News from Anguilla
30 January 2000. Issue 4

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Latest News from Anguilla....

It has been announced that The Queen’s second son, Prince Andrew, will be visiting the Overseas Territories (including Anguilla) in March. Details of the itinerary have not yet been released.

It is fair to say that the Royal visit will entail many things, not least of which would be the cancellation of police leave in order that there is adequate security and coverage. Policing resources would also be similarly stretched on election day (officers have to be on duty at the various voting venues). For these reasons, as well as a desire not to have the Royal visit take place during, or too soon after, the General Election, the Governor exercised his Constitutional prerogative and brought forward the election date by a week, to 3 March. Not everyone appreciated this and some of the incumbents in Government declared that it did not give the electorate enough time; however, the general consensus seems to be that anything which speeds the present impasse to a resolution is a good thing. Should the present Government be effectively returned to power, it will be interesting to witness the verbal exchange and observations which may be made by the Chief Minister who, in a recent radio broadcast, reverted to the criticism often heard at street level in the U.K., that Royalty tend to favour Official Visits overseas in the wintry months in the U.K.!

As mentioned in the previous issue, Governor Robert Harris has reached an age where he is able to retire from the diplomatic service, and so he and his wife, Mary, flew out from Anguilla, his last posting, on Thursday. Until the arrival of his replacement, Deputy Governor Roger Cousins will be Acting Governor.

The new Governor is H.E. Peter Johnstone. He is scheduled to arrive on 3 February. The following day, after inspecting a Guard of Honour, he will be sworn in as Governor at the House of Assembly. Welcoming speeches are traditionally given by the Chief Minister and Leader of the Opposition: bearing in mind the fractious relationship between our Chief Minister and Whitehall, it will be inappropriate to assume that the former’s will be all honey and roses.

As can be seen from all of this, the incoming Governor will have his hands full for the first few weeks.

On the political side, the various parties, including the emergence of several alternatives to the traditional groups, are starting to get their messages across at island-wide meetings. (One, The Movement for Grass Roots Democracy, took out 3 pages of adverts in this week’s local print media, including a diagram of how they see democracy working: a commendable initiative although some readers felt the same bewilderment on seeing it that a stranger feels when confronted with the route-map of a city tube/metro). The tempo of the rhetoric will increase a great deal between Nomination Day (18 February) and the election. In the meantime, the Deputy/Acting Governor has ordered Radio Anguilla to immediately suspend (until after the election) two of its call-in programmes as well as (its participation in) the weekly (live) press conferences by the Chief Minister and the Opposition. In their place, each of the main political groupings are allocated 15 minutes per week of broadcast time, to get their messages across, and each candidate, regardless of his political affiliation, will be allowed a ten minute slot on the radio, during the run-up to the election. All broadcasts are to be pre-recorded and vetted to ensure that they do not contravene the libel law.

In a sad note, two young men (aged 19 and 17) were killed in a horrific car crash on Sunday, which stunned the community. Anguilla feels hard done by if it suffers one road fatality in a year. To lose two, so soon into the year, is a shocking start.

A happier development was an important step in the alleviation of suffering caused by Hurricane Lenny, by the presentation of a cheque of EC$100,000 from Scotiabank to the local Rotary Club. The Club will attempt to double the benefit of this by applying to Rotary International for "matching funds". The cheque has been turned over to the Chairman of the Hurricane Relief Assessment Committee which has already disbursed over EC$500,000 to the needy.

The initiatives of the supra-nationals

Not all recipients will be aware of several initiatives of bodies such as the United Nations, OECD, European Union, APCO and G-7. All of these initiatives have an effect on the operations, or even existence, of a nation’s International Financial Services. Some are specific to certain territories, while giving others a relative advantage. Their existence, the reasons for them being proposed and their implications are essential reading for anyone with, or contemplating, any relationship with any of the "offshore jurisdictions" as they illuminate the environment in which we are, or may be, expected to operate.

We will be looking at each these initiatives over the next few issues, and then we will look at a more global context as well as what is being done about them. We will start with ….

This well-crafted document is very comprehensive (with 107 footnotes and 5 figures/appendices), and full of examples of how the Financial Havens, by means of their enabling machinery have allowed people and companies to hide assets. It is almost a manual on how to defraud and launder money – and likely get away with it. It concludes: "What started as a business to service the needs of the privileged few has become an enormous hole in the international legal and fiscal system. It is estimated that there are now more than a million anonymous corporations. Consultants for the offshore banking centres say that they are home to more than US$5,000 billion in assets – US$1,000 billion in bank deposits and US$4,000 billion in the form of stock, bonds, real estate and commodities. Governments around the world, from India to the United States, from Argentina to Russia, are finding that they are losing much of the tax revenue .. because of the calculated use of foreign secrecy. The Government of Venezuela is actively trying to recover money stolen from its banking system – an amount so large that it has ruined the economy and caused hardship for the majority of its citizens. The situation is so bad that the opportunity to commit the crime of tax evasion is advertised openly on the Internet by hundreds of firms. If the international community is to develop a rule of law to match the globalisation of trade and the global movement of people, the issues raised by this hole in the system will have to be addressed. The approach will have to be systemic rather than by individual cases, and it will have to face the issues of the use of sovereignty by some countries to give the citizens of other countries a way around the laws of their own society".

Earlier, in its comments on IBCs, after acknowledging and illustrating legitimate uses for these vehicles, it headlines them as being "at the heart of the money-laundering problem" as "virtually all … schemes use these entities … to hide the ownership of assets". After outlining the rationale for the emergence in the nineteenth century of (conventional) corporations, and contrasting them with the reporting provisions of their IBC counterparts, it suggests that "One approach … would be an international agreement not to recognise corporate entities that do not have full authority to do business in their home jurisdiction … would bar IBCs from opening bank accounts and engaging in securities …. commodities trading … owning property outside the country of incorporation and .. deny them the right to do business". And that is the less drastic of its proposals.

Of course, no company manager worth his salt would be seen as being soft on the war against corruption or theft, or the fight against drugs. It would be tantamount to proposing the abolition of Mothers Day. Nor can it be denied that the Offshore Financial Centres are the only places which are worthy of attention in this regard. Noted financial writer Jeffrey Robinson, commenting in the (UK) Observer on the investigation into the activities of the Bank of New York and its links with Semion Mogilevich (allegedly "the most dangerous mobster in the world"), wrote: "The City [of London] is an absolute cesspool and it will remain a cesspool because the people in charge don’t care … London is the best place to launder money in the world. Since the money-laundering regulations were introduced in this country four years ago, there have been thousands of reports but only one successful prosecution. [Men like Mogilevich] take full advantage of globalisation, ill-equipped law enforcement and lax money-laundering laws – especially in Britain – using the City as their onshore gateway to the offshore world".

For the reasons given above, it may be that the writing is on the wall relative to the use of IBCs world-wide in their present form.

This issue's "how to avoid being the victim of a scam" article: Scams and how to spot them.

P.T.Barnum is alleged to have observed that "there’s a sucker born every minute". He did, of course, speak prior to the age of mass communication in the shape of the Internet; therefore his estimate is nowadays woefully inadequate.

Since man’s earliest days, there has been a prolific industry devoted to parting the gullible from their wealth. "Caveat Emptor - let the buyer beware", has been a popular legal axiom for many generations; it is possible that even during the Roman Empire, its populace were, even then, suckers for a good innovative scam.

The Internet, with its powers of anonymity and the offshore industry, with its in-built provision of secrecy have proved a godsend to the less than desirable commercial elements of society and the offshore scam has become the method of choice for those wishing to enrich themselves at the expense of others.

Unfortunately, the laws in many offshore jurisdictions are almost inevitably geared toward preserving the privacy of companies registered there and concealing the identities of the true owners, thus supplying the scam artist with a marvellous cover for his wretched activities. Not only is it laborious to establish the ownership of such companies but, since foreign judgements are seldom recognised, it is difficult to obtain any satisfaction through existing legal channels without going to a great deal of trouble and expense (we’ll be looking at this aspect in another issue).

For many years we have attempted to verify the "bona fides" of various companies – not just here in Anguilla, but elsewhere - on behalf of our correspondents but the proliferation of suspicious operations has made this virtually unworkable. Instead, we now suggest the following due diligence procedures to establish just whom you may be dealing with.

1. The first, and to us, the most apparent question is: how long have you been in business and who are the principals? Everybody has to start somewhere and an honest answer to the first followed by a frank answer to the second question would suggest some degree of integrity. Also, the Registrar of Companies can certainly confirm the incorporation date of an IBC but can only list the Registered Agent - not necessarily the directors. The latter bit of information can be revealing - not all Registered Agents are created equal and some are notoriously lax in establishing the true identity and aim of the company.
   
2. Is it an investment programme? If so, ask for audited accounts of previous year's performance. If the auditors are unfamiliar to you (i.e. James B. Conman and Associates or similar) check them out. If the company says it’s an "internal audit", forget it!
   
3. Are accounts "co-mingled"? In other words, does your money go into a big pot? The danger here is, that if they decamp with your cash, you have absolutely no recourse. Naturally, if it is an internationally known fund or company listed with the appropriate authorities, this proviso does not apply. But be careful, many totally unregulated funds are not averse to using prestigious names to dupe the unwary. "Investment Clubs" and the like are an almost certain way of disposing of your cash without your receiving much in the way of earnings. Remember that all of the more successful schemes make some returns to their investors before vanishing.
   
4. Do they have an address, fax and telephone numbers? A surprisingly large number of enticing websites and programmes lack some or all of these rather fundamental requirements. In Anguilla all mail has perforce to go to a P.O.Box since there is little in the way of mail delivery but courier packages do require a physical street address. Make sure they have one! However, some company managers specialize in setting up mail boxes using an individual "suite number" with virtually no questions asked and providing a physical address, a set-up which could prove very popular with less savoury operators, so it pays to ask a few questions. Call the phone number - it may just be the number of the Registered Agent or an answering service, not a real office. A few loaded questions should soon establish this.
   
5. If it’s an investment programme, are the yields unbelievable because they have knowledge known only to a privileged few? This is a sure signal of a scam - no matter what you may hear (or want to hear), no such programmes exist except in the minds of the con-men and the "wannabe's" of this world. The clue is that everything must be kept so classified that even you, a participant, cannot be made privy to the identity of the "top international banks" involved. Give us a break! P.T. Barnum had it right after all!
   
6. Websites can be very deceptive - it costs little to have a really prestigious looking presence on the Internet and words and phrases such as "Our Mission", "Our Team of Specialists", "Dedicated Professionals" etc. leap off the pages at you but the reality may be very different. Many will be businesses operated, not from the apparent offshore jurisdiction, but from an office, computer and answering machine elsewhere, likely onshore, where their records may be subject to search and confiscation by the authorities and where your name may show up one day. The only sure way to finding out who you are dealing with is to show up at their offices, if you can find them, unannounced. It's an exercise that may save you a lot of money in the long run and we highly advocate it as "the ultimate in due diligence"!

We’ll be looking at some further and detailed aspects of this.

For further information on ongoing scams in the offshore world, go to:

First American Legal Corporation , an excellent site on offshore matters in general.

For an in-depth survey of the matter, Offshore Alert is an expensive but invaluable monthly publication.

The Goldhaven site also has some useful hints.

Useful Numbers to call in the case of entities registered in Anguilla:

The Eastern Caribbean Central Bank (Anguilla Office) - 1 (264) 497 5050.

The Registrar of Companies - 1 (264) 497 5881.

The Office of The Attorney General - 1 (264) 497 3044.

"I'm not so much concerned about the return on my principal
as I am about the return of my principal."
-- Will Rogers

Best wishes,

Graham