From: Black Unicorn <unicorn@schloss.li>
Date: Sat, 30 Mar 1996 17:05:58 +0800
To: Cypherpunks <cypherpunks@toad.com>
Subject: Note: Problems Confronting the Asset Concealer [Part 1 of 2 of Volume I]
Message-ID: <Pine.SUN.3.91.960329170907.15388E-100000@polaris.mindport.net>
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Prologue:

C'Punks:

While direct crypto relevance is limited, I thought that this work 
might interest many on the list and so I decided to post it in any 
event.  The sections on fourth and fifth amendment protections, or 
lack thereof, for banking documents might shed some light on the 
eventual disposition of crypto keys under the same circumstances.

This text represents a sanitized and >heavily< modified version of 
scholarly work I recently published.  I should also mention that 
portions of the original work have been subjected to official review 
prior to publication.  For the purposes of posting to the list, and to 
conceal my identity, I changed the note to approach things from the 
perspective of the asset concealer.  Although this wouldn't have gone 
over well when submitted for a scholarly publication, it better 
represents the way I think about these issues.  Given the nature of 
the "legitimate" scholarly work that predates it and its subject 
matter, this note seemed the logical extension, and I found myself a 
bit carried away with it before I was done.  In this regard the below 
is a more honest and complete picture of asset protection than the 
scholarly work, or probably than any other publication floating about 
right now.

And it's just for you cypherpunks, for the moment.

Unfortunately, after completing the work I began to realize that many 
sections were inappropriate for general release.  As a result several 
source cites that survived review have been removed, but I have tried, 
where able, to keep the majority of the substantive material present.  
When I felt the need to remove substantive portions it was either to 
prevent exposing what I believe to be novel methods, because I 
consider the sections work product which I would like to continue 
utilizing effectively, or to protect those methods I know to be 
utilized by my associates.  To prevent misunderstandings, where large 
portions (more than a few lines) or crucial elements have been 
removed, I have so indicated with empty brackets. ("[]" and "[...]").

I've segmented the note.  I'll consider posting the second, third and 
forth volumes if there's enough interest.  As they involve some of the 
more sensitive issues, I'm not sure yet if I'm willing to release them 
generally, with more deletions, or at all.

If it gets to you garbled, mail me, I'll send you another copy.

As always, this is an educational/academic work.  The law is ever-
changing and attempting to conduct international financial 
transactions without exacting professional advice is ill advised and 
extremely dangerous.  I'm not being paid for services, so the reader 
uses this material at his or her own peril.

I reserve all rights to this work.  Please do not re-distribute it 
without permission.  I intend to allow its semi-free circulation 
generally, but I must ask that forwarders request permission before 
reproducing it so that I may have an idea of where it is going.  This 
is mostly for my personal edification.  >Please do not< make it 
available via WWW, FTP, or other unrestricted distribution.  If you 
insist on ignoring my wishes, may a thousand biting flies infest your 
pubic hair, but at least leave my e-mail address on it.

**********

[...]

Practical and Legal Problems Confronting the Asset Concealer in 
Relation to Offshore Financial and Corporate Entities:  A View from 
the Perspective of the Individual Attempting to Avoid Extraterritorial 
Discovery, Attachment, or Coercion.

[] (unicorn@schloss.li)*

* LL.M.,[]; M.A.,[]; J.D.,[]; B.A.,[];.  [] is an attorney licensed to 
practice in The District of Columbia, Switzerland, [], and also a 
former member of the intelligence community.

'''''

I.  Introduction
II.  Use of the Offshore Haven
     []
     What to Look for in an Offshore Haven
     []
III. Legal Considerations for the Asset Concealer
     U.S. Discovery
       Compelled Consent Orders
       Local Illegality
     Foreign Offshore Jurisdictions Respond
       Discovery Blocking
       Judgment Blocking
     Are High Profile Offshore Centers to be Avoided?
     []
     The Goals of the Asset Concealer and Selection of Jurisdiction
       Tax Cases
       Securities Issues
       []
     The Constitution is of No Help.
       The Fourth Amendment
       The Fifth Amendment
IV.  Esoteric Considerations
     Intelligence Threats
     The Anatomy of a Money Laundering Investigation
     []
     Private Banks
     Using Private Banks to your Advantage
     []
     Bearer Shares
V.   Reviews of Specific Jurisdictions
     Why I Don't Like Switzerland Anymore
       The SBA
       Mutual Legal Assistance Treaties
     Why I Like Panama
     Why I Like Liechtenstein
       The Anstalt/The Treuunternehmen
       The Stifung/The Aktiengesellschaft
       Secrecy
     Why I Like (sort of) The Cayman Islands
       Private Banks
       []
     Why I Like Vanuatu
       Bearer Shares
       []
       Private Banks  (Easy?)
       []
     Why I Like Turks and Caicos
       Redomiciling
       Private Banks  (The Easiest?)
       []
     Why I Like Bermuda
     Why I Like (in a pinch) The Bahamas
       The Bahamas Corporation
       Private Banks
       The Local Authorities
     Why I Like Nauru
       Holding Corporations
       Private Banks
     Why I Like (sort of) The Virgin Islands
       Security Through Obscurity
       The Thatcher Appeal to Reagan
     Why I Like (in a pinch) Aruba
     Why Moving Money is Easy in Latvia
     Why Moving Money is Easier in Thailand
     Why Moving Money is Easiest in Estonia
       Arms Dealing and the Velocity of Money
       []
       Liquidity and Ease of Exchange
       The Local Authorities
     Why I Send Casual Arms Dealers to Liberia
       []
     Why I Send those with $10m+ to Seychelles
       Diplomatic Immunity
       []
       Investment Incentives
       Reliability
     Why I Send Those with $15m+ to Monaco
       Conversion to Bearer Shares
       Shipping Investments
     Why I Send Dirty Money to Rumania
     Why I Send the Filthiest Clients to Bulgaria
       Fraud in the Bright of Day.
       The Local Authorities: A Case Study
       []
     Why I Send Narcotics Money to Turkey
     Why I See Promise in Gibraltar
VI.  Conclusions
     Constructing Asset Concealing Organizations: Step by Step
       Forming the Holding Entity
       Forming the Direct Asset Holders
       []
       Bearer Shares: Double Blinds
       Forming and Using Your Personal Financial Institution
       Moving the Money:  Avoiding Currency Reporting
       []
       The Re-investment Vehicle
       Warning Signs
       Pressing the Panic Button
       The Tools of the Trade and How to Use Them
       A Case Study I
       A Case Study II
       []
       A Case Study IV
     The Future of International Asset Protection
     The Key to Success in Any Jurisdiction
     Secrecy or Expatriation?
     Final Thoughts
VII. Appendix
     Detailed Analysis: Personal Financial Institution Formation in:
       The Cayman Islands
       Panama
       Luxembourg
       Jersey
       Bahrain
       []
       Vanuatu
       The Bahamas
       []
     []
     Contacts:
       Professionals I Recommend to Asset Concealers
       []
       Financial and Trust Institutions of Note
       []

'''''

I.  Introduction

While there has been much writing on "tax shelters," money laundering, 
and the use of the international business corporation to "judgment 
proof" assets, I've seen little discussion of the practical 
considerations in shielding assets effectively, especially for the 
United States resident.  With all the seminars, and "insider's guides" 
to the various jurisdictions and their incentives, there exists a 
significant amount of disinformation floating about.  I thought I 
would take the time to dispel some of the rumors and myths about asset 
protection and try to give a practical view that is sorely lacking in 
any of the common or scholarly literature on the subject.  The 
following work will examine these issues in more detail.  Part II will 
examine very briefly the uses of the offshore "tax haven."  Part III 
will consider some of the legal aspects confronting the asset 
concealer.  Part IV will examine some of the more esoteric issues and 
attacks on the asset concealer. Part V will take a closer look at some 
jurisdictions.  Part VI will draw some conclusions, provide a step by 
step guide for constructing asset concealing organizations and make 
some predictions for the future.

II.  Use of the Offshore Haven

Most people assume that the amount of the underground economy is 
fairly small and that offshore banking is entirely too complicated for 
the everyday person to deal with.  This is patently false.

Even as early as 1979 estimates of illegal money flowing through the 
Caribbean tax havens alone was in excess of fifty billion dollars a 
year.  The Use of Offshore Tax Havens for the Purpose of Evading 
Income Taxes: Hearings Before the Subcommittee on Oversight of the 
House Committee on Ways and Means, 96th Cong., 1st Sess. 1 (1979).  
One estimate at the time attributed $25 billion a year to the Bahamas 
alone.  Illegal Narcotics Profits: Hearings Before the Permanent 
Subcommittee on Investigations of the Senate Committee on Governmental 
Affairs, 96th Cong., 1st Sess. 474 (1979) (Exhibit No. 33, Offshore 
Banking: Issues With Respect to Criminal Use, Submitted to the Ford 
Foundation, Nov. 1979, by Richard Blum and John Kaplan).  In 1978, the 
Bahamas held $95.2 billion in foreign assets, a mere $1.8 billion of 
which was used to finance foreign trade.  Douglas J. Workman, The Use 
of Offshore Tax Havens for the Purpose of Criminally Evading Income 
Taxes.  Today the Cayman Islands have a population of 30,000, over 500 
banks and some $415 billion of assets on deposit.

All one must do to take advantage of an offshore tax haven is get the 
money offshore and design a vehicle to use it where you live.  The 
techniques used to accomplish these goals are as varied as the 
creativity of the asset concealer.  Even so, and while any treatment 
of this subject must almost by definition be incomplete, some of the 
more apparent aspects and methods are touched on below:

A) Moving money offshore:

Obviously, a cash producing business could easily stream funds 
overseas without much auditing liability.  Follow this simple 
procedure:
1. Put cash in pocket.
2. Get on plane to offshore jurisdiction.
3. Deposit cash.
4. Return.

Or in the case of non-cash businesses:

American Business ("Biz") is owned by U.S. Citizens 1-3.  Business 
"expenses" for Biz are paid to a foreign corporation ("For1"), and 
deducted from Biz's corporate taxes.  While an audit might disclose 
these payments to the foreign corporation, it is fairly easy to shield 
them within the cost of goods sold.  If pressed, it is easy for Biz to 
claim that For1 and Biz are unrelated, and produce canceled checks 
and/or receipts to effect such proof.  For1 retains 10% of the 
payments from Biz, and passes the remainder to another foreign 
corporation ("For2").  An auditor will now have no direct access to 
records of the payments from For1 to For2, and indeed, the records may 
not even be in the country.

Biz could also claim to be paying for services rendered under contract 
by For1, where in actuality said services are being performed by Biz 
and claimed by Biz as business expense deductions.

[...]

B)  Bringing the money back.

Assume For2 is owned by a foreign offshore trust ("Trust") the 
beneficiaries of which are citizens 1-3.  Any investigation would be 
tasked to reveal the existence of this relationship or the flow of 
funds back to the citizens.  While for technical purposes these funds 
are held offshore, their presence in a U.S. bank in the name of Trust 
is certainly possible.

Wiser still, For2 could direct Trust to make a third foreign 
corporation ("For3") the 100% beneficiary, invest in U.S. securities 
through For3 (the capital gains of which are not technically taxable 
to foreign entities not connected to the United States).  Repatriating 
the assets is a simple matter accomplished either by situating For3 in 
a jurisdiction with a treaty waiving the withholding tax on dividends 
and interest (in past this has been the Netherland Antilles) or by 
drawing directly on the foreign accounts of For3 in such a way so as 
not to draw undue attention.

In past if Citizen 2 had some appreciated securities he would have 
sold them to Trust in return for an annuity with a carryover basis, or 
as an installment sale.  Citizen 2 would recognize only the annuity 
gain on the transaction because the gain will be realized by the 
offshore entity.  Obviously, the capital gain can be repatriated in 
the same way as above.

Citizen 3 lives and spends a great deal of money in the United States, 
but is already the subject of several large judgments in the country.  
She instructs Trust to lease a new Ferrari, and obtain a secured Gold 
Mastercard in the trust's name from the bank administering Trust.  
Citizen 3 can enjoy the fast life, draw massive cash advances as well 
as purchase anything she likes without income accountability.

Various complications can be included in any liberation/repatriation 
plan.

Tainted funds can be exchanged for large denomination bank notes in 
varied currencies, the notes exchanged for bank checks, bearer credit, 
or bearer bonds/certificates of deposit, or any liquid monetary 
instrument easy to travel with. (Uncut diamonds, precious metals or 
securities are all quite popular).  The goods are then transferred 
into another country and liquidated or stored.

[...]

While many of the legal loopholes have been filled with regard to the 
more public transactions, it becomes increasingly clear that asset 
concealing is an informational issue.  The more difficult one makes it 
for investigators to discover assets, trace their movement, or to 
attribute any of these things to the depositor, the more effective the 
asset concealing endeavor will be.  Asset concealing thus becomes a 
question of economics.  How much can the prosecuting authorities 
spend, how much time do they have, and is there any degree of 
suspicion to begin with?

     What to Look for in an Offshore Haven

[...]

III.  Legal Considerations for the Asset Concealer

     U.S. Discovery

       Compelled Consent Orders

Many people believe that foreign and domestic banks, particularly 
those situated in jurisdictions that criminalize such disclosure, will 
never release depositor's account information, assets, or related 
documents.

This too is patently false.  In fact, the United States has gone to 
lengths to make it difficult for foreign banks and fiduciaries to 
withhold such items from U.S. litigants.  Typically, heavy fines are 
imposed on banks refusing to comply with court orders compelling 
discovery of financial documents, even those located in foreign 
jurisdictions and where the disclosure imposes criminal and civil 
penalties on the disclosing bank.  Fines of $2 million are not without 
precedent.  (Unites States v. Bank of Nova Scotia, 740  F.2d 817, 832 
(11th Cir. 1984), cert. denied, 469 U.S. 1106 (1985)(upholding 
$25,000/day fine totaling $1,750,000 for failing produce documents 
located in the Cayman Islands under grand jury subpoena duces tecum; 
Marc Rich & Co., A.G. v. United States, 707 F.2d 663, 670 (2d Cir.), 
cert. denied, 463 U.S. 1215 (1983)($50,000/day against Swiss 
corporation for noncompliance with subpoena duces tecum demanding 
documents located in Switzerland).  It should be very apparent that 
U.S. courts are not shy about imposing potent sanctions, even upon 
third parties, in order to facilitate plaintiffs and prosecutors 
access to documents and evidence.

On international discovery, See Generally, Note: Ordering Production 
of Documents from Abroad in Violation of Foreign Law, 31 U. Chi. L. 
Rev. 791 (1964); Note: Recent Developments in the Law Concerning the 
Foreign Illegality Excuse for Non-Production, 14 Va. J. Int'l L. 747 
(1974); Note: Foreign Nondisclosure Laws and Domestic Discovery Orders 
in Antitrust Litigation, 88 Yale L.J. 612 (1979); Limitations on 
Concurrent Jurisdiction -- U.S. Court May Order Discovery of Foreign 
Documents, Notwithstanding Foreign Law, If Discovery Will Support 
National Policy, Is Vital to the Litigation, and May Be Accommodated 
by the Foreign Sovereign, 20 Va. J. Int'l L. 925 (1980); Rosdeitcher, 
Foreign Blocking Statutes and U.S. Discovery: A Conflict of National 
Policies, 16 N.Y.U. J. Int'l L. & Pol. 1061 (1984); Robinson, 
Compelling Discovery and Evidence in International Litigation, 18 
Int'l Law. 533 (1984).

       Local Illegality

This puts many banks in dire straits as local jurisdictions can in 
turn impose powerful sanctions for complying with court ordered 
discovery in the United States.  See e.g., Bank and Trust Company 
Regulation Act of 1965, @ 10(3) (amended 1980)(Bahama Islands)(fine up 
to $ 15,000, prison term up to two years, or both); Art. 47, Bank G. 
(Switzerland)(fine up to $ 50,000 or prison term up to two years, fine 
to $ 30,000 for negligence); Montserrat Ordinance, No. 5 Section 5 
(1980)(The Confidential Information Ordinance)(fine up to $ 5,000 and 
prison term up to two years for "nonprofessional person," fine up to $ 
10,000 and prison term to four years for "professional person"); The 
Bank Secrecy Act, Art. 2 (Greece)(minimum of six months imprisonment 
with no possibility of suspended sentence, or imposition of fine).

>From the perspective of the asset concealer it is worth noting that it 
is not only banks that can be fined for failure to disclose financial 
information.  Accountants, clerks, corporations, or literally any 
fiduciary, are subject to significant fines and incarceration in the 
United States for failing to comply with court ordered discovery.  
Many of these "secondary" participants are targeted and, as often they 
have shallower pockets, are less able to bear the legal costs of 
defending against these powerful fines and, unlike banks, have less to 
lose in the way of reputation and client goodwill if they comply and 
disclose.  Given the lower fines and the infrequency with which 
criminal penalties are imposed on professionals so compelled, it is 
often to the advantage of the foreign document or evidence holder to 
disclose and risk the ire of local authorities rather than the 
notoriously vigorous U.S. courts.  Some U.S. courts have gone so far 
to indicate that banks unwilling to submit to the will of one or the 
other sovereign should "cease operation of the foreign branch."  See 
e.g., First Nat'l City Bank v. IRS, 271 F.2d 616 (2d Cir. 1959); 
United States v. First Nat'l City Bank, 396 F.2d 897 (2d Cir. 1968).  
At least one court has not only acknowledged this dilemma, but wielded 
it as a policy measure, "...the defendant should feel the full measure 
of each sovereign's conflicting commands and so choose between laws of 
those two sovereigns."  Westinghouse Elec. Corp. v. Rio Algom, Ltd., 
480 F. Supp. 1138 (N.D. Ill. 1979).

Generally speaking, there is little guidance for federal district 
courts, in which most of the litigation arises, as the only solid 
Supreme Court authority is Societe Internationale pour Participations 
Industrielles et Commerciales, 357 U.S. 197 (1958).  Courts, while a 
bit shifting in their doctrine, have tended to apply a few common 
considerations.  Factors indicating the United States interests at 
stake and the foreign entity's good faith attempts to comply with the 
court's order will both, almost without exception, be considered in 
reviewing the need for sanctions against foreign entities.  See 
Generally, Mark Brodeur, Note: Court Ordered Violations of Foreign 
Bank Secrecy and Blocking Laws: Solving the Extraterritorial Dilemma, 
1988 U. Ill. L. Rev. 563.  What is concerning for the asset concealer 
is the meaning of the latter.  Good faith attempts to comply with a 
U.S. court order do not typically include refusal, however apologetic, 
on the grounds of local illegality or violation of general privacy 
considerations of the fiduciary's client.  In practice the balance 
between U.S. interests rarely, if ever, weighs in favor of the party 
resisting disclosure.  United States v. Davis, 767 F.2d 1025 (2d Cir. 
1985); Bank of Nova Scotia I, 691 F.2d 1256 (11th Cir. 1982); Bank of 
Nova Scotia II, 740 F.2d 817 (11th Cir. 1984); United States v. Vetco 
Inc., 644 F.2d 1324 (9th Cir. 1981); State of Ohio v. Arthur Andersen 
& Co., 570 F.2d 1370 (10th Cir. 1978); United States v. Field, 532 
F.2d 404 (5th Cir. 1976); Garpeg Ltd. v. United States, 583 F. Supp. 
789 (S.D.N.Y. 1984); Compagnie Francaise D'Assurance pour le Exterieur 
v. Phillips Petroleum Co., 105 F.R.D. 16 (S.D.N.Y. 1984); Banca Della 
Svizzera Italiana, 92 F.R.D. 111 (S.D.N.Y. 1981)(All resulting in 
findings of bad faith on the part of the custodial agent).

       Foreign Offshore Jurisdictions Respond

Many foreign states have sought to eliminate the dilemma by enacting 
laws ("blocking statutes") re-enforcing banking secrecy.  Blocking 
legislation usually takes two forms.  Judgment blocking, which 
indicates that the enacting nation will simply not recognize certain 
foreign judgments, and discovery blocking, which prohibit disclosures 
for certain discovery requests.

It is interesting to note that much of the disagreement surrounding 
the efficacy of judicially compelled extraterritorial disclosure seems 
to revolve around a basic difference in approach for foreign states 
and U.S. Courts.  Mr. Brodeur, notes that foreign states usually find 
themselves concerned with the applicability of U.S. jurisdiction in 
their state and questions of sovereignty, where U.S. courts tend to 
feel that the "pertinent legal conflict" revolves around the general 
legitimacy of the compulsory disclosure orders themselves.  While the 
perspective of the United States is understandable, foreign states 
have a point.  Rare indeed is the U.S. court that bothers to assert 
jurisdiction based on the 'required' finding for extraterritorial 
extension of jurisdiction that the foreign entities activities have 
sufficient "effects" within its borders.  Brodeur notes further that 
there is little precedent in international law for compelled discovery 
orders and that many states protest such orders consistently.  See, 
International Law Association, Report of the Fifty-First Conference 
407 (1964), documenting the protests of, e.g., Denmark, the United 
Kingdom, France, the Federal Republic of Germany, Italy, Japan, 
Norway, Sweden, Belgium, Greece, and the Netherlands.  Most foreign 
states view their active resistance to U.S. policy as a preservation 
of their own sovereignty and policy.  See, Rosenthal & Yale-Loehr, 16 
N.Y.U. J. Int'l L. & Pol. 1075, 1080 (1984); Comment: Foreign Blocking 
Legislation: Recent Roadblocks to Effective Enforcement of American 
Antitrust Law, ARIZ. ST. L.J. 945 (1981).

Given the above, the asset concealer will want to select an entity 
located in a jurisdiction with strict banking secrecy law and, 
ideally, one which has enacted legislation blocking compelled 
discovery.  Such legislation will give the investor an idea of the 
local policy and posture vis-a-vis the United States and compelled 
discovery generally.  Lists of such jurisdictions are somewhat 
difficult to come by but the generally accepted (if dated) authority 
on the subject is E. Chambost, Bank Accounts -- A World Guide to 
Confidentiality 93-259 (1983).  Chambost lists comprehensive 
treatments of 44 countries that provided banking secrecy in 1983.  
More recent publications include Grundy's Tax Havens, Tolley's Tax 
havens, and the superior Practical International Tax Planning by 
Marshall Langer.  This publication is updated quarterly and if a 
comparable alternative exists publicly, I am unaware of its existence.

Among the more robust of the listed countries are Great Britain, South 
Africa, Australia, Germany, France, Italy, Denmark, Japan, Portugal, 
Sweden, Belgium, Spain, Finland, Mexico, Norway, the Netherlands, 
Andorra, Bahrain, Hong Kong, the British Virgin Islands, Guernsey, 
Luxembourg, Isle of Man, Russia, the Bahamas, the Cayman Islands, 
Hungary, Liechtenstein, Vanuatu, Panama, Singapore, Switzerland, 
Lebanon, Malaysia, Nauru, Austria, Costa Rica, Klienwalsertal, 
Jungholz, St. Vincent, the Turks and Caicos Islands.

The surest and longest standing banking secrecy jurisdictions have 
historically been Austria, The Cayman Islands, The Bahamas, 
Switzerland, Costa Rica, El Salvador, Liechtenstein, and Panama.  
Unfortunately, with the growing EC/EU membership, Austria and 
Switzerland have begun to lean away from their strict banking secrecy 
and I personally find these jurisdictions to be a bit risky, 
especially given Switzerland's recent legislation and adoption of the 
latest round of banking reform treaties with the United States, which 
I will treat later.  While the treaty is not in full release as of 
this writing I am able to disclose that it deals, among other things, 
in detail with Banking Secrecy compromises.

Jurisdictions in which I found significant discovery blocking statutes 
include: The United Kingdom, Australia, Belgium, Denmark, Finland, 
France, Germany, Italy, the Netherlands, New Zealand, Norway, the 
Philippines, South Africa, Sweden, and Switzerland.

Jurisdictions with judgment blocking which I consider sufficient 
include the United Kingdom, Australia, Belgium, Canada, the 
Netherlands, the Philippines, and South Africa.  The most powerful 
blocking statutes, (as in the United Kingdom) provide for the private 
recovery against the disclosing party of funds lost as a result of 
violation of the statute.  The cautious asset concealer will seek such 
a jurisdiction.  It is wise to keep in mind, however, that many 
jurisdictions do not have explicit blocking statutes on the books and 
yet are as secretive, or indeed, more secretive than those which do.  
Vanuatu is a good example of such a jurisdiction.

Still other jurisdictions find their basis for banking secrecy in 
common law.  Hong Kong: based on, Tournier v. National Provincial & 
Union Bank of England, 1 K.B. 461 (C.A. 1924); Anguilla, Antigua, 
Barbados, Bermuda, Montserrat, St. Vincent, the Turks and Caicos 
Islands, (Fedders, Waiver by Conduct -- A Possible Response to the 
Internationalization of the Securities Markets, 6 J. Comp. Bus. & Cap. 
Market L. 1, 30 (1984) are among these.

The dedicated asset concealer will take note that discovery and 
judgment blocking statutes, unlike banking secrecy laws, are not 
waivable by banking customers.  If placed in custody by local 
authorities to effect compliance, the depositor will be unable to 
effect his or her own release by instructing the foreign institution 
to surrender the requested documents or information.  Almost all such 
blocking statutes require express governmental authority for 
disclosure.  The hard core concealer will recognize, however, that 
many judges will be more sympathetic to the defendant who is unable to 
comply, even in good faith, and may refuse to impose incarceration for 
contempt as a result.  While a factor, relying on the good graces of 
the judge overseeing a proceeding involving the magnitude of assets 
likely to be present is probably ill advised.  Some jurisdictions 
refuse to acknowledge the instructions of asset holders held against 
their will.  Others will refuse to acknowledge judicially compelled 
consent orders.  (The Cayman Islands).  Still others will refuse to 
release documents or funds unless the asset holder or fiduciary signs 
a form personally in the offshore jurisdiction (which does not have 
extradition treaties).

An array of anti-duress, coercion and compulsion provisions are 
available from the more creative fiduciaries.  For example, duress 
code words triggering the transfer of assets to a separate random 
jurisdiction at the trustee's discretion, or into the care of a 
unnamed third trustee.  In the latter instance, the first trustee can 
plausibly deny any knowledge of the assets disposition.  One 
arrangement I am fond of is illustrative of the range of options 
available to the innovative designer.  Client A expects difficulties 
with local law enforcement.  If Client A's attorney learns of his 
arrest or detention, he is instructed to call the trustee managing A's 
assets.  The trustee, when notified, would collect the documents from 
his office, walk across the street and deposit the documents in a drop 
box at a neighboring trust company.  The trustee would then phone the 
neighboring trust company and notify one of the managers of the 
document deposit.  The manager of the neighboring trust company would 
select a nominee at random and instruct him to assume the duties 
entailed by the documents in the drop box.  In this way, even if 
traced to the original trustee the assets are now managed and 
assumably have been transferred by an entirely different trustee who 
is unknown to the first.  In the event A is released, he need only 
accompany the original trustee to the neighboring trust company to 
reclaim his assets.

Those countries which have statutes that U.S. courts have recognized 
as criminalizing disclosures tend to represent the most stringent 
tested blocking law examples.  These include Mexico, (Securities & 
Exch. Comm'n v. Minas de Artemisa, S.A., 150 F.2d 215, 218 (9th Cir. 
1945) and Panama, In re Chase Manhattan Bank, 297 F.2d 611, 612-13 (2d 
Cir. 1962).  After 1962, most courts refused to take judicial notice 
of the legality of disclosure in the foreign jurisdiction as it is 
currently considered irrelevant to the proceedings.

While many of the statutes enacted to counter aggressive United States 
discovery practices are based on the increasing anti-trust litigation 
in the 1970's, anti-trust law is beyond the scope of this note.  For a 
detailed treatment See e.g., I E. Nerep, Extraterritorial Control of 
Competition Under International Law 54-162 (1983).

The most important distinction in the appellate cases which have 
denied motions to compel discovery of foreign documents in the face of 
the foreign states criminalization of such disclosure, e.g., Ings v. 
Ferguson, 282 F.2d 149 (2d Cir. 1960) First Nat'l City Bank v. IRS, 
271 F.2d 616 (2d Cir. 1959) is that in both of these instances the 
entities holding the documents or discovery information were not 
themselves were not parties to the litigation.  See, e.g., Ings at 152 
(citing fact that custodian of records was not a party to the 
litigation as a prominent factor in its reasoning).  The astute asset 
concealer will not use his concealing bank to, e.g., trade securities 
illegally, and thus involve the concealing bank in the litigation.  
Still, it should be noted that the existence of an agency relationship 
provides an easy out for courts determined to compel discovery and the 
easiest way to assure that ones concealing institution is not named in 
a suit is to conceal the identity of the institution in the first 
place.

While jurisdictions which have active blocking statutes requiring 
governmental authority for a financial institution to release 
depositor information or documents are probably safest, courts at one 
time held that compelling a defendant depositor to actually instruct a 
bank to disclose his financial records violates his fifth amendment 
rights.  See In re Grand Jury Proceedings, 814 F.2d 791 (1st Cir. 
1987).  Fifth amendment rights will be discussed more fully below.  
Generally speaking, the asset concealer should avoid relying on the 
fifth amendment absent extraordinary circumstances.  For a full and 
detailed treatment of the fifth amendment non-applicability in cases 
involving judicially compelled document production, See Gordon Hwang, 
Note: Fisher v. United States: Compelled Waiver of Foreign Bank 
Secrecy and the Privilege Against Self-Incrimination, 56 Fordham L. 
Rev. 453 (1987)(Concluding that "the act of producing a consent 
directive... does not violate a witness' fifth amendment privilege 
against self-incrimination").

     Are High Profile Offshore Centers to be Avoided?

Further considerations for the U.S. asset concealer relate to the 
Cayman Islands and like jurisdictions.  For some time American 
citizens traveling frequently to the Cayman Islands have experienced 
increased law enforcement and tax scrutiny.  While I won't speculate 
as to the existence of a "black list," the glorious war on drugs has 
assured that The Cayman Islands and her visitors have, on occasion, 
attracted more law enforcement attention than the prudent asset 
concealer would want to endure.

In addition, both the Bahamas and the Cayman Islands have signed 
Mutual Legal Assistance Treaties ("MLATS") with the United States.  
Though the Bahamian and Cayman MLATs both have important restrictions 
on information relating to tax matters, the Bahamian treaty, requires 
assistance in tax matters where the "offense" involves narcotics, 
theft, violence, or dual crimes.  The Cayman MLAT excludes tax and 
currency offenses not relating to another criminal matter.

[...]

An excellent source for current high profile banking secrecy 
jurisdictions can be the periodic study by the Subcommittee on 
Investigations of the Senate Committee on Governmental Affairs, "Use 
of Offshore Banks and Companies."

     The Goals of the Asset Concealer and Selection of Jurisdiction

       Tax Cases

The reason for secrecy is terribly important in deciding jurisdiction.  
Of course, most litigation on the subject is with reference to 
taxation actions.  Jurisdictions with favorable laws for the "tax 
problem" depositor have traditionally included Switzerland, the 
Bahamas, the Cayman Islands, Bahrain, and Hong Kong.  See Generally 
Crinion, Information Gathering on Tax Evasion in Tax Haven Countries, 
20 Int'l Law. 1209 (1986)(analysis of law and practice of obtaining 
evidence from abroad in IRS investigations).  Switzerland, however, 
has leaned away from providing shelter to U.S. depositors accused of 
tax evasion.  While in practice Switzerland has been reluctant to 
disclose the information of depositors engaged in tax litigation with 
the United States and other nations, pressure from the U.S. has moved 
Switzerland, grudgingly, to comply in many of these cases.  Banking 
secrecy in Switzerland remains more stringent in other areas, but her 
deference to the United States is disturbing.

       Securities Issues

Securities litigation is probably the next most frequent category of 
case involving international discovery and the compelled discovery of 
documents.  Blocking and secrecy laws of those countries with robust 
legislation will protect the asset concealer concerned with this area.  
Many countries which have signed agreements with the United States, 
notorious for its excessively energetic securities regulation, still 
have found ways to avoid complete compliance through treaty loopholes.  
Of particular note, with my previously expressed reservations about 
newly emerging agreements, is the Swiss accord, The United States-
Swiss Treaty on Mutual Assistance in Criminal Matters 27 U.S.T. 2019, 
T.I.A.S. No. 8302 (1977) which is fairly typical of such agreements.  
Because the Swiss agreement requires that the alleged acts which are 
the subject of the litigation spurring discovery be illegal in 
Switzerland as well as the prosecuting nation, and because some U.S. 
and other securities violations do not expressly "contravene" Swiss 
law, the Swiss treaty is, in extremely limited circumstances, an open 
tunnel for non-disclosure.  See Generally, Brodeur supra.

Offshore entities are particularly useful in active trading for the 
asset concealer anticipating securities regulation problems.  Problems 
with the SEC's Enforcement of U.S. Securities Laws in Cases Involving 
Suspicious Trades Originating from Abroad, H.R. Rep. No. 1065, 100th 
Cong., 2d Sess. 2-6 (1988).  The sheer volume of international trading 
on the large U.S. markets provides an excellent opportunity for 
securities traders to become a "drop in the bucket."  Reported 
purchases of stock in the United States by foreign entities were $41.8 
billion as early as 1982.  Swiss banks alone may account for as much 
as 20% of the trading volume on the New York Stock Exchange.  Siegel, 
United States Insider Trading Prohibition in Conflict with Swiss Bank 
Secrecy, 4 J. Comp. Corp. L. & Sec. Reg. 353, 357 (1983).  Because the 
enforcement of securities laws within the United States has been so 
dependent on disclosure and the open identity of the traders, many 
have used this "weak link" to avoid unwanted attention by trading from 
anonymous or nearly anonymous accounts abroad.

[...]

Some jurisdictions continue to provide a measure of safety against 
outside investigation of fraudulent and illicit trading through 
blocking and privacy statutes, Liechtenstein, Monaco, Luxembourg, and 
the Cayman Islands are the best examples. See Generally, Rochelle G. 
Kauffman, Note, Secrecy and Blocking Laws: A Growing Problem as the 
Internationalization of Securities Markets Continues, 18 Vand. J. 
Transnat'l L. 809, 819-26 (1985)(discussing countries with blocking 
statutes and the effect  of these laws on the SEC); Yvonne G. Grassie, 
Recent Development, Foreign Bank Secrecy and Disclosure Blocking Laws 
as a Barrier to SEC Policing of Transnational Securities Fraud, 65 
Wash. U. L.Q. 259 (1987)(discussing judicial and administrative 
efforts to deal with blocking statutes).

Occasionally, where suspicious trading originates from a country such 
as Panama, Luxembourg, or Liechtenstein with blocking or secrecy 
statutes and no bilateral agreements with the United States, the SEC 
takes no investigative action.  See Grassie. at 11 (statement of Mr. 
Mountjoy).  Where a bilateral agreement exists, the Commission is 
often reluctant to invoke less it "wear out its welcome" with the host 
country.  Id. at 12-13 (investigation into suspicious trading through 
Swiss banks in which conclusive indications that U.S. securities laws 
had been violated existed still resulted in no request information to 
the Swiss authorities).

Identifying foreign owners can be virtually impossible when ownership 
must be traced through bearer shares, such as those issued by 
Liechtenstein Anstalts,  or when ownership is held through accounts in 
jurisdictions with iron clad bank secrecy laws.  See, e.g., Ingo 
Walter, The Secret Money Market 185-237 (1990) (emphasizing use of 
secrecy jurisdictions as means of avoiding detection and enforcement); 
Marc C. Corrado, Comment, The Supreme Court's Impact on Swiss Banking 
Secrecy: Societe Nationale Industrielle Aerospatialle v. United States  
District Court, 37 Am. U. L. Rev. 827, 829-31 (1988)(reviewing Swiss 
domestic policy rationales for bank secrecy); Michael Getler, Europe's 
Ultimate Tax Haven, Wash. Post, Jan. 15, 1978, at H5; Liechtenstein; 
Coming Clean, The Economist, Apr. 26, 1980, at 59; Steve Lohr, Where 
the Money Washes Up, N.Y. Times, Mar. 29, 1992, at 27 (Magazine); John 
Wicks, A Tax Haven Where Companies Outnumber the Population, Fin. 
Times, Aug. 24, 1984, at 8.  To deal with the challenges posed by 
foreign ownership and trading, the U.S. Securities and Exchange 
Commission has negotiated an intricate web of treaties and memoranda 
of understanding.  See, e.g., Richard M. Phillips & Gilbert C. Miller, 
The Internationalization of Securities Fraud Enforcement in the 1990s, 
25 Rev. Sec. & Commodities Reg. 119 (1992).  Switzerland now often 
conditions permission to trade on U.S. securities markets with a 
waiver of secrecy.

[...]

(End of Segment 1 of Volume I)

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