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January/February 2000 issue:
You've probably heard about the Richard Hape case (the joint RCMP-TCI
police investigation of British West Indies Trust Company and the seizure
of documents in the TCI office) and the John Mathewson case (the former
Cayman Islands banker who turned over client files to the FBI in a plea
bargain after being charged with tax evasion and facing criminal
sanctions). In light of these events, our cover story in this issue
focuses on trust and confidence in professional relationships. How much
background information is available from offshore regulatory authorities?
Who should you contact to carry out due diligence? What can they do for
you and what can they not do for you? All of these questions and more are
answered in our cover story.
This issue reports on over 40 news items in our offshore reports, industry
news, investment news and offshore financial planning columns.
Our caveat emptor column focuses on the advance fee fraud with an in-depth
look at Operation Risky Business and the 419 fraud.
St Vincent is the subject of our special focus section. One of the first
Caribbean centres to have offshore financial legislation, St. Vincent has
emerged as a premier jurisdiction for privacy and confidentiality.
And don't miss Part I of our Due Diligence Directory, which contains six
new warning notices, and Part II, which lists eight new individuals
charged with financial fraud - an indispensable due diligence resource.
The issue is available on the newsstands until approximately February
25th. It can also be purchased directly from our website, while supplies
last.
You can order a copy of the January/February 2000 issue at a price of
CDN$15 (US$12) through our web site at:
offshorefinancecanada.com
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Vol. 1 No. 23
Dec. 19 to Dec 25, 1999
OFFSHORE ROUND-UP: An OFC publication
Copyright 2000 O.F.C. Publications Inc. ISSN Pending
Edited by Paul Zaleski
Table of Contents
1. US and EU try to finish data privacy talks
2. Auditors embroiled in lawsuits
3. UAE banking system faces pressure
4. Internet security group to buy rivals
5. Web site offers hedge fund trading
6. US to retain global e-commerce lead
7. E-commerce law undefined in borderless new world
US AND EU TRY TO FINISH DATA PRIVACY TALKS
Date: December 20, 1999
Source: Financial Times
US and EU political leaders are trying to conclude their difficult
negotiations over data privacy by March. The talks are vital for
businesses seeking to protect the flow of data across the Atlantic.
The dispute stems from legislation passed by the EU in October, 1998
giving consumers the right to access personal information held
electronically by companies. The US has no similar legislation, preferring
the self-regulation approach for companies.
Negotiators are discussing a self-regulation scheme whereby US.companies
would commit themselves to a set of data protection principles. US
authorities prefer self-regulation for e-commerce in general and claim
self-regulation gives better results in the US than legislation.
Companies are worried the problem could turn into a full-blown trade
dispute and wind up with the World Trade Organization, where a resolution
would take even longer.
AUDITORS EMBROILED IN LAWSUITS
Date: Dec. 21, 1999
Source: Financial Times
A recent spate of high-profile lawsuits against Big Five accountants has
the accounting firms scrambling to re-invigorate their risk management
programs.
PwC, the world's largest auditor, was hit in December with a lawsuit
against Chuo Audit, a Japanese affiliate firm. The same month it also
reached an undisclosed out-of-court settlement with Standard Chartered
bank, over a damage claim of $350 million for faulty auditing.
Ernst & Young said it had agreed to pay $335 million to settle shareholder
litigation connected to accounting irregularities at CUC International,
which it audited.
Observers suggest the large settlements may stretch the insurance taken
out by the firms. Any shortfall then comes out of partners' pockets.
A 1998 study by the international federation of accountants found that
litigation had an appreciable economic fallout. Risk management focuses
on not just improving practice, but also on vetting clients to ensure that
the business is not too risky and that the reputations of directors are
sound.
UAE BANKING SYSTEM FACES PRESSURE
Date: Dec. 21, 1999
Source: Financial Times
The central bank of the United Arab Emirates is expected to come under
increasing pressure to improve the legal environment and ease restrictions
on the activities of foreign banks as the UAE heads towards full
membership in the World Trade Organization in 2003.
Foreign and local banks in the UAE want to broaden the range of services
available to sophisticated clients as the UAE economy continues to grow.
Expanding tourism, an increase in free zone industrial activity, the
recent creation of a formal stock exchange and the launch of large
infrastructure projects will create new business opportunities for banks.
Foreign banks currently hold about 25 per cent of total bank assets and
own a similar market share, but are limited to a maximum of eight
branches. UAE has also implemented a freeze on the entry of new foreign
banks.
The UAE central bank has failed to implement rules restricting lending
levels to individual clients and foreign bankers say the industry has a
definite need to improve oversight in order to avoid fraud. Better legal
remedies would allow banks to commit more resources, according to HSBC
Bank Middle East CEO John Coverdale. "What I am looking for is to be able
to take an effective debenture, so I can get my money back if a company
doesn't survive," said Coverdale.
INTERNET SECURITY GROUP TO BUY RIVALS
Date: Dec. 21, 1999
Source: Financial Times
VeriSign, a leader in the rapidly growing market for e-commerce security
services, plans to acquire direct competitor Thawte Consulting of South
Africa, the world's second largest provider of digital certificates to web
sites.
In a separate deal, VeriSign also acquired Signio, a California online
payment verification service. The acquisitions have a combined value of
about $1.3 billion.
VeriSign will issue stock worth $575 million to acquire Thawte and another
$733 million in stock to take over Signio. VeriSign issues digital
certificates that authenticate the identity of online businesses and
assure data transmission
WEB SITE OFFERS HEDGE FUND TRADING
Date: Dec. 22, 1999
Source: Financial Times
PlusFunds.com, a web site that provides real time information on hedge
fund performance, is participating in a joint venture with the Bermuda
Stock Exchange (BSX) to offer online trading of hedge fund shares.
Investors will be able to deal in fund shares starting in March through
the PlusFunds platform, with trades settled over the BSX.
The market, called Global FundTrader Plus, will operate 22 hours a day,
six days a week. The venture is trying to change the nature of the sector
from one of low secondary trading to something similar to mutual funds,
which have a liquid secondary market of buyers and sellers. The company
says it has signed up several large banks and brokerages to act as a
secondary market.
Under US regulations, the exchange would be open to offshore individual
investors and tax-exempt US organizations such as pension funds,
endowments or charitable trusts. However, it would be closed to US
individuals.
US TO RETAIN GLOBAL E-COMMERCE LEAD
Date: Dec. 22, 1999
Source: Financial Times
The US will hang on to its global lead in e-commerce far into the new
decade, according to surveys by the Boston Consulting Group and Forrester
Research. The results challenge the claims by Mori, the international
polling organization, that other countries are closing the e-business gap
on the US.
BCG estimates that by 2003, US companies will trade $2.8 trillion worth of
goods and services - almost one quarter of business-to-business purchasing
in the US - via either the Internet or private electronic data interchange
networks. The rest of the world will account for $1.8 trillion.
Currently the US trades $700 billion electronically compared to $330
billion for the rest of the world.
Forrester Research said only Northern Europe, led by Scandinavia, will
approach the US figures.
E-COMMERCE LAW UNDEFINED IN BORDERLESS NEW WORLD
Date: Dec. 23, 1999
Source: Financial Times
Commerce is global but law is not. That truth is causing tremendous
uncertainty now as global business tries to deal with local and national
law in the online world.
No one is sure whose rules govern. "To reap the benefits of e-commerce,
an acceptable level of legal certainty and uniformity must be present,"
said Washington Internet lawyer Jay Westermeier.
The question of jurisdiction remains unresolved, both internationally and
within the US. "What consumer laws, contract laws, privacy laws and other
laws apply to e-commerce transactions?" asked Westermeier.
US courts have begun to sketch a tentative standard, with a bias towards
the laws of the consumer's home jurisdiction, providing a sale actually
took place through an interactive Web site.
However, the question of foreign jurisdictions remains murky. For
example, a draft EU electronic commerce directive stipulates that the law
of the consumer's home jurisdiction would apply. But that raises problems
for US companies, because European consumer protection and privacy laws
are much tougher. Companies are then forced to set up separate web sites,
or create a megasite that meets every possible local and national legal
requirement - costly options that may defeat the supposed efficiency gains
of globalized e-commerce.
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