President's Message

Last year was a difficult transition year that required more time than expected in order to implement the OI President's 2001 defined objectives. However, the office met that challenge; 2001 accomplishments included: Re-focus on the OI founding principles of education and ethics; increased communication via conferences, roundtables, website and the introduction of the Offshore Financial Intermediary; increase in membership numbers ; further definition OI's valued assets (e.g. its members, important industry position, as well as growing database).

2002 promises to be an exciting year for the Offshore Institute. The OI President's 5 Objectives for 2002 were outlined at the Offshore Institute's Annual Conference on the 13th of November 2001. In short, we shall continue to use collective efforts to increase membership, monitor industry developments and encourage industry lobbyists sympathetic to the needs of the international financial service sector. Further, I outlined 5 additional objectives for 2002, as follows:

Encourage Executive Committee, Chapter and Regional Chair active involvement in reaching the OI's Objectives

It is critical to have the ongoing contribution of support, time, strategic planning, and recruitment contributions of the persons who hold positions of leadership within the Offshore Institute. You will see that each Executive Committee member will be participating actively in 2002 in order to assist the OI in reaching its agreed objectives. For instance, in 2002 educational events will be held in the jurisdictions where our valued Executive Committee members reside.

We also recognize that Executive Committee members as well as all members at large are our best potential sources for attracting new members to the Offshore Institute. Therefore, we have launched a program which invites each existing member of the Offshore Institute to introduce two qualified member candidates to the Offshore Institute.

2002 OI Roundtable, Regional and Annual Conferences with dates

In a related article within this edition of the Offshore Financial Intermediary you will find the "OI 2002 Roundtable, Regional and Annual Conference Schedule – "topics of interest to professionals in the international financial service sector", which outlines scheduled roundtable, regional and annual conferences for 2002. Support the OI events by your attendance.

Roundtables are intended to be informal gatherings after work whereat two or three 10 to 15 minute presentations are given on topics. Chapter chairs are to hold these events, which could coincide with a scheduled OI chapter meeting. Regional conferences are intended to be one to two day events, which are more formal than roundtables. Regional chairpersons are to hold such events, which could coincide with Executive Committee meetings. Executive Committee member David Chong is overseeing organization of the OI 2002 Asia-Pacific Regional Conference.

The Annual conference is intended to be a two and a half day formal event which enables members to congregate and for the Offshore Institute to conduct its annual general meeting and otherwise address formal corporate business. Executive Committee member Barry Engel is overseeing organization of the OI 2002 Annual Conference. If you are interested in organizing, attending, and / or participating at one of the OI 2002 events, please contact the President's personal assistant at leonor@lsfa-law.com.

Appointment of Local and Regional Chairperson

Identifying industry leaders that see the benefits of assisting the OI in building its presence in their region continues to be a presidential priority. We are currently in discussions with strategically located members who are interested in becoming OI chapter or regional chairpersons. Once the requisite number of new members is recruited, the driving member is eligible to become chapter or regional chair. The chapter is typically launched at a roundtable where new member certificates are distributed and the chapter chair is appointed. I invite interested members that are willing to be involved, to contact us at info@offshoreinstitute.org for further details.

Establish informal "Member's Committee" of OI Industry Leaders

An informal "Member's Committee" composed of leading professionals strategically located throughout the world has been established. The Member's Committee will maintain contact with the President and have monthly phone conference to update each other on matters relating to developments in their region relating to OI and related matters. The initial valued Member's Committee consists of Mr. Ian Le Breton (London), Mr. Anthony Bristol (St. Lucia), Ms. Kimberly Smith (Los Angeles), Mr. Alexandre Schwab (Geneva) and Rene Kooyman (Geneva / Amsterdam).

Provide Meaningful Services to Members

OI Member benefits include roundtable, regional and annual conferences which provide important opportunities to network with other members and guests, remain informed of industry developments, and remain involved in the Institute. The OI's official website and e-based magazine The Offshore Financial Intermediary allow members platforms to remain informed as well as communicate messages to other OI members and contacts located throughout the world.

In 2001, additional membership benefits developed included: the new OI brochure and informational flyer, conference discounts, numerous professional networking opportunities, member recommendations (e.g. government regulators), broadcast e-mail communication to members, gateway for members to attend and speak at conferences, publish papers, as well as additional ad hoc benefits, etc.

For 2002, in addition to the foregoing, we are implementing the following:

2002 Diamond Annual Writing Award

Dorothy and Walter Diamond are valued and respected founding members of the Offshore Institute. Their individual and collective professional work over the years has assisted in defining the international financial service sector as well as tangibly furthering the overall level of education and ethics within the industry.In honor of the Diamonds, the Offshore Institute's Diamond Writing Award will be presented at the 2002 Offshore Institute annual conference – (see: Diamond Annual Writing Award). We invite interested members that are willing to be involved, to contact us at info@offshoreinstitute.org for further details.

University Education Program Project

Consistent with the OI's educational mandate, we have been in discussion with several respected Universities in order to enter into a formal agreement to offer an educational program. We have refined our search to 3 candidates and have focused discussions with one outstanding established University. We are using best efforts to make an important announcement concerning the proposed OI educational program within the first half of this year. You will be kept informed as discussions progress.

Develop and Publish Directory On-Line

In an effort to gain better communication with members and be consistent with current communication trends, in 2001, the President launched the Offshore Financial Intermediary – official on-line magazine of the Offshore Institute. Based upon the OFI's success, we are considering the benefits of providing our members with an on-line membership directory. You will be kept informed as discussions progress.

Offshore Institute Member E-mail address

We now have available an Offshore Instit ute specialized e-mail address capacity so OI members can have a personalized e-mail address such as: membername@offshoreinstitute.org. Contact President's personal assistant leonor@lsfa-law.com if you are interesting in taking advantage of this membership benefit.

I take pride in the successes of 2001 and warmly thank those that supported my volunteer efforts with their own. I am confident that our members take pride in their chosen career paths, affiliation with the Offshore Institute and the principles of education and ethics that the OI represents.

I look forward to hearing from you and the opportunity to meeting with you and one of the many OI events developed for 2002.

Samuel M. Lohman President
lohman@lsfa-law.com

January 2002 Articles

Matters of Interest to the International Offshore Financial Intermediary

OECD: Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes 27 October 2001 Corporate entities -- corporations, trusts, foundations and partnerships -- are , according to the OECD, often misused for money laundering, bribery and corruption, shielding assets from creditors, tax evasion, self-dealing, market fraud and other illicit activities. The OECD feels that the veil of secrecy they provide may also facilitate the flow of funds to terrorist organizations in some jurisdictions.

A new OECD publication, Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes, urges governments to combat such misuse by acting to ensure the availability of information about ownership and control.

Behind the Corporate Veil concludes that the types of corporate entities that are most frequently misused are those that provide the greatest degree of anonymity to their beneficial owners. In response, the OECD calls on governments and other relevant authorities to ensure they are able to obtain information on the beneficial ownership and control of corporate entities and, where appropriate, to share this information with law enforcement authorities domestically and internationally.

Specifically, the OECD recommends that governments should consider taking action to:

Require up-front disclosure of beneficial ownership and control information to the authorities upon the formation of the corporate vehicle;

Oblige intermediaries involved in the formation and management of corporate vehicles (such as company formation agents, trust companies, lawyers, trustees, and other professionals) to maintain such information;

Develop the appropriate law enforcement infrastructure to enable them to launch investigations into beneficial ownership and control when illicit activity is suspected.

For further information, please contact Stilpon Nestor (Tel: +33 1 49 10 43 40 or stilpon.nestor@oecd.org) in the OECD's Corporate Affairs Division. The full report can also be browsed for free in PDF format.

OECD Progress Report Harmful Tax Practices 14 October 2001 OECD countries have agreed on a number of modifications to the tax haven aspects of their efforts to eliminate harmful tax practices. These are set out in detail in a newly published Report which provides an update on all aspects of the work. The modifications relate to the commitments that the OECD is seeking from tax havens interested in co-operating with it to address harmful tax practices. The Report extends the time for making such commitments to 28 February 2002.

In developing this Report, the OECD seeks to establish a framework within which all countries can work together constructively to eliminate harmful tax practices with respect to highly mobile activities such as in the financial and service areas. The focus of the Report is on progress made in connection with the tax haven work. There are now a total of 11 committed jurisdictions -- Aruba, Bahrain, Bermuda, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, Netherlands Antilles, San Marino, Seychelles. In addition, Tonga has taken measures to eliminate its harmful tax practices and no longer meets the tax haven criteria.

In light of concerns raised regarding certain aspects of the harmful tax practices project, a number of modifications have been made to the tax haven work that are likely to facilitate future commitments by tax havens. These can be summarized as follows:

Commitments will be sought only with respect to the transparency and effective exchange of information criteria to determine which jurisdictions are considered uncooperative tax havens

The potential framework of coordinated defensive measures would not apply to uncooperative tax havens any earlier than it would apply to OECD Member countries with harmful preferential regimes

In order to ensure that committed jurisdictions have enough time to develop implementation plans, the time for making such plans has been extended to twelve months after the date of making the commitments.

The OECD recognizes that some jurisdictions have concerns about their administrative capacity to meet the commitments. OECD Member countries are now in the process of setting up a program to offer specific assistance to strengthen and improve the design of the administrative capacity of those jurisdictions which require assistance . More available at: www.oecd.org/daf/ctpa

FATF: Special Recommendations on Terrorist Financing

30 October 2001 At an extraordinary Plenary on the Financing of Terrorism held in Washington, D.C. the Financial Action Task Force (FATF) expanded its mission beyond money laundering. It will now also focus its energy and expertise on the world-wide effort to combat terrorist financing. The FATF agreed to and issued new international standards to combat terrorist financing, which it calls on all countries to adopt and implement. Implementing these Special Recommendations will deny terrorists and their supporters access to the international financial system. The agreement on the Special Recommendations commits members to:

Take immediate steps to ratify and implement the relevant United Nations instruments

Criminalize the financing of terrorism, terrorist acts and terrorist organizations.

Freeze and confiscate terrorist assets.

Report suspicious transactions linked to terrorism.

Provide the widest possible range of assistance to other countries’ law enforcement and regulatory authorities for terrorist financing investigations.

Impose anti-money laundering requirements on alternative remittance systems.

Strengthen customer identification measures in international and domestic wire transfers.

Ensure that entities, in particular non-profit organizations, cannot be misused to finance terrorism.

In order to secure the swift and effective implementation of these new standards, FATF agreed to the following Plan of Action:

31 December 2001, self-assessment by all FATF members against the Special Recommendations. This will include a commitment to come into compliance with the Special Recommendations by June 2002 and action plans addressing the implementation of Recommendations not already in place. All countries around the world will be invited to participate on the same terms as FATF members

February 2002, the development of additional guidance for financial institutions on the techniques and mechanisms used in the financing of terrorism

In June 2002, the initiation of a process to identify jurisdictions that lack appropriate measures to combat terrorist financing and discussion of next steps, including the possibility of counter-measures, for jurisdictions that do not counter terrorist financing

Regular publication by its members of the amount of suspected terrorist assets frozen, in accordance with the appropriate United Nations Security Council Resolutions

The provision by FATF members of technical assistance to non-members, as necessary, to assist them in complying with the Special Recommendations.

United Kingdom: the UK LIMITED LIABILITY PARTNERSHIPS (LLP)
By: Simon Denton (Correspondent)

04 December 2001 The United Kingdom ('UK') comprises England, Scotland, Northern Ireland and Wales and is one of the fifteen member states of the European Union. It has one of the world's leading centers for banking, insurance and other financial services: the London City. The UK has signed double taxation treaties with 100 countries and thus enjoys one of the most extensive double taxation treaty network in the world. Despite the fact that the UK is by no means a low tax country, UK companies and limited liability partnerships can be used effectively and advantageously in a tax planning structure.

THE UK LLP

This legal entity was created by the Limited Liability Partnerships Act 2000. The essential feature of a limited liability partnership (LLP) is that it combines the organizational flexibility and tax status of a partnership with limited liability for its members. This limited liability is possible because an LLP is a legal person separate from its members.

The LLP can do anything that a natural person could do. It has the ability to enter into contracts, own assets and will continue in existence in spite of any change in membership. Its existence as a separate legal entity makes it more closely akin to a company than to a partnership. The concept is similar to that of the US Limited Liability Corporation, a US legal entity that is not generally subject to US taxation. Although the LLP is a legal entity, it is taxed like a partnership so no tax is assessed on the LLP but profits are only taxed in the hands of the partners, so if a partner is a non-UK entity and does not trade in the UK, no UK tax will be liable. Thus it may be possible to create a non-UK taxable structure provided that the trading activities take place outside of the UK and the profits are generated from a non-UK source.

For the full text follow the UK LLP or contact Simon Denton (uk@sovereigngroup.com)

UK Corporation Tax

05 December 2001 The UK Treasury proposed earlier this year to introduce an exemption from UK corporation tax for the capital gains realized by UK companies from the disposal of substantial shareholdings in other companies. The recent pre-budget report confirmed that the Government will publish draft legislation for an exemption from Capital Gains Taxation on substantial shareholdings. The current proposals would require - in order to benefit from the exemption:

the UK holding company to be beneficially entitled to at least 20% of the investee company's ordinary share capital

which must be a trading company or a member of a trading group

and the shares would have to be held for at least 12 months prior to the disposal.

The Treasury aims to introduce the exemption from tax on capital gains in the 2002 Finance Act - this should mean that it would become effective from April 2002. With the already existing beneficial regime in the UK, the proposed changes, if enacted, will place the UK in a very strong competitive position with the other classic holding jurisdictions such as Holland and Luxembourg.

News Flash:

Capital gains to remain tax free in Switzerland

29 November 2001 Swiss voters have thrown out a proposed tax on capital gains. Nearly 70 per cent of voters came out against the proposed tax, which would have levied a 20 per cent tax on all gains above SFr 5,000 ($3,000). The initiative for a capital gains tax, inspired by the Trades Union Federation, would have levied a 20 per cent tax on all gains above SFr 5,000 ($3,000). The rejection of capital gains tax was applauded by both business and the Bankers Association. They said it would preserve Switzerland's leading role as a financial center, and save small- and medium-sized businesses from a crippling tax burden. The country's business federation had argued that a tax on capital gains was unnecessary because Switzerland already has a wealth tax. The rejection of capital gains tax leaves Switzerland and Greece as the only two industrialized nations not to levy taxes on increases in the value of assets.

The Isle of Man: 1 January 2002 'Date for Corporate Service Providers'

1 January 2002 The Financial Supervision Commission at the Isle of Man has announced that the Corporate Service Providers Act 2000 will become fully operational with effect from 1 January 2002. From this date, it will be illegal to carry on regulated Corporate Service Provider business without a license granted by the Commission. Any person who thinks they may need a license but has not yet applied, is urged to contact the Commission immediately in order to ensure that any necessary application is made on time. The Commission is currently completing the processing of the initial batch of license applications. Thereafter, licenses will be granted on a case-by-case basis. Further details: Paul de Weerd (paul.deweerd@fsc.gov.im) or telephone (01624) 689337

Liechtenstein To Take Action Over Anonymous Account Holders 31 December 2001 Liechtensteiner Vaterland

Transfer of Residence: Immigrating into Malta
By: Hans J. Hoegen Dijkhof (Correspondent)

18 December 2001 Malta is situated below Sicily, Italy. Malta might become a member of the European Union. According to polls half of the population is supporting this, while one quarter is rejecting this perspective. The last 10 years, the island experienced a spectacular growth. On this basis it would like to become member of the EU. According to the EU there are too many exemptions in the VAT system and imbalances in the income tax system. Social security has not yet reached the EU level. Furthermore, there should be some reforms in administration and judiciary. The European Commission also urges the Maltese Government to liberalize the economy and stop supporting ship building. Malta itself is desirous to limit second residences for foreigners.

For the full text: Immigrating to Malta or contact Hans Hoegen Dijkhof: (HD@HD-DUTCHLAWYERS.NL)

St Lucia Update
By: Nicholas John (Correspondent)

10 December 2001 St. Lucia’s International Financial Services Industry has put into place seven pieces of legislation designed to make the jurisdiction a modern center for carrying out international financial services at acceptable international standards. The first licenses to practice in the industry were issued in March of 2000. The past 18 months the government focused on establishing a solid foundation for the future development of the jurisdiction. The initial set of legislation that launched the jurisdiction includes:

The Registered Agents and Trustees Licensing Act

The International Business Companies Act

The International Trust Act

The International Banks Act

The Mutual Funds Act

The International Insurance Act

The Money Laundering (Prevention) Act.

The innovative legislative package is designed to meet the ever-changing requirements of the international financial community. For the full text: St. Lucia Update or contact Nicolas John jonnie@candw.lc.

OI Membership Activity Reports

We are delighted to report that there were no less than 5 official events in the 4th quarter of 2001 that the Offshore Institute coordinated, organized and / or otherwise was involved in as follows:

Report: 4th and 5th October 2001
Amsterdam Conference OI joint venture with Moda:
The Future of Offshore

Offshore Institute members, including President Emeritus Ben Bendelow and President Samuel M. Lohman, participated in the two-day event held in Amsterdam Raddisson SAS Hotel. The speakers addressed ways in which to "Maintain an Effective Offshore Strategy in a Fast Changing Regulatory Environment". Despite the terrible events of September 11th, the event was well attended. Mr. Bendelow reported on the current situation in the offshore financial service industry and Mr. Lohman reviewed matters relating to anti-money laundering compliance. In addition, Membership Coordinator, Mr. Rene Kooyman attended the conference and presented the benefits of being a member of the Offshore Institute to the attendees. The conference was a success and a number of attendees applied for and have been welcomed as new members of the OI.

Report: 16th October 2001

Huntington Beach, California: OI Roundtable 2001 Series:

Topics of Interest to Professionals in the International Financial Service Sectorn Istitute Member and California chapter coordinator Ms. Kimberly Smith of Guardian Finance hosted a gathering of professionals in Huntington Beach, California. OI President addressed the informal gathering and introduced the Offshore Institute as well as fundamental principles of international commercial and private planning. We express our gratitude to Ms. Smith for her successful effort in organizing and sponsoring the important roundtable event.

Report: 18th and 19th October 2001

Las Vegas Conference in conjunction with PESI: Offshore Practice & Procedure Offshore Institute members, including President Emeritus Barry Engel and President Samuel M. Lohman participated in the two-day event held in Los Vegas at the Aladdin Resort & Casino. The sixth annual event was chaired by President Barry Engel who also discussed use of offshore for asset protection planning among other topics. Other speakers included noted lawyer Alexander A. Bove, private banker Jamie Black and others. Mr. Lohman chaired the second day and also discussed matters relating to banking secrecy and anti-money laundering compliance. Once again, PESI and Mr. Engel were successful in providing a relevant and educational program that was extremely well attended at a venue that is always exciting.

Report: 24th and 25th of October 2001

Geneva Conference: Forum IMMOBANK 2001 organized by WAPIC: Les Investissements Immobilier en Europe Samuel M. Lohman as Offshore Institute President addressed a group of professionals involved in international real estate market on matters relating to anti-money laundering due diligence as it relates to their domain. The President of the Geneva Conseil d'Etat likewise addressed the international gathering.

Report: 11, 12, and 13 November 2001

Montreal OI 6th Annual Conference 2001 in conjunction with PESI Offshore Institute members from around the world gathered in beautiful Montreal Canada to listen to respected industry leaders on matters relating to the international financial service industry and the Offshore Institute in particular. The event began with a very well attended cocktail reception hosted by Mr. Reuben Tylor's organization Cook Islands Trust and Banking Corp. Ltd. Mr. Tylor and Mr. Lohman addressed the informal gathering and together launched the three-day event.

The next two days were filled with lively debate, presentations on important relevant topics as well as an opportunity for members to meet and exchange ideas. The highlight of the event was the excellent presentations of Walter and Dorothy Diamond who together discussed "New Strategies in a Restricted Offshore World".

The OI held its formal Annual Meeting, which will be reported shortly by Executive Committee member and secretariat, Reg Newton. Mr. Barry Engel coordinated the conference with PESI and we congratulate and express our appreciation to him as well.

Report: 27th of November 2001

Geneva: OI Roundtable 2001 Series:

Topics of Interest to Professionals in the International Financial Service Sector OI Caribbean Coordinator, Mr. Anthony Bristol, UK Chapter President Ian Le Breton, and Geneva Chapter Coordinator Alexandre Schwab each presented short informative presentations on topics of interest to professionals in the international financial service sector. The event was held in the Hotel Les Armures in the historic old town of Geneva. It was an informal gathering of professionals for Geneva, the UK and elsewhere. The event was well attended and is scheduled again for 2002.

Report: 29th of November 2001

London Chapter Meeting

Mr. Lohman accepted an invitation to attend a scheduled London chapter meeting. The Royal Bank of Scotland graciously provided the venue and refreshments as well. At the onset of the meeting, Mr. Lohman was allowed a few minutes to present UK Chapter President Mr. Ian Le Breton with a small gift to reflect the OI's appreciation for the strong leadership and support that he has given to the OI over the years. Thereafter, Mr. Simon Denton of The Sovereign Group gave an excellent presentation on UK limited Liability Companies.

OI 2002 Roundtable, Regional and Annual Conference Schedule

The 1st Annual Asia Pacific Regional Conference

12th & 13th September, Singapore

The Offshore Institute Annual Conference 2002

10th 11th October, Venue: to be advised

The 1st Annual Caribbean Regional Conference

To be confirmed

Round Tables

Jersey: 18th April
Denver: 20th June
St Lucia: July
California: 24th September
Geneva: 28th November
British Virgin Islands
Barbados: to be advised
Amsterdam: to be advised
Slovak Republic: to be advised
Czech Republic: to be advised

Provisional UK Chapter Meeting Event Dates: