President's Message

The OIMD&A is on its way!

You shall be receiving by post The Offshore Institute Membership Directory & Analysis 2003-2004 ('OIMD&A'). Your copy of the OIMD&A includes important articles of interest to professionals working within the international financial services industry.

2003 OI Events

As all are aware, 911, Iraq and SARS (and other factors) have contributed to a general reluctance on the part of professionals to attend conferences that are outside of their own city. Nevertheless, we are planning significant OI events in Labuan, in conjunction with Labuan week in September; the British Virgin Islands, in conjunction with the 3rd Annual Anti-Money Laundering Symposium, and new chapter launches in Geneva, Mauritius and Nevis. You will see more information regarding these events in this issue of the OFI. (read) However, we shall be forwarding shortly a specific mailing regarding events for the balance of the year.

OFI News: June 2003 Sector Developments

FATF to Publish Revised Forty Recommendations against Money Laundering

The Financial Action Task Force (FATF) will hold its final plenary meeting under the German Presidency in Berlin on 18-20 June 2003. Primary item on the agenda will be the adoption of the revised Forty Recommendations against money laundering, the world wide acclaimed international standards in this area, which will be fundamentally readjusted for the second time since the beginning of FATF's work in 1989. Therewith, for the first time consistent due diligence obligations will be established both in all financial as well as in non-financial sectors. The OECD Matters: Different Perspectives

OECD / FATF: List of non-cooperative countries and territories

Vanuatu has made additional Commitments in order to improve the transparency of its tax and regulatory systems and establish effective exchange of information for tax matters with OECD countries. As a result it has been removed from OECD List of Unco-operative Tax Havens.

Bahamas: keeping a watchful eye on the OECD

The OECD seems to be keeping promises not to impose sanctions on non-members that are not imposed on OECD member states. The Bahamian government revealed that it is critical, however, of the organization's record on its commitment to the level playing field principle. This situation could be further complicated by developments in the European Union. The Bahamian government is keeping a watchful eye on developments. Join the club, or not; what is the OECD for?

A useful booklet handed out by the OECD begins with a suitably apologetic tone. The OECD, it says, 'has been called a think tank, a monitoring agency, a rich man's club and an unacademic university.' The OECD sees itself as 'a steering group for the world economy'. There seems to be a growing body of opinion that the OECD may not be the right agency to do so.

European News

EU Constitutional Convention Moving Towards Harmonized Tax Regime

The forum drawing up a European constitution must soon tackle the politically explosive issue of EU tax harmonization, but several countries will resist pressure to give up their national veto, officials said.

EU fears a delay implementation financial control

Several of the ten countries set to accede to the European Union in 2004 are facing delays in the implementation of various necessary pieces of legislation, which could lead the EU to put in place 'protection clauses' against the countries in question.

Offshore Private Banking in decline: Swiss Private Banks a dying breed?

As a result of the current attacks on bank secrecy a five per cent decline in offshore banking revenues is predicted this year. 'The traditional European offshore model is dying. Banks must restructure to survive.'

Switzerland: Overwhelming support for financial privacy

The overwhelming majority of Swiss are in favor of protecting financial privacy vis-à-vis third parties. The Swiss attach great importance to the protection of financial privacy.

Switzerland / Isle of Man

The Isle of Man Government visited the Swiss capital in order to held talks with the Swiss authorities on European issues such as the Savings Tax Directive, and developments involving the OECD. They discussed such points as access to EU financial markets and the pros and cons of exchange of information or withholding tax as ways of co-operating with the EU savings tax directive.'

Isle of Man: ACCA warned by taxman

ACCA (the Association of Chartered Certified Accountants) has warned that the Inland Revenue is actively seeking obscure, and at times questionable, 'taxable opportunities' in small company structures.

Under the previously legislation contained in the Taxes Act, many husband and wife companies have now found themselves subject to unexpected tax demands from the Inland Revenue.

Isle of Man and Channel Islands to present 'United Front' on EU tax

Representatives from the Isle of Man, Jersey and Guernsey met last week to discuss the implications of the EU Savings Tax Directive. It was decided that the three jurisdictions should present an united front on any official communication with the EU regarding the issue.

Jersey Business braces itself for increasing scrutiny from IR

Trust and company businesses in Jersey should brace themselves for a perceptible increase in requests from the UK Inland Revenue in the near future, according to KPMG. A recent report by the National Audit Office said the Special Compliance Office of the IR considered the offshore sector a particular risk.

Jersey / BVI : New law allows BVI fund migration

16 May 2003 Five collective investment funds have moved from the British Virgin Islands to Jersey under new legislation. The funds are the first collective investment funds to migrate to Jersey from the BVI under new provisions of the Companies (Jersey) Law and the first unclassified funds to migrate to Jersey under these provisions.

Jersey: 'Huge challenge' faced by banks over EU's savings tax directive

The operational impact of new European Union demands on the finance industry has been described as 'hugely challenging'. The new systems required by the EU's savings tax directive will place a huge cost on the industry which will ultimately affect the customer.

Guernsey: creating a strong culture of compliance

The Guernsey Financial Services Commission is having to take on extra staff and expand into new premises to keep pace with regulatory developments in the global finance industry.

Gibraltar Moves Closer To EU Representation

The enfranchisement of Gibraltarians in European Parliament Elections moved a step closer when the UK's European Parliament (Representation) Bill was given Royal Assent. The new Act will now pave the way for Gibraltar to vote in European elections as part of either an English or Welsh constituency.

Cyprus To End Import Tax Relief On Raw Materials

May 2003 The Cypriot government has decided to end import duty relief on a wide range of raw materials whilst simultaneously lifting import duties on a variety of finished goods coming from the European Union.

US and Caribbean News

USA: The Center for Freedom and Prosperity:

Taxing Americans Working Overseas harms U.S. competitiveness

The Center for Freedom and Prosperity criticized the Senate Finance Committee for raising taxes on Americans who live and work overseas.

The proposed $35 billion tax increase on Americans working abroad however has been dropped as part of a preliminary compromise that House and Senate negotiators reached.

USA: Offshore Voluntary Compliance Initiative

More than 1,000 American taxpayers have just cut a deal with the Internal Revenue Service to avoid prosecution for keeping money in overseas accounts to evade taxes. The Offshore Voluntary Compliance Initiative netted 1,253 tax cheats. Based on applications reviewed so far, the program will generate at least $50 million in back taxes , and the figure could wind up being twice that.

US proposes Aid Package to Caribbean

According to recent reports the United States has earmarked $11 million in aid for the Caribbean region to take part in future FTAA (Free Trade Area of the Americas) negotiations and other international agreements.

CARICOM: Improving relations between the Caribbean Community and Cuba

The Foreign Ministers of the Caribbean Community considered recent developments in Cuba. The Foreign Ministers emphasized that the Caribbean Community has a long-standing tradition of respect for human rights and fundamental freedoms, adherence to the rule of law, and to the effective practice of representative democracy. The Foreign Ministers of the Caribbean Community urged the Government of Cuba to ensure greater transparency in its criminal justice system.

Bermuda could face exodus of US companies if tax bill becomes law

International companies could pack up and leave Bermuda because of plans to repeal tax exemptions to US citizens as part of a new tax bill approved last week by the US Senate Finance Committee.

Barbados Hosting Discussions On Negotiations With EU

Barbados is hosting a series of meetings this week on the subject of a regional Economic Partnership Arrangement (EPA) with the European Union. The EPA has been formed with the intent of giving the Caribbean region access to the European Free Trade Area.

BVI immobilizes bearer shares

The BVI Legislators have enacted a Bill that will provide for the immobilization of Bearer Shares, effective December 31st, 2004. With the immobilization of Bearer Shares all International Business Companies (IBC’s) will be required to establish and maintain a Register of Directors and appoint the first Director within 30 days of the incorporation of the company.

ASIA and PACIFIC News

Labuan: Number of offshore companies increased

The number of offshore companies incorporated in the Labuan International Offshore Financial Centre (IOFC) increased by 33.5% last year. According to the OECD/FATF Labuan IOFC does not appear to have a serious organized crime or money laundering problem. The OECD/FATF Evaluation Team wishes to conclude its report on Labuan by recognizing the many important measures mainland Malaysian and Labuan authorities have taken to ensure that the risk of money laundering in Labuan IOFC is minimized.

Saudi Government Expected To Offer Tax Breaks To Foreign Firms

The Saudi government is expected to cut the tax rate on foreign company profits from 45% to 25%. The measure now awaits the endorsement of the council of ministers. The new legislation additionally offers tax breaks on R&D spending and geological survey costs.

South Africa: Tax amnesty includes advisors

The Cape Town - Government has decided to include financial advisers in draft tax and foreign exchange amnesty legislation. People who have money offshore in contravention of exchange control and income tax laws will be free from criminal or civil prosecution, provided they successfully apply for amnesty between May 1 and October 31 this year.

Australia: Red light for key offshore tax change

Businesses are expected to save about $270 million over the next four years due to a series of proposed changes to the international business tax regime. Capital gains tax rules applying to investments of more than 10 per cent in foreign companies will be eased, and rules applying to managed funds that invest in foreign funds will be simplified.

New Zealand's Corporate Tax could deter future investment

A recently published study of worldwide corporate tax rates has found that the prevailing trend in the developed countries is tending towards lower rates of tax. Accordingly, New Zealand's 33% corporate tax rate is now relatively high in comparison with the global average, and one local expert fears that this will undermine the country's competitiveness.

June 2003 Articles

Matters of Interest to the International Offshore Financial Intermediary

The U.S. as an Offshore Jurisdiction
By: Walter H. DIAMOND

Although the recent wave of criticism of offshore operations by the world's leading trade and financial organizations as well as by Government agencies has forced implementation of tight restrictions against tax avoidance, there still are numerous advantages of going offshore. While one no longer should use an offshore jurisdiction to avoid taxation, there are many other benefits, including lowering taxes, available in today's world of globalization.

Offshore Financial Intermediaries and Private Banking Sector:
Present and future issues and opportunities
By: Samuel M. Lohman

The author is bullish on the future of the Offshore World. As long as there are persons who have accumulated wealth, there will be the need for professionals with expertise in wealth planning. Clients that are successful in their given discipline generally see the need to seek assistance in matters outside their expertise.

Marketing Offshore Financial Services
By: René A. KOOYMAN

The offshore sector has a long history. Each continent is serviced by offshore finance centers (OFCs) that have been structured decades ago. New Centers are formed. The debate upon increased regulation, good governance and increased competition is forcing the sector to professionalize.

Offshore structures for UK domiciled and resident individuals (or companies). By Simon Denton Simple offshore structures have ceased to be effective in reducing taxes due to a raft of anti-avoidance legislation. However, life insurance contracts may be used to 'decontrol' an offshore structure for tax purposes and allow an offshore structure to be most effective in deferring taxes indefinitely. Most governments treat insurance contracts very sympathetically.

The Kiss of Life: Innovation and adaptability in the Bahamas
By: Timothy Colclough

Like most offshore nations, The Bahamas continues to evolve. Ever striving to strengthen the product range and regulatory structure, the Bahamas are looking to place themselves ahead of competing nations and become the investor’s jurisdiction of choice. Case in point, and in addition to the positive changes already implemented, proposed legislation relating to new corporate structures and an upgrade of the Mutual Funds Act, among others, is currently being considered.

OI Membership Matters & Activity Reports

Changes in the OI Organization:

Resignation of Mr. Barry Engel from Executive Committee

We report to the members that Mr. Barry Engel's resignation from the Executive Committee has been reluctantly accepted. Mr. Engel's past contribution to The Offshore Institute can not be overstated. He served as President for two terms and provided leadership to the OI at a critical time in its development. We thank Mr. Engel and trust that he will support the growth of the Institute. We note that four candidates for Executive Committee are being reviewed by the Executive Committee at the moment. These discussions have been ongoing and will culminate with appointments within the next two months to be confirmed at the upcoming Annual General Meeting of The Offshore Institute.

Resignation of Mr. Reginald Newton as Registrar

We further report that Mr. Reginald Newton has resigned as Registrar of The Offshore Institute. He was a founding member of the OI and has supported the organization from its inception. We thank Mr. Newton and trust that he will support the growth of the Institute.

Likewise we report that 3 candidates Registrars are being considered by the Executive Committee at the moment and a successor should be appointed within the next 4 weeks.

OI Activity Reports:

The Offshore Institute sponsored and / or participated in the following conferences, activities and publications over the last few months:

Publications:
1st Issue 2003 Labuan Digest

Article interview of OI President Samuel M. Lohman 'Big Man on Campus'. This is the official publication of the Labuan International Financial Service Center and spotlighted Mr. Lohman’s interest in education and ethics as well as The Offshore Institute’s role in regards to the same concerning the international financial service industry in general.

International Investor, published by Sovereign Publications Limited and edited by Peter Shearlock

March 2003 This authoritative reference publication contained keynote articles from Alan Greenspan, chairman of the US Federal Reserve; Dr. Willem F. Duisenberg President of the European Central Bank; Samuel M. Lohman, President of the Offshore Institute. Mr. Lohman’s article was entitled: The Process of Change within the International Financial Service Industry: Are You Participating? Copies of this important publication are being distributed to each Offshore Institute Member as an additional Membership benefit.

London, The Wealth Management Congress 2003

19-22 May 2003 Over seventy speakers and 150 attendees from leading family offices, private banks, investment managers and wealth advisors. OI President, Lohman spoke on Why International Financial Service Centres Will Remain Important for Wealth Managers. For info on the conference contact www.wealthmanagementcongress.com. Copies of the presentation can be obtained by request to lohman@lohman-law.com.

Volume 1 Issue 1 The Step Journal

April 2003 Following discussions between The Offshore Institute President and representative of STEP, Keith Johnston, Policy and Communications Manager at STEP worldwide, quoted President Lohman within STEP’s official publication, as follows:

'The Offshore Institute suggests organizations like STEP and the ITPA should come together and create a Davos-like forum to respond to OECD. Certainly the efforts of the international financial centers need to be better organized, better funded and better led.'

USA and Europe In Business 2003

May 2003 The European Council of American Chambers of Commerce has published its year publication 2003. A contribution of the OI President has been included in the Finance & Investment section. Mr. Samuel Lohman stresses the fact that the financial service industry has an important role to play in global efforts to combat terrorism and crime. To be successful, industry changes must be widespread, comprehensive and evenly spread.

A copy of the article can be ordered at lohman@lohman-law.com

Offshore Institute Membership Directory 2003 - 2004 The Offshore Institute Membership Directory (OIMD&A) 2003 - 2004 has been published recently. The OIMD&A Directory combines an in-depth analyses of the developments in the sector. The Directory provides a complete overview of all OI members' contact details in alphabetical Country Listing and and a listing on Family Name..

Members and relevant providers that desire to receive a copy please contact Leonor Roque: +41 22.317.8020 , leonor@lohman-law.com

Activities: 2003 UK Chapter Meeting

16 April President Samuel Lohman addressed the UK Chapter during the course of one of the Chapter’s periodic meetings. The meeting took place at the lovely Chesterfield Hotel in London and the subject addressed was: The International Finance Services Industry has and is undergoing changes never before seen. Are we prepared for the future? Past and present practices, education and the future of our Industry.

The event was well attended and participants included former UK Member of Parliament, Mr. Bowen Wells. Appreciation to the leadership of the UK and the organizers of the April Chapter meeting.

2003 Florida Bar: Annual Wealth Protection Conference 'The Need for Asset Protection Grows Everyday'

9 May OI President represented The Offshore Institute at the gathering and spoke on The event was very well attended and copies of Mr. Lohman’s presentation can be obtained by contacting The event was very well attended and copies of Mr. Lohman’s presentation can be obtained by contacting lohman@lohman-law.com.

New Offshore Institute Chapter Formations

New chapters are scheduled to be formed this year in Mauritius, Nevis and Geneva. Information will be provided as the launch event venues and dates become fixed.

Denver Roundtable

Deputy President, Jerry James is organizing the Annual Denver Roundtable. Repeated discussions with Mr. James confirms that the event is to take place. However, of this writing the date and venue have yet to be confirmed. We shall keep you informed once we have these details from Jerry.

Annual Conference in Geneva

Discussions are in the final stages to hold the 2003 Annual Offshore Institute Conference in Geneva, Switzerland. The event will focus on new developments within the international financial service industry regarding products, services and jurisdictions of interest. The second day will focus on policy, legislation and regulation that affects the international financial service industry. We contemplate that our discussion with the world class conference organizing group will reach an agreement by the end of June for the event to take place during fiscal year 2003. You will be notified of the date, venue, speaking and sponsorship opportunities within the next two weeks.

Annual Offshore Institute Asia Pacific Regional Conference