President's Message

Further to the Offshore Institute's objectives of promoting education and ethics within the international financial service sector, herein you will find an update on the US Qualified Intermediary rules, a balanced review of the OECD's 'February 28th Commitment Letter' deadline from the perspective of the OECD and Mr. Dan Mitchell of of the Washington DC based Heritage Foundation.

As President of the Offshore Institute, I take particular pride in noting that we have recieved no less than 27 new member applications since the January issue of the OFI. The applications include individuals from varying backgrounds ranging from professionals with many years of experience in the international financial service sector to successful entrepreneurs that are interested in gaining inside education and exposure to the OI member network throughout the world. In the usual manner, each application will be circulated to Executive Committee members for review, comment and / or approval. The next issue of the OFI shall report the names of the successful applicants. Needless to say, we welcome each application with open arms and are proud of the number that have been received.

We are confident that you will enjoy reading this issue of the OFI as much as we enjoyed making it available. As always we invite your comments and support. If you like what you read and you have received this issue of the OFI indirectly, then let us have your Email address and we will see to it that you will receive the next issue directly.

Samuel M. Lohman
President, Offshore Institute
lohman@lsfa-law.com

March 2002 Articles Matters of Interest to the International Offshore Financial Intermediary

U.S. Qualified Intermediary: One Year On Bankers (and others) Anxiously Await Phase II
By: Edward Flaherty

Mr. Edward Flaherty reports that with the passing of the one year anniversary of the 'qualified intermediary' ('QI') agreements between the US Internal Revenue Service and bankers from around the world, the QI's are now bracing for the real bite of the QI regime to kick in.

Mr. Flaherty's article gives a brief overview of the QI to date and speculates on what non-US banks and financial intermediaries can look forward to, at least over the next two years. (read)

February 28 2002 The OECD Matters: 2 Perspectives

The OECD's February 28th deadline for receiving 'commitment letters' has come and gone. The OFI provides a balanced review of this important date, from the perspective of Mr. Nicholas Bray of the OECD and Mr. Dan Mitchell of of the Washington DC based Heritage Foundation.

OECD's Perspective: 'Progress Report'

The OECD reports that it welcomes the commitments made in recent weeks by jurisdictions providing offshore financial services to co-operate with OECD countries in addressing harmful tax practices. A number of commitments have been accepted by the OECD's Committee on Fiscal Affairs and publicly announced ahead of the OECD's 28 February 2002 deadline for receiving such commitments. Other proposed commitments received by the OECD are now under review. (read)

Dan Mitchell's Perspective: 'No Meaningful Committment'

Mr. Mitchell outlines how the February 28 2002 deadline, previously set by the OECD to receive so-called commitment letters from jurisdictions, has past and the OECD '...did not receive a single meaningful 'commitment'. Most low tax-tax jurisdictions ignored the OECD's imperialist demands'. (read)

OFI News In Brief: March 2002

Switzerland Voters Approve to Join the UN

The Swiss voters have spoken. In a referendum the Swiss voted with an ample majority for joining the United Nations. The government and the international press widely welcomed Switzerland’s vote to join the United Nations. Opponents however have warned that the vote 'will have financial and economical consequences.... foreign confidence in Switzerland will fall'. (read)

FATF Self-assessment exercise

At the Global Forum the FATF announced the completion of the first phase of a self-assessment exercise of its members against the Eight Special Recommendations to counter the financing of terrorism. The Forum called on all jurisdictions in the world to undergo a self-assessment exercise. (read)

Basel Committee: Know Your Customer’ rules

The Basel Committee on Banking Supervision issued guidance to banks and banking supervisors on customer due diligence processes last October, setting out minimum standards for the development of appropriate practices. Committee declared that clear and comprehensive ‘Know Your Customer’ rules are needed if banks are to avoid being used to transfer illicit funds for criminals, corrupt officials and terrorists. (read)

Additional OFI News In Brief:
UK Chapter Special Feature Section

The United Kingdom Chapter of the Offshore Institute through its Vice President, Simon Denton, reports on news from around the world.

The Offshore Institute and the OFI are grateful to the UK Chapter for providing this Special Feature Section addressing the issues and for contributing their time & effort in bringing such information to the attention of the Offshore Community. For comments and further information on the UK Chapter contact:

Simon Denton, Vice President UK Chapter
Sovereign Corporate & Fiscal Services Ltd
1st Floor Victory House 99 –101 Regent Street London W1B 4EZ
Tel + 44 (0) 207 479 7070 Fax + 44 (0) 207 439 4436
E-mail: sdenton@sovereigngroup.com
Website: http://www.sovereigngroup.com

EU to open information exchange talks

EU Finance Ministers reached agreement last October on a mandate to authorize the opening of a formal phase of savings taxation negotiations with key non-EU countries on ways to tackle tax evasion. The aim of the talks is to persuade the USA, Switzerland, Liechtenstein, San Marino, Monaco and Andorra to agree to adopt anti-tax evasion measures. (read)

OECD modifies harmful tax initiative

Mr. Denton further reports that the OECD formally modified the tax haven aspects of its initiative to eliminate harmful tax practices by removing the 'no or nominal taxes' and 'no substantial activities' elements from the commitments it is seeking from co-operating jurisdictions. Commitments from listed jurisdictions will now be sought only with respect to the transparency and effective exchange of information criteria. (read)

OECD exchange of information

The OECD has indicated that all Offshore Financial Centers would be required to introduce procedures for exchange of information upon request for criminal tax matters by the end of 2003 and on civil tax matters by the end of 2005. (read)

International Tax and Investment Organization opposes clamping of corporate vehicles

The ITIO - a committee set up to help smaller low tax jurisdictions respond to OECD and FATF demands - has accused OECD of double standards in its treatment of offshore taxation and corporate vehicles. (read)

EUROPEAN NEWS:

Isle of Man corporate service providers regime The Corporate Service Providers Act became fully operational on 1 January 2002. From this date, it became illegal to carry on regulated Corporate Service Provider business without a licence granted by the Financial Supervision Commission. The Financial Supervision Commission (FSC) has issued a consultative paper on a new Companies (Amendment) Bill. (read)

Gibraltar rejects joint sovereignty talks

The UK and Spain have brought forward the target date for agreement on a new constitutional settlement for Gibraltar to this summer. They had previously set a deadline for the end of 2002. (read)

Jersey Criminal Justice Law

The Jersey Government has called on the OECD to provide a level playing field in terms of international tax initiatives. Mr John Mills, Jersey's civil servant, said the move was necessary to prevent the island's businesses moving to Switzerland. (read)

Cyprus approves tax reforms for EU membership

The Cyprus cabinet approved radical tax reform plans last November as part of the preparations for membership of the European Union. (read)

UNITED STATES NEWS:

US Patriot Act tightens 'offshore' rules

President Bush signed the USA Patriot Act into law on 26 October 2001. The Act contains provisions to strengthen anti-money laundering rules and ...special scrutiny to foreign jurisdictions, financial institutions operating outside the US, and classes of international transactions or types of accounts that pose particular, identifiable opportunities for criminal abuse. (read)

CARIBBEAN NEWS:

BVI to establish Financial Services Commission

At the BVI an independent regulatory body is to be established early this year under the Financial Services Commission Bill. BVI has delayed announcing changes to its legislation and procedures for as long as possible. (read)

Cayman Islands sign US Agreement

The Cayman Islands Government signed an agreement with the US to provide for exchange of information, upon request, for criminal tax evasion, civil and administrative tax matters relating to US federal income tax. (read)

Netherlands Antilles

The new Kingdom Tax Treaty between the Netherlands and the Netherlands Antilles was due to be ratified by the end of last year. Ratification of the treaty will enable implementation of the New Fiscal Regime (NFR). (read)

FAR EAST NEWS:

Mauritius makes changes to Companies Act

The President of Mauritius assented to three pieces of new legislation to upgrade the regulatory framework and the key underlying financial services structures last December. (read)

UAE approves Anti-Money Laundering Bill

The United Arab Emirates (UAE) was identified as a conduit for funds tied to the 11 September terrorist attacks. Its Central Bank froze accounts in respect of a US list of people connected to the attacks. A bill against money-laundering was approved by the Council of Ministers. (read)

Hong Kong: A Broader-Based Tax System?

The Advisory Committee on New Broad-based Taxes issued a consultation document last year types of broad-based taxes suitable for Hong Kong. (read)

OI Membership Matters & Activity Reports

The 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 awarded at the Offshore Institute’s annual conference. (read)

An informal Member's Group has been formed which consists of active OI members from strategic locations throughout the world. Committee members are: Mr. Anthony Bristol (Caribbean), Mr. Simon Denton (UK), Ms. Kimberly Smith (USA), Mr. Ian Le Breton (UK), Mr. Rene Kooyman (Geneva) and Daniel Kratky (Slovakia).

The focus of the Member's Group's first discussion was the OI's on-line presence. The conclusions reached were communicated to Executive Committee Member, Mr. Jerry James who will oversee the website update. I thank each individual within the Member's Group for the time and support that they have given to the President; their individual and collective ideas are inspiring.

Further, we report that Mr. Daniel Kratky of the Czech and Slovak Republics has taken on the responsibility of Regional Coordinator for this important part of the world. The President believes Mr. Kratky will be an important force in assisting the OI in developing this region and providing educational support, access to the OI network of professionals, and otherwise forward the objectives of the Offshore Institute. Congratulations Daniel and we look forward to working with you. (see related article below)

Please note the upcoming OI Roundtable Conference scheduled for 18th of April in Jersey. Executive Committee member and President Emeritus, Mr. Ben Bendelow is overseeing the organization of the same. You will receive additional information in regards to that event in due course. Please further note the New Shore Access 102 educational program scheduled for April 21 - 27, 2002.

Mr Daniel J. Kratky appointed as Regional Coordinator Eastern European region

In February Daniel J. Kratky was appointed as Regional Coordinator for the Eastern European Region. As it was stated by the President of Offshore Institute Mr. Samuel M. Lohman during the signing of the contract, following his appointment as Regional Coordinator of the Offshore Institute Mr. Daniel J. Kratky will be responsible for the development of membership in the region of Eastern Europe. While being in this capacity he will pay special attention to the development of Offshore Institute's membership in Slovakia and in the Czech Republic. Potential members of Offshore Institute in Slovakia will include legal advisors, bankers, financial and taxation professionals and advisors as well as managers of large companies who are already active or are planning their activities in offshore industry and who at the same time will be able to meet the professional and moral criteria of the OI. A number of targets will be essential in the coming period: