Chapter 17 -  What You Need To Know About Real Estate & Terrorism Risk

Chapter 18 -  Solutions To New Regulatory Burdens and Risks
Case Study # 10 Inadequate Due Diligence
Case Study # 11  Be Careful When Banking Offshore
Case Study # 12  The Snitch Factor

Section Five - How To Build Safe Protected Wealth

Chapter 19 - New & Enhanced Post 9/11 Wealth Planning & Protection Techniques

Chapter 20 - How To Choose an Investment Or Wealth Planning Advisor 

Chapter 21 - The Swiss Inner Circle

Chapter 22 - Other Global Consultants, Publications & Organizations 

Section Six - You’ve Protected Your Wealth Now Restore Your Liberty 
 
Chapter 23 -  Back To The Articles: Restoring the Republic With the Swiss Confederation Institute     

Chapter 24 – FreedomFest: Where Free Minds Meet  

Chapter 25- Don't Delay: Start Today To Preserve Your Wealth & Liberty  

Chapter 26 - Are You Willing To Pay the High Price For Freedom?  

Case Studies  

Resource Guide  

About the Author  

THE SWISS Preserve SOLUTION
How To Preserve What Is Yours!  Ron Holland's politically incorrect guide to defending your wealth & liberty
from internal and external threats in our new 21st Century  

 

Chapter 18- Solutions to New Regulatory Burdens and Risks

Talking Points:  The horrendous attacks of 9/11 and the current War on Terror have created many more regulations.  This new regulatory climate is of great importance to foreign firms and also to you as a customer.  You need to deal with offshore financial partners in jurisdictions that do not deal with dirty money, since this can bring problems to lawful American investors even when you have done everything right.

"The bureaucrat's first objective, of course, is preservation of his job - provided by the big-government system, at the taxpayers expense. ...Whether real world problems get solved or not is of secondary importance.  It doesn't take much cynicism, in fact, to see that the bureaucrats have a vested interest in not having problems solved.  If the problems did not exist (or had been invented), there would be no reason for the bureaucrat to have a job"   --William Simon, former U.S Treasury Secretary

       The terrorist attacks of September 11, 2001, and the resulting Patriot Act and Homeland Security Act, have brought about unprecedented changes to both the U.S. and offshore investment business. We are now forced to say goodbye to the days when the United States had even a shred of respect for personal privacy and confidentiality.  Instead, we are now forced to welcome in a new world of total transparency in most financial affairs.  Following are some of the most important changes that American investors now have to deal with:

Enhanced Client Due Diligence Now Critical

       The due diligence process on clients from an offshore bank or a financial service provider has been an intrusive tactic forced on the world by the U.S. government. No one likes it-- from prospective clients to the financial institution-- but these “know your customer rules", which have long been required in the U.S., have now been effectively exported around the world.  Although intended to attack money-launders, drug dealers, and now terrorist elements, most experts readily admit this is just another step in Washington’s plans for global intrusion and control over world financial affairs.

       The new “due diligence” and “know your customer” rules are simply excuses for governments to pry or snoop into your financial affairs.  Under the pretext of terrorism, the requirement for financial intermediary due diligence has been transferred from Washington, who first demanded it, to the offshore financial institutions and your financial professional. This shift in regulatory responsibility from the U.S. regulatory authorities to offshore financial providers is the same thing that regulators have done to your lawyer, accountant, CPA, insurance agent, and stockbroker in the U.S. The new American Empire  bureaucracy is now global in nature and enforcement.

Case Study # 10 Inadequate Due Diligence

       Mr. John Doe lives in Atlanta, Georgia, and has been doing business with the offshore XYZ Bank for many years.  This bank has always provided him with excellent service and good performance. Of course, John follows all government required reporting and disclosure rules on his account and has religiously filed all the necessary forms since opening his account.

       One evening, CNN issues a news report stating that the U.S. authorities suspect that Sheik Mohammed, a major XYZ bank client, has been connected with terrorist activities in the Middle East. John remembers meeting this Sheik with the strange accent at an offshore investment conference a few years earlier, and occasionally he still receives some off color e-mails from him.  John assumes that this is none of his business, because after all, he is not involved with  Sheik and doubts the government is telling the truth in the first place.  As the bad publicity against the bank intensifies, John becomes concerned and finally decides to transfer his account to another institution. What might happen next? 

      John called his account manager and requested that his account, which was half invested in U.S. mutual funds, be liquidated in anticipation of a wire transfer to another bank. His first hint of a problem was when the banker apologized, indicating that the bank had been denied access to the U.S. financial markets because it had been named as a financial institution alleged to have facilitated transactions linked to a terrorist act.  John would have to wait considerably to transfer his account because under the post 9/11 terrorism national emergency, the federal government can designate any person or organization as a “terrorist” and without proof freeze their individual assets. 

            Panic began to set in when John realized that the U.S. mutual funds in his account were frozen and could not be liquidated as long as they were held in street name by the XYZ bank. But at least he could request a check from the cash balance in his account.  He immediately drove to downtown Atlanta and presented all of his domestic and foreign banking references, leaving out, of course, the XYZ bank.   He then completed the paperwork to open a new account at the prestigious Zurich-London Private Bank. He made an initial deposit into the new account of $50,000 from his local brokerage account. The XYZ bank had been good enough to fed-ex the check for his cash balance to his home address in suburban Atlanta and it promptly arrived the next day. He then took the check and deposited it into his new account.  He felt lucky to at least have half of his funds safe and out of the nightmare situation at XYZ Bank.

            The next morning, while driving to work, John received a call from his new banker informing him that his check would not clear from XYZ Bank. He then informed John that they had just received a phone call from the Financial Crimes Enforcement Network (FINCEN) asking about John’s relationship to the known terrorist Sheik Mohammed and his involvement with the XYZ terrorist bank. His new banker went on to inform him that John might be better off with his account at another bank. John was outraged and told his new banker that he would drop by and withdraw his initial deposit immediately. John was shocked to hear his banker reply, "I am sorry sir, your bank account here at Zurich-London Private Bank has been frozen due to your relationship with the known terrorist Sheik Mohammed."

            How did this happen?  John's e-mail address was on the Sheik’s confiscated computer. Therefore, he too was considered a terrorist suspect. 

            John now needed a drink, even this early in the morning, so he pulled into his favorite, though rarely used, 24 hour bar and had a couple of drinks. Feeling better, he handed the waitress his credit card and was waiting to sign the receipt when she returned saying his card was no good. This was the last straw. John called his local banker, a long-time golfing buddy, to ask what the heck was going on. He was kept on hold for 15 minutes until his friend finally answered with this shocking statement, "John, you were the last person I ever thought would be a traitor to our country. All of your accounts are frozen and, as for the house payment you owe us, it looks like this does not really matter because I hear the government is getting ready to seize your house, property, and automobiles."

            So what finally happened to poor John? After six months of numerous interviews with federal authorities and local police they indicated that he was free of all charges. It had actually all been a big mistake.  Sheik Mohammed, in fact, had merely been a high flying, heavy drinking guy out having some fun with the girls, dressed up as a Sheik on the financial conference circuit. He was wealthy with a substantial account at XYZ Bank but had no connection to terrorism.

            The federal authorities thanked John for his help and support during this time of terrorism and dropped him off at the closest bus stop.  But what price did John pay for "helping?"  He lost his job, his house and cars were repossessed for non-payment, all his bank accounts were frozen, and his offshore account had vanished in the bankruptcy of XYZ Bank.  What recourse did John have?  Could he sue the government or the agencies and employees who destroyed his life?   No!  The 9/11 Emergency Executive Order excluded the government and employees from all liability for actions such as this. 

            Is this a worse case scenario? Yes, but could it happen under the present environment in the United States?  Yes-- and this is another reason for investors to utilize highly respected offshore financial providers who also perform due diligence on clients, both for their protection and the protection of their clients.

            Improved bank due diligence would have meant this nightmare situation never would have happened.  First, although John might have been fooled into believing in the false identity of Sheik Mohammed, with extensive due diligence, XYZ Bank would have known exactly who the "Sheik" was.  Today, offshore financial institutions have the ability to vet clients and perform their due diligence by utilizing the data bases of the Homeland Security Act, credit reports, and other government resources to determine other agencies previously searching this data. They would have known the real identity, credit history, and everything necessary to immediately prove to a Washington fishing expedition who the Sheik really was. Second, if he had been a real Sheik and had been on any government watch, stop, or monitor list, the financial institution would have immediately ended the potential for any client relationship. Third, the XYZ Bank’s due diligence file would have also cleared John Doe of any relationship with terrorists.

            Thus, it is vitally important in this scary, post-9/11 world for detailed due diligence and client vetting.  It is crucial to protect both the financial institution and the client, as well as other clients that might get pulled into a nightmare situation as related above.  It is wrong for an American citizen to be forced to live in fear or something similar happening to them, but be prepared, because it could happen. 

Your Offshore Account Must Be Fully Compliant

            Hundreds of thousands of privacy-oriented offshore investors in America, Canada, and elsewhere have sometimes failed to report and pay taxes on offshore structures and reportable income due to ignorance, poor planning, bad advice, or thinking they would not get caught. This presents two problems, one for the investor caught for breaking the law, and another for the offshore financial institution involved. 

            Since 9/11, complete privacy and confidentiality is virtually dead, and some old-style structures and programs are being made retroactively illegal, taxable, and reportable. New government mandated changes now mean that numerous offshore clients are not in compliance with U.S. laws. Obviously, no offshore institution wants to be known for sheltering tax dodging clients and investors because this would lead to bad publicity, increased local regulations, and a possible run on the bank or institution as other clients flee the watchful eyes of the American regulators.  Frankly, since 9/11, old-style, non-reported accounts are bad for the institution and bad for the client because the mandated reporting, which is forced on the entire world by Washington, creates exploding liabilities for both parties.

            Alternatives for investors with offshore bank accounts are few and far between.  Why? First, some financial institutions are simply reporting to whatever jurisdictional regulator or Washington agency is demanding records. This is usually on a private basis so there is little publicity. The information is simply disclosed and the ultimate price paid by either the client or the beneficiaries is up to the tax official’s discretion. Second, the institution simply terminates the questionable account and the client is left with nowhere to reinvest the funds,  due to the tightened “know your customer” rules requiring the disclosure of the source of all funds.  Third, sometimes honorable financial institutions will maintain a problem account but with additional fees and service charges.  The question in this case then becomes for how long will they continue to do this?

What was good business practices for hundreds of years involving privacy, security, safety, and confidentiality, is now being turned upside down under the cover of the War On Terror.  This excuse is now affecting the entire financial world in the way that Washington’s earlier War on Drugs impacted the United States.

Case Study #11 Be Careful When Banking Offshore
John Doe has long maintained a legal and reportable offshore bank account in a small island jurisdiction for his import and export business. Over time many new clients had been referred to the bank from a high profile offshore financial newsletter promising investment returns and tax benefits far in excess of what John had received in his offshore account. 

Suddenly the financial press, both in his home country and the local money center, was filled with stories of an investigation by U.S. and local regulators into charges of money laundering and tax evading structures by many of the clients recommended by the “offshore expert.”   Although the  bank clients were supposedly protected by the tiny jurisdiction’s privacy and secrecy laws, the bank quickly caved in to the foreign authorities when management discovered the U.S. could basically shut down their ability to liquidate American investments and transmit funds to or from the United States.  John’s name as a bank client came up on the list of accounts the bank privately submitted to the U.S. authorities under duress and threat and also on a U.S. Treasury list of foreign financial account filings. John was in for close scrutiny and repeated audits which resulted in much of his offshore account funds going to pay lawyer and accountant bills before he was finally cleared of all suspicion of illegal offshore activities.

So you see how due diligence can work both ways. First of all, smart offshore clients should closely review and do their own personal due diligence on a financial institution from the perspective of a potential government regulator.  One should always consider the following questions when selecting a financial institution:

Does the financial institution and, more importantly, its representatives or referrers behave in an open and conservative manner following all the necessary marketing and disclosure regulations now required in our post 9/11 world?

Is the institution or their services promoted by questionable marketing and advertising entities, which elevate the profile and foreign regulatory risk toward the institution?  For example if they over promise performance and advocate questionable tax benefits, they eventually will suffer regulatory problems which, as you can see from the above case study, can be passed on to you.

The solution is simple.  Deal with conservative, highly regulated offshore financial firms

Ron Fact, Book & Video Recommendations For This Page:
Due diligence is an over used term describing research on an investment, advisor or service. Adequate due diligence is difficult at best as most information on an investment or service is by its very nature usually prejudiced in favor of the investment by the seller or against the investment outlining the benefits of a competing investment service. The growth of the one world regulatory state thanks to Washington has produced a new kind of required due diligence where financial firms, bankers and providers must know their prospective customers and where the money comes from. This has destroyed most of the privacy of financial affairs around the world and this is the reason for the actions rather than terrorism, drugs etc.

Historically many banks and offshore financial firms were happy to offer their services to whatever clients walked through the door as their job was to provide investment management and financial services and not sink to the level of the snooping regulators. Today, as an American investor, you want your offshore banker or financial service provider to perform strong due diligence on all clients because you do not want your legal investment affairs to be caught up in the problems highlighted in the case studies above. It isn't right or fair for the rest of the financial world to be forced to become spies, snitches and undercover thugs for the bureaucracy against innocent investors out to legally protect their wealth from a corrupt system in their own home country but this is the world we live in today. Make sure your offshore financial provider protects themselves and you by performing strong due diligence on you and the source of your investment funds. If they don't, then go elsewhere. - Ron Holland

 

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