US Clamps down on the Cayman Islands
The IRS in Houston briefs me to advise them on what could be done to stop money
laundering in the Cayman Islands. This anti-money laundering battle to halt organized
crime today is the legacy of Al Capone.
By the late seventies, it had become apparent to the US government that they were
losing the war against crime – not just organized crime, but disorganized crime.
Petty gangsters and white collar criminals were experiencing relatively little difficulty
in finding safe havens for their lucre. From the lowest level of protection money,
extorted from widows out of their social security payments, to the most profitable
levels of drug-dealing, government corruption, terrorism, and corporate fraud, the
proceeds of crime were finding a welcome home in the ordinary banking system. First
the money was inserted through deposits in accommodating or inattentive bank branches;
then it was scrambled though various layers of seemingly innocent transactions,
like futures trading or real estate; and finally the illegal funds were housed in
investments or trusts, frequently offshore. The cover-up of much of the illegal
transactions and earnings of the large corporations would have been impossible without
the complicity of the major financial institutions and audit firms.
Tax fraud was becoming just as big a problem. The offshore tax havens were processing
tax-free what was estimated by the FBI and Scotland Yard to account for 60 percent
of all the money in the world.
The confrontation between the US and the Cayman Islands is where I receive my initiation
into this struggle between Good and Evil. The economic stability of the strongest
country on earth is being threatened by one of the smallest islands in the Caribbean.
I learn that nearly every dollar bank note in circulation in the US for more than
three months has traceable smudges of drug powder on it.
Before flying over to Grand Cayman, I study everything I can about the place. The
Cayman Islands is projecting its image euphemistically as an “international offshore
financial center”. The term “tax haven” has vanished from its vocabulary, and no
mention is made of fly-by-night racketeers or of bankers and their accountants burning
documents at night in the parking lots behind the banks. Official publications assure
visitors that the Cayman Islands is paradise on earth – but self-praise is no recommendation,
and things are not always what they are claimed to be. It is a short while after
race riots in the Bahamas and an assassination attempt on the Governor of Bermuda;
so the Caymans are proud to boast that their little colony enjoys total racial harmony.
The facts are rather different. Another Cayman boast is that they had eliminated
mosquitoes. Perhaps true – but no mention is made of the sand-flies that tear your
skin to pieces and that have taken over the island after a real estate development
scam had collapsed leaving moist trenches a few miles from the capital Georgetown.
It is no secret that this huge and expanding financial center is being built by
drug dealers and tax dodgers. A child could have written my opinion of advice to
the IRS it was so obvious. Bring in the other big countries to force international
collaboration, or nothing much will ever be able to be done to stop money laundering
or prevent wealthy Americans from using the Cayman Islands to evade taxes on an
industrial scale. The US could not possibly curb these illegal operations without
effective cooperation from other countries. These recommendations are followed.
By the end of the century, the US is well positioned to pressure the Cayman Islands
and other tax havens into a measure of collaboration and force exchanges of information.
Try this one for size: If you don’t collaborate we won’t allow any of your dollars
back into the world banking system. Even a worm may turn Anyone visiting the islands
today will indeed find a bona fide international offshore financial center, excellent
race relations, and some serious attempts at controlling bloodsucking insects and
bankers.
The Cayman Islands government eventually came to realize that the better interest
of the colony lies in cooperation with the US. Now the Cayman Islands is rated the
most lawfully compliant of the Caribbean tax havens.
I always feel proud of opportunities to do anything useful for Uncle Sam – he’s
done a lot for all of us.
Tax Planning Tips from Al Capone on what NOT to do – Tax Evasion
Al Capone, the most notorious gangster in the annals of organized crime, known,
by no means affectionately, as “Scar-Face”, and the criminal who made more money
out of crime than any criminal before or since, was, unbelievably, nailed for what
was certainly the least heinous of his crimes – tax evasion. At a time when the
other law-enforcement agencies were losing the battle against the underworld, the
only card that the US government was able to play effectively in its game to beat
Al Capone, turned out to be his fiscal delinquency. When the Special Intelligence
Unit of the Treasury had obtained enough evidence to prove that Al Capone was evading
tax, they invited him in for some intense grilling. Remembering that his brother
Ralph had been sentenced to three years for tax evasion, Al Capone accepted the
invitations and made several visits, suitably escorted by a Washington lawyer who
answered all questions for him.
Al Capone said hardly anything to the Inspector. But as he left the interviews,
he squinted through his scar-face and muttered: “Now, just you take good care of
yourself!”
Al Capone was understandably somewhat sensitive about the source of his income,
and his lawyer explained to the Commissioner that he was a member of an organization
that kept no books. Consequently, it was difficult for him to reach any accurate
figure of his share of the profits. Finally, his lawyer did admit that Al Capone
had some income, though never in excess of $100,000 in any single year. The Commissioner
asked for this in writing and Al Capone wrote confirming it, but drawing the Commissioner’s
attention to the fact that he was the sole support of his widowed mother, that his
house was mortgaged to the hilt, and that he had a sister and son to support. It
was very touching. Nevertheless, it was the admission of undeclared income contained
in this letter that helped to put Al Capone away for life.
“Not only has Dr Spitz never lost an international tax case – no plan he has constructed
has ever been challenged” - Offshore Investment
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