAL STRATEGIES
Going Public: A Unique Perspective
By Eric Barnes
President & General Manager, Capital Funds Group © 2000 - All World Rights Reserved
What’s The Better Deal? A Modern Fable
In 1999, your private company grosses US$1 million.
Your Fairy Godmother will give your company US$10 million. You won’t have to repay the money. You’ll keep 100%
equity in your company.
Your alternative is to have Sponsor A take your company public. They’ll raise US$10 million in return for 43.2% of
your stock. Your insiders will retain about 4.626 million
shares (56.8%) of your company’s stock.
In either case, you use the money wisely to build your
company. In five years, you want to sell it. At that time, your
company’s profit is US$3 million/year.
Which offer should you have taken five years earlier to
get the best price? The Fairy Godmother option leaves you
with 100% ownership of your private company. It should sell
for 1.5 times its annual profit (considered by most business
brokers to be a very high estimate). Your golden parachute is
worth US$4.5 million.
The Sponsor A program assumes a public company
merger in five years. Based on your company’s earnings, its
stock should trade for over US$40/share. Your 4.626 million
shares will be worth over US$184 million—more than 40
times as much as the Fairy Godmother option.
The moral of this story is to take your company public.
But…ALL PUBLIC OFFERINGS HAVE INHERENT RISK!
This cannot be OVERSTATED. There are no guarantees.
Anyone who offers them to you has something other than
YOUR best interests in mind. If you’re not willing to assume
some risk, do NOT engage in any public offering.
Powerful Advantages of Going Public
• Raising funds becomes easier.
• Banks prefer public companies for financing and
lines of credit.
• You become a much more attractive acquisition target.
• When it comes time to sell, your company is priced
on its share value times the number of issued shares.
This is far greater than the balance sheet value of a
private company.
• You will have more funds with which to expand your
company.
• You will have easier access to global markets.
• You may gain considerable tax advantages if you
are moving into worldwide manufacturing, sales
and/or distribution.
• You can use your stock like money to acquire
assets and other companies.
Drawbacks of Going Public
• You will have to make regular official reports on the
financial condition of your company.
• There may be regulatory scrutiny.
• You must answer to a group of strangers called “stockholders.” You must keep them informed of your activities, your victories and your defeats. Some of them will
even call and bother you.
• Proper record keeping becomes even more vital.
The Five Methods Of Becoming
a Public Company
1. Standard IPO method. This means beginning from
scratch, hiring attorneys and accountants, finding market makers and an underwriter who might be interested. Then you do all the paperwork demanded by the
Securities and Exchange Commission. You’ll wait anywhere from 18-24 months before acceptance into the
market. You’ll spend up to a year doing “dog and pony
shows” for prospective market makers and institutional
investors.
Your risk is that the market makers will not perform
and that investors don’t buy your stock. If they don’t, your
merchant bankers, underwriter and market makers may simply walk, leaving you holding an empty and very expensive
bag.
You will spend US$1,000,000 or more plus US$300,000
paid up front to an underwriter in non-refundable fees. And
most IPOs leave the insiders with less than 50% ownership of
their companies. You lose control. Market professionals
often immediately sell your stock short. This can add 1020% more stock into the market that never profits your company! Your investor relations cost go up accordingly, though
you have no benefit from it.
The hard fact is that of small companies taking this
route, less than 50% ever finish the IPO process. The odds
of bucking the short selling are even lower. Over 98% of all
companies that go public with an IPO fail within five
years.2
2. Reverse merger. A public company buys your stock
for restricted stock. You own over 50% of the issued
stock for your company. The past management then
sells their free trading stock as you make your best
efforts to improve the share price of your public
company. Stock support costs destroy your company
as past management laughs all the way to the bank.
3. Shells. You can buy a publicly trading and reporting
“shell” corporation. If you don’t know what you’re
doing, you will likely buy a worthless shell. If you
page 6
FINANCIAL STRATEGIES
do know what you are doing, you will battle with
the sellers to disclose the problems with the shell.
The worst two problems are:
(1) stock, warrants and options hidden by current
insiders who will dump it into your market efforts
to raise your price and (2) the potential for lawsuits
due to the actions of past management for which
you now become liable.
As of December 1999, the cost of an over-the-counter
trading shell is between US$400,000 and US$450,000.
To this you must add the costs of proper “due diligence”
(US$100,000) and the filing of the S-4 (US$150,000).
Thus, the cost of a clean shell will exceed US$600,000.
4. Spinoffs. These are private companies spun off from
companies that are already public. This shortens
the process to 4-7 months and reduces cost. You
also have a new company with no hidden secrets
and no hidden shares. However, you may still find
yourself dealing with excessive shares, short selling
and other difficulties. You will still be relying on the
acceptance of your stock in the general market. If
your market makers won’t support your stock, you
will again be left holding the bag.
Nevertheless, in a world of difficult choices, spinoffs
are the best method available for going public.
5. The Supported Spinoff™. This unique program,
offered through Capital Funds Group, is notably
different in that the consultant, the spinoff sponsor,
the underwriter, the market makers, editorial writers
and the investors are all delivered as one single
working entity. The spinoff sponsor takes insider
non-trading stock in your company as part of their
fees. They have a vested interest in ensuring your
success in the market.
Nor does the underwriter require half the
non-accountable expense as an up front fee in
order to deliver funding. This results in an
immediate saving of approximately US$300,000,
more than the total cost of the Supported Spinoff™.
Further, the underwriter’s own offshore investor
pool can provide over US$10MM in an offshore
private placement for your company.
If you qualify for this program, your chances for
success have now grown to over 80%, absent a
total market meltdown.
Current Fees
As of August 1999, the Supported Spinoff™ Sponsor
introduced a monthly payment plan that calls for an initial
payment of US$15,000, then US$10,000 per month, with a
cap of US$100,000 if you’re not yet approved for trading by
the SEC. At the first funding of the company, there will be
an additional US$150,000 due, for a total of US$250,000.
Part of the fee is 150,000 shares of the client company’s
“insider stock” that is pooled and vaulted along with the
rest of the insider stock. There is also an underwriter’s fee
of 8% deducted from the final amount raised.
Fees may change. Contact Capital Funds Group
to confirm current costs.
If you are interested in becoming part of the our
next funding cycle, schedule a formal meeting with the
Supported Spinoff™ Sponsors in Sacramento, Cal. at your
earliest convenience. You should be prepared to make a
presentation to the sponsors of what you intend to do
with the funding and satisfy them that your company
meets their criteria. You should bring your attorney,
accountant and any other advisors you deem necessary
to this meeting. The underwriter will not be present unless
your prior due diligence has brought you to the point of
being prepared to sign the Letter of Intent and the
Sponsoring agreement.
You will have the opportunity to ask whatever
questions you need answered to become comfortable with
both the program and the Supported Spinoff™ Sponsors.
This is critical. If you are taken into the program, you
will be involved with these individuals for up to five years.
Unless your company is successful, their stock, pooled
with yours, will have no value. They want your success to
happen. They will also have a seat on your Board of Directors
for that period of time.
After acceptance into the program, you will be given all
the information necessary for you to conduct a complete due
diligence effort. This will include resumes of all the principal
players as well as lists of references. This will cover the
Supported Spinoff™ Sponsors, their attorney, Capital Funds
Group and a great deal of information on the underwriter.
This meeting requires a non-refundable fee of US$950.
The purpose of this, according to the underwriter, is to
separate the real players from the shoppers.
We also offer a service creating an IBC (International
Business Company) for you. There are distinct advantages
in having such a structure, both as an international business
and as a place to hold your insider stock.3 Send an e-mail
to [email protected] for a short article describing
this program, its advantages to you and its costs.
Contact me now with an executive summary of your
business plan, a paragraph or two on how you would apply
a US$10 million funding and your most recent financials.
I look forward to working with you and helping you
achieve your greatest goals.
(About the author: Eric Barnes is President & General
Manager of Capital Funds Group. Tel.: +1-510-547-3846.
Fax: 1-510-450-0369. E-mail: [email protected]
Internet: http://www.capitalfundsgroup.com. This is an
abbreviated and edited version of a longer article. For the
complete version, e-mail [email protected])
(Editor’s note: One of our members has suggested Canada
as a lower-cost alternative to the United States when forming a
public company. We’ll be exploring this and other options for
offshore entrepreneurs to raise capital in upcoming issues.)
page 7
ASSET HAVEN FOCUS
Liechtenstein: One of the World’s Oldest
Offshore Centers4
By Mark Nestmann
t is said that bankers in Switzerland don’t talk…but that those
in neighboring Liechtenstein have no tongues. The privacy
laws in this tiny enclave are among the strictest in the world and
the company laws, dating from 1926, among the most innovative.
Nor do the court-tailored remedies devised by resultsoriented judges in common law countries burden Liechtenstein.
An action such as the Mareva Injunction (which permits a court
to order a worldwide asset freeze in advance of any judgment9)
could not exist in Liechtenstein without an act of the legislative
assembly.
The Principality of Liechtenstein is also the only offshore
financial center with laws developed to deal with the threat of
confiscation by governments—a problem the House of
Liechtenstein, the royal family whose prince is head of state—
has dealt with for centuries.
In a criminal inquiry, Liechtenstein provides legal assistance only for crimes that are also criminal offenses there (dual
criminality). A Liechtenstein court reviews all such requests
before assistance is rendered. Legal assistance is forbidden for
tax and other “fiscal” offenses.
This tiny alpine enclave, surrounded by Austria and
Switzerland, has entered into a customs union with Switzerland
and uses the Swiss franc as its currency. However, its legal system is separate from that of Switzerland. And by joining the
European Economic Area in 1995, it gained most-favored trade
status with the European Union, without sacrificing the potentially anonymous relationships its laws allow.
Apart from the European Convention for Mutual
Assistance in Criminal Matters (1959)10, Liechtenstein has ratified no Mutual Legal Assistance Treaties (MLATs) and has only
one tax treaty in effect (with Austria).11 But Liechtenstein has
ratified the European Anti-Laundering Convention and defines
laundering as dealing with the proceeds of “any serious crime.”
I
Unlike newer arrivals to the “offshore” world,
Liechtenstein has a highly diversified industrial economy.
Personal income averages about US$39,000/year, making
Liechtenstein one of the world’s wealthiest countries.
Liechtenstein’s prosperity makes it less susceptible to political
pressure than less affluent offshore centers.
In 1926, Liechtenstein ratified the “Law on Persons and
Companies,” or “PGR” (the German acronym).5 This statute
created several unique entities that allow near-absolute
anonymity. They include the Anstalt (translation, “establishment”) and the Stiftung (“foundation”). The PGR also provides
a statutory framework for the recognition of trusts, making
Liechtenstein one of the only countries with a civil law
background6 to do so. In 70 years, there have been only
minor amendments to this law.
These entities can provide significant asset protection to
you and your beneficiaries. A creditor who disputes a transfer
of property to a Liechtenstein structure must do so within 12
months before the granting of an enforcement order or the
opening of bankruptcy proceedings. This period can be prolonged to five years if the creditor can demonstrate that the
transfer was intended to defeat its claims. This can be extended
another five years if the creditor notifies you in the initial fiveyear period, via a written pleading, of its intention to attack
your structure. The extension begins on the date the writ is
filed in Liechtenstein.7
This is a longer period than in some competing jurisdictions, but with the exception of certain judgments from
Switzerland and Austria, Liechtenstein does not recognize civil
judgments from other countries.8 All such matters must be relitigated in Liechtenstein courts, where punitive damages are not
enforced. In contrast, most common law asset havens will
honor foreign judgments.
Always Use an Attorney
The attorney-client privilege is perhaps stronger in
Liechtenstein than anywhere else in the world. Anything you
tell your attorney in his capacity as an attorney is subject to his
duty to remain silent. Even a court may not overrule this obligation.12
Always initiate any contact in Liechtenstein through an
attorney. However, most Liechtenstein banks and trust companies will discourage you from working directly with an attorney.
But if you persevere, you will find a Liechtenstein attorney you
can use to create an Anstalt or Stiftung.
An Ideal Estate Planning Tool
An Anstalt is a company formed by one or more persons
or legal entities. It is legally separate from its founder. You can
structure an Anstalt almost any way you want, free of the restrictions of the common law trust. But like a trust, the Anstalt may
have beneficiaries. You can also configure the Anstalt to be taxed
as a trust to comply with your domestic requirements.13
The Anstalt can provide virtual anonymity, limited liability
and complete control (if you want it and can handle it). It permits current and successive beneficiaries (usually family members) to participate in a “dynasty” instrument of perpetual duration. Anonymity is achieved by always working through your
attorney. While the Anstalt must be registered, your identity as
founder need not be disclosed on registration documents.
The person forming an Anstalt is the founder and possesses founder’s rights. The founder should be your attorney, who
will execute a deed of assignment to you, customarily in bearer
form. You become the holder of the founders’ rights. While
this transfer can occur anonymously, it may be reportable and/or
taxable in your own country.
page 8
ASSET HAVEN FOCUS
The Anstalt’s power can be used to its fullest potential only
by a person who is not subject to the jurisdiction of a litigationcrazed country such as the United States. If you maintain significant control over the Anstalt and you are named in a judgment,
a court may order you to repatriate assets conveyed to it—and
hold you in contempt if you don’t.
If you later expatriate, your attorney can revise the Anstalt
to better exploit the possibilities under Liechtenstein law.
However, if you have the power to amend the articles, a creditor
could argue that you control it and that you should be ordered
to repatriate its assets for the creditor’s benefit.
An Anstalt that does not engage in commercial activities is
the preferred structure. This avoids the requirement to submit
audited financial statements to the Liechtenstein government
each year to which commercially active Anstalts must adhere.
It also makes it more likely that your domestic tax authorities
will treat the Anstalt as a trust, not a company. This avoids
the potential (in the United States) of double taxation. Your
Liechtenstein attorney may create an entity owned by the
Anstalt that conducts a business without affecting the
commercial status of the Anstalt itself.
A Flexible Family Foundation
A Liechtenstein Stiftung or foundation is in concept similar
to foundations used for centuries in civil law countries. These
entities are not nearly so flexible as the Liechtenstein Stiftung.
In recent years, Panama and other civil law countries have also
passed foundation statutes. These laws, while possessing
admirable asset protection features, are as yet untested.14
A Liechtenstein Stiftung is a fund endowed for a specific
purpose or purposes. Like an Anstalt, it has an identity separate
from its founders. Unlike a trust, the Stiftung may hold both
legal and beneficial title to assets in its own name. (In a trust,
a trustee has legal title to assets, while beneficiaries have
beneficial title.) Yet the Stiftung can be configured to be
treated as a trust by your domestic tax authorities.15 The
Family Foundation, (Familienstiftung) which may not engage
in commercial activities, is again the preferred structure.
As with the Anstalt, it is not possible to own a Stiftung.
However, the founder can influence its management to a
much greater degree than a trust settlor. And unlike a trust,
the members of the Foundation Council, the ruling body, can
be changed without affecting the title to assets held by the
Stiftung, under whatever circumstances are defined in the
bylaws. In a trust, changing the trustee requires changing
the legal ownership of the underlying assets. From a practical
standpoint, this can be difficult.
Your Liechtenstein attorney should be the only member
of the Foundation Council. The Council is liable to the Stiftung
for any negligent or reckless breach of its obligations. You may
also appoint a protector (a familiar feature of common-law
trusts) to supervise the Council.
The founder may also be a beneficiary and also reserve
certain rights, including the right to revoke, change or amend
the Stiftung’s articles. The Stiftung can also protect the interests
of your beneficiaries against creditors. Only the Stiftung’s assets
are available to creditors in payment for its debts.
A Stiftung begins its existence when entered into the
Public Register. However, a Family Foundation only needs to
deposit the foundation deed—which should contain only your
attorney’s name—with the Public Register. Both your identity
and the names of your beneficiaries may be kept secret.
Again, as in the Anstalt the full power of this strategy can
be exploited only if you expatriate. Retaining too many rights
over the Stiftung may lessen its effectiveness as an asset protection vehicle.16
Foundation, Establishment—or Trust?
Because the founder’s rights can be passed to succeeding
generations in an Anstalt, this structure is more flexible than a
Stiftung, in which the authority of a family over its wealth is
shared with the Foundation Council, particularly after the
founder’s death. The Anstalt is thus a more suitable dynastic
vehicle. The Anstalt’s downside is that: (1) founder’s rights
are economic rights and may constitute part of your taxable
estate and (2) your heirs might not take proper precautions to
responsibly use the immense powers that the bearer[s] of the
founder’s rights wields.
What about a Liechtenstein trust? While Liechtenstein
is one of the few civil law jurisdictions to explicitly recognize
a trust, the concept of a “trust” is not part of civil law and
the legal results if challenged may be unpredictable. For this
reason, using a common law jurisdiction for a trust may be
preferred.
Another consideration in any Liechtenstein structure is
the concept of forced heirship. Under Liechtenstein law, your
spouse and heirs have a right to a compulsory portion of
your estate. However, Liechtenstein law allows a forced heirship
challenge only if the law governing you or your country of
residence permits it. This will rarely be a concern if you live in
a common-law jurisdiction, but may be if you live in a civil-law
country.17
For More Information
A Liechtenstein legal firm that is willing to let members
deal directly with an attorney is—
Dr. Dr. Batliner & Partner
Aeulestrasse 74/Postfach 86
9490 Vaduz, Liechtenstein
Tel.: +423-236-0404
Fax: +423-236-0405
Contact: Iwan Ackermann or Martin Gstoehl
(Editor’s Note: The Sovereign Society will be sponsoring a
gala tour of European banking havens September 18-25, 2000
that will include a visit to Liechtenstein and an opportunity
to meet with attorneys from the Batliner Group. For more information, contact Amberlee Huggins, World Financial Seminars,
105 W. Monument St., Baltimore, Md. 21201 U.S.A.
Tel.: +1-410-223-2633. Fax: +1-410-223-2650.
E-mail: [email protected])
page 9
EXPAT LIVING
Looking for a Low-Tax Retirement?
Come to the “Switzerland of the Americas”
By Nicholas Pullen and Robert Bauman
and US$100 per dependant.
I
You must spend at least four months each year in Costa
Rica. ID cards—carnets—must be renewed every two years.
f you’re looking for a peaceful retirement haven with an
ideal climate, first-class amenities, a moderate cost of living
and low taxes, consider Costa Rica, the “Switzerland of the
Americas.” For about US$1,000/mo., you can live a
comfortable if modest lifestyle in a modern studio
apartment with a swimming pool.
Situated in Central America with Pacific and Caribbean
Sea coastlines, Costa Rica has a long history of stable government (with the exception of a brief civil war in 1948). The
official language is Spanish, but English is widely spoken,
particularly in the larger cities and in the thriving expatriate
community.
Costa Rica’s tax legislation is based on the principle of
territoriality. Residents are not liable for income tax on foreign income they receive, only income derived in Costa Rica.
Nor do capital gains taxes or estate taxes exist. This makes
Costa Rica an effective domicile to avoid estate taxes.
One downside to Costa Rica is crime. According to an
official U.S. State Department warning (Nov. 1999), most
crimes are non-violent, but violence is increasing18. As in all
countries, the best defense is to keep a low profile and to
blend in with the locals.
Residency Through Pension or Investments
To qualify for residency as a pensionado (retired person
with pension), you must demonstrate a minimum income of
US$600 per month from a retirement plan or pension. You
may combine you and your spouse’s pension income to
achieve this threshold. This income must be permanent and
be remitted to Costa Rica. All remitted pension income is
exempt from income tax. However, imported motor vehicles
are hit with a whopping duty of 100%, with household goods
subject to duties of from 25 to 100%.
To qualify for residency as a rentista (retired person with
investment income), you must demonstrate a minimum
income of US$1,000 per month from investments, such as a
certificate of deposit or an annuity. Qualifying investment
income is exempt from income tax.
You must also provide written verification from a financial institution to Costa Rican authorities that sufficient funds
are on deposit in a permanent account to provide the required
minimum income for at least five years. You must re-qualify
for rentista status every five years.
Your spouse and any children under 18 qualify as
dependants and may accompany you to Costa Rica.
Pensionados and rentistas can claim spouses and children
under 18 as dependents. Children between the ages of 18
and 25 who are attending school full-time are also classed as
dependents.
The cost to process residency applications is approximately US$700 per principal applicant, US$250 for spouse
You and your dependents may not earn a salary in Costa
Rica until you become permanent residents. However, you
are permitted to own and operate an income-generating
business, make investments and own real estate. Income
from a Costa Rican source is subject to income tax at a flat
17% rate.
You can apply for permanent residency after two years
of pensionado or rentista status. (Citizens of Spain are exempt
from this requirement.) Citizenship and passport is possible
after you have been a permanent resident for seven years.
There are companies that purport to sell “instant” Costa
Rican citizenship based on “honorary consul” or similar status, but these generally rely for their existence upon corrupt
contacts within the government. Avoid them.
Permanent Residency Through Investment
You can obtain immediate permanent residency in Costa
Rica as an inversionista (investor) by making an investment
in a government-approved program:
• US$50,000 in an approved organization in
the tourism or export industry.
• US$100,000 in a reforestation project.
• US$200,000 in any other type of business.
For details of current approved opportunities, contact
your Costa Rican consulate or the Costa Rica Tourist Board
(address at end of column).
Qualification under this category provides all the privileges of permanent residency, including the right to work or
operate a business in Costa Rica.
One current government approved investment program
is the Forestales Alegria SA or “Melina Farm” reforestation
project. By purchasing a parcel of land in the Melina Farm
project you and your family can obtain immediate permanent
residency. And you receive income from the sale of harvested trees free of Costa Rican taxes.
The project consists of 70 one-hectare parcels. Fifty of
these parcels are now for sale at US$115,000 each. This price
includes administration costs, legal fees, and two years of
management and care of your parcel by a licensed forestry
engineer. Management is overseen by the Costa Rican
Department of Reforestation.
This program appears to be legitimate, but Costa Rica
has a long history of investment and real estate scams perpetrated against foreign visitors. Title insurance is generally
unavailable. Due to irregular enforcement of property rights,
existence of unresolved expropriation claims, and squatter
invasions, property protections are uncertain, particularly in
rural areas.
page 10
EXPAT LIVING
Belize—A New Tax-Free Program For Retirees
By Nicholas Pullen
B
elize offers an even lower cost of living than Costa Rica,
albeit in a less-developed country. But Belize, while lacking some of Costa Rica’s amenities, is the only English-speaking country in Central America. It also offers lovely scenery,
a tropical climate and some of the world’s most innovative
laws to attract new residents and foreign capital.
The Belize economic citizenship program has existed for
several years. We have not recommended it because of some
widely publicized scandals in it several years ago, although
the program now seems to operate with less political interference. Belize also offers one of the world’s strongest “asset
protection trust” laws and has enacted innovative legislation
dealing with international business companies (IBCs) (see
TSI 2/00).
In 1998, Belize enacted legislation to establish itself as a
retirement haven. The Retired Persons (Incentives) Act
establishes the “Qualifying Retired Persons” (QRP) program.
If you qualify, you are exempted from taxes on all your
income earned from sources outside Belize. Further, remittances of this income are exempt from income tax.
You will not be allowed to work in Belize or receive any
income from a Belizean source. However, QRPs can operate a
business in Belize. Income arising from activities and operations outside Belize—even if the business is being directed
from Belize—is exempt from Belize tax. Only income to your
business earned from Belize nationals is subject to income tax
at a rate from 15%-45%.
Import duties are also waived for a vehicle, personal
effects and household goods brought into Belize by QRPs.
The waiver also covers an airplane, boat or other means of
transport. Additional vehicles can be imported duty-free at
the rate of one every five years. (A similar waiver was once
in effect in Costa Rica, but has now been discontinued.)
No “Minimum Stay” Restrictions
As a QRP, you are under no obligation to reside in Belize
for any particular length of time each year. However, to continue to qualify as a QRP, you must maintain a year-round
residence in Belize.
To qualify, you must over the age of 45 and demonstrate
the ability to make regular remittances of income into Belize
to support yourself and your dependants (if any). Your
spouse and dependents qualify along with you at no extra
cost. Dependents are classified as children under 18 (23 if in
school full-time).
There are two options: (1) demonstrate an income of
US$12,000 per year accrued from a pension or an annuity; or
(2) demonstrate an income of US$24,000 per year from any
other source outside Belize.
The fees for the program are US$700 to join, an application fee of US$100 and a further US$100 for your ID card
once your application has been approved.
Belize—Downside
Belize is a developing country and many amenities to
which you may be accustomed are lacking, particularly outside Belize City, the capital. And even there, for instance, it is
not possible to access U.S. bank accounts through automated
teller machines (ATMs). You will need to obtain cash
advances from local banks, during business hours, using your
credit or debit card.
Crime, including robbery and mugging, is also a problem, according to the U.S. State Department. Belize City has
been the site of more reported incidents than other areas of
the country. Keep valuables out of sight, avoid wearing jewelry, and travel in groups during daylight hours to minimize
the risk of being targeted.
(Editor’s Note: The Belize Country Kit features a book
and video on retirement in Belize. For more information,
call International Living at +353-51-304-558 or e-mail
[email protected])
Resources and Contacts
The following agencies are jointly responsible for
administering the QRP program: The Belize Tourist Board,
New Central Bank Building,, Level 2, Gabourel Lane, P.O.
Box 325, Belize City, Belize, Tel.: +501 231913, Fax: +501
231943, E-mail: [email protected]
The Ministry of Tourism, Constitution Drive,
Belmopan, Belize, Tel.: +501 823393, Fax: +501 823815,
E-mail: [email protected]
An excellent source of information about Belize
is http://www.belize.com. You can read an online newspaper
containing information about current events there at
http://www.belizetimes.com. And Belize Today is a
magazine focusing on travel and life in Belize.
http://www.turq.com/belizefirst.
For more information on the pensionado, rentista or
inversionista programs, contact the Costa Rican Tourism
Board:
Instituto Costarricenese de Turismo, Departmento
de Rentistas, Apartado 777-1000, San Jose, Costa Rica,
Toll-free from North America and Europe: +1-800-3436332. For further information on the Melina Farm
program, see http://www.melina.co.cr.
A law firm that can assist in all aspects of residency
applications is: Tacsan & Umana, Tel.: +506 222 1835,
Fax: +506 233 5804, E-mail: [email protected]
Another excellent resource is the Association of Residents
of Costa Rica (ARCR). Contact: ARCR, P.O. Box 11911007, Centro Colon, San Jose, Costa Rica, Tel: +506 221
2053, Fax: +506 233 1152, E-mail: [email protected],
Internet: http://www.arcr.org Costa Rica information
web site. http://www.infocostarica.com. The Costa Rica
Forum is a useful place to get in touch with and receive
information from existing foreign residents in Costa Rica.
page 11
FEEDBACK
An important benefit of membership
in the Society is the opportunity
to network with fellow members.
We invite your feedback
(anonymously, if you prefer) and
any other information that you
believe will benefit other members.
The Society does not necessarily
agree with nor endorse the
views expressed herein.
Send your feedback to:
The Sovereign Society
5 Catherine Street
Waterford, Ireland.
Phone +353-51-844-068
Fax: +353-51-304-561
E-mail:
[email protected]
Don’t Serve as the
Protector of Your
Offshore Trust
Dear TSI,
In reference to your recommendation
that persons forming an offshore trust not
serve as a trustee or protector of that trust
(TSI 7/99):19
The situation you discuss is one in
which the U.S. persons gave up the role of
co-trustee (or protector) after they had
been ordered by a court to repatriate the
assets from their trust. These persons
were then jailed for contempt of court until
they ordered the foreign trustee to return
the assets.
But suppose they gave up being cotrustee or protector before the court
ordered them to repatriate the assets or
better yet, before the investigation started
or lawsuit filed? Would the courts still
hold them in contempt?
Best regards,
A U.S. member
Mark Nestmann responds: I
relayed your question to Richard Duke
(http://www.assetlaw.com), an asset protection attorney and member of our
Board of Advisors. Here’s what he told
me—
“If you resigned prior to investigations, then you may be okay. But to be
safe, I tell my clients to completely “go
offshore.” If they are afraid of doing
this, then it shows that they want to
retain control and therefore they should
use domestic planning techniques only.
The impossibility defense can only
be alleged on a legal basis if the action
(required by the court) is truly impossible. Removing a U. S. person as cotrustee or having that person resign will
be classified by most U. S. courts as a
charade. The same is going to be true of
the appointment of a U. S. person as
trust protector.
“Most U. S. courts will
conclude that
U.S. trust protectors
can remove the trustee
and exercise other
controls over the trust.”
Richard Duke,
Tax Attorney
A U. S. settlor wants a U. S. trust
protector for only one reason: to oversee
the trustee. And even with narrow powers and negative powers, this resignation
or removal of the U. S. trust protector is
going to be classified as a charade by U.
S. courts. Most U. S. courts will conclude that: 1) the U.S. trust protectors
can remove the trustee and exercise
other controls over the trust (according
to foreign trust law and the trust instrument); and 2) the resignation or removal
of the U. S. trust protector created the
impossibility defense (too late!). This
was the lesson of the Anderson decision
(TSI 1/00). If the U. S. settlor is not
going to give up real control to the trust
assets (required for the trustee to be the
legal owner in a trust relationship), then
don’t go offshore.
I am not saying that the foreign
trustee, after resignation will return the
assets—the foreign trustee won’t; it didn’t in the Anderson case). But the court
will hold the settlor in contempt and
place him in jail; and most settlors do
not want to go to jail.”
Can PGP be Broken?
Dear TSI,
I am a software engineer engaged in
research and development efforts in cryptography and related areas. I am afraid I
must take exception to recent articles on
PGP that have described it as essentially
unbreakable. This unfortunately is not
true.
Public key encryption algorithms,
such as those used in PGP, are breakable,
without using supercomputers, with standard PCs, and in (very) finite time—less
than a day for a very powerful PC. It is
also not true that the only way is brute
force. It is true that specialized knowledge
is needed and that this knowledge is not
yet widespread, but it has been done.
PGP is indeed “Pretty Good Privacy.”
Unfortunately, it is not much more than
that. The technology it uses is not stateof-the-art and is now more than a decade
old. It is breakable. Not easily, but breakable.
The major reason the U.S.
Department of Justice dropped its case
against Phil Zimmerman (who wrote PGP)
was that it was no longer legally viable.
The legal definition states that exportable
encryption must be breakable by the NSA.
PGP is.
A member in Israel
Mark Nestmann responds: We
continue to get messages that “PGP is
breakable.” Here are the facts:
1. Public key encryption programs
such as PGP can be cracked, but according to the information we’ve received
from cryptography experts, only with
much shorter key lengths than we recommend. A public key encryption key
called “RSA-129,” approximately equal
in security to a 426-bit PGP key, was
cracked in 1994. Five years later, another team of researchers broke “RSA-155,”
approximately equal in security to a
512-bit PGP key. However, nothing was
discovered during the course of the
experiment to cause any other keys to
become less secure.20
It is conceivable that in another
five years, researchers may be able to
break the equivalent of a 768-bit or even
a 1,024-bit PGP key. But longer keys are
page 12
FEEDBACK
exponentially more difficult to break
than short keys. One measure of the
effort is how many millions of processing instructions per second, or “MIPS,”
are required to do the job. The RSA-155
key was broken after about 8,000 MIPSyears. But a 1,024-bit PGP key would
require 300 billion MIPS-years to crack.
To break a 2,048-bit key would require a
billion times more MIPS than a 1,024-bit
key.21 But for safety sake, we recommend even longer key lengths: 4,096
bits, or the maximum length permitted
by the current version of PGP.
As far as PGP possibly containing
“back doors” that make it easier to
attack, I addressed that possibility—
which most cryptographic experts consider remote—in TSI 7/99. The following statement from Phil Zimmermann
may also put this issue to rest:
“No version of PGP
in which I have
been personally
involved has ever
had any back doors or
any other mechanism
to intentionally
weaken PGP.
Phil Zimmermann,
Creator of PGP
“No version of PGP in which I
have been personally involved has ever
had any back doors or any other
mechanism to intentionally weaken
PGP. After all the hardship and legal
persecution that I endured to bring PGP
to the world, I find it surprising and
offensive that anyone would think that
I would quietly stand by and tolerate
any compromise in the cryptographic
integrity of PGP…Network Associates
[the company that now owns PGP]
has not shown the slightest interest
in compromising the integrity of PGP.
They recognize that it would not be
in their business interests to do so.
Anyone may download the source code
for PGP from http://www.pgpi.org and
examine it for any back doors.”22
Ultimate Secrecy,
Revisited
Dear TSI,
I would like to follow up on Mark
Nestmann’s reply to the anonymous letter
entitled “Ultimate Bank Secrecy” published in TSI 1/00. I don’t necessarily
endorse all the techniques I mention, but
am simply pointing out alternatives.
Mark mentions the Austrian
Sparbuch and similar offerings available
in Croatia, Lithuania, Zimbabwe and the
Czech Republic as possibilities. They are,
but to a very limited extent; they are NOT
suitable for investment accounts. All of
these are deposit accounts and with very
few exceptions (the occasional incoming
wire transfer is possible with some banks)
require the physical presence of the passbook to deposit and withdraw funds.
Disregarding the potential language problems in providing instructions for doing
this, the locations of these countries make
these accounts impractical for most people
other than for “emergency” funds.
Depending on your specific requirements, it IS still possible to open anonymous accounts with a number of banks or
financial institutions located (generally) in
the smaller Caribbean tax haven countries.
However in view of the recent high-profile
failures of a number of such banks, particularly in Antigua, care must be taken in
selecting the home for your funds. Don’t
expect the banks that offer such accounts
to openly promote them. Judicious
research and careful approach is needed to
track down and get a response from suitable institutions, which can be difficult for
a beginner to the offshore world.
An easier method is to obtain an
“ATM only” debit card, which, unlike credit or debit cards that can be used to make
retail purchases, does NOT always require
identification to obtain. But here we start
to enter a “gray” area, since for such an
account to be opened with 100% assurance
of anonymity, a false name and mail drop
address must be used to take delivery of
the card. If there is no fraud intended, this
is not necessarily illegal. You can set up
the account to accept incoming funds via
wire transfer (some accept Western Union
Quick Pay transfers or even e-gold), but
debits can generally occur only with the
ATM card.
Moving further into the “gray”
area, it’s still relatively easy to find
banks, both in the Caribbean and in the
Baltic Republics, particularly those with
a good Internet presence, that will open
“no reference” accounts, although ID by
way of a certified or notarized passport
copy is almost universally required.
Now, most banks are more concerned
about accepting your money and covering
their own backs against external audits
than with 100% compliance of all rules
and regulations, so as long as the
documentation you send them looks
authentic, you should have little problem.
It’s relatively easy for anyone with
a good scanner and image manipulation
software to creatively modify virtually
any document, even passports, so that
the resulting copy is indistinguishable
from a genuine original. A notary stamp
presents little problem as does a mail
drop address and you have a 100%
“anonymous” account (or a 100%
anonymous signatory to a corporate
account) with full banking facilities
and even the option of obtaining debit
or secured credit cards.
Of course, as Mark said in his
own comments, “you also need to do
some soul-searching” before committing
to such means of obtaining untraceable
accounts, but I feel that the availability
of such options needs to be pointed out
to those who have a genuine reason for
wanting anonymity in the face of
increasingly invasive and repressive
authorities.
With regards,
An offshore reader
Mark Nestmann responds: The
techniques mentioned here are interesting from the perspective of achieving
ultimate anonymity—if you really need
it—but potentially violate a number
of laws. For instance, while the act of
obtaining a debit card in a false name
may not be illegal, knowingly purchasing or manufacturing a fake government-issued ID with which to identify
yourself to the bank is illegal in the
United States and many other countries.
Then, of course not reporting the
existence of the account and/or income
it generates also may violate the law.
Be very careful.
page 13
SOVEREIGN SNAPSHOTS
By Mark Nestmann
Caribbean/South America
Marc Harris Organization salesman sued. The sole defendant is Kevin
McNamee, former head of the Harris
firm’s Costa Rica office. An elderly U.S.
investor claims she is owed US$37,668
of a US$70,000 investment she made
through the Costa Rican office in 1998.
Source: Offshore Alert, 11/99.
http://www.offshorebusiness.com.
Comment: The Harris Organization
recently lost a libel action in U.S.
District Court against Offshore Alert publisher David Marchant (TSI 10/99).
Antigua discuses “harmful tax
competition” with OECD. While wanting to learn what measures the OECD
plans to bring against “tax havens,” the
Antiguan government is not acknowledging the OECD’s authority to oversee
the tax regimes of other countries.
Source: International Enforcement Law
Reporter, 10/99. Comment: Sounds like
the proper attitude to us.
Europe
U.K.: Avoid these tax mistakes.
For instance, if you live in the United
Kingdom and own U.S. shares in your
own name, they may be subject to U.S.
estate tax. To simplify matters, transfer
your holdings into one or more offshore
companies. Transfer the company’s
ownership to an offshore trust of which
you are a beneficiary. At your death,
probate is a non-issue, since the trust is
an independent legal entity. Source:
Finance Confidential, 12/99. Tel.: +44171-447-4040.
U.K.: Use “roll-up funds” for tax
efficiency. U.K. residents can defer or
eliminate tax by using offshore “roll-up”
funds. These funds reinvest income and
capital gains and thereby can accumulate tax-free until the shares are cashed
in—perhaps when your tax rate falls or
you are non-resident. Source: Tax
Beater Report. Tel.: +44-171-447-4040.
Action to take: Three fund managers
that offer roll-up funds are Rothschild,
tel.: +44-1481-719700; Guinness, tel.:
+44-1481-712176; and Lloyd’s, +441481-704900.
Germany’s war against private
wealth. Police patrols, helicopters and
roadblocks have been introduced to stop
German citizens from trying to get cash
into neighboring Luxembourg and away
from Germany’s crippling taxes.
Intercepted cash is instantly confiscated
and the owner must go to court to
answer charges of tax evasion. Source:
Daily Mail, 9/12/99. Fax: +44-171-9374463.
Pressure is mounting on
Austria to abolish its anonymous
Sparbuch, or passbook savings
account. The Financial Action Task
Force (http://www.oecd.org/fatf) has
notified Austria that the Sparbuch
is a violation of the Task Force’s
“40 Recommendations” to combat
money laundering. The European
Commission is suing Austria in the
European Court of Justice over the
Sparbuch, claiming that its existence
violates the Council of Europe Money
Laundering Directive.23 Austria has
announced it will abide by the decision
of the ECJ. Source: International
Enforcement Law Reporter 9/99.
http://www.ielr.com. Comment: Several
sources continue to sell Sparbuchs, but it
seems clear that they will be abolished—
and we thus do not recommend them.
France: haven from forfeiture.
Despite its many shortcomings as a
haven for wealth (stifling taxes, burdensome regulation, haughty bureaucrats,
etc.), the French courts will not honor
any civil forfeiture order obtained in the
absence of a human defendant. (Most
civil forfeiture orders are against property, not persons.) Even a forfeiture order
accompanying a criminal conviction will
not be enforced unless such enforcement
is authorized through a specific treaty
ratified by France, such as the 1988
United Nations anti-drug convention.
Source: International Enforcement Law
Reporter, 10/99. http://www.ielr.com.
North America
U.S. declares war on foreign
investors. On Dec. 3, 1999, President
Clinton signed legislation that will allow
the President to issue executive orders
declaring foreign individuals “foreign
narcotics kingpins” and have their U.S.
assets instantly frozen.24 The act also
applies to U.S. or foreign persons who
merely provide “goods or services” to
narcotics kingpins. Source: International
Enforcement Law Reporter, 1/00.
http://www.ielr.com. Comment:
This new law is the most dangerous
extension yet of the ill-conceived U.S.
“War on Drugs.” You have no right to
contest this designation.
Attacks resume on U.S. expatriates. Proposed legislation would penalize anyone who gives up their U.S. citizenship and obtains significant tax benefits as a result. Future U.S. beneficiaries
of “tax renouncers” would be subject to
a 55% inheritance tax. Further, the government would have a much stronger
hand in preventing tax renouncers from
returning to the United States.25 Source:
Marshall Langer. Fax: +44-20-74934299. Comment: Our Capitol Hill
contacts say there is little chance for
action on this proposal for now.
U.S.: Privacy in the workplace.
Employers can monitor employees’ email, Internet use and telephone conversations and conduct physical searches of
desks and file cabinets (even if locked).
Employees must be given notice of these
policies. But employers may not rummage in an employee’s purse or briefcase.26 Source: New York Times,
12/16/99. http://www.nyt.com.
You can hold foreign currencies
and offshore investments in an
Individual Retirement Account. While
taking your IRA offshore doesn’t necessarily provide asset protection, there are
major privacy and investment diversification advantages. Source: Information
Line, 11/99. Contact: Asset Strategies
International at 1-800-831-0007 for a
free self-directed global retirement kit.
The “fiscal offense” exception
from extradition is narrower than commonly believed. There are 173 countries that will not honor a formal extradition request from the United States for
“fiscal offenses,” which include tax evasion. But 121 of them will extradite tax
exiles for other crimes, such as fraud.
Filing an income tax return containing
material misrepresentations can be construed as fraud and could thus serve as
the legal basis for extradition. Source:
Offshore Investment, 9/99 (last of a threepart series). http://www.offshoreinvestment.com.
U.S.—no privilege. Attorneyclient privilege does not extend to tax
returns prepared by lawyers, says a fed-
page 14
SOVEREIGN SNAPSHOTS
eral appeals court.27 Source
Lawyers Weekly, USA, 12/27/99.
http://www.lweekly.com.
U.S.—huge jump in biggest jury
verdicts. The ten biggest jury awards
to individual plaintiffs approached an
aggregate US$9 billion in 1999, nearly
tripling from 1998. Source:
http://www.overlawyered.com.
Canada rejects national ID card.
The proposed card raised serious
privacy concerns, would cost up to
C$3.6-billion and came with no
guarantee of savings from reduced
fraud. Source: National Post, 1/5/00.
http://www.nationalpost.com
Planning for the Canadian
departure tax. Expatriating Canadian
residents are deemed to have disposed
of their assets at fair market value when
they depart and to have reacquired
those assets for the same amount after
leaving. This “deemed disposition”
results in a tax obligation. By using
a Canadian resident trust to freeze
assets, the departure tax is not triggered
when a trust beneficiary leaves Canada.
More aggressive strategies are appropriate when minor children are beneficiaries. Planning is also necessary to pay
the security the law requires to guarantee payment of the tax. Source:
Offshore Finance Canada 11-12/99.
http://www.offshorefinancecanada.com.
World
Survey: China most corrupt country, Sweden the least. Transparency
International’s annual survey ranks the
world’s most corrupt countries as China,
South Korea, Taiwan, Italy, Malaysia and
Japan. The least corrupt: Sweden,
Australia, Canada, Austria and
Switzerland. Source: http://www.transparency.de.
Idiot sightings. At the airport
check-in, the ticket agent asked “Has
anyone put anything in your baggage
without your knowledge?” I said, “If it
was without my knowledge, how would
I know?” He smiled and replied, “That’s
why we ask.”
Check Out
Offshore due diligence directory
posted. While warning notices are pub-
lished regularly warning consumers of
various offshore frauds and suspect
companies, there is no centralized database that compiles them. Offshore
Finance Canada has now compiled a list
of these notices and published them at
http://www.offshorefinancecanada.com/d
uediligence.html. Caveat emptor.
A network of live-aboard sailors.
The Seven Seas Cruising Association is
an information source for persons who
want to “disconnect” from their home
country and sail the world. Contact:
Tel.: +1-954-463-2431. Fax: +1-954463-7183.
If you truly need to disappear…
check out http://www.bikershome.com/
~nix/spycounterspy/home.html. One
of the most complete web sites we’ve
seen covering “on the edge”—if sometimes extreme—counter-surveillance
techniques.
Looking for a comprehensive
source for economic statistics? Check
out http://www.dismalscience.com.rtf.
Cyberspace
Company offering “digital gold”
seeks investors. Start-up DigitalGold,
Inc. is seeking US$11 million in venture
capital to develop a 100%-gold-backed
electronic currency with several
improvements over e-gold
(http://www.e-gold.com).28 E-gold is
flawed because it is U.S.-based and the
gold is kept in U.S. bank safety deposit
boxes. And e-gold is not compatible
with Visa and MasterCard. DigitalGold
plans to incorporate in an offshore center and its gold will be maintained in
secure non-U.S. depositories. It also
plans to offer account-holders a VISA
debit card. Contact: Digital Gold, Inc.
Tel.: +1-540-789-7411. Fax: +1-540743-4439. E-mail: [email protected]
Note: This information is not intended
as a securities offering.
Internet Service Providers not
responsible for posting of libelous content or porn. The influential New York
Court of Appeals has ruled that an ISP
is merely a conduit for information
and thus is no more responsible than
a telephone company for defamatory
statements made through it. And in
Germany, a state court has overturned
the 1998 conviction of the former head
of CompuServe (Germany) for failing to
block access to child pornography sites
on the Internet. Sources: New York Law
Journal, 12/3/99. http://www.nylj.com.
National Law Journal, 11/29/99.
http://www.nlj.com.
Cable modems are a hacker’s best
friend—protect yourself. With a cable
modem, your computer is permanently
connected to the Internet. Good news
for hackers, but not for security. To
protect yourself: 1) always enable
passwords; 2) turn off “sharing” for
your files and hard drives; 3) and follow
the suggestions in Practical Privacy
Strategies for Windows 95/98, available
for free downloading in the members
only section of http://www.sovereignsociety.com. A printed version is sold at
http://www.sovereignsociety.com/bookstore.cfm.
Offshore company online supermarket. Buy a previously formed (shelf)
company from the Bahamas, British
Virgin Islands, Delaware (U.S.A.), Belize,
Gibraltar, Mauritius, Nevis or the United
Kingdom. Average cost: US$500.
http://www.getco-offshore.com.
Privacy
Mobile phone encryption cracked
by scientists. Two Israeli scientists say
they have broken the encryption that
protects 230 million GSM phones worldwide. They say they can break the code
in less than a second. Source: Daily
Telegraph 9/12/99. http:://www.dailytelegraph.co.uk
What in the world is “REMOBS?”
It stands for “remote observation” is
used to monitor telephone connection
quality. The equipment is supposed to
switch over to the next conversation
every minute or so…but the switching
circuit can be disabled, resulting in a
telephone tap. This is perfectly legal in
most countries—although in some, a
warrant may be required—and impossible to detect remotely. Source: Privacy
& Security 2001, 9/99.
http://rosseng.com. Comment: Don’t say
anything on the telephone you don’t
want your spouse, your worst enemy—
or the taxman—to overhear. To make
private telephone calls, use pay phones
and follow the strategies discussed in
TSI 3/99 and 9/99.
page 15
Society to Begin
Chapter Meetings
The Sovereign Society will begin
a series of chapter meetings in April.
You’ll hear from Peter Zipper, Senior
Vice President of Anglo-Irish Bank,
and Bradley Barros, President of
Global Financial Advisors Network,
as well as Mark Nestmann, editor
of TSI; and Erika Nolan, the Executive
Director of the Society. These
meetings will be held:
• April 18, 2000—in Chicago at
the Metropolitan Club in
the Sears Tower
• May 3, 2000—Los Angeles at
the City Club at Bunker Hill
• May 10, 2000—Ft. Lauderdale
at the Tower Club
A nominal fee will be charged.
Please look for a detailed brochure in
your mail in the next few weeks. To
reserve your space today or for more
information, contact—Steve Piffath,
Member Services, at 1-888-358-8135
or via e-mail at [email protected]
Don’t Forget Your Free
Member Networking
Announcement
An important benefit in The
Sovereign Society is one free “Member
Networking Announcement” for each
year of your membership. Use your
free announcement to advertise whatever product or service you can provide
to fellow members…or seek out members with similar interests. And if
you’d like to have your announcement
Lifetime Membership Offer
run more than once, you can do so for
Extended
a nominal fee. For details, contact our
The response to the lifetime memMembership Office in Ireland via e-mail
bership offer we announced in January
at [email protected]
has been overwhelming…and by popuor at +353-51-844-068.
lar demand we’ve extended it until
Sovereign Society Moves to March 30, 2000.
Larger Quarters
Rapid growth at The Sovereign
Society has led to a need for more
office space. We have therefore moved
down the street a few buildings to
larger quarters in Waterford. Our new
address is 5 Catherine Street,
Waterford, Ireland. The fax and phone
are the same. Tel.: +353-51-844-068.
Fax: +353-51-304-561.
New Contact Number for
Second Passport Program
Marshall Langer, one of the
Society’s recommended advisors for our
“Residency, Citizenship & Passport
Program, has a new fax number for
passport inquiries. You may contact
him c/o Fiona Cloke, fax: +44-20-74934299.
For more information on this
program, please see the brochure in the
members only section of The Sovereign
Society web site.
Don’t miss the latest offshore
alerts or the current Society news.
Please send your email address to us at
[email protected] and we’ll
be sure to email you with the latest member
updates between TSI issues.
Become a lifetime member of
The Sovereign Society by this date
and you’ll receive expedited delivery
of all of our publications sent for life
…discounts to all of our conferences…
and a free copy of our latest research
report, The Cybercash Report—all for
only US$795. This price increases
after March 30, 2000.
To take advantage of this offer,
contact our Customer Service Office
at +353-51-844-068; fax: +353-51-304561. In the United States, contact our
representative office at 1-888-325-8125.
Or send your check or money order to
The Sovereign Society, 5 Catherine
Street, Waterford Ireland.
New From The Sovereign
Society Bookstore
The Cybercash Report, edited by
Mark Nestmann. (Jan. 2000, 36 pgs.
US$49).
The Offshore Money Manual 2000,
by Robert Bauman and David Melnik.
(1999, 360 pp., US$99).
You can purchase these titles at
The Sovereign Society bookstore at
http://www.sovereignsociety.com/bookstore.cfm.
Member Networking Announcements
If you’d like to introduce fellow members to a product or service that
you offer or personally recommend, The Sovereign Society invites you
to publish them in our “Member Networking Announcements” department. Your first listing is free. Send in yours today!
The Society reserves the right to disqualify any listings it deems
unsuitable and does not endorse any person or organization listed or
their respective products, services or programs. In addition, the Society
shall not be liable for any and all liability, including negligence, that
may arise from a member’s use of the following advertisements.
M C R MANAGEMENT CONSULTING DR. ROTTMANN
Venture Capital Investments-Equity Financing-Mergers & Acquisitions
Munich-Zurich-Paris-London-New York-Miami-Los Angeles-Hong Kong
Member of International Society of Financiers
D-80997 Munich, Germany, Tel.+49.89.8115600,Fax +49.89.8115648
[email protected], www.cybermall2000.com/stores/management
FREE INTERNATIONAL ASSET PROTECTION/PRIVACY CATALOG.
From Mark Nestmann, editor, TSI, author, Privacy 2000 and Asset
Protection 2000. USA/Canada: (800) 345-6665. Fax: + 1 (603)-357-2073.
E-mail: [email protected] Internet: www.nestmann.com.
FACTORING SERVICE. Services include collection of monthly payments
and late fees, accounting, issuance of periodic account statements,
payment forwarding, all contact with payers, including delinquency notices
and direct calls for payment if needed. Fully insured to protect your
security. Your debtors send contracted periodic payments to us; we post
to individual accounts maintained in our system and make deposits to our
trust account. Our fees range from 1% to 2% of unpaid principal contract
balance per year, payable monthly or $25.00 US monthly, whichever is
greater. We send our check to your designated payee with proceeds as
soon as payer’s payment clears our bank. You receive a full statement of
account activity monthly, annually, or at whatever frequency you require.
Your privacy is assured. All inquiries answered promptly. Since 1990.
Reply to: [email protected]
page 16
CONFERENCE CALENDAR
Discover the Secrets of
Offshore Wealth Building
and Asset Protection
Imagine that you could bring more
than two dozen of the world’s leading
authorities on offshore wealth building and
asset protection into your home for four
days of intensive briefings. Each could
answer any question you might have in
their own field of expertise—tax-advantaged
offshore insurance products, offshore private banking, asset protection trusts—in reference to your individual situation.
You might think that this level of
investment counseling is only available to
multi-millionaires. But it’s not. When you
join us May 17-21 at The Sovereign Society’s
Premier Offshore Advantage Seminar for
four sun-drenched, tax-deductible days on
Paradise Island, the Bahamas, not only will
you hear from these experts, you’ll have the
opportunity to meet with them privately to
review your own personal offshore strategy.
You’ll hear from attorneys Marshall
Langer on second passports…Michael
Checkan on moving assets in retirement
plans offshore…Hywel Jones and Colin
Bowen on tax-deferred offshore insurance
policies…Michael Chatzky on offshore
trusts…Eric Roseman on offshore mutual
fund investing…and nearly two dozen other
experts on privacy, offshore investing and
offshore banking.
You’ll also meet TSI editor Mark
Nestmann and other members of The
Sovereign Society staff and have the
opportunity network with fellow attendees
at our complimentary cocktail reception.
But please understand, this seminar
is not a convention or a mass meeting.
Only by strictly limiting attendance can
we insure that you’ll have the opportunity
to fire questions at the speakers, socialize
with them over cocktails or meet with
them privately.
Registration for this important event
is only $US995. All events will be at the
newly renovated Sheraton Grand Hotel.
For more information or to register, please
see the enclosed brochure, or contact:
Michael Whetstine, World Financial
Seminars, 105 W. Monument St.,
Baltimore, Md. 21201 U.S.A., Tel.: +1-410223-2645, Fax: +1-410-223-2650,
E-mail: [email protected]
NOTES
Each issue of The Sovereign Individual contains dozens of references for your
further reading or investigation. You don’t need to read the notes to benefit from TSI,
but we believe you’ll find them a valuable research tool. To learn more about the legal
references and hyperlinks in the notes, please consult your welcome package.
1
2
See FEAR List, 4/8/99. http://www.fear.org.
See http://www.inc.com/incmagazine/archives/02980561.html for a number of IPO horror
stories. Well worth the read.
3 See TSI 2/00 for a comprehensive discussion of IBCs.
4 Mark Nestmann, Asset Protection 2000 (2d Ed.) discusses Liechtenstein as a financial
haven in much greater detail. It also contains a list of Liechtenstein banks and attorneys.
You can order it from The Sovereign Society bookstore. The table of contents and
excerpts are posted at http://www.nestmann.com.
5 Liechtenstein Company Law (Liechtenstein Verlag), translated by Bryan Jeeves, is an
English translation of selected portions of Liechtenstein company law, including the law
relating to Establishments and Foundations.
6 “Civil law” refers to a legal tradition based on Roman Law and influenced by the rationalist school of philosophy. Each civil law jurisdiction stands on its own. There is no “common law” exported to other legal systems as in English Common Law. See Mark
Nestmann, Asset Protection 2000, available from The Sovereign Society bookstore.
7 Andreas Batliner, “Liechtenstein Law on Contestation.” Memo to Clients, 10/95.
8 “The Principality of Liechtenstein in the European Economic Area (EEA)—Taking Stock
and Looking Forward.” PA News, 11/99.
9 For background, see Gee and Andrews, Mareva Injunctions: Law and Practice (Longman
Group U.K., 1987)
10 The European Convention on Mutual Assistance in Criminal Matters is the main international instrument in Western Europe for gathering evidence abroad. Cooperation is limited to judicial authorities and does not extend to police or other government officials. See
Paul Gully-Hart, “Obtaining Evidence in the Civil Law System.” Published in Richard D.
Atkins, Ed., The Alleged Transnational Criminal (International Bar Association, 1995)
11 Andreas Batliner, “Mutual Assistance by Liechtenstein in Criminal Matters.” Memo to
Clients, Oct. 1997.
12 Andreas Batliner, “Professional Secrecy of Lawyers and Trustees, the Right to Refuse to
Testify.” Trusts & Trustees. http://www.trusts-and-trustees.com/library/batliner-06-961.htm
13 For details, see Brian Jeeves, “Judicial Recognition of the Liechtenstein Anstalt and
Stiftung in the Common Law World.” Offshore Investment, July-August 1998.
14 Speech of Andreas Limburg, Offshore Investment Second West Coast Convention, Oct. 29,
1998.
15 Jeeves, Offshore Investment.
16 The Internal Revenue Service recently released Private Letter Ruling 199935051 in which
it treated a Stiftung as a corporation, not a trust. See Thomas Azzara, “Liechtenstein
Foundations Attacked by IRS.” Tax Haven Reporter, 12/99. Tel.: +1-242-327-7359). This
consequence, which led to a significantly higher tax liability, was most likely due to poor
drafting of the Stiftung. If the Stiftung is designed to be taxed as a trust, the IRS will generally respect that designation.
17 David G. Forbes-Jaeger and Martin Gstoehl, “Liechtenstein Foundation and Anglo-Saxon
Trust Compared.” Memo to Clients, 7/99.
18 http://travel.state.gov/travel_warnings.html.
19 For information on the role of the protector and other participants in an offshore trust, see
Offshore Trusts: Your Key to Flexible Asset Protection, in the members only section of
http://www.sovereignsociety.com.
20 For more information on these projects, see
ftp://ftp.ox.ac.uk/pub/math/rsa129/rsa129.ps.gz and “E-Commerce Encryption Now
Vulnerable?” CNN Interactive, 8/30/99. http://cnn.com.
21 For more information on the effort required to break encryption keys of various lengths,
see http://axion.physics.ubc.ca/pgp-attack.html.
22 http://www.pgp.com/phil
23 Council Directive of 10 June 1991 on Prevention of the Use of the Financial System for
the Purpose of Money Laundering (91/308/EEC).
http://freespace.virgin.net/old.whig/mondir.htm.
24 The Foreign Narcotics Kingpin Designation Act (1999). H.R. 1555. Public Law No: 106120. Text at http://thomas.loc.gov.
25 H.R. 3099. http://thomas.loc.gov.
26 O’Connor vs. Ortega, 480 U.S. 709 (1987). http://www.findlaw.com.
27 United States vs. Frederick (#982644A, 7th. Cir., 1999).
http://laws.findlaw.com/7th/982644A.html.
28 For background, see “Sovereign Society Now Transacts Business in E-Gold!” TSI 10/99.
New Website Password
The password for the members-only
section of The Sovereign Society’s
website at www.sovereignsociety.com is: