OffshoreNet

While all the hype about pending US regulation and acceptance of online poker has the industry excited, there is a negative side that nobody is talking about.

At a recent affiliate conference in Amsterdam the talk of pending US regulation was a hot topic of discussion. Every person I talked to was quivering with excitement about how great this was for the industry, and the fantastic opportunities that would arise.

I disagree completely.

The transparent bed-sharing of Harrah's and Party Poker, and the slightly more subtle relationship between MGM Mirage and Full Tilt clearly illustrate that the big boys are making sure that they are ready to not only play in this market, but own it. Add Harrah's disclosure that they have spent over $400,000 in cash during the first quarter of the year as a registered lobbyist to build support for Rep. Barney Frank's "Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2009", and their position is clear.

It is no secret that Harrah's and the others are looking for a way out of their recession woes. Rumors of bankruptcies are rife on the Vegas scene, and the income that would be generated by entering the online poker market would provide much needed cash relief, and do so almost overnight.

But here's the thing; where will that leave everyone else? Do you really think that Harrah's and their brethren are throwing their considerable lobbying efforts behind bills that would legalize online poker out of the goodness of their hearts so that we can all play in their sandbox? Not a chance!

MGM's statement that they support the legalization, regulation and taxation of Internet gambling is very telling, as they are, like Harrah's, already legal, regulated, and taxed. It is a much shorter road to travel for these companies to find a legal status for providing online poker than it will be for a company that is not already holding a US gaming license.

The prevailing opinion is that online poker will become available in the state of California first, as their state legislature has reportedly already reached positive decisions in this regard. If that happens you can bet that Nevada will soon follow, and then New Jersey. Regardless of how they fall, or even if it is a federal legalization, it would make sense that currently licensed operations, (and their bed-fellows), will have the first crack at the market, and it seems equally reasonable to assume that those operations will then take steps to ensure that they have market protection.

Providing online gaming licenses to non-US gaming operators, regardless of their "white label" status in other jurisdictions, is something that could take years to implement, if ever. Even pressure from the generally ignored WTO is unlikely to make a difference. The US made their opinion of the WTO's rulings very clear when they stripped gambling from its WTO obligations several years ago. It is obvious that they are going to conveniently continue to ignore them.

So where will that leave the established, reputable gaming companies that are operating in legal, regulated environs? Without a passport to the US market for sure. And for those that continue to operate in the US without a US license you can be sure that on the bequest of the Harrah's of the world that they will be forced out by whatever means are necessary. The US government will finally be armed with laws to do so.

As for the players themselves, and the large number of prospective players that have not yet played online because of trust issues, it will also be an easier decision for them to play with a brand that they recognize from down the road.

There is still no specific law that prohibits online gambling in the United States, and for those operators that are currently accepting US player action, this is the scenario in which they will remain the most successful. Unfortunately, in my opinion, change is inevitable.

Gian Perroni is the President of CanAffco.com, a Vancouver based marketing and affiliate management group focused on the online gaming sector.

Switzerland beats New York London and Singapore in a new ranking by Scorpio Partnership for the financial center that best caters for the world's rich.

"To the mobile wealthy, Switzerland is very nearly all things to all people," said Scorpio Director Stephen Wall. It "has been and will continue to be the biggest beneficiary of moves away from London."

This despite recent concerns over the state of Swiss offshore banking and bank secrecy.

It is estimated that Swiss banks currently manage 27% of offshore wealth that is privately held. London still remains in a strong position,  but has been damaged by insecurity over proposed changes in government legislation, according to the London-based wealth management adviser

While London retains "an inherently strong position," it ranks second after damage resulting from "recent regulatory and fiscal changes," Scorpio said.

The U.K. government's changes have "engendered a sense of mistrust and uncertainty among the mobile wealthy and their advisers," said Scorpio Managing Partner Sebastian Dovey.

Professionals such as doctors, lawyers and entrepreneurs who make up majority of the world's rich are those defined as the "mobile wealthy" by Scorpio

Here's the ranking of  the world's top "mobile wealthy residency" centers:

1. Switzerland
2. London
3. Singapore
4. New York
5. Hong Kong
6. Jersey
7. Cayman
8. Isle of Man
9. Monaco
10. Dubai
11. Guernsey

Source: Bloomberg

We are by now used to hearing rhetoric about "pledges" to end bank secrecy and an end to tax havens, as if forcing another country to change its legal code were a natural course of action.

But what do the so-called tax havens think about all this? Here's an interesting article from Uruguayan newspaper El Pais (Uruguay was one of the 4 countries originally placed on an OECD "blacklist"). The author, respected Uruguayan economist Ignacio De Posadas, makes the case for Uruguay keeping it's bank secrecy law. Now of course he cannot speak for a country of 3 million people, but its revealing nonetheless to hear their story, not often represented in the Western press. The article is written article in Spanish; here are some of his arguments in translation.

- The issue isn't about when people use bank secrecy to commit serious crimes, nobody disputes that.

- Uruguay doesn't have any obligation to enforce the collection of French or British taxes (nor would those countries give them anything in return).

- What right do "powerful" countries have to pressure smaller countries into changing their internal laws - an action which will benefit the more powerful and result in a loss for the smaller country?

- The OECD text says that tax havens should bring themselves in line with "international standards" for tax-information sharing, as if it were a UN convention or some other multilateral agreement signed by Uruguay, when really it's an OECD convention, of which Uruguay is not a member and has nothing to do with.

- Why are they doing this? Because over several decades OECD countries have been expanding and complicating their systems of taxation - out of all proportion with the return these administrations give to taxpayers. In other words - it's their problem. What does Uruguay have to do with it?

- How does bank secrecy benefit Uruguay? In reality the question isn't being put in the right way. Bank secrecy is consecrated in the constitution. Of course there are limits and norms to bank secrecy, but these aren't pre-requisites. In other words..it doesn't matter if it benefits Uruguay or not, it's a right. Full stop.

The war on tax havens is about strong and powerful countries using force to impose themselves on smaller nation states. There are no guns but the principle is the same.

More on bank secrecy.

The Obama administration is unveiling a new set of measures aimed at ending the use of tax havens and offshore banking centers by US corporations for tax avoidance purposes. It is expected that not only multinationals but also a large number of wealthy families and individuals that use corporate structures will be affected.

The administration is looking to change a tax-saving technique known as "deferral", which allows large multinational corporations to defer paying tax on overseas earnings until the funds are repatriated. The proposed legislation would seek to limit tax deductions that companies could earn from this and is expected to raise $60.1bn over the next 10 years.

In addition they are seeking to overhaul "check-the-box" rules which allow US companies to choose where their subsidiaries are taxed - often low-tax offshore havens with strict bank secrecy that gladly welcome the capital. The administration hopes to raised $86.5bn through this measure.

Personal account holders are also being targeted. New rules would make it harder for Americans to open offshore bank accounts for tax purposes. They would increase reporting requirements and penalties, and make it harder for offshore account holders to win their cases in court. Authorities expect to claw back just $9bn from this measure over the same period.

While many welcome the administration's moves against tax haven use by "big business", especially considering ruthless IRS rhetoric against personal tax avoidance, others are wondering if there will ever be a limit to government tax collection. As "tax haven loopholes" are closed down one by one, individuals and corporations are forced to take part in the economy of the government's choosing. And with the burden of proof shifted away from the accuser to the accused, we may find ourselves once again sliding backwards into a medieval system of taxation.

The Sunday Times published this years list of the 100 wealthiest people working or living in Britain and i-Gaming executives featured heavily in the list with four PartyGaming executives among the top ten richest online business people, including PartyGaming founders Russ De Leon and Ruth Parasol ranked second place on the internet list with £700m. Group operations director Anurag Dikshit and marketing director Vikrant Bhargava were in third and ninth place respectively, with fortunes of £559m and £230m.

Bet365 founders Peter Coates and daughter Denise are sixth on the list, with an estimated £400m each, while online betting exchange Betfair placed three executives in the top 20. Betfair founder Ed Wray is the 11th wealthiest with £190m; Andrew Black is the 12th with £185m; and equity investment manager Richard Koch is the 17th with a company stake worth £129m.

The man at the top of the list however, is Peter Cruddas, founder and owner of internet securities dealer CMC, with a fortune estimated at £1bn. The Sunday Times reported that the Rich List was hit hard by the recession this year. The world economic slowdown wiped £155bn from last year's list, the biggest fall since the group was first compiled 21 years ago.

Steel tycoon Lakshmi Mittal has seen £16.9bn evaporate from his fortune due to the collapse of the world steel market this year, but remains the richest person in Britain with a fortune of £10.8bn. The Duke of Westminster is the richest Briton, and continues to occupy third position overall due to his real estate fortune of £6.5bn.

Allen Stanford stands accused of running an $8bn ponzi scheme involving fraudulent certificates of deposit, but the financier came out with all guns blazing in a recent interview at the office of his criminal defense lawyer.

Although the SEC has described his operation as a "massive, ongoing fraud" Stanford feels fundamentally misunderstood.

"The SEC far overreached and basically ruined a multibillion-dollar company..Everybody got paid and everybody got made whole until the SEC came in and shut everything down," he said in the interview.

"The SEC came in and gestapo-ed my business, and I watched $5 billion of my net worth disappear.''

"If the SEC had not come in and taken the actions they did, and had the ripple effect they did around the world, unequivocally yes, we would've survived,'' Stanford said. "Now, I don't know. I don't know where the business stands because I've been locked out of my businesses, too.''

Stanford claims that his bank had liquidity problems like other financial institutions during the crisis..

"But Stanford International Bank didn't have a fed-funds window to go to for a bailout,'' he said. "We were extra liquid, with more than $2 billion on hand, but it turned out not to be enough.''

Stanford has not been charged with criminal wrongdoing, however Stanford's Antiguan receiver Nigel Hamilton-Smith expressed "little doubt" that the Antiguan branch was run as a ponzi scheme.

"I used to be one of the richest men in the world, who has done nothing but work his butt off, and I've been turned into a pariah,'' Stanford said. "But I don't feel sorry for myself. I'm angry.''

How offshore "tax havens" don't include US tax dependencies like the US Virgin Islands. The past few months have seen attacks against "offshore tax havens" which undermine collection of US taxes and other efforts from other high-tax countries. The OECD, a European think-tank which pays no tax, has come up with a list of countries which don't subscribe to their plan to regulate world finances. But while the US is happy to use the OECD as its highly paid tax-free international lobbyist, it is secretly promoting tax havens in its own back yard, actively soliciting the very same opaque "offshore funds" and money groups which started the crisis.

Some of the tax benefits for offshore funds looking to start up in the US Virgin Islands include: - 90% exemption on US income tax (results in a top federal tax rate of 3.5%!)

•           100% exemption on 4% gross receipts tax

•           100% exemption on 0.75% real property tax

•           100% exemption on 4.2% excise tax

•           100% exemption on 7% US Customs import duty

•           1% VI Customs Duties instead of 6%

The craziest thing about this whole set up is that, apparently..the US Virgin Islands is not considered a "tax haven" BECAUSE it is a US territory under US flag and protection..what does that mean? High-tax countries don't care about "international financial transparency" or any of that poppycock, they don't care about being fair, and the OECD is certainly not about "tax justice", it's about "tax piracy" and each man getting what he can.

 

Credit Suisse is taking further measures to protect itself, by ordering thousands of its American offshore banking clients to leave or face declaring their account details to the IRS.

The Swiss newspaper Sonntadszeitung has reported that US customers have the option to move their funds to a Credit Suisse subsidiary, CS Private Advisers, which would reveal their accounts to US authorities, or receive a cheque for the balance of their funds.

UBS, Credit Suisse's larger rival, paid US authorities $780m to settle a case brought against it by the US justice Department, in which it was accused of helping wealthy US clients evade taxes. UBS also agreed to name 250 of its clients. Credit Suisse may be offering this choice to its US customers to avoid a high-profile UBS-type investigation. Credit Suisse has between 2,500 and 5,000 US clients with 3bn Swiss Francs in undeclared funds, according to Swiss media sources. 

In a statement, Credit Suisse downplayed any notion of a legal crisis: "Credit Suisse adheres to the highest compliance standards, applicable laws, regulations, and policies..We offer both domestic and international wealth management services to US clients in compliance with all applicable laws, regulations, and policies."

, Jason Sharman, armed with little more than google and a $10,000 dollar budget, set out to form anonymous companies and offshore bank accounts worldwide - with interesting results (see economist article). Where were the places with the most lenient due diligence requirements?

In his 45 attempts to open anonymous shell companies and secret bank accounts Jason was successful in 17 cases, of which 13 were OECD countries. Britain earned top honours. In 45 minutes Jason was able to form an anonymous bearer -share company without identification, complete with nominee directors and a secretary for just  £515.95 ($753).

But when he tried to open accounts in Switzerland and Bermuda, he was asked for documents like a notarized copy of his birth certificate!!

It just goes to show that high-tax governments aren't interested in where the money's coming from - as long as they get a slice of the pie..

Lets see what theatrics tomorrow brings.

UBS have forced out a top executive who formerly handled secret offshore bank accounts for wealthy Americans. The news comes as US authorities and the Swiss bank continue to lock horns in a tax fraud investigation centering on rich US citizens with undeclared offshore bank accounts.

The man in question, Martin Liechti, was put on paid leave according to a UBS spokesman. It is understood that the two parties are negotiating an exit agreement that might be acceptable to both.

Its not the first time Liechti has been in the news. In May of last year he was taken in for questioning by US authorities as part of their investigation into alledged tax evasion by UBS's US clients.The banker was detained for several months before being released and returning to his native Switzerland, a move which shocked many in the world of swiss offshore banking and beyond. Some Swiss private banks are now barring foreign travel for their top executives fearing similar arrests.

His removal will invite speculation as to how much information he gave the US authorities during his detention, and how much UBS are willing to give, as US pressure to break the legal stalement increases.

Liechti is not the only member of UBS top brass to leave the bank recently. The CEO,  chairman and several private bankers have all resigned or been forced out in the past few months.

With a Stanfordian echo, news has arrived of yet another scandal involving falsified certificates of deposit. US regulators have put a halt to a suspected $68 million Ponzi scheme at Millenium Bank, based in St Vincent and the Grenadines.

There have been rumours for some time that Millenium bank was offering CD's at implausibly high rates, but this is the first time the alledged scam has been made public.

Millenium bank has apparently been marketing its financial products to wealthy US citizens since 2004, and described itself as subsidiary of a Swiss bank, United Trust of Switzerland SA. The investors, lured by the prospect of high investment returns offered by banking offshore, happily snapped them up.

"The defendants disguised their Ponzi scheme as a legitimate offshore investment and made promises about exuberant returns that were just too good to be true," said the director of SEC's texas office Rose Romero.

"Investors need to be especially cautious when placing money with entities that may be outside the reach of U.S. regulators," Romero added.

"None of the investor funds were used for any investment purpose," the SEC said in a court hearing. Instead the fraudsters made off with the vast majority of the funds, keeping only a small amount to pay off existing investors.

Clients were asked to send checks to the Caribbean, where they were forwarded to California, the SEC said, The money was then deposited in a Las Vegas bank account opened by some of the conspirators.

Only $3million of the collected funds was returned to investors, according to the SEC.

Promised changes in Swiss bank secrecy will still not allow the US access to the information that want, according to tax haven expert Raymond Baker of Global Financial Integrity, a Washington-based think tank.

In an interview with swiss media agency swissinfo he maintains that recent decision to adopt OECD standards will not do enough to catch tax evaders.

 ''This announcement is not a significant step because it does not change Swiss laws on banking secrecy. In fact, what the Swiss government said in essence is that if a foreign government knows what it is looking for, the Swiss authorities will cooperate. But the government has given itself lots of leeway for denying requests for information.''

The Swiss for example have only agreed to hand over information in response to requests with specific evidence on a case by case basis. However Baker would rather they also gave in to so called 'fishing expeditions' even if evidence of illegality is unclear. He proposes that the OECD standards should be amended to allow for this:

''It is important that these standards are expanded, in particular to allow governments to request information from Switzerland and other tax havens, even if foreign governments only have reason to believe that funds are deposited there illegally.''

If the OECD model is changed as Baker suggests, the ramifications could be huge, with people worldwide losing the privilege of bank secrecy at the whim of another country or just because they have an offshore account. Baker also called for Switzerland to change its legal code to allow foreign governments easier access to personal data:

''I want Switzerland to end the distinction between tax fraud and tax evasion. This baffling distinction is becoming increasingly untenable. It is obvious that most of the funds deposited in tax havens violate the law. I would like Switzerland to take the lead.''

It's irresponsible and plain wrong to suggest that most funds in tax havens violate the law. Much may depend on whether citizens and governments worldwide are duped into giving up their rights by this type of rhetoric.

Swiss Offshore Banking is still in a strong position according to the chairman of Swiss Bank Julius Baer, Raymond Baer. His statement comes as international investors fear for the privacy of their Swiss bank accounts following Switzerland's decision to adopt OECD regulations regarding information exchange.

"International clients will continue to appreciate the financial privacy traditionally anchored in Switzerland," he said, indicating that Switzerland's reputation may keep it afloat.

"Decisive is that the core of banking secrecy, the protection of privacy, is kept and that it doesn't come to an automatic exchange of information," he added.

These comments are likely to unnerve global leaders and charities looking for blanket adoption of the OECD rules by tax havens like Switzerland. Without automatic exchange of information it could take years for 'stolen' money from tax evasion cases to be repatriated.

Switzerland, Austria and Luxembourg said today that they would abide by OECD rules and cooperate on sharing information about customers with other countries on a case-by-case basis, but not automatically, as many countries want.

"The decision will permit the exchange of information with other countries in individual cases where a specific and justified request has been made," the Swiss government said.

Switzerland will now cooperate in cases of suspected tax evasion, at least once double taxation agreements are renegotiated with other countries, which could take time. It also said it could seek an amnesty for existing clients.

Andorra and Liechtenstein on Thursday and now the big three in Europe, all were on a list presented to the G20 this week by the Organization for Economic Cooperation and Development (OECD) of financial centers where it deems bank secrecy rules to be too favorable for tax evasion.