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The Almighty Buck

Nauru: Real life Kinakuta 162

Posted by CmdrTaco from the but-how-do-you-eat-your-captain-crunch? dept.
23mcgee writes "Today's washington Post has a story about a small Island in the pacific named Nauru. After exhausting it single natural resource, geographically remote Nauru is reinventing itself as an offshore banking center that provides it's customers the means to hide their transactions -- an offshore haven similar to Kinakuta, the fictional data haven in a Slashdot favorite; Neil Stephenson's Cryptonomicon. "
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Nauru: Real life Kinakuta More

Nauru: Real life Kinakuta

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  • I've always been confused by hording dollars to offshore (or Swiss) accounts to avoid taxes, etc. How can it work. You're taxed on the money you make from your paycheck.


    I'm not sure about the US, but us Canadians have to declare any foreign income as well. So I'm confused.


    Can anyone enlighten me?

  • I think this demonstrates that much as we might want the Net to be sovereign, the real world and real geography-specific legal systems are going to dictate the way the web evolves. Nauru's a start, though - an anonymizer for cash! Now that's what I need when my 52% French tax bill comes due.
  • Quick, we gotta get our hands on it before the dentist does.

    SIR, ARE YOU FUCKING WITH ME, SIR?


    ------------------------------------------------ ----------
  • Of course they have other resources (chocolate & swatches mainly haha), but they already do the anonymous banking thing, right?

    Many countries are doing this already -- Dubai in the United Arab Emirates is trying to move away from dependence on oil reserves towards, as here, banking and finance, to cite an example off the top of my head. Can this kind of thing work everywhere? Bleed the land dry, then run the economy by skimming cash off other lands?



  • There are several possibilities:

    1.) Many countries (such as the Cayman Islands) will offer you residency if you purchase property in the Islands. If you've got enough money to hide in the Caymans this isn't a problem. From that point you're a Citizen of THERE, and not of the US and no longer bound by silly IRS codes.

    2.) Offshore banking makes it hard for the IRS to prove income. Transactions greater than $10,000 to/from a US bank get reported directly to the IRS. That's not the case in the "money havens", since they are not bound by US law. You could transfer monies to and from your brokerage account (in another country, England maybe? Who knows?) where you could make capital gains on investments, but the IRS has no way of obtaining the information.

    Hope this helps clear up the confusion.

  • You can use this to hide illegal transactions, overseas transactions (for example, income from a foreign country), etc. I'm sure others can come up with more ideas.
  • Probably never read the book.

    -----------

    "You can't shake the Devil's hand and say you're only kidding."

  • Re:offshore confusion (Score:4)

    by georgeha ( 43752 ) on Thursday October 28, 1999 @07:18AM (#1580819) Homepage
    I've always been confused by hording dollars to offshore (or Swiss) accounts to avoid taxes, etc. How can it work. You're taxed on the money you make from your paycheck.

    I'm not an expert on offshore banking, but I'm pretty sure that if you're drawing a paycheck, you're probably not a candidate.

    However, if you have a large income strictly in cash (10s, 20, 50s, 100s), once you find a way to get that cash overseas, without federal knowledge (aka money laundering), you can then safely deposit in your offshore bank account.

    There are other situations I can imagine. I'll give your company this contract, at this price, but you have to sweeten the pot with a deposit in this foreign account, and for your own sake you better draw it out of a unaccountable fund (hush fund), maybe lots of petty cash withdrawals, some funky depreciation schedules, oddly priced sales of new equipment, etc.

    To use the Cryptonomicon example, a Taiwanese clone maker solds thousands of PC's with unlicensed MW software. All the profits were lost apparently (a good accountant can do this, I know a little of accounting practices, and it seems like fiction writing at times), but they could have ended up in an offshore bank.

    In short, if you're a working stiff pulling down a weekly or monthly salary, there isn't much advantage to an offshore bank. If you're a drug dealer/smuggler or high placed government or corporate official, you might have need of sucha thing.

    George
  • About time someone other than the first post kiddies get the first post!

    I believe using offshore anonymous bank accounts are generally used for illegal or shady purposes, therefore I don't think tax laws matter all that much. (am I wrong?) The money can't be traced and therefore can't be classified as earned income.

    -----
  • This is far from off topic. Read the book and it might make a tad bit of sense ;) If anything some kindly moderator mark it up to funny. Or hell even witty.
    "We hope you find fun and laughter in the new millenium" - Top half of fastfood gamepiece
  • offshore banking has been around for awhile. i remember that in The Firm (book not the movie) the Cayman Islands were used as the bank to launder money. but there's also firms that specialize [curzoninc.com] in anonymity. They can forward mail, voicemail, email for you and set up anonymous accounts in different countries that have less restrictive laws about banking. I'd love to get an offshore account (even comes with a Visa bank card), but the $10,000 initial deposit requirement is a little steep.
  • I'd love to get an offshore account (even comes with a Visa bank card), but the $10,000 initial deposit requirement is a little steep.

    Even after you get the free toaster?

    George
  • Having a place where you can put money in anonymously is nothing new. I mean, the Swiss do it, more or less. So they're not novel.

    This would be big news if Nauru decided to alleviate the bank transactions on the island of any international control, including themselves. That was the major point in Cryptonomicon; that the only way to create a true data haven is to put it somewhere outside the influence of any country, period.

    That's when it would severely screw up the world's economy, because a perfectly anonymous electronic currency would be untaxable and uncheckable. That is, even by the bank itself, which is not the case of Swiss banks.

    And I still think the best place to put a data haven is on the Moon. :)

    "Knowledge = Power = Energy = Mass"

  • I've wondered about this myself, and while I'm still pretty ignorant of what actually happens, I have made some guesses. It seems to me that the best use of such bank accounts is for money that is gained through non-standard means which the government does not monitor. Suspicion would be raised if your account with a regular US bank were to get large infusions which weren't compatible with any reported income. Note that US banks are required by law to inform the government about transactions over US$10,000. If the government notices this discrepency, they may very well start investigating you, and you may be subject to such inconveniences as assessment of taxes, prosecution, etc.

    I figure I'll have at least one offshore bank account eventually, but I haven't developed a need for one yet. Or maybe I'm lying about that.

  • Nauru profits by charging fees: for example, $5,680 to establish an offshore bank and as much as $4,980 every year after that to keep the registration active. With markups, the prices advertised by middlemen run about $20,000 to get started.

    Heh heh. I could put a penny in a Nauru anonymous bank account, and no one would be the wiser!

    Let's just say this bank is not for you and me. They cost more than I had in a bank account my whole life.

    "Knowledge = Power = Energy = Mass"

  • My favorite part is:

    Nauru's president, Rene Harris, also declined to comment on the island's offshore services. "What's it got to do with you?" he asked angrily before hanging up.

    The disturbing thing is that after years of Bill Clinton biting his lip and trying to look remorseful, an attitude like that seems almost refreshing.

  • The US decides that they don't want so many people to be hiding their money here and they have a little police action against Nauru. I mean literally just send in a couple hundred marines and helicopters and take the place over, given the current ability of us presidents to use military force without congressional or UN (haha) approval I really don't think this is so farfeched. I'm all for undermining the us tax structure but I'm worried that if all of these tax shelters are used by mobsters then the rest of us common sensible self deterministic anarchists are never going to get to use them properly. Here is my suggestion, set up the pr functions on the island, get a big international data cable strung out there, then sink a big concrete submarine [popularmechanics.com] down there and keep all the data and money underwater, where a bunch of marines and helicopters can't just waltz in and get it. Then this would be a lot more like Cryptonomicon. and lord knows we need the world to be a lot more like that.
  • I have to ask: What does this have to do with the normal topics of /.?
    Just a very loose tie-in with encryption.
    Rob really needs to reel it in.
    /. is wandering farther and farther every day.
  • I thought that $10,000 was to simply *establish* a bank...

    Nauru profits by charging fees: for example, $5,680 to establish an offshore bank and as much as $4,980 every year after that to keep the registration active.

    .. Or are you referring to something else?

    Anyway, $10k to establish a bank is nothing. Am I misreading this?

  • I like the idea of tax reform better than OS hording. Imagine dribbling your money back in at 10K chunks... Naaahhh.. Tax reform is the way to go. You guys do vote ; don't you? Jamey
  • It is good for people to have a means to keep their transactions private from prying eyes. Combine this with encryption, and hopefully we'll soon have a financial system in which it's impossible for the Feds to keep track of our money no matter what they do. This has great implications for the future of the tax burden: the Federal government will simply run out of money and be forced to cut back. Most of the times, "money laundering" means hiding the proceeds of drug deals. Drugs should be legal anyway, so I don't have a problem with drug dealers using this method to hide their transactions. There are some crimes that legitimately should be stopped (swuch as hiring a hit man, but there are other means of catching those criminals, and I don't think it's worth endangering our financial security for the small number of cases wheretighter controls would catch criminals.
  • Instead of providing a constant stream of 'how to pimp out your linux box' articles slashdot has a broader base. Thats why i visit. I enjoy articles with 'loose tie-ins' because they are intressting. Everything geek.
  • A pacific island paradise for offshore banking is a pretty cool idea, but I'm wondering when we'll see data havens in the strictest sense of the word.

    Though it seems like a lot of the need for data storage in a legally-neutral locale could be alleviated by strong crypto, I still suspect that one day, we'll see something along the lines of vast server farms operating in jurisdictions largely untouchable by traditional institutions of law and order. What might some of the applications be? Aside from the obvious use indicated by the subject ;)

    Perhaps when coupled with highly secure (and secret) financial transactions, the black market might find itself with a whole new dimension...

    -jay
  • ...is not easy...

    From the article:
    Tracking Nauru banks is difficult, the State Department report said, because all "have the same post office box." The only visible presence offshore firms have on Nauru may be a wall display in a hallway of the Nauru Agency Corp., where their names are engraved in plastic.

    So the trick is to open your own BANK, not just an account with one of the banks...

    Check this out:
    In 1998, $70 billion was transferred from Russian banks to accounts of banks chartered in Nauru, primarily to evade taxes, Victor Melnikov, deputy chairman of the Russian central bank, said in an interview yesterday...The estimated volume of Nauru's Russian capital flow is so staggering as to strain credulity, some analysts said. In comparison, Russia's total exports amounted to only $74 billion last year, according to the International Monetary Fund.

    How about a Bank of Andover/Slashdot incorporated in Nauru?

    --diva

  • Re:Not quite Kinakuta (Score:1)

    by Anonymous Coward
    Here's the link: http://www.offshorebanking4u.com/ [offshorebanking4u.com]. On their application they say they cooperate with authorities to prevent fraud. However if you click around they do provide anonymous accounts for $5000 initial deposit. Also they accept deposits in e-gold.
  • how much do they charge for an ATM card??

  • ...will they be using Finux for their datahaven?

    W S B - transmitting from the beyond...

  • Re:hehe...bird crap (Score:1)

    by Anonymous Coward
    Smallest country is "Seaworld" (It has a longer title, I don't recall it.) Was founded when a retired army officer took over a British sea fort and declared independence. He shot at the navy when they went to try and reclaim it and has been a country ever since. (Although Britain doesn't recognise them :-) Has a population of two, now the kids have left home... issues his own passports & everything...


    [sillywiz]
  • account! bank ACCOUNT!
  • Unfortunately, the Swiss Banks have stopped using numbered (number-only) accouts. This was done upon the request of the U.S. so they could investigate potential suspects easier. From what I can tell, the Swiss are becoming less stalwart in their privacy issues, which allows places like this to fill the void.

    Rick
  • This -might- work. The Swiss banks have been under enormous pressure to back off the anonymous account stance for ages, and the Nazi gold that was found there (a few tens of billions of $'s worth) certainly didn't help their case. The Swiss Government seems to be more sympathetic to other nations than it's merchants, too.

    With Switzerland no longer the totally safe refuge it once was for tax exiles, the "instantaneously rich", and other such folk, it wasn't going to be long before someone started up an alternative.

    It's a pity that it doesn't sound like it's 100% computerised, complete with ultra-strong encryption, but rather a low-tech system. That leaves it very vulnerable, especially to armed nations, or larger criminal organisations. Even the locals might get a tad greedy.

    With electronic currancy, there's nothing physical to steal. This reduces the incentive to level the buildings, demolish the safes, and generally make a mess of the place. Physical storage, though, doesn't have that. There's something to see, something to take, and that is worrying. For them, anyway. Doesn't bother me, as I'll never have enough money to make it worth putting there.

    I expect one of three things, in their first 2-3 years of operation: An Island-wide civil war, an invasion by a foreign power (possibly the US, though France has never shown itself as caring of national sovereignty, as the New Zealanders discovered), or a heist that dwarfs Brinks-Matt and the Great Train Robbery combined.

  • find a way to get that cash overseas, without federal knowledge (aka money laundering)
    Quibble: Money laundering is not simply getting money out of the country without anyone noticing. Money laundering involves getting it back into the country in such a way that it appears to be legitimate income. This is important if you have a large amount of money derived from illegal activities.

    One simple way of laundering money is to get yourself one of these anonymous offshore bank accounts, then create a fictitious offshore company that hires you to perform expensive consulting work. You have really hired yourself, but it's hard to tell that's what has happened, and harder still to prove it. So you then submit work records and bills to the bogus company and get paid. Your income appears to be legitimate. Of course, this means you have to pay income tax on it, but at least you get to keep the rest, and you can pass an IRS audit with flying colors.

    This is great for relatively small amounts of money (say, up to a few million). There are much more sophisticated games you can play with things like currency futures trading if you really need to launder massive sums.

    There was a really interesting book (now out of print) called Power On Earth by Nick Tosches (New York: Arbor House, c. 1986) which covered the story of the Italian banker Michele Sindona, who was reputed to have ties to the Mafia and, by his own admission, knew some pretty shady characters. At one point in the book, Sindona gives a good overview of what money laundering is (and isn't) and several ways it can be done.

  • Hmmm... I disagree...I find thsi kind of thing interesting as I'm guessing many other "nerds" do. so it seems to fit quite well. I wouldn't mind seeing more of this kind of stuff, I get burned out on all of the Linux/Unix/etc stuff somtimes. Maybe Rob should start a new section ...something that deals with the frings nerd stuff.. like this..

  • an attitude like that seems almost refreshing. Not just refreshing, but quite frankly, justified. The US and Russia are complicit in any fraud that comes about. We're talking about a little island whose only resource is fossilized birdie doo. If they were really a problem, they'd lose their independence in a second. Frowning and saying "How awful, someone should do something" is TOTALLy unconvincing when you could end the problem within 24 hours. Given that the world super-powers don't really care, I don't think it's anyone else's concern.

    On a similar note, I don't think it's that different from a state deciding they'll make it cheap and easy to form a corporation, or that they won't charge income tax. Suddenly, all the other states begin losing income as businesses flock to the finance-friendly states.
  • I never knew there was such big market in fossilized bird droppings. Who would have thought that an entire islands ecomony was based on bird shit.
  • I wasn't totally sure about the particular's about money laundering, other than it was a way of taking money of dubious origin, and then somehow making it appear to be legitimate income.

    George

  • Not to in any way diminish Mr. Stephenson, who is one hell of an author, he was not the first to come up with the concept of the "Data haven". As early as 1988, Bruce Sterling imagined the concept with his Jamaican "Data Pirates" in Islands in the Net [amazon.com].


    However, Neil does get points for predicting the right hemisphere. :)



    --
  • There is no money there, just a president who will do anything for a quiet life. Just invading would not make the phony banks dissapear. Invading Liberia would not make all those dodgy shipping companies suddenly spend lots of money to make their ships safe.
  • The "offshore account" isn't terribly helpful to those of us that are employed; the money that comes to us has ample causes to be disclosed to organizations like the Internal Revenue Service (US), Inland Revenue Service (UK), or Revenue Canada (guess?).

    Offshore accounts are useful in keeping transfers of funds hidden once that money is sitting offshore.

    This would be useful for:

    • Making payments for questionable activities such as sales/purchases of illegal substances
    • Making payments for "consulting services."
    Note that transferring funds to and fro between Transparent Jurisdictions like Canada or the US and Opaque Jurisdictions like Lichtenstein or Switzerland or ... is:
    • Significantly inconvenient.

      In order for the important transfers to remain secret, you'd need to have a whole pile of accounts, some to be used for the "Opaque Transactions," and others to be used for "Transfers To/From Canada."

      One account is most definitely not enough, and the action of shifting money is also not convenient.

    • You don't use one of the "Hidden Accounts" to pay off your MasterCard bill, as that would expose its existence to domestic authorities.

      Ditto for any other situations where you need to have money in Canada to spend on things.

    • Note that interest rates on deposits in these foreign places are not likely to be terribly high.

      The tax havens are "capital rich," which means that based on supply+demand, interest rates will be low to nonexistent.

      The net effect of this is that you don't actually make money off of having money in the tax haven; all you do is to avoid being taxed at home.

    The net result of all of this is that there's probably little point to opening "tax haven" accounts unless you've got at least a few million dollars kicking around, or unless someone who would find it worthwhile to move money to a tax haven owes you payment for significant services.

    The people that would thus care about this might be:

    • Athletes, models, and the likes,
    • The vieux rich,
    • Organized crime figures.
  • Even the working stiffs pay income tax on intrest earned.
    With an off shore bank account such as this you could earn your money (paying income tax) then transfer it the the offshore account.

    From the offshore account you invest it. Intrest earned goes back to the offshore account. No tax's on the intrest.

    Yes this would probably be illegal.
  • But wasn't Freeside in Gibson's Neuromancer (1984 if I'm correct) a data haven, among other things?

    And then of course, Nicky Halflinger, computer prodigy, writes a massive tapeworm that protects his adopted community from being cracked as well as breaking into every secret database in the world and releasing it, in 1975's Shockwave Rider, by John Brunner.

    George
  • I think you can get a Swiss bank account with an initial deposit of $5000 if you want an oversea's account.
  • In Cryptomonicon the sultan of Kinakuta declared that they would not interfere with the transfer or storage of data. The idea was that that they would create a "data haven" where everything would be encrypted. They planned to use this data haven to provide information on protecting ourselves from holocausts. However they soon realized that most of their investors were pretty shady characters with a lot of money. In the process they discover a huge cache of gold and diamonds, etc. They realize that they can create their own currency (totally anonymous, digitally signed, electronic currency -- no paper trail of an sort on transactions transacted) and back up the currency with the discovered treasure.

    numb

    ?syntax error

  • No its not... (Score:4)

    by Hobbex ( 41473 ) on Thursday October 28, 1999 @08:08AM (#1580865)
    This is not a data haven in the Kinakuta way at all, its simply a the same kind of anonymous offshore banking that has been done on small island countries for many years now. Nothing actually goes on in the country, but because it can register companies, operating under its flag can be used to overcome all sorts of regulations. Its really not to different from convenience flagging of boats to get around safety regulations. Or cheap domain names (like Nuine, Cocos, and Turkmenistan).

    In a way its a sad story how this country which overspent its natural resources is now forced to prostitute itself to Russian organized crime in order to fund its budget. Not that I am against offshore banking (I am in principle against taxes), but still...

    However, if the article mentions that the country has 190 million dollars in a fund left from its wealthier days. Maybe, if the leaders are willing to play "dirty" against the big guys, doing a Cryptonomicum wouldn't be such a bad idea. How much would putting a good pipe to the island (or a permanent sattelite link) cost?

    I am doubtful of the realism of Stephensons vision however. If an offshore datahaven were to succeed with causing an upheaval in the western economies, you can bet your ass America wouldn't think twice before the island had a carrier permanently docked in its harbour. Its funny how much influence that can have over a very small country, huh?

    I mean, just look what happens when anything threatens the American oil market...

    The true datahaven can't be located in some physical place. It has to be nowhere, and it has to be everywhere. It will not gain its security by mountain vaults but by crypography, and it won't secure its existance by oceans but by being dynamic, distributed, and smart. Lately I have seen a few projects in the open source world aspiring towards solutions in this direction (Freenet, the Eternity system) and they are much better news in this front than the existance of roque island states.

    -
    /. is like a steer's horns, a point here, a point there and a lot of bull in between.
  • It states in the article several times that no money is physically transferred, to the island or to any other place.

    As a practical matter, it is only in the form of ledger entries that offshore dollars ordinarily pass through Nauru. The way the international banking system works, funds are electronically transferred to and from "correspondent accounts" that the Nauru-registered banks maintain in distant money centers such as New York.

    The system is as secure as the 'distant money centers' are. And it's all electronic.

  • I forgot to mention that using these "tax havens" to hide income is not, generally speaking, particularly legal if you're a resident of (say) Canada, the US, and other "less dodgy" nations.

    If you're a resident of Canada, for instance, Revenue Canada considers your income for tax purposes to include all world income, and that includes whatever you might be trying to hide by flowing it through a tax haven.

    Thus, if you don't leave Canada, probably taking on residency in one of the tax havens, the avoidance of tax represents tax evasion which is definitely against the law, and possibly a criminal act (as opposed to being "merely civil").

    Becoming an International Criminal may not be on the "top ten list" of things to do this week...

  • I never knew there was such big market in fossilized bird droppings. Who would have thought that an entire islands ecomony was based on bird shit.

    One word: fertilizer.

  • Strong encryption code that isn't supposed to get exported. thus the 'oops.'

    -----
  • certainly invading them would stop them from keeping money for people. At the very least they have an account system and records that could be
    impounded and have their lines of communication shut off. It's no the same as a ship registry it's got to be a physical place. That's the whole point of a data haven or tax shelter, the way the work is they physically reside in a place with non-disclosure laws, other than that it's jsut a bank. A bank can't function w/o a staff and a phone and a database.

    so there
  • That $5680 wasn't the fee for opening a mere bank account; that was the fee for establishing your own BANK.

    Just a slight difference...

  • If I was ever to consider an offshore account, it wouldn't be from tax concerns - while I dislike the income tax for its privacy invasiveness, USAmericans pay low taxes compared to other nations. (Though there are still many changes I'd like to see - a general shift towards consumption taxes, raise the taxes on capital gains for absentee ownership and other forms of unearned income while cutting payroll taxes, and direct tax credits (rather than deductions) for charitable contributions, among others. But I ain't holding my breath.)

    If I had substantial assests, I'd be using them to make myself a royal pain in the ass to the powers that be. I'd therefore be concerned about making someone's shit list and having the hammer of civil forfeiture [fear.org] - whereby the state can take anything and everything you own without even charging you with a crime, much allowing you a trial by a jury - directed against me.

  • /. has a focus?

    I thought we got rid of that years ago.

    focus! [slashdot.org]

    hocus focus [slashdot.org]

    Just two quick examples of Rob reeling it in from this category alone.

    /. needs focus like I need a real job.
  • Do you really believe that the policies of the US government have anything at all to do with what the voters want?

  • But they don't need physical defenses. The bank doesn't exist on the island, and the island itself is part of the U.N. If the U.S. waltzes in and tries to take it over, they'll get themselves into a lot of trouble.

  • From that point you're a Citizen of THERE, and not of the US and no longer bound by silly IRS codes

    Sadly, not so.

    (disclaimer: don't get your tax advice from slashdot!)

    It's a widespread fallacy that countries only have the power to tax their own citizens. Most countries will tax their own citizens on their income, plus they tax all income earned within their country. If you're a US citizen drawing a salary in the UK, you quite often end up paying two lots of tax. Yopu have to hope for a favourable "double taxation treaty" to rescue you. It's never this simple.

    As noted below, offshore havens are of use to people who have substantial sources of income other than paychecks . . . .

    jsm

  • Anyone who's read Iain (M) Banks' latest novel The Business (it's excellent, by the way, and I am planning to write a review of it, as well as IMB's sci-fi novels) will be able to draw definite parallels between Nauru, as a country which has a seat at the UN, and requires external help to support itself, and a certain country in the novel, the name of which I won't mention, as it's a spoiler.

    By the way, hasn't it occured to anyone that the websites, systems and networks which these offshore banks use, are probably completely owned by various intelligence agencies' hackers?

    D.
    ..is for Dangerous!

  • > to hide in the Caymans this isn't a problem.
    > From that point you're a Citizen of THERE, and
    > not of the US and no longer bound by silly IRS
    > codes.

    Dream on. I am working here, and I am a citizen
    of another coutry, and paying taxes like anyone
    else. I suggest to read the appropriate IRS docs
    otherwise you are in trouble. Even worse, I pay
    three times higher taxes that you on certain
    income (the so called "Income not connected with
    US business") unless this money goes directly
    outside US, for example business deals in my
    country and deposited in my country's bank
    acount. But in that case IRS does not care anyway.
    Also if you lived in US for more that four
    years, you are treated as a US permanent resident
    for tax pusposes, altough you are screwed as
    a foreigner in any other way. When Uncle Sam
    wants his cut, nothing can stop him from coming
    up with any law that surves the purpose.

    > transfer monies to and from your brokerage
    ...
    > but the IRS has no way of obtaining the information.

    Worse, each brokerage transaction gets immediately reported to the IRS, not just transactions above 10 grands. Even if you keep money cash, not in stocks, the broker keeps them in a money market account. Where else this interest comes from?

    If you really beleive in what you said, and are doing this, I suggest that you get the he.. out
    of US before IRS raids your business. You can read
    the Senate hearing if you don't believe me,
    I just forgot the url with the horror stories.

    Best,

  • At least one of the ex-Soviet states attempted to set itself up in this way. Naturally, there are also the Caribbean islands with confidential banking laws and low (no?) taxes. I believe it's a reasonably common method of building revenue.

    Unfortunately, one problem when attempting this is the confidence issue. People are very confident that Switzerland will remain, with no major changes to its banking policies. It's much harder to predict the actions of a small nation that has just initiated this sort of policy. The stability and reliance on tradition hasn't been demonstrated. You really don't want the state to start revealing information (or nationalizing assets!).

    Naturally, this won't keep all money out. It's also likely (as Neal [cryptonomicon.com] said) that a higher portion of early adopters will be doing something shady. This gives these small states an opportunity to demonstrate their commitment to their policies, especially if larger states [usdoj.gov] fail to pressure the state for information or other violations of policy.

  • Well, kind of. For situation (1), the Grand Caymans don't much care if you're a US Citizen or not -- it's not their job to administer US tax laws. It also doesn't much matter if you become a Cayman citizen or not, since its the US government you have to convince of your non-citizenship, or as far as they're concerned, you're still paying those taxes.

    Now, there are two ways to go about this. If you're a criminal type, of course, you don't much care what the US government thinks. And you're probably not getting too many of those drug, prostitution, and illicit gambling charges on VISA, these are in cash. Which, of course, is smuggled out of the country hidden in dolls or coffins or whatever, at least according to most of the gangster movies I've seen.

    The other thing is to actually become a citizen of a tax haven and remain a non-resident of other countries. An actual case of this is Irving Gould, onetime principle owner and Chairman of the Board at Commodore. At some point in time, he moved to the Bahamas, real house an everything, and I assume became a citizen. But he had to be careful about being percieved as a resident of any country. So he actually had people who kept track of how many days he spent in any given country. For example, it was not uncommon for the PET Jet to circle until after 12AM, when old "Uncle Irv" was coming into the US, just so that fraction-of-a-day couldn't be held against him in US tax court. In other words, maybe a bit shady, but all perfectly legal.

    I don't supposed you would do this until you're making enough money to have that kind of lifestyle, but that kind of goes without saying. Most offshore accounts offer little interest, charge high fees for transactions, require opening deposits in the $10-$25 range, etc. It's not likely to attract the typical working stiff, even if you're a contractor or some-such getting lots of payments in cash. On the other hand, a millionaire with lots of foreign income and fewer scruples could well go for such a thing, profitably.

    It'll probably only get easier, with the e-banking and e-trading. There are already US-based companies specializing in setting up foreign investors in US stocks and bonds, and it probably won't be long until US folks have the same online shot at some foreign securities. Now, when you're doing the electronic transfer to your bank in New Jersey for that killing you just made on the Newer Markt, ole Uncle Sam will be there to congradulate you. But all you'll hear from that Caymans' bank is the $50 (or whatever) deposit fee.

    Which just goes to illustrate the old point that the rich do, in fact, get richer.

  • I don't wanna flame war but this kind of thing really irks me, why don't you post registered if you are going to make insulting comments? how can I even care about your point of view if you are too scared to identify yourself by a handle? on the internet? you're safe kid, it's ok.

    "Lord knows we need the world to be a lot more like that. "

    all I meant by that is alot of us here on slashdot enjoy a fertile imagination, if the world was more like cryptonomicon it would be:
    A. Not so banal
    b.Funny
    c. Have data havens


    why don't you check who's afraid of reality when you can't put a name to your silly little comments.

    (sorry to the rest of you. just can't stand people who get off on ruining others good times.)
  • I would guess that you're best off biting the bullet and paying French tax. If Nauru keeps advertising itself like this, it will get put on the blacklist of money laundering centres. If that happens, it will be next to impossible to introduce money stored in Nauru to the banking system of any country located where you might possibly want to spend it.

    Unless you go through illegal channels of course. But money laundering is a very expensive business -- if someone had a laundering scheme which would provide an "anonymizer for cash", and you ended up keeping 48% of the money, then that would be regarded as a very efficient scheme indeed.

    In general, havens are not usually worthwhile for straightforward tax avoidance -- they're more for your Kalashnikovs and Kokayne/IMF loans crowd.

    And if you're paying 52% straight down the line, I can probably give you the name of a man who could save you some.

    jsm
  • Uh, that was supposed to be $10K-$25K. I could swing the $10-$25 opening minimum myself :-)
  • like when the us waltzed into former yugoslavia?
    like when the us waltzed into grenada?
    or panama?
    The un can't do anything. The un is a figure head.
    the us doesn't even pay it's dues. The us can't get into big trouble becuase without nato there is no un.

    regarding the fact that the bank isn't even there, explain that to me and I'll shut up.

    there is a long history of one country blockcading or invading another for financial reasons. If you asked carl marx that is the only reason.
    but you can't ask him cause he's dead.

  • Anyway, $10k to establish a bank is nothing.

    No, but there's more to it than the Post put up. US$10K is the administrative fee to set up the bank. If you want to use your bank for any actual banking business, then you would have to pay in capital of about US$1mn, or nobody but nobody would deal with you. If you didn't want to do that, but wanted to use the bank as a front company for tax-driven transactions, you'd still probably have to stump up, in order to fall outside the "thin company" regs.

    So $10K would basically buy you a brass plate on a wall (brass plate and rental of wall extra), and the right to call yourself a "bank" which can be useful if you're planning any Nigerian advance-fee frauds. Or if you're laundering money on the cheap, and just want to extend a paper trail (rather than being concerned to create a bank which can carry out transactions with any appearance of legitimacy).

    But for that privilege, $10K is indeed cheap. Which is why I would guess that "Incorporated in Nauru" will soon become the best way known to man to get yourself blackballed from any reputable banking system.

    jsm
  • It's a widespread fallacy that countries only have the power to tax their own citizens. Most countries will tax their own citizens on their income, plus they tax all income earned within their country. If you're a US citizen drawing a salary in the UK, you quite often end up paying two lots of tax. Yopu have to hope for a favourable "double taxation treaty" to rescue you. It's never this simple.

    The US is actually quite unusual in taxing its citizens when they work in foreign countries, although there is a $70,000 exemption (no tax paid on earnings of less than $70,000 while employed overseas). As a Finnish citizen, for instance, I don't have to pay any Finnish taxes on income I make abroad, as long as I spend at least 180 days outside the country per year. (This made quite a difference in Japan, where I paid 6% Japanese income tax instead of ~45% Finnish income tax.)

    And again, the above paragraph is a simplification of 17,000 pages of international tax code, so don't put all your money in a Nauruan bank account based on this...

    Cheers,
    -j.

  • No, the system is as secure as the ledgers are who cares where the accounts are if the records of the accounts are not secure.
  • Tracking Nauru banks is difficult, the State Department report said, because all "have the same post office box."

    Damn, well I guess they can just use the CIA maps...no wait...yup we're screwed.

    But seriously folks, banks don't launder money, people launder money. If you make offshore money havens a crime, only criminals will have offshore money havens.

    Ok, I'm done now.
    --

  • Re: money laundering (Score:3)

    by jsm2 ( 89962 ) on Thursday October 28, 1999 @08:43AM (#1580894)
    One simple way of laundering money is to get yourself one of these anonymous offshore bank accounts, then create a fictitious offshore company that hires you to perform expensive consulting work. You have really hired yourself, but it's hard to tell that's what has happened, and harder still to prove it. So you then submit work records and bills to the bogus company and get paid. Your income appears to be legitimate. Of course, this means you have to pay income tax on it, but at least you get to keep the rest, and you can pass an IRS audit with flying colors.

    Ahhhh (this used to be my life, a few years ago). I'm sure that Mendax would like to remind all slashdotters that this is an illustrative example only, and that it should not be tried at home.

    The phrase you can pass an IRS audit with flying colors is used here rhetorically -- actually, a half-competent auditor would tear you to shreds if you tried this "thin" scam on any significant tax liability. Real tax avoidance schemes are a lot more complicated and require [ahem] godlike genius consultants to design them (particularly if you want to have a chance of them being declared legal).

    Oh yeh, and people who "go to Vegas, buy a load of chips and then cash them in without gambling" get to learn a fair amount about both the IRS and the Secret Service before long. The casino companies have a troubled enough relationship with Lily Law without acting as willing accessories to avoidance or worse.

    If you're really interested, the locus classicus is "Secret Money" by Ingo Walter.

    jsm
  • Happen to be short on cash? Has your country, once thriving with entrepreneurs coming in to take out your one and only resource, now been stripped bare of it's past glory?

    Then come join the thriving business of MONEY LAUNDERING, or, as we like to call it, Helping out the less fortunate! Come join the hundreds of other third-world countries as they too pick up on what the "economy" is REALLY about! Within months you too will be lying in mountains of money, smoking your Cuban Cigars, surrounded by beautiful women in bikinis!

    What's that? You say the rest of the country is angry that you're holding on to all the profits while they're still poor? Well, if you respond to this add within the next 30 minutes, we'll throw in, ABSOLUTELY FREE, a pair of genuine, bona-fide mafia hitmen, voilin cases and all! Now, you too can sit back and relax to endeavor in your mounds of cash while you hear sounds of bones breaking and screams of pain from the next room!

    Supplies are limited, order today!


    Is this going to be the wave of the future? Once we've sucked the Earth dry of it's resources, we'll move toward starting other business practices that aren't so "legal?"

  • Couldn't they just get their two letter ISO country code, open a NIC, and extort money out of corporations for domain names, like all the other little island nations?

  • Even More Obscure Banks (Score:1)

    by Anonymous Coward
    Even this is insufficient security for some people. There are banks "based" in the Turkish Republic of North Cyprus (TRNC), a state which is only diplomatically recognized by Turkey, which are entirely outside of the ordinary system of international law. However, Russians are not major customers: the TRNC government's relations with Russia have been poor since they considered a large weapons sale to the internationally (except for Turkey) recognized government on the rest of the island.

  • Tax Evasion for Dummies (Score:4)

    by mosch ( 204 ) on Thursday October 28, 1999 @08:50AM (#1580898) Homepage
    This isn't designed to avoid the taxes on your paycheck. It's to avoid taxes on "other income".

    Example #1, let's say that you run a company worth $500,000,000. Now let's say you want to give yourself a "raise". You hire a "consultant" who happens to bill you to an account fron one of these offshore banks in the amount of $10,000,000. Your company sends the money for "work rendered" and wow, that's odd your company just sent those ten million dollars to YOUR secret account and you've just evaded taxes on $10,000,000.

    Example #2: you run a profitable "business" from traditional organized crime, or large-scale drug dealing, or assassinations or even working as $5,000/day call girl. Now you have a whole lot of money and if you legitimize it within the U.S. you'll end up with a lot of taxes on it. But what if this money gets deposited to your offshore account? Well, now suddenly there are no taxes involved. Neat, eh?

    As for the laws about foreign income, the IRS even admits it's basically honour system. There's no way to trace this so basically as long as said random rich person reports enough income to be credible, they can hide the rest without fear of the authorities find out. After all, there isn't a real difference in lifestyle between somebody who makes $100,000,000/year and somebody who makes $10,000,000/year, so you hide $90,000,000 and report that you make $10,000,000/year and meanwhile become worth billions without taxation difficulties.
  • >The best way I have found to do it is to take a
    >trip to Vegas, get $xxK in chips, gamble a
    >little, then cash in, thereby getting new bills.

    Hmm, have you tried this?

    I can't find the post, but I distinctly remember a past comment on /.
    where the poster was pretty definite that the second or third time you tried this,
    there were FBI and/or Treasury agents around Vegas who would call you in for a nice chat
    about why you weren't gambling.

    I have no knowledge either way, but that caution sounds pretty plausible to me.
  • Maybe I'm missing something, but one thing this island seems to lack (besides natural resources) is a good communication system. Not only is it difficult to get to physically, it sounds like Nauru is difficult to reach by telephone. That would seem to make becoming a center of secret international banking much more difficult. Is there an effort to improve Nauru's communication system in all this? Will the people of Nauru benefit by this, or will all the benefits go to their customers and investors?

    The Nauruans got burned once, when they sold all their birdsh1t to foreigners. They got rich quick, then got poor again just as quick. Poorer than when they started, since their island seems to have been deforested in the process. I'd expect them to be cautious going into a venture like this one.

    If there is are fortunes to be gained by this, and if the Nauruans can use it to improve their lot and that of their children, more power to them.
  • Dubai in the United Arab Emirates is trying to move away from dependence on oil reserves towards, as here, banking and finance

    Dubai, of course, is not a poor country -- the "banking and finance" they are moving towards is based on fifty years' worth of investment of their own oil profits, and they will certainly not be screwing around with money laundering (although they probably will have strong banking secrecy -- Gulf State accounts are usually highly secretive, mainly because they're so big).

    In general, when you see an annoucement like this, it's because some chancer in New York, London or (all too often) Vancouver has sweet-talked the local government into letting him run his pet scheme from there, kidding them that they will have a thriving financial sector. The money never, ever shows up in the local economy, apart from a few bribes to the Finance Minister.

    jsm
  • The trouble with this position, as any economist will tell you, is that most of the government's "products" (national defense, for example) cannot be provided to just those who are willing to pay for them. We can't have an army, and say to hostile countries "We'll fight to the death to protect our country... except for Joe's house. You can invade that if you want."

  • Use The Backhoe, Luke! (Score:3)

    by jsm2 ( 89962 ) on Thursday October 28, 1999 @09:01AM (#1580904)
    get a big international data cable strung out there .... keep all the data and money underwater, where a bunch of marines and helicopters can't just waltz in and get it

    "We can't get at the money or data, sir! It's all hidden underwater, at the other end of this big ... long ... fragile .... fibreoptic cable .... with the other end .... in New York ...ohhhh".

    jsm

  • focus!@#$!# (Score:3)

    by werd life ( 94886 ) on Thursday October 28, 1999 @09:02AM (#1580905)
    Hate to beat a dead horse, but anyway, one of the normal /. topic *is* money [slashdot.org]. And this story does have something loosely to do with money. Anyway, News for Nerds [slashdot.org] is a hell of a lot more than just the OSI-Seven Layer model. 'Sides it is nice to tie my /. addiction to something more connected to the real world than an mp3 playing router, and stories like this give me something I can bring up to people at the bar that might not be complete tech freaks. ya know.

  • OS Banking and why.. (Score:1)

    by Anonymous Coward
    I have seen many people on here ask the question of "why would you want to put your money in an OS acct?"
    I figured I would give an example.

    Lets say you have a stock acct in the US with 200,000$ in it as well as a savings acct with 50,000 in it. The people
    that use the OS accts have money like this. If your average return on stocks is 30% and your average return on
    savings is 2% then you have an income of 60,000$ a year in stocks and 1000$ a year on savings. This means that
    you have a total annual income of 61,000$. The US government is going to want there cut of your hard earned
    money, (22%) 13,420.00$, come tax time. This will leave you with 47,580$ after taxes..

    Now lets say you have a OS acct. You do your stock trading from your OS acct and keep your savings in an OS acct
    as well. The US government does not see the income as a US income. There for you get to keep the 22% and not
    report it to the IRS. That is an extra 13,420$ in your pocket. That is also worth the trouble of keeping the money
    outside of the US.

    There are other sides to this such as you can trade stocks, bonds, and currency in any country in the world, as well
    as growth funds, and living funds offered by the bank.

    Hope this helped some one.. ;)

  • I know im gonna get moderated for this but I am involved in this type of industry and maybe people might also want to get involved, or at least like more info
    Many ppl want an offshore account but get knocked back, or dont know how to go about it. This makes things easy...
    http://www.exxcomm.com/ [exxcomm.com]

  • you can move it and/or restring the fiber, my whole point on this is to have a really secure tax haven it has to be physically secure as well, there is no such thing as legally secure when big countries with big armies are involved. And a real cryptonomicon style data/money haven has to actually have money in it. Gold or other precious metals, because it would be using encrypted data as currency backed by actual gold.
  • , there isn't a real difference in lifestyle between somebody who makes $100,000,000/year and somebody who makes $10,000,000/year, so you hide $90,000,000 and report that you make $10,000,000/year and meanwhile become worth billions without taxation difficulties.

    Hmm...this makes me think... How much do you figure ole Billy Gates has tucked away in offshore accounts??

    Just a thought.

    Ender

  • This is good justification for my "shameless plug" posted elsewhere here. US$1125 gets you an offshore credit card. There is nothing illegal about it. It is only illegal if you do not declare it in your income tax.

    www.exxcomm.com

    did you know 2/3rds of the entire planets transactions are made offshore?
    Offshore != illegal

  • Aw, I hope they don't do that, I was thinking it would be neat to get a .nr and run my webpages from there ;)
  • actually, a half-competent auditor would tear you to shreds if you tried this "thin" scam on any significant tax liability.
    Okay, you seem to know more about this than I do. Can you elaborate on this? It isn't obvious to me how a tax auditor could determine that an offshore company, paying you from a numbered offshore account, is actually just you in disguise.
    Real tax avoidance schemes
    Is this a minor glitch on your part, or are we not talking about the same thing? Money laundering per se is not a tax-avoidance scheme; in fact, for money to be laundered, you have to pay taxes on it. The point of money laundering is simply to make illegal gains look like legitimate income. (Again, if you disagree, please elaborate.)
  • Don't worry, I know Enoch Root is hanging around somewhere ... I've seen him posting on Slashdot. Enoch, where are you?


    Beer recipe: free! #Source
    Cold pints: $2 #Product

  • Does anyone have a link to info on Freenet or the Eterneity system mentioned above. I did a quick search didnt find anything that looked relavent.

    Im interested in this datahaven concept... it has to be everywhere.. like a vast distributed filesystem with quotas based on storage capacity and bandwidth?

    I havent read cryptonomicum... on the todo list now
  • Ha ha ha, but when I deposit my ill-gotten gains from my super-elite open-source software Mafia, I'll be one of the most feared men in America!

    My plan is nearly to fruition... Bwahahahahaaaaa!


    Beer recipe: free! #Source
    Cold pints: $2 #Product

  • But wasn't Freeside in Gibson's Neuromancer (1984 if I'm correct) a data haven, among other things?

    Couldn't tell you... it's been years since I read Neuromancer. My point was not that Sterling was the first to come up with it, but that he was using it before Stephenson. Perhaps I should I have stated that better... but I was going for a little controversy in the post title. :)



    --

  • So? (Score:1)

    by TheCarp ( 96830 )
    Fine then....
    get rid of the standing army.
    No war - no army

    Problem solved.

  • The U.S. would have to dissolve the island nation or seize political control of it in order to have direct control over the laws which permit the bank to exist. If you recall, the U.S doesn't even do such things to non-member nations. There are some rules which they do take seriously... for instance the one which prevented them from taking Saddam out of Iraq... which I believe is part of thier constitution.

    Despite the instances you describe above, I think the U.S. does not think lightly of attacks on U.N. member nations... much less toppling their governments and taking control of their banks.

    As for the physically existing in any significant capacity on an island with a weak communications infrastructure and limited access by air... that's just silly. They probably operate much like cruise ships. Offices all over the world, but they pay taxes and work by the rules of foreign governments. It's even covered quite clearly in the article:

    Tracking Nauru banks is difficult, the State Department report said, because all "have the same post office box."

    The only visible presence offshore firms have on Nauru may be a wall display in a hallway of the Nauru Agency Corp., where their names are engraved in plastic.

    As a practical matter, it is only in the form of ledger entries that offshore dollars ordinarily pass through Nauru. The way the international banking system works, funds are electronically transferred to and from "correspondent accounts" that the Nauru-registered banks maintain in distant money centers such as New York.

  • Do they really?

    A very small number (Read: The vocal Minority)
    seem to be nationalistic, but somehow I doubt the
    vast majority is. They have money and basically
    free income...why should they care?

    How many people outside of congress and a few
    right wing public "Congressional Wannabee" nuts
    really care about flag burning and Clinton's
    blow jobs?
  • I would suspect you are a large top level suplier
    or importer then.

    Certainly a good buisness tho...I doubt it you
    were REALLY a a cannabis suplier who had enough
    money to need to use offshore acounts, you would
    post on /. (even anyously) and say so...
    maybe you would...but I doubt it

    Though if you are...
    your service is greatly apreciated by those
    of us who love the product
    (course any marijuana I would get tends to
    be the more quality stuff so is probably grown
    local in a small garden...so I doubt I would
    see any of your suposed stuff)
  • It's interesting how various tiny nations have tried to cash in on the net.

    Like Nauru, tuvalu is a tiny pacific island, the world's 4th smallest nation. [tsx.org] Population : 10,000. When the internet boom began, tuvalu stood to make a fortune on the domain name trade - it's .TV country code was a potential goldmine (www.fox.tv ?)

    What happened next was a sad tale of how a pacific nation, remote and unaware of the existence of the internet, was swindled by domain name sharks.

    First, webTV grabbed admin. control of the .tv domain from ICANN without informing Tuvalu - further proof that webTV is evil incarnate. Tuvalu's prime minister came to know that something called the "Internet" existed after visiting Australia, and managed to get ICANN to hand them control.

    Good wired story here. [wired.com]

    Next, VCs and domain name companies descended on the remote island, courting the confused govt. Ultimately, Tuvalu signed a deal with a Canadian company, which failed to deliver the $50 million it had promised in a year (that's 10 times the country's entire GDP). Sad story. [cnnfn.com]

    Now Tuvalu, wiser and bitter, is still looking for a company to administer .TV and raise the nation's fortunes. Being honest religious folks, they don't want to do pr0n, shady financial deals, or anything unethical.

    If only they could be like Nauru, with its offshore banking, or Niue, which hosts tons of porn on the .nu (naked in French) domain, or like Tonga, which sells $100 .to domains, no questions asked; they could improve their per capita income 10 times, but instead, they are fumbling in confusion.

    I felt particularly sorry for them because they are so naive and quaint. It's a custom on the island to apologize if you walk past someone sitting, since the level of your head is higher than theirs. And hey, you can climb on top of the local church if you ask permission from the pastor. They're so naive their web site [yahoo.com] is a Yahoo Club.

    Poor Tuvalu. Maybe the linux community can help them out by hosting their domain thingie and transforming their island. :)

    w/m.


  • A data haven is basically nothing more then an FTP-server on which you can safely store and access your data. For this to be possible at an easy and low cost model I think you need to do the following things.

    1. Client side encryption. This way you as the provider of the service can not be responsible for the contents, since you have no way of having knowledge of the contents.

    2. Multiple locations. Governments change, with that policies change, though this is a good thing in a democracy it might adversely affect your business.

    3. The possiblity for VPN so that people can make online changes.

    4. The possibilty to store and make available huge amounts of tapes, since the bandwith of a truck loaded with tapes or disks is still unsurpassed.

    Basically, this has been done for years by back-up companies. What they need to do is link their sites through a network and make sure that the locations are identical. This way it is almost impossible for a government or even a combination of governments to take over the system. (I thought I read about INTEL entering this market, but I couldn't find the URL on Wired. Anybody got the article on that for me?)
  • They already do.
  • Tuvalu currently makes a lot of its foreign exchange selling phone numbers (they have their own international phone code) to international phone sex lines. They expect to make a bit more when the global freephone number system is in place.
  • And I still think the best place to put a data haven is on the Moon. :)
    No thanks, too easy to find and nuke. A far better idea would be to have multiple automated havens orbiting the sun in random, unkown orbits (possibly shifting over time), constantly communicating with each other to keep things up to date (lots of redundancy) and to make them harder to track. Sending the data to these havens would be relatively easy: just broadcast it (with heaps of redundancy again, I don't think acks would work). The unfortunate thing is that getting data out again might be a problem.
  • So there's another place for people with 10x your yearly salary coming in every month to stash some of it. And? You think this is cool because...?

    All it does is make sure that even less of the top .01%'s money gets taxed, so the rest of us working stiffs can pick up the bill. God help me when my obnoxious neighbour, who spends all his time swimming in his money like ScroogeMcduck gets hold of this, and announces he won't be paying any taxes on the million dollars he made this year... I'll have to rip his eyeballs out. :)
  • ? It isn't obvious to me how a tax auditor could determine that an offshore company, paying you from a numbered offshore account, is actually just you in disguise.

    Well, the first thing he would do would be to ask you "who owns this company?". If you answer "I don't know", then you have just committed a very serious offence indeed. Depending on circumstances and jurisdiction, the guy may be able to subpoena your lawyer or accountant and force them to grass on you. He can certainly have your house searched for the particulars of ownership. And your bank will usually want to know the background of the offshore company it's dealing with before accepting transfers, which is information it will give up without even protesting.

    Your example is absolutely fine in principle. But you have to add a lot more layers of the same thing (so that you can make it much less likely that the auditor will ask you or your friends a killer question) to make it work in practice.

    Is this a minor glitch on your part

    Yes, sorry. I realised halfway through the post that I didn't want to imply that I'd ever designed laundering schemes. What I did were tax avoidance (!=evasion, although the IR didn't always agree) schemes. But although your objective in these schemes is always that they be legal, there's always a temptation to add a few layers of "security through obscurity", which is the same sort of thing money launderers do, so one gets a fair enough feel for what will and won't work.

    jsm

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