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Showing posts from February, 2013

Drones, Ponzi Schemes and Caribbean Money Launderers

Many would say that the drug trade is responsible for much of the increase in violence that terrorizes the Caribbean region.  It would appear that the United States is not just aware of the escalation in violence but is already taking action to combat the drug trade.  In his blog, Kevin Edmonds points out that the U.S.–Caribbean border is the “Third Border,” which the Department of Homeland Security (DHS) has referred to as an “open door for drug traffickers and terrorists.” Edmonds references a recent study by the National Defence University has stated that “the region's nexus to the United States uniquely positions it in the proximate U.S. geopolitical and strategic sphere. Thus, there is an incentive, if not an urgency, for the United States to proactively pursue security capacity-building measures in the Caribbean region.”
Apparently a November 2012 report by the U.S. House Committee on Homeland Security recommended that Latin American drug cartels be classified as terrorist …

Caribbean Offshore Financial Centers

Starting in the 1960s, certain Caribbean territories were granted independence from the United Kingdom and since then some of them have struggled to define themselves in the new global landscape.  At first they continued with their monoculture of sugar cane or bananas and as that collapsed, they switched their dependence to tourism.  Given the risks that come with allowing an economy to be entirely dependent on tourism, some territories have sought to become offshore financial centers (OFCs), but most have not found the level of success they expected.
Despite the rhetoric from most English and some Dutch territories, success in the OFC space appears to have been limited to certain British dependencies together with Panama.  Bermuda (yes I know it is technically not in the Caribbean but most people think it is) is a global leader in reinsurance although it has lost ground in funds, the BVI is an incorporation hub which is developing very strong links with China, the Cayman Islands is …

The IRS, FATCA and Caribbean IGA’s

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As the Caribbean comes to terms with the implications of FATCA, some territory governments are considering signing Intergovernmental Agreements (IGAs) with the United States.  By way of background, the Foreign Account Tax Compliance Act (FATCA) is part of the effort by the US government to prevent money laundering, and reduce tax evasion.  It has implications for (1) Americans residing outside of the US, (2) for financial institutions outside of the US (FFIs) with American clients and for (3) non-American businesses with American clients.  In this commentary, I am only focusing on number (2).
Under FATCA, Foreign Financial Institutions (FFIs) can either report on the activity of American account holders directly to the IRS or to their own government who will in turn collate and pass on the data to the IRS.  In principle, the real advantage of the IGA is with territories where Data Protection legislation prevents FFIs from remitting data directly to the IRS.  Furthermore, the IGA rout…

Impact of IRS Rules on Businesses outside of the US

A couple weeks ago, the Nassau Guardian reported that the Bahamas Hotel and Tourism Association reported a problem to the Caribbean Hotel and Tourism Association.  A change in US tax regulation has meant that US credit card companies were implementing an automatic 28% withholding fee on payment to their members.   Undoubtedly this is a situation that can potentially impact any business with American clients.  Businesses need to understand it and they need to be prepared.
The Foreign Account Tax Compliance Act (FATCA) is part of the effort by the US government to prevent money laundering, and reduce tax evasion.  It has implications for (1) Americans residing outside of the US, (2) for financial institutions outside of the US with American clients and for (3) non-American businesses with American clients.  In this commentary, I am only focusing on number (3) non American businesses that receive payments from American entities.
A few weeks ago, I myself received an email.  A non-Americ…