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Re: NIST Draft Key Escrow Paper
by jim bell 17 Dec '03

17 Dec '03

A few comments on the NIST draft. SUBJECT: Draft Paper, "Enabling Privacy, Commerce, Security and Public Safety in the Global Information Infrastructure" FROM: Bruce W. McConnell [Initials] Edward J. Appel [Initials] Co-Chairs, Interagency Working Group on Cryptography Policy > It would permit users and manufacturers free >choice of encryption algorithm, facilitate international >interoperability, preserve law enforcement access, and, most >importantly, provide strong system security and integrity. What if we don't WANT to "preserve law enforcement access"? What if we believe that, as individuals and as a society, we would be safer and better off to emasculate the government-employed thugs? > Recognizing that a robust infrastructure is not yet a >reality, we are also considering measures to liberalize export >policy for some non-escrowed products. Why restrict it at all? >Enabling Privacy, Commerce, Security and Public Safety in the >Global Information Infrastructure Too bad they weren't more honest and said, "Government employee safety." >Government >and industry must work together to create a security >management infrastructure and attendant products that >incorporate robust cryptography without undermining national >security and public safety. I don't believe this. Do you? > A policy for escrow of >cryptographic keys which provides a basis for bilateral and >multilateral government agreements must be determined so that >industry can produce products for worldwide interoperability. WRONG! This is NOT necessary in the least. Just allow free export, period. >Industry will participate in defining algorithms and protocol >standards, and will develop key escrow encryption products >suitable for the protection of both government and private >sector information and which will assure timely, lawful, >government decryption access. If this system is "voluntary" then why the "assure" part? > Government will help set >standards for the Key Management Infrastructure (KMI) and >deliver a market for robust security products. In other words, it will shell out stolen tax dollars to willing co-conspirators. No thank you! A KMI >infrastructure and attendant key escrow products will provide >many benefits, both domestic and internationally, as the US >begins to realize the advantages of the global network for improve commerce, security and public safety. Most if not all of these advantages have no need for a "key management infrastructure." > The nation's commerce is moving to >networking. With these enormous changes, means must be found >to responsibly raise the quality of cryptographic services >without jeopardizing effective law enforcement, imperilling >public safety. I wish they'd be a bit more honest and use "government safety" instead of "public safety." > Industry and government must partner in the development >of a public key-based key management infrastructure and >attendant products that will assure participants can transmit >and receive information electronically with confidence in the >information's integrity, authenticity, and origin and which >will assure timely lawful government access. Why, exactly, "must" industry do this? This whole system is supposed to be "voluntary," right? There is a more compelling rationale for the government to be a partner in the development of the KMI. Not only has the Information Age sparked fundamental changes in the way we interact, but reliance on information systems makes our institutions vulnerable to an unprecedented degree. Aha! "our institutions vulnerable to an unprecented degree?" You're catching on! But it's primarily the GOVERNMENT institutions which are going to be vulnerable. > Almost all >institutions upon which public safety and national security >depend, ranging from the power grid to military command and >control, are at severe risk because of their presence in and >dependence upon a global information infrastructure. Yes, you guys know you're gonna get your statist butts kicked, right out the door. (In case you couldn't imagine it, I'm grinning right now...) > Additionally, the widespread >use of encryption without safety features such as key recovery >can pose serious risks to society. No, not a risk to "society". A risk to government and its agents. > It will put at risk >important law enforcement and national security investigations >where electronic surveillance and search and seizure are >essential in preserving and prosecuting crimes, and more >importantly, in saving human life. I choose to forgo these investigations and their advantages. > Participation in the KMI will be voluntary. Key escrow in > the KMI will occur naturally through mutually trusted > authorities. What do you mean, "Voluntary"? >+ There will be a transition period during which legacy > equipments which do not support key recovery can be used > to communicate with users in emerging full featured KMIs. Huh? If this system is really "voluntary," this last paragraph doesn't make sense. > Self-escrow will be permitted under specific > circumstances.(1) Huh? What is the word "voluntary" supposed to mean, with relation to these statements? > Export controls on Key Escrow products will be relaxed > progressively as the infrastructure matures. Why not eliminate escrow controls on all products? (1) The escrow agency must meet performance requirements for law enforcement access. Again, whither "voluntary"? > To participate in the network a user needs a public key >certificate signed by a CA which "binds" the user's identity >to their public key. That's simply wrong. No certification is needed to use public-key encryption, as users of PGP well know. > One condition of obtaining a certificate >is that sufficient information (e.g., private keys or other >information as appropriate) has been escrowed with a certified >escrow authority to allow access to a user's data or >communications.(3) (As noted before, this might be the CA or >an independent escrow authority). The certificate creation >process is pictured above. Sounds like more abuse of the word, "voluntary." > For users to have confidence in the KMI, CAs must meet >minimum standards for security, performance, and liability. A >Policy Approving Authority (PAA) certifies CAs for operation. >The PAA sets rules and responsibilities for ensuring the >integrity of the CAs. The PAA is also responsible for setting >CA performance criteria to meet law enforcement needs. "Voluntary"? > If law enforcement has obtained legal authority to access >a user's encrypted data or communications, it would certify >that authorization to the escrow authority. The escrow >authority will then relinquish information sufficient to >access the user's communication. "Voluntary"? What if the user has already come to an agreement with the escrow authority that under no circumstances should any key be disclosed? What if the user only gives the escrow authority an encrypted key? >III. Some Issues > Difficult issues include i) how to refine the application >of export controls, ii) whether and to what extent to permit ?self-escrow, More "voluntary" abuse... >Export Controls > The task, then, is to find a method of applying >export controls that meets the interest of national security, >public safety, privacy, and competitiveness. Uh, have you forgotten about "individual freedom"? > Freedom to choose any mutually trusted certificate >authority may accommodate the above interests. How about "freedom to choose NO trusted certificate authority"? >(4) In addition, >allowing ready export of products of any bit length to markets >where the key management infrastructure, which complies with >statuatory constraints, is in place to permit government >access to keys, would provide both a level market for U.S. >manufacturers and higher quality security products for users. I don't want a "level playing field" here. I want a free, unrestricted, and open playing field. >Products that meet defined performance requirements and which >will not operate until the key is escrowed with an appropriate >certificate authority will address commercial, public safety >and national security needs. But they won't address individual freedom needs. (4) A mutually trusted authority is an escrow agent trusted by users to store keys and trusted by law enforcement to provive access upon certification of lawful authority. How can I trust any organization that will compromise my privacy on request by the government thugs? >Transition > We are working toward a policy that permits licensing of >key recovery encryption systems regardless of algorithm, bit >length, or whether implemented in hardware or software, once >needed infrastructure and government-to-government agreements >are in place. Don't bother. I have an easier system already. "Free and unencumbered exports for all software and hardware." There, that's easy. > In the interim we recognize that the policy must >make it worthwhile for manufacturers and users to invest in >escrowed KMI. In other words, you want to misuse the power of government to bribe them into cooperation. With these objectives in mind, and consistent >with applicable statutes, But ignoring most of the US Constitution... the interim policy will consider: Prior to formal government-to-government agreements: >+ Permitting export of products that use an escrowed KMI to > approved markets, e.g., Europe or Australia, consistent > with the policies of the destination country. What if "the politcies of the destination country" don't ask for ANY escrow system? Are you saying you'll support free export in those cases? > Continuing and expanding the administration's previously > announced key escrow initiative by permitting the export > of 64 bit S/W or 80 bit H/W key escrow products that meet > defined performance requirements, after one-time review, > to any destination if keys will be escrowed in the U.S., > or in foreign countries with which the U.S. has a > govvernment-to-government key escrow agreement. Not acceptable. How about 128-bit, non-escrowed softeware? That would be a good start. > Permitting the export of other products on a case-by-case > determination that such exports are consistent with US > interests. Maybe you meant, "government interests"? > The proposals for an interim export control policy are >founded on the assumption that the products will require the >use of an escrowed KMI in a country with which the U.S. has a >government-to-government agreement. Aha! So you're assuming THEIR country's thugs and OUR country's thugs will gang up on us? > The interim policy also reflects a judgment that overseas >escrow of key will generally be permissible with suitable >government-to-government arrangements. There is a concern that >U.S. products with keys escrowed in the U.S. will not be >saleable overseas. Hence, it may be possible to permit >overseas escrow in Europe, even before government-to- >government arrangments are completed. This exception is >possible since the European countries are already moving to >implement key escrow systems and we can reasonably expect to >enter into law enforcement agreements in the near term. Danger Will Robinson! Danger! >The >OECD's goal of negotiating multilateral cryptography >guidelines by 31 December 1996 is further evidence of European >intent and momentum in infrastructure development. YES! Gotta make sure you don't get your collective butts kicked out of power , huh? The interim policy reflects a differentiation between hardware and software products, i.e., hardware products with greater bit lengths are treated more favorably under this policy. Hardware implementations of products permit more confident binding between encryption and the key management, limiting the risk that the encryption can be easily stripped from the key management and used independently of key recovery. Uh, where's that "voluntary"? >Software does not provide similar protection. This >said, the interim policy to permit export of 64 bit software >key recovery products would reflect a significant increase >over the bit length restrictions applicable to non-key >recovery products. Self-Escrow > Self-escrow will be a principal concern of many large >corporations that want to provide corporate data recovery, >protect against loss of proprietary data from use of an >outside escrow agent, and simply for reasons of efficiency and >cost. Hence, self-escrow must be considered as an acceptable >option. How about "non-escrow"? > A solution is a national policy which allows CAs for an >organization to serve as escrow authorities if they can meet >necessary performance requirements. These requirements should >be determined by government in consultation with industry and >should address timeliness, security, confidentiality of >requests for, or release of, keys, and independence of the >escrow authority from the rest of the organization. To this >end, the government should seek legislation that would shield >organization certificate authorities from internal pressures >in the course of law enforcement investigations. In other words, you don't want "honesty" to affect the snitches? >Legislation > There is some consensus that the ultimate legislative >package should include provisions to criminalize the >unauthorized disclosure/use of escrowed key, provisions to >authorize civil actions by victims against those responsible >for the unauthorized disclosure/use of escrowed key, >provisions specifying the circumstances in which escrowed key >may be requested and released (e.g., death of a family member >or employee), and establishing liability protection for >certificate authorities who exercizes due prudence in the >fulfillment of their performance obligations. What about requirements that people whose keys are requested be notified immediately of such a request and are given an opportunity to challenge it, or even better given an opportunity to demand that the key is erased, or given an opportunity to FAIL to provide a decrypt key to unlock the escrowed decrypt key? >Government to Government Agreements > > There is an expressed need by all govenments to have >access to information affecting their own security Finally they admit it! > To demonstrate resolve and good faith, the United States >Government should immediately: > The only way the US government could demonstrate "good faith" is to disband itself immediately. 6. Negotiate with other governments arrangements for access to escrowed keys consistent with national sovereignty, national security, and public safety. As trusted partners, industry and government can share expertise and tackle intractable problems such as the insecure operating system. In times past, the cryptographic algorithm was the core of the solution: now it is the easy part. The debate over algorithms and bit lengths should end: it is time for industry and governments to work together to secure the GII in such a way that does not put the world at risk. We agree that "the debate over algorithms and bit lengths should end." We just think it should end with complete and total elimination of export restrictions. Period! Key Recovery Performance Criteria Key recovery provides for backup storage of a user's private keys. This backup capability helps ensure the availability of a user's data even after it has been encrypted. It also provides for an effective means for law enforcement access. Key recovery requirements whould be viewed from the perspective of the individual, the corporation, or governments that require access. Most of the criteria to be discussed have a dimension for key recovery on an individual basis as well as from a corporate or government perspective. The criteria can be grouped into three categories. + Confidentiality - Confidentiality must be maintained on all requests for release of key recovery information. WHY? If the system is VOLUNTARY.... [is there some reason that the bozo didn't include an email address?] Jim Bell jimbell(a)pacifier.com

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unsuscribe
by Kim Johansson 17 Dec '03

17 Dec '03

unsuscribe

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Note: Problems Confronting the Asset Concealer [Part 2 of 2 of Volume I]
by Black Unicorn 17 Dec '03

17 Dec '03

(Volume I - Part 2 of 2) The Constitution is of No Help. The asset concealer who hopes to rely on the constitution to protect him might wish to consider the view of one noted scholar: "The Constitution provides little protection for account holders. Courts describe the interest of the United States in enforcing its laws as overwhelming and the ability of prosecutors to uncover evidence of criminal conduct as essential. That interest usually overwhelms any possible constitutional right of a bank customer. United States v. Miller rejected the Fourth Amendment's Search and Seizure Clause as a basis for a privacy right in bank records." (Todd Jones, Compulsion Over Comity: The United States' Assault on Foreign Bank Secrecy, 12 J. Intl. L. Bus. 454), and cases since have followed this holding almost religiously. As discussed briefly above, it is likewise unlikely that the fifth amendment will protect the asset concealer to any degree of certainty. Several cases have held that fifth amendment rights do not apply to banking records or financial information. Zicarelli v. New Jersey State Comm'n of Investigation, 406 U.S. 472, 478 (1972)(Banks and other institutions cannot invoke the self incrimination clause of the Fifth Amendment); Braswell v. United States, 487 U.S. 99, 102 (1988); Bellis v. United States, 417 U.S. 85, 89-90 (1974). On the fifth amendment concerns See Generally, Comment: Sidestepping Foreign Bank Secrecy Laws: No Sanctuary in the Fifth Amendment and Little in the Interest of Comity, 10 Hous. J. INT'L L. 57, 57 n.1 (1987). Corporate entities have no Fifth Amendment protection at all by virtue of their agent status, Bellis v. United States, 417 U.S. 85, 89-90 (1974), and more and more such protection is withheld even if the corporate entity is a co-defendant. Braswell v. United States, 487 U.S. 99, 102 (1988). Exceptions may exist for those entities which are operated as sole proprietorships. Braswell at 104 citing United States v. Doe, 465 U.S. 605 (1984). The cases following In re Grand Jury Proceedings, 814 F.2d 791 (1st Cir. 1987) demonstrate how the fifth amendment has been eroded or eliminated in application to this problem. In the In re case the defendant was directed by the district court to sign a consent form permitting the disclosure and production by a financial institution of documents protected by Singapore banking secrecy law. On refusing to sign, the defendant was held in contempt. The investigation alleged reporting and currency violations. The defendant appealed to the First Circuit which held the signature as both "testimonial" and "self-incriminating." The court reasoned that the consent form "amounts to an assertion" that the bank customer consented to production of the requested records and that it was "self- incriminating" because it could be used to demonstrate incriminating facts (e.g., that the accounts in the witness's name existed and were within the witness's control). Even at the time, however, this decision was in conflict with the Second, Fifth and Eleventh circuits, which have held such an order does not violate the fifth amendment. (Typically on the grounds that the forms signed were non-testimonial). Lately, clever prosecutors and private litigants have evaded the testimonial hitch entirely by phrasing their consent forms in the hypothetical, and not naming specific account names or numbers. The Supreme Court upheld the order of contempt for a defendant refusing to sign such a document. See, Doe v. United States, 108 S. Ct. 2341 (1988). The Court noted that the form was carefully drafted not to make reference to a specific account, but only to speak in the hypothetical. Compare the unconstitutional language of the In Re Grand Jury form: "I [witness], consent to the production to the [District Court and Grand Jury] of any and all records related to any accounts held by, or banking transactions engaged in with, [bank X], which are in the name of, or on behalf of: [witness], if any such records exist." with the now constitutional: I, [witness], of the State of New York in the United States of America, do hereby authorize and direct any bank, trust company, or other financial institution located outside of the territorial United States at which I have or have had an account of any kind, or at which any corporation has or has had an account of any kind upon which I am or have been authorized to draw, to disclose all information and deliver copies of all documents of every nature in the possession or control of such bank, trust company, or other financial institution which relate to any such accounts, together with a certificate attesting to the authenticity of any and all such documents, to any agent or employee of the United States Government who presents a copy of this Consent Directive which has been certified by the Clerk of the United States District Court for the Northern District of New York to such bank, trust company, or other financial institution, and this Consent Directive shall be irrevocable authority for doing so. United States v. A Grand Jury Witness, 811 F.2d 114 (2d Cir. 1987). For more examples See also, United States v. Davis, 767 F.2d at 1040 (holding any problem of testimonial self-incrimination is solved by such an order precluding use of directive as admission); In re Grand Jury Proceedings, 814 F.2d at 795 (expressly approving of reasoning in Davis); United States v. A Grand Jury Witness, 811 F.2d 114, 117 (2d Cir. 1987); United States v. Cid-Molina, 767 F.2d 1131, 1132 (5th Cir 1985); United States v. Ghidoni, 732 F.2d 814, 818 (11th Cir.), cert. denied, 469 U.S. 932 (1984); United States v. Browne, 624 F. Supp. 245, 248 (N.D.N.Y. 1985); United States v. Quigg, 48 A.F.T.R.2d 81- 5953, 5955 (D. Vt. 1981). Even more importantly, the character of the "documents" themselves, public or private, electronic or paper, would seem to be a factor courts will refuse to consider. Fisher v. United States, 425 U.S. 391, 410-11 (1976) rejecting both an analysis based on the nature of documents and privacy as the policy supporting the fifth amendment. Some protection still exists. Many jurisdictions refuse to recognize "consent" orders signed under judicial compulsion. See, In re ABC Ltd., 1984 C.I.L.R. 130 (1984) (Grand Court of the Cayman Islands)(Consent directives compelled under threat of contempt sanctions do not constitute consent under Cayman Bank Secrecy Law); In re Confidential Relationships (Preservation) Law, Law 16 of 1976, Cause No. 269 of 1984 (Grand Ct. Cayman Islands July 24, 1984). [...] IV. Esoteric Considerations Intelligence threats: The asset concealer should note that financial institutions have increasingly become the target of foreign intelligence operations. The IRS has conducted intelligence operations against foreign banks extensively in past and the scope of such operations in the present is unclear. From 1965-1975 the intelligence division of the IRS's Jacksonville, Florida district conducted operations named "Tradewinds" and "Havens." Both operations were designed to gather intelligence on American investors in offshore banking entities, and expose potential tax evasion and criminal activity. Several IRS agents testified on the operations before the House Committee on Government Operations in the First Session 94th Congress, 1975. In 1965, when the Bahamas enacted its bank secrecy legislation criminalizing the release of banking information, the IRS turned to paid informants within the banking community to elicit information about the banking activities of U.S. citizens, a tactic that violated Bahamian law. The most dramatic of these was the "briefcase caper," wherein a female IRS informer "entertained" a Bahamian banker while her accomplice photocopied the contents of his briefcase. United States v. Payner, 434 F. Supp. 113 (N.D. Ohio 1977), rev'd, 447 U.S. 727 (1980) The IRS finally ceased the operation in 1975 when it admitted that it had obtained information in violation of federal law. The IRS has also shown a propensity for illicit information gathering from the mails. At one time in the late 1960s, the IRS combed through mail to identify those U.S. citizens who received mail from Swiss Banks. Though most Swiss banks at the time mailed their customers using unmarked envelopes, the IRS aggressively pursued traffic analysis in the mails. Agents from the IRS mailed inquires to several Swiss banks and recorded the number of the postal meters used to respond. These collected numbers were matched against international mails using high speed copiers at the port of entry and those matching the postal meter numbers were audited at "random." The practice was later upheld in United States v. Leonard, 524 F.2d 1076, 36 (2nd Cir. 1975) cert. denied, 425 U.S. 958 (1976), and some 150 taxpayers were prosecuted. Generally speaking, the Supreme Court has upheld the use of illegally obtained information in tax cases in United States v. Payner, 447 U.S. 727 (1980). Given the success of the IRS operations ($52,000,000 at a cost of $1,500,000 according to the hearings on Tradewinds and Haven) it is difficult to imagine that these methods have been entirely abandoned. Moreover, the asset concealer should recognize that today private litigants have access to the most professional intelligence services themselves. Organizations like The Investigative Group, Inc., Kroll, Pinkerton, and Control Risks, Inc. have recruited former investigative and intelligence professionals aggressively and offer their services to private litigants as a matter of course. Given the forgoing the private banking option, below, becomes more and more attractive. Pressure from the IRS alone is not the only concern that asset concealers might wish to consider. Congress has more than once called for sanctions against banks that do not bow to the wishes of the United States. Staff of Senate Subcomm. On Narcotics, Terrorism and International Operations, 101st Cong., 2d Sess., Drug Money Laundering, Banks and Foreign Policy 32 (Comm. Print 1990) Given this, the serious asset concealer should consider using banks that hold no assets in the United States, and which do not conduct normal banking business in the United States, as these assets, or the banking charter generally, could easily be suspended, frozen, or revoked. [...] The Anatomy of a Money Laundering Investigation [...] Private banks The asset concealer may also wish to consider the option of a private bank. Private offshore banks provide individuals or small groups of investors with their very own financial institution. This, of course, reduces the number of individuals with access to banking information, allows for the more direct control of records, and all but eliminates the potential for coercion of a large banking parent. In addition, private banks create a captive source of loans for investors, provide additional funds at interbank rates, allow the payment of interest tax free, the participation in tax free international underwriting, assist clients in international trusts and corporation formation, and eliminate many overhead costs of banking. If one can balance the costs and government fees of forming such a bank, they are the most secure and direct method of asset concealing. Asset concealers who wish to pursue this option would do well to keep in mind that their choice of corporate form for their financial institution will impact their fifth amendment protections. Braswell v. United States, 487 U.S. 99, 102 (1988)(Normal rule stripping fifth amendment protections from financial institutions refusing to comply with compelled discovery orders even when named as co-defendants may not apply for those entities which are operated as sole proprietorships). In the cases of securities related charges, where at one time charges could be filed solely on the basis of the defendants invocation of the fifth amendment in reference to questions about the existence of foreign bank accounts of financial dealings, in the absence of a direct connection, such an assertion alone is no longer enough to warrant an action. See Comserv Corp., 698 F. Supp. at 789. (Absent other evidence assertion of Fifth Amendment privilege is "not a sufficient basis for the SEC's action." Id. See also Pagel, Inc. v. SEC, 803 F.2d 942, 946-47 (8th Cir. 1986)(citing Baxter v. Palmigiano, 425 U.S. 308, 317 (1976)). Until around 1965, establishing banks in the Bahamas and other islands was simple. Forming a normal corporation and granting it banking powers was about the extent of the efforts required. The Bahamas eventually tightened restrictions and while there are still over 350 banks on the island, establishing new entities is more difficult today. The Cayman Islands followed suit in 1966, enacting legislation virtually identical to that of the Bahamas. Additional legislation passed in 1989 modifies some of the 1966 rules. While a "bank" is nearly impossible to organize in Bermuda today, finance companies can be organized to conduct some quasi-banking activities. The most attractive, and least regulated of the major jurisdictions today are Turks and Caicos, and Vanuatu. Turks and Caicos, while regulating "banks" a bit more strictly, allows almost unregulated formation of trust companies. Vanuatu permits the formation of exempted banks, making it perhaps the most attractive jurisdiction for the asset concealer interested in forming his or her own financial institution. To some extent is it possible to form a financial institution in Switzerland, but this has become increasingly difficult, and the highest standards for capital pay in and reputation make it prohibitively restrictive for most asset concealers. Jersey, Luxembourg and Guernsey are other options, but all still impose strict regulations on the formation of new banks. Luxembourg requires that the banking business be conducted locally, that the new bank be sponsored by two well established banks, and that at least 350 million Lux.F. be paid in prior to formation. Panama still allows offshore bank creation with limited fees and a low paid in capital requirement of $250,000 which must be deposited locally. New banks must generally be backed by large and reputable banks. I remain suspicious of actual banking activities in Panama, however, considering the increased U.S. presence in the country since the ousting of her former dictator. Netherland Antilles also allows formation of offshore banks which are generally treated like investment companies. Offshore banks can be granted a flat tax of 6% on income and require only a 20% pay in of the capital requirement which is NAf 1 million. (1NAf=$0.56 at the time of this writing). Nauru permits offshore banks but a reputation requirement often prevents novice applicants from easy approval. Nauru does, however, have very low licensing fees, which are usually not more than normal trading or holding corporations. Shell banks (those without substantive assets of any kind) were popular until 1977. They required no paid in capital and were commonplace in Anguilla and St. Vincent. While technically such institutions no longer exist, some of the smaller jurisdictions have difficulty enforcing their capital and debt-equity ratio requirements, often creating "effective" shell bank opportunities after an initial showing of capital which is later removable. For the prudent asset concealer, however, shell banks will present a less than desirable alternative to meaningful bank licenses in legitimate jurisdictions. My own views aside, conventional wisdom holds that offshore banks are best formed in the Bahamas and Cayman Islands. Both of these jurisdiction's license applications can exceed 100 pages. Directors are generally required to offer proof of bona fide banking experience, officers, managers and shareholders required to make disclosures, and references checked. In many cases, as with Vanuatu for example, stand-ins for officials, directors and managers are available through local trust services. Initial capital statements are typically audited. Paid in capital requirements are usually $250,000 or more. The Cayman Islands and other jurisdictions allow substitution of capital for guarantees from reputable banks or trust companies. Almost every jurisdiction requires annual license fees. [...] See Generally, Peat Marwick's numerous publications. Using Private Banks to your Advantage [...] Bearer Shares Bearer shares are an immensely useful tool to the asset concealer. Bearer shares are certificates of equity ownership which are freely transferable and embody full ownership rights to the holder. They do not bear the name of the shareholder or beneficiary and are not registered. Bearer shares are generally numbered certificates with removable serialized coupons attached which can be exchanged for dividend payments, much like bond coupons. Bearer shares with voting rights are generally tallied by deposit with a designated bank in exchange for corporate voting ballots issued by the bank before shareholder meetings. Because Bearer shares are not registered, and entitle the holder to the full benefits of ownership, and because dividend coupons are detachable, a stockholder in the corporation can be completely anonymous and a distinct entity from those entitled to dividend payments. Typically on formation trustees accept bearer shares in the corporation and later pass them to the actual shareholders who may in turn separate the dividend rights, transfer the shares, or both, to a third party. In this manner the ownership of the corporation is almost entirely shielded. Antigua, Barbuda, Liberia, Liechtenstein, Luxembourg, Nauru, Netherland Antilles, Panama, Switzerland, and Turks and Caicos all permit bearer shares, as do Cayman and Vanuatu for exempted companies. V. Reviews of Specific Jurisdictions Why I don't like Switzerland anymore Not obscure enough. Spineless. Switzerland has, perhaps for legitimate reasons at first, attracted a tremendous amount of attention as a banking secrecy jurisdiction. The astute asset concealer will avoid such jurisdictions where possible as they tend to attract suspicion and law enforcement attention. For example, a 1981 study by Swiss National Bank and the public prosecutors office attributed 26 kidnapping incidents in 1970 and 1978 to Swiss money laundering elements in the ransom demands. (Massnahmen gegen "Geldsauberung," Neue Zurcher Zeitung, (NZZ) May 9/10, 1981, No. 106 at 9). High profile customers in Swiss banks have attracted so much public attention as to make the jurisdiction extremely high profile. See, e.g., N. Schmid, Banken Zwischen Legalitat Und Kriminalitat 189- 191 (1986) (King Faisal of Iraq, King Faruk of Egypt, Algerian Liberation Front, Ex-Shah of Iran Pahlevi, and Presidents of Argentina, Kongo-Katanga, Nicaragua); Internationale Rechtshilfe - Gefahr fur das Bankgeheimnis, NZZ, Aug. 30, 1989, No. 200 at 21 (Marcos, Irangate, drug mafia); The Lifestyle of Rich the Infamous, FORTUNE, Dec. 2, 1988, at 38 (tax fugitive Marc Rich). Cf. Nationalrat will scharferen Geldwascher-Artikel, Tages-Anzeiger, Nov. 28, 1989, No. 277 at 9 (statement of member of Swiss House of Representatives)("...no country can point to as many illegal banking transactions as Switzerland"). In 1977 a private agreement between the Swiss Bankers' Association ("SBA") and member banks of the SBA took effect. The agreement establishes a duty of due care in the identification of potential account holders and depositors and is intended to reduce the incidence of rampid criminal activity through Swiss banks. (Vereinbarung uber die Sorgfaltspflicht bei der Entgegennahme von Geldern unde die Handhabung des Bankgeheimnisses)(VSB 1977). In addition, the Bankers' Agreement contains a stipulation that depositors wishing to trade on United States securities markets are required to waive their rights to secrecy as a condition to trading. The SBA provides in detail for SEC investigations into securities violations involving Swiss banks. The "Lebanon Connection," was the scandal that most turned the tables on Swiss banking secrecy. (Allegations that several of Switzerland's major banks assisted Turkish-Lebanese drug ring over in the laundering of proceeds totaling over 1.6 billion francs. Taglich eine Million Dollar gewaschen, Graber, Geldwascherei 42 (1990). See also, Wichtiger als Geldwascher bestrafen ist die Verbrecherorganisation treffen, Tages-Anzeiger, Nov. 12, 1988, No. 265 at 33 (Lebanon Connection largest Swiss money laundering scandal to date); Geldwascherei: Dampf aufgesetzt, Schweizerische Handelszeitung (SHZ), Nov. 10, 1988, No. 45 at 17 (Illegal drug profits entered Switzerland on daily basis via couriers carrying briefcases filled with dollar bills in small denominations). Immediately after, the Swiss Federal Council (Bundesrat) streamlined the typically lethargic elements of Swiss legislative efforts to criminalize money laundering, and the new legislation was approved by the Swiss Parliament to take effect August 1, 1990 P. Bernasconi, Grenzueberschreitende Wirtschaftskriminalitat, 83 Schweizerische Juristische Zeitung (Sjz) 73, 82 n. 24 (1987). Cf. P. Forstmoser & A. Meier/Hayoz, Einfuhrung in das Schweizerische Aktienrecht 329 (4th ed. 1989). Under the law, money laundering crimes are punishable by imprisonment for up to five years and by fines of up to one million Swiss francs. (Scweizerisches Strafgesetzbuch, Code Penal Suisse, Codice Penale Svizerro, art. 47, 273). Because the Mutual Assistance Treaty with the United States permits release of banking records to the United States in the event the activity is illegal in both countries, it would seem that money laundering investigations will grant prosecutors the right to request, and obtain Swiss banking records. Switzerland has gone on to eliminate the "Form B" account. (permitting a proxy to vouch for the depositor, and effectively making the account anonymous subject to the proxy's trustworthiness. Swiss Bankers Ass'n, Convention de Diligence Banquers, Form B (1987)). As of April 25, 1991 Swiss banks are now required to record the identity of the beneficial owner of depositor accounts, leaving a wider paper trail for U.S. prosecutors. According to one commentator, "In short, the United States now has an extremely powerful vehicle with which to pierce the veil of Swiss banking secrecy..." Kanwar M. Singh, Nowhere to Hide: Judicial Assistance in Piercing the Veil of Swiss Banking Secrecy, 71 B.U.L. Rev. 847. Even given the legislative tendency to erode Swiss secrecy, one must understand that the image Swiss banking secrecy has been much inflated in public opinion. Swiss banks have become very conscious and wary of indiscriminately opening accounts which may be the subject of illegal funds receipt. Swiss banks are increasingly reluctant to open new numbered accounts. "Coded" accounts are typically granted only to current customers. Truly "anonymous" accounts do not exist at all in Switzerland. Instead, numbering is directed to avoid internal violations of banking secrecy and problems along the line of the Bahamas "briefcase caper." Honegger, Demystification of the Swiss Banking Secrecy and Illumination of the United States Memorandum of Understanding, 9 N.C.J. Int'l L. & Com. Reg. 1, 17 (1983). In fact, contrary to popular belief, purely anonymous accounts do not exist at all in Switzerland. H. Bar, The Banking System of Switzerland 61 (1957). At the very least one or more senior bank employees will know the depositor's identity. Even in the case of Form B accounts, records of depositors were typically kept privately by higher officials in the bank. When taken as a whole, the legislature's specific indication of its willingness to erode the protection of banking secrecy in Switzerland, the pending legislation, interest in EU membership, acceptance of the European Convention on Money Laundering, four other anti-secrecy laws recently passed in Switzerland along with the more intrusive internal policies of Swiss bankers, my interest in Switzerland as an asset concealing jurisdiction is much eroded. See Generally, Rebecca G. Peters, Money Laundering and Its Current Status In Switzerland: New Disincentives for Financial Tourism, 11 J. Intl. L. Bus. 104 (1995). For a defense of the current status of Swiss banking secrecy, however, See Paolo S. Grassi and Daniele Calvarese, The Duty of Confidentiality of Banks in Switzerland: Where it Stands and Where it Goes. Recent Developments and Experience. The Swiss Assistance to, and Cooperation with the Italian Authorities in the Investigation of Corruption Among Civil Servants in Italy (The "Clean Hands" Investigation): How Much is Too Much? Why I like Panama. At one time, Panama was regarded as the leading tax and securities trading haven in the Western Hemisphere. 3 W. Diamond & D. Diamond, Tax Havens of the World, at Panama-1 (1989). While the political upheaval and overthrow of Manuel Noriega have changed much, many aspects of Panamanian law remain friendly to the asset concealer. Panamanian corporations have no minimum capital requirement, and registered shares are not required to be completely paid in. While corporate law requires two shareholders for the purpose of electing a board of directors, (which can consist of only three persons, none of whom must own shares), after the board is elected the corporation may be reduced to one shareholder. Ownership can be effectuated through bearer shares if they are fully paid in, and there are no citizenship requirements except for the appointment of a resident agent, who is generally the incorporating agent. "Bearer shares" are well entrenched in Panamanian law. They allow corporate ownership to be shielded quite effectively from identification by permitting the corporation fully transferability in private face to face transactions of nothing more than the corporate share certificates. Typically, an agent handles incorporation, and exchanges the bearer certificates with the principal, who then may even exchange it with a second principal, completely shielding the final holder of the corporation from identification by the agent absent the cooperation of the first principal. Bearer shares will be discussed more fully below. In addition, Panama continues to maintain strict banking secrecy laws and no taxation of income produced from sources outside the country. Large investors may enjoy the benefits of extensive investment and capital incentives. Banking Law of Panama, Law No. 16, Arts. 2-4 (Jan. 28, 1959). These arrangements have particularly suited Panamanian corporations for discrete, indeed totally confidential, securities trading on U.S. markets. Many traders have used Panamanian corporations extensively in this regard, and even where the existence of the corporations and their complicity in insider trading has been established, few investigations have been able to bear the burden required to secure convictions. See, e.g., SEC v. Levine, Civ. Action No. 86-3726 (S.D.N.Y. filed May 12, 1986)(alleging defendant Levine made securities trades based on inside information through two Panamanian corporations beneficially owned and controlled by Levine) In re Joseph A. Lugo, Admin. Proc. File No. 3-6740 (Lexis, Securities library, Releases file)(May 10, 1988)(Panamanian bearer stock corporation involved in scheme to defraud investors); SEC v. Palmer Fin. Corp., Litigation Release No. 12,082, 43 SEC Docket 1230 (D.D.C. May 3, 1989) (violations of Sections 13(d) and 16(a) of the Exchange Act). The combination of opaque ownership anonymity and non-cooperation with authorities even in criminal investigations makes Panama the ideal first tier expatriation jurisdiction, and an excellent re-investment vehicle. Panama's entities will be discussed in more detail in the second "implementation case study" section below. Why I like Liechtenstein I must disclaim my passage here by disclosing that I am personally involved in business, banking, and government in Liechtenstein. Despite her neighbor's less than favorable bent, Liechtenstein remains a powerful jurisdiction for the asset concealer. The primary vehicle employed is typically the Liechtenstein Anstalt, but Foundations and general trusts are also exceptionally effective. Unlike Luxembourg and Dublin, Liechtenstein, by virtue of her disdain for EU membership, will not be burdened by the proposed standard EU withholding tax to which even Switzerland and the Channel Islands may eventually be subject. Though the Channel Islands and the Isle of Man are technically outside the EU area, many point to their presence within the "sterling area" as dangerous with regard to the proposed tax's reach. Liechtenstein is also much easier to reach than most island offshore havens. Perhaps best of all, foreign judgments, except in Switzerland or Austria, are not enforceable in Liechtenstein. Private plaintiffs will waste their time seeking local assistance in attaching assets. Liechtenstein Entity Forms The Anstalt The Anstalt or "Establishment" is a corporation which is more accurately characterized as a international holding corporation. Typically financial or controlling interests in foreign corporations and other entities are left in the care of an Anstalt and thus in the jurisdiction of Liechtenstein. In many ways Anstalts function much the way that conventional trusts do. An Anstalt can be founded with only one "founder" or "promoter" who is typically an agent local to Liechtenstein acting for an anonymous owner. The local agent holds the charter of ownership on the Anstalt, which is the only record of the actual beneficiary of the entity, and can be made a bearer document. Owners of Anstalts enjoy advantages such as: Thirty year tax rate freezes, no mandated debt-equity ratio, liability limited to assets, and extremely low taxation. Some 70,000 Anstalts exist, though the precise number is a closely held secret (to avoid any attempt at process of elimination guesswork). There is a one time fee to establish an Anstalt, generally SwFr 1,000 or 3% of the starting capital, and a yearly tax on net assets of the greater of 0.1% or SwFr 1,000. Dividends are taxed at 4%. A minimum capital requirement of SwFr 30,000 exists for Anstalts, but can typically be waived. Taxation is more complicated for commercial entities in Liechtenstein, and auditing requirements apply, but generally taxation falls within 6 to 18%. There are no reporting requirements for Anstalts which do not themselves conduct commercial activities. Some problems with the Anstalt still remain. Anstalts, like Panamanian corporations, are generally bearer certificate owned and easily transferable as a result. Because of this, and the fact that most Anstalts are single owner entities, asset disputes can result if the bearer document falls into the wrong hands. The Treuunternehmen Treuunternehmens or "Trust Enterprises" are modeled after the Massachusetts trust and are generally unlimited as to its structure. Offshore activities, while better left to other jurisdictions in general, can be best effected through Treuunternehmens. The Stifung For the wealthiest clients, the security of Liechtenstein's foundations (Stifungs) are unparalleled, even in the offshore world. While establishing a Stifung requires a due diligence finding by the trustee or founding attorney of the client's general good character, the disposition of the funds applied after the founding of a Stifung will be unscrutinized. Stifungs require a separate offshore holding company for administration, have a board of directors, and a trustee/attorney. The beneficiary is known only to the directors, and the attorney. Like Anstalts and Treuunternehmens, Stifungs offer limited liability. Stifungs can be best described as autonomous funds without corporate structures. Stifungs too have some cautionary notes attached. The director of a Stifung may take a narrower view of the distributions of assets than the original founder originally intended. As directors are usually singular in Liechtenstein Stifungs, there is no recourse to disgruntled beneficiaries. Of course, these problems are easily solved if a close and trusted person can be appointed as the founder. Many trustees suggest the original founder's successor be appointed automatically on the death of the former. Additionally, paying out on the entire net worth of the Stifung tends to assure the correct ownership attribution. All of these entities are perfect for the asset concealer who wishes to stand before a local court and deny ownership of additional assets. In addition to being technically true of the beneficiary of an Anstalt or Stifung, it has the additional advantage of being entirely uncontradictable. Anstalts can be in bearer form, and Stifung founders are typically trustees. A measure of the frustration of U.S. regulatory and prosecuting authorities in tracing the owners of Anstalts can be seen in the slew of U.S. proceedings with similar case names. e.g., SEC v. Certain Unknown Purchasers, No. 81-Civ-6553 (S.D.N.Y. July 25, 1983) The Aktiengesellschaft Aktiengesellschafts, "Share Companies," or "Stock Corporations" are primarily Anstalts for larger number of beneficiaries, and provide more complicated vehicles for share distributions and stricter internal board requirements. They also have an initial capital requirement of SwFr 50,000. Bearer or registered shares are permitted. Shares may be held by nominees. Aktiengesellschafts are required to keep proper books, appoint qualified auditors, and submit balance sheets to Liechtenstein tax authorities. While holding corporations are a simple matter to establish, less than savory investors will have difficulty with direct banking. Liechtenstein has been conscious of her international reputation, and generally more fussy about her banking clients. Those depositors with less than SwFr 250,000 will be unable to expect much personal attention even if bankers will generally not turn away small depositors. Depositors with SwFr 1,000,000 or more can expect fuller service banking services including portfolio advice. Depositors with SwFr 3,000,000 can expect completely individualized service, including discretionary management by multiple fund managers directed to the client's individual needs. Forming individual financial institutions is extremely difficult. Secrecy Generally, Liechtenstein enjoys much more potent secrecy than her neighbor Switzerland, but because this has been somewhat eroded by international money laundering agreements and exceptions for criminal enterprises, she is a better reinvestment and shell management vehicle than expatriating entity. The SEC's own Mr. Haberman commented once on Anstalts, "We've traced stuff to Anstalts in the past and then couldn't get anywhere - where the money came from, who the beneficiaries were, nothing." Indeed, even where the ownership of the Anstalt is "obvious," proving it in court without the charter documents or extensive showings of financial information is all but impossible. The combination of a Liechtenstein Anstalt as an umbrella for offshore corporations in other jurisdictions and bank accounts in a separate, potent banking secrecy jurisdiction is thus an excellent concealing combination. Criminal activities, particularly drug related, are likely to remove the veil of secrecy, but unlike Switzerland, Liechtenstein's bankers have not explicitly adopted the SBA's 1982 "due care" agreement. Secrecy in regard to tax matters is as absolute as can be found worldwide. Liechtenstein and her financial institutions will under no circumstances whatsoever render any assistance to tax authorities. Assistance in criminal matters, even in light of the recent money laundering compact, is limited to those cases where the activity in question reflects badly on Liechtenstein as a financial center. Criminal investigation assistance under the Legal Assistance Act expressly provides for natural and legal entity secrecy even in cooperation with foreign authorities unless the crime in question is also illegal in Liechtenstein. Assistance in the case of criminal charges stemming solely from tax evasion or currency infringements and related offenses will be curtly denied. The 1992 provisions criminalizing drug-trafficking (Betaaubungsmittelgesetz). provide for five year sentences for those acting to hinder the discovery or retention of assets related to illegal drug production, distribution, storage, etc. 1995 provisions adopting Europe's convention against money laundering expands the exceptions to banking secrecy to proceeds having their origin in any sort of criminal offense which is also illegal in Liechtenstein. Lawyers and trustees have a right of silence in any administrative or judicial proceeding, and secrecy is expressly written into statutes in several places. Liechtenstein is best used as a tax shield and post expatriation umbrella for asset reinvestment rather than initial expatriation. For a detailed treatment of Liechtenstein Laws with regard to insider trading, See, Emmanuel Gaillard, Insider Trading: The Laws Of Europe, The United States And Japan, 1992. For a critical look at Liechtenstein secrecy entities, See, Liechtenstein's Uncertain Foundations, Anatomy of a Tax Haven, UE Ramati, Hazlemore Ltd Tax Publications, Dublin. Why I Like (sort of) The Cayman Islands While the Islands have attracted increased law enforcement attention of late, they remain very attractive as a base for offshore corporations. Cayman typically implies no-direct taxation, is not a party to any tax treaties, and grants exceptionally secure assurances against future increased taxation. Cayman has excellent telecommunications systems, offers direct dialing to offshore locations and remains on eastern standard time all year long. Government fees are the greatest burden to the asset concealer. The real hitch in the Caymans is the mutual legal assistance treaty between the United Kingdom and the United States. The treaty provides for information sharing in those instances where crimes are mutually recognized. This, of course, excludes tax related offenses if they are not connection with otherwise criminal activity. Investigations into narcotics trafficking activates a more liberal agreement which gives the U.S. Attorney General direct access to otherwise confidential information regarding Cayman Islands account holders. Entities in the Caymans Every Cayman company is required to keep a register of its directors, officers, mortgages, charges, and shareholders. Exempted companies may keep their registers anywhere in the world, others must keep it locally. Exempted companies are not required to disclose any of their shareholders publicly. Cayman corporations are divided into three types. Local companies, exempted companies, and nonresident companies. Local companies are permitted to conduct business in the islands. Exempted companies are the general vehicle used to conduct offshore business and while they may use a local office to do so, they may not themselves conduct local business. Nonresident companies are less flexible than exempted companies, but are less expensive to form. Companies can typically be formed in one to two days and the documents are fairly simple. Nearly 2,500 new companies are formed every year in the Caymans, offering the asset concealer ample opportunity to be lost in the crowd. Exempted companies are granted a 20 year stay on taxes of any kind. Unlike non-resident companies, exempted companies can issue bearer shares, no par value shares, and need not include "Limited" or "Ltd." as part of their business name. Directors of exempted companies must hold at least one meeting a year locally but alternate directors are permitted and often trust company stand-ins are used. While exempted companies can have a single shareholder, nonresident companies must maintain 3 or face personal liability of the shareholders for company debts. Exempted companies cannot invite Cayman citizens to hold shares or debentures, though unsolicited share and debenture purchases are permitted to them. Private Banking Cayman is particularly useful, even given the criminal legal assistance treaties, in its ease of banking entity establishment. More than 500 licensed banks exist on Grand Cayman, and several trust companies have been formed in the last decade. Banks and trust companies must be licensed by the Governor and Executive Council. Class A licenses permit local and offshore operation, and Class B licenses permit only offshore operation. Multinational corporations, families, and even individuals with "clean" credentials have been able to obtain licenses for banks and trust companies in the Caymans without much difficulty. Unrestricted Class B licenses have a capital requirement of about $500,000 with a 100% pay in requirement, though portions may be guaranteed. It is possible, in some circumstances, to obtain a restricted Class B license with less capital. Class A licenses cost $50,400 per year, while Class B licenses a mere $15,120. Setting up an offshore bank in Cayman should be possible with $40,000 and $25,000 per year. Quarterly financial statements are required and while annual financial statements must be audited, they need not be published. Class B licenses are generally eligible for a 20 year guarantee against taxes. Restricted Class B licenses are also available, but these can be hard to come by. Restricted licenses limit the number of depositors, and the undertaking which the bank may involve itself with. Usually a filing with the authorities is required. As the cost of obtaining an unrestricted Class B license is essentially the same, it is not usually worth the extra effort to pursue a restricted license. Cayman banks of all flavors can be owned by a single shareholder, and contracting with local banks to operate facilities and lend personal are both permitted. Typically trust companies charge between $15,000 and $25,000 per year for such services. [...] Government fees are the most plaguing obstacle to the asset concealer. If prices continue to increase, it may be beneficial to seek other jurisdictions in which to conduct ones activities. Despite expense, Cayman is still an excellent place to establish an offshore investment company, a bank or financial institution, captive insurance company, or offshore trust. Why I Like Vanuatu The pacific island nation of Vanuatu was at one time a condominium administered by France and the UK. Currently, Vanuatu, formerly called The New Hebrides, is a Republic with a multi-party democracy and regular elections. Under the British, Vanuatu adopted many of the aspects that today make it an interesting asset concealing jurisdiction. Vanuatu has a balanced budget, a balance of payment surplus, no or almost no public debt and low inflation. The government has explicitly endorsed tax haven type policies and even the opposition parties seem uninterested in rocking the boat. Australia, however, has tightened regulations on her citizens who transact with Vanuatu. Australian citizens must now file a "taxation clearance certificate" with local authorities before conducting business with Vanuatu. Taxation Administration Act, section 14C (Australia) In practice, such certificates are virtually impossible to obtain. The great advantage of Vanuatu is the saturation of tax-haven participants. Local financial, legal and accounting services have been so successful and numerous, that a flurry of merger and acquisition activity has resulted in the consolidation of several entities. The result has been increased stability in these areas. There is no registration requirement for trusts in Vanuatu, so there is no official account of their number, though it can assumed to be large as several large trust companies, some captives of major worldwide trust companies or banks, work actively on the islands. Offshore exempted (secret) companies number 650+. Bearer Shares Exempted companies in Vanuatu are "secret" and disclosure of financial or ownership information is punishable by a fine of VT100,000 or imprisonment of up to 12 months. (1VT=$0.009 at the time of this writing). Companies Regulation 1971, section 416. While non-exempt companies require public filings of ownership, in practice this is often circumvented by trust ownership and registration in the names of the nominees. Warranted bearer shares can only be issued by non-exempt companies and must be fully paid in. Companies Regulation 1971, sections 38(a), 93. Perhaps most importantly there are no taxes what so ever on capital or corporate profits. As a result there are no double taxation treaties, and hence no provisions for information sharing whatsoever. The obscurity of Vanuatu makes this one of the most impenetrable offshore centers around. Banking does not permit coded accounts, or accounts in pseudonyms, although practically there are few if any checks on identity for depositors. Local trust companies make these restrictions effectively unimportant, as nominee services are readily available to assure more potent account secrecy. New companies can be very quickly set up in Vanuatu. Three working days turn around time can be expected if an application is filled out in detail and in advance. While off the shelf companies are not "available," in practice abandoned, unwanted, unused, or idle companies can often be purchased from local vendors. Corporate forms in Vanuatu follow the Cayman Islands and Bahamas models. The result is an excellent offshore style legal framework. Companies in Vanuatu may be limited by shares, by guarantee, or unlimited. They may be private, (if the articles impose: self restricted transfer of shares, members number less than 50, and a prohibition on public subscription for shares or debentures), or public. For the asset concealer, the private company is the most useful. Exempted companies are not permitted to own shares in non-exempt companies, own interest in any local undertaking, allow public subscriptions to stock or debentures, or conduct any business with any non-exempt company. Any local judicial proceedings involving exempted companies in Vanuatu will be held in camera, and public records of the proceedings will not be recorded. Technically speaking, a Vanuatu corporation is required to have issued and paid two shares in the minimal amount of VT1/share. No formal requirements as to shares is actually required and shares with no par value at all may be issued by unlimited companies. Exempted companies need only have one director and a separate secretary. Private Banks The real gem of Vanuatu, however, is the ease with which the asset concealer may create a banking company. Financial institutions in Vanuatu must be licensed and must have a minimum paid in capital of VT12.5 million if the head office is in Vanuatu, and VT50 million otherwise. There is an annual license fee of VT300,000. Reserve fund and liquid asset minimum holdings are enforced, and banks or financial institutions may also be exempted if they conduct no local business except with related entities and exempted financial institutions and banks are not subject to many of the stricter regulations imposed on non-exempt entities. Unlike almost any jurisdiction, financial institutions may be exempted. This is a powerful tool for asset transfer, privacy and concealment. Exempted banking entities are afforded a good deal of flexibility in their minimum capital requirements subject to the approval of the Registrar. There are no reserve or equity ratios imposed on exempt banks. Most interestingly, local trust companies are in the habit of providing all staff, local directors, attorneys, and required personal for exempted banks. Some beneficial ownership and audit requirements are in force, but exempted financial institutions and banks can expect full confidentiality as a matter of course and lax enforcement. Combined with the complete absence of currency controls, Vanuatu is nearly the perfect jurisdiction for those asset concealers interested in founding their own private financial institution. [...] See Generally, Vanuatu Companies Regulation 1971, Vanuatu Banking Regulation 1970, Vanuatu Trust Companies Regulation 1971. (Continued in Volumes II, III, and IV) --- My preferred and soon to be permanent e-mail address:unicorn@schloss.li "In fact, had Bancroft not existed, potestas scientiae in usu est Franklin might have had to invent him." in nihilum nil posse reverti 00B9289C28DC0E55 E16D5378B81E1C96 - Finger for Current Key Information

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Re: Note: Problems Confronting the Asset Concealer [Part 1 of 2 of Volume I]
by cpunk＠remail.ecafe.org 17 Dec '03

17 Dec '03

Black Unicorn wrote: > Practical and Legal Problems Confronting the Asset Concealer in > Relation to Offshore Financial and Corporate Entities: A View from > the Perspective of the Individual Attempting to Avoid Extraterritorial > Discovery, Attachment, or Coercion. "Laundernomicon?"

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FTC online workshop on privacy
by E. ALLEN SMITH 17 Dec '03

17 Dec '03

Pointing out encryption, anonymnity, etcetera as means couldn't hurt... BTW, at the end of the message is something from this Adam Starchild fellow, with a web address for "Asset Protection & Becoming Judgement Proof." I'd be interested in a review of it. -Allen From: IN%"rre(a)weber.ucsd.edu" 22-MAY-1996 01:05:58.45 From: Phil Agre <pagre(a)weber.ucsd.edu> =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= This message was forwarded through the Red Rock Eater News Service (RRE). Send any replies to the original author, listed in the From: field below. You are welcome to send the message along to others but please do not use the "redirect" command. For information on RRE, including instructions for (un)subscribing, send an empty message to rre-help(a)weber.ucsd.edu =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= Date: Sun, 19 May 1996 14:41:06 -0700 From: Adam Starchild <taxhaven(a)ix.netcom.com> To: privacy(a)ftc.gov Subject: FTC Workshop on Consumer Privacy in Cyberspace FEDERAL TRADE COMMISSION WORKSHOP ON CONSUMER PRIVACY IN CYBERSPACE TO BE HELD IN JUNE 1996 The Federal Trade Commission's Bureau of Consumer Education will hold a public workshop on June 4 and 5 to focus on privacy issues in the online marketplace. The development of technologies such as the Internet and the World Wide Web has allowed online businesses to collect and use personal information about consumers, often without consumers' knowledge or consent. The workshop will examine consumer privacy issues in this new marketplace, consumer and business education about the use of personal information online, and ways to enhance the growth of the online marketplace by fostering consumer confidence. Workshop topics will include the use of consumer information, the use of medical and financial information online, the collection and use of information about children, electronic approaches to protecting consumer privacy online, and the European Union's directive on the protection of personal data. The workshop will be open to the public and will be held on June 4, 1996 from 9:00AM to 5:00PM in Room 432 of the FTC headquarters building, 6th Street and Pennsylvania Avenue, N.W., in Washington, D.C. On June 5, 1996 the workshop will be held from 9:00AM to 12:30PM in Room 332 of the FTC headquarters building. The Bureau invites representatives of consumer groups, industry, government agencies, and other groups to take part in the workshop. Any person wishing to be considered for participation in the public workshop must file a written request, on or before May 24, 1996, to Martha Landesberg, Division of Credit Practices, Bureau of Consumer Protection, Federal Trade Commission, Washington, DC 20580. Posted by Adam Starchild Asset Protection & Becoming Judgement Proof at http://www.catalog.com/corner/taxhaven The privacy list is run automatically by the Majordomo list manager. Send a "help" command to majordomo(a)ftc.gov for assistance.

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Re: The limits of my patience.
by jim bell 17 Dec '03

17 Dec '03

At 08:43 AM 3/30/96 -0500, Black Unicorn wrote: > >On Fri, 29 Mar 1996, jim bell wrote: >> Explains a lot! You _are_ paid for this. In an earlier era, you would >> have gladly run the ovens at Auschwitz if you'd gotten paid for it. > >You're way out of line here. >I expect an apology. And as a form of protest, I recommend that you refuse to post any more messages to CP until you get it! That would solve a lot of problems, I think.

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Psuedo-Ramdom Number Generator
by Vipul Ved Prakash 17 Dec '03

17 Dec '03

Don't know if its proper to post some trivial code snippets on the list. I felt some one just might find is useful. Vipul {********************************************************************* LFSR-based Psuedo Random Number Generator LFSR is a random number generator based on a Linear Feedback Shift Register The _tap_ sequence is 31, 6, 4, 2, 1 and 0. The primitive polynomial mod 2 formed from the tap sequence is x^32 + x^7 + x^5 + x^3 + x^2 + x + 1. The function LFSRRandom generates a 16-bit unsigned word. Function SetInit defines the initial parameters to run the generator with. It should be noted that a particular set of Initial parameters will always generate the same set of psuedo-random numbers. Vipul Ved Prakash <vipul(a)pobox.com> 25th Feb '95 **********************************************************************} uses crt; var lShiftReg : longint; wLastRandom : word; procedure LFSRRandom(var wGeneratedRandom : word); var i : integer; wNewRandom : word; lFnResult : longint; begin wNewRandom := 0; for i := random(3) to random(3) + 13 do begin lFnResult := ((lShiftReg shr 31) xor (lShiftReg shr 06) xor (lShiftReg shr 04) xor (lShiftReg shr 02) xor (lShiftReg shr 01) xor (lShiftReg)) and $1; lShiftReg := (lFnResult shl 31) or (lShiftReg shr 1); wNewRandom := wNewRandom or (lFnResult shl i) end; wGeneratedRandom := wLastRandom xor wNewRandom; wLastRandom := wNewRandom end; procedure paramError; begin writeln; writeln; writeln(#07,'Syntax : RGen <random number file> <number of randoms to be generated> '); writeln; halt; end; procedure setInit(x, y : longint; z : integer); begin if x <> 0 then lShiftReg := x else lShiftReg := 1; { Anything but 0 } wLastRandom := y; randseed := z; end; var i : longint; ch : char; wGeneratedRandom : word; ranfile : text; S : string; number : longint; code : integer; dummy : integer; count : integer; begin count := 0; clrscr; setInit(4,5,10); if (paramcount < 2) then paramerror else assign(ranfile, paramstr(1)); rewrite(ranfile); val(paramstr(2), number, code); if code <> 0 then paramerror; for i := 1 to number do begin count := count + 1; LFSRRandom(wGeneratedRandom); str(wGeneratedRandom, S); writeln(ranfile, S); if count > 100 then begin count := 0; write('.'); {Write a dot after every 100 numbers} end; end; close(ranfile); writeln; writeln('Done. Press a key to exit...'); ch := readkey; writeln; end. .od8888bo. \|/ .d%::::88::888b. (@ @) .d888::::::::8:888%. ------------------oOO-(_)-OOo----------------- 88888:::::::88888::%. You walk across with your flowers in your hand d888888:::88;888888::b Trying to tell me no one understands 888888888:888888888888 Trade in your hours for a hand full of dimes Y8888888::::::888888%P Gonna make it baby in our prime. '8888888:::::::8888:%' ---------------------------------------------- '88888888:::888888%' Vipul Ved Prakash Fax : +91-11-3328849 '8888888::88888%' Positive Ideas. Internet : vipul(a)pobox.com '"Y88%B8P"' ---------------------------------------------- PGP Key : Finger <vipul(a)pobox.com> PGP Key fingerprint = 35 FF A2 CA BD 6B 80 82 61 30 F2 23 96 93 77 E4 ~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=~-=

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Re: New crypto bill to be introduced
by jim bell 17 Dec '03

17 Dec '03

At 11:35 AM 3/30/96 -0500, Declan B. McCullagh wrote: >A few responses to Jim Bell: > >* Why would Sen. Burns introduce *this* particular crypto bill? Would >you believe that he wanted to appear cyber-clueful and net-friendly, but >didn't know exactly how to do that -- so certain people suggested that >this bill would be an appropriate way to do it? I'm well aware of symbolic gestures. Maybe this is one of them. But having not seen it yet it's who knows how worthy it is. I'm wondering when somebody is going to post it. I'm also waiting for those people who claimed that the Leahy bill was dead (for lack-of-time reasons if nothing else) to express the same opinion of this newer bill. Not that I want it dead; I just want to see if people are using consistent levels of logic. > >* Why would Sen. Burns introduce this particular bill *now*? One word: CFP. Yes? >* Why would Jim Bell post anonymously? He writes: >> That is a silly conclusion. The primary reason for anonymity with such >> postings is to avoid controversy being associated with one's name. I, as > >No, the primary reason for anonymity is to avoid being *associated* with >one's name. I know this may be attributing an undeserved sense of >precedence, but perhaps Jim Bell has realized that his opinions are >discarded out-of-hand by many on this list, so he posts anonymously to >regain some credibility. A message from anonymous would also work nicely >to reinforce his own position, allowing Jim Bell to claim additional >allies. In view of the fact that I've repeatedly publicly stated that I'm not aware of the Leahy-bill position of many if not most of the people listed, this seems unlikely. Like most of the people around here, I'm still waiting for some sort of showing that demonstrates why any given person was listed. I'm also waiting for counter-arguments: For example, statements by those listed, or others, explaining why they they should not have been listed. There is a distinct lack of documentation from BOTH sides. This leads me to suspect that there may really be only one side there: a straw man set up anonymously, and a bunch of people racing (non-anonymously, of course!) to knock him down. (Or possibly the original anonymous message was legit, and some others were posted to discredit the original post; I may not have those messages, and I haven't looked to see if they came from a stable anonymous address.) >Anyway, last night I sat next to Dorothy Denning on the bus to the EFF >Pioneer Awards reception and dinner, and we chatted for about 20 >minutes. She's a sweet old lady -- I can't think of anyone with whom >it's easier to agree to disagree. I asked her what she thought of a >number of people -- on Tim May she said: "Let's not talk about that." >She also said she's educating a House committee about crypto next week >-- I dearly hope our side will have some experts there as well. I think we need to ask ourselves why Denning keeps getting invited to these kinds of hearings. If the purpose is to get an accurate, unbiased view of encryption, I'm sure there's plenty of experts who could take her place without sharing her conveniently pro-government position. Never having seen such a hearing, I can't say for sure, but I suspect she's billed as an "encryption expert," when in fact she should be labelled as a "pro-government-biased encryption expert." Which, I suppose, is okay too, since all sides deserve to be heard. However, there should be no illusion about her point of view in such matters. Jim Bell jimbell(a)pacifier.com

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RE: Why Americans feel no compulsion to learn foreign langua
by jamesd＠echeque.com 17 Dec '03

17 Dec '03

A foreign language is useful only when there are large numbers of folk around who speak *one* *particular* foreign language, and these folk have knowledge and skills and power and wealth, for example if you are close neighbor of Germany or France. Americans feel no compulsion to learn foreign languages because the only time they need a foreign language is spanish to negotiate with whores. --------------------------------------------------------------------- | We have the right to defend ourselves | http://www.jim.com/jamesd/ and our property, because of the kind | of animals that we are. True law | James A. Donald derives from this right, not from the | arbitrary power of the state. | jamesd(a)echeque.com

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Re: Note: Problems Confronting the Asset Concealer [Part 1 of 2 of Volume I]
by jim bell 17 Dec '03

17 Dec '03

At 10:40 AM 3/30/96 -0500, Adam Shostack wrote: >Black Unicorn wrote: > >| While direct crypto relevance is limited, I thought that this work >| might interest many on the list and so I decided to post it in any >| event. The sections on fourth and fifth amendment protections, or >| lack thereof, for banking documents might shed some light on the >| eventual disposition of crypto keys under the same circumstances. > > Actually, this is not all all irrelevant. The question of how >a non-American living in the US can benefit from writign crypto code >has been a topic of discussion the last few days. A real >understanding of laundering is needed for the time between now and >when the bad guys stop trying to tax the non-physical. While your interest in Unicorn's essay is understandable, I think you've missed the problems with his point of view. He's apparently suffering from a disease which is supposed to be common among first year law students, specifically: Citing legal precedents as if they are some sort of justification for themselves. You correctly referred to "the bad guys" above as taxing the non-physical, so you're obviously on the right track. Unicorn, however, does not REALLY think of them as being "the bad guys," in fact his gravy train _depends_ on them! It is this conflict of interest which drives him to cite precedent after precedent as somehow supporting his nebulous positions. What he misses is that citing these precedents merely destroys whatever confidence we could have in the legal system. And since the legal system will be charged with interpreting whatever bills are passed by Congress, by extension these precedents show that all the all the potential benefits promised by bills such as Leahy's are conditional. Similarly, even a negative which appears minimal today could easily turn into a "killer" problem tomorrow. Peter Junger's analysis of the Leahy bill was far more useful, primarily because it focussed on the areas that this bill could be abused. Unicorn cites cases of abuse frequently, but does not identify them as such, leading me to conclude that all he can do is to cite precedent. Jim Bell jimbell(a)pacifier.com

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