Up Front

Attorney at Law-
Michael L. Alberga
Not Afraid of the
OECD or the FATF

Attorney at Law, Mr.Michael L. Alberga

Still under scrutiny from the G7s FinancialAction Task Force (FATF), a review team from this organizationis scheduled to visit the Cayman Islands, next week Monday, fora series of meetings in connection with this country's commitmentto put in place compliances mandated through local legislation,to avoid remaining on the FATF's 'Black List'.

The meetings planned, according to a spokespersonfrom the Financial Secretary's office: "is a follow-up onthe on-going dialogue the Cayman Islands Government has been havingwith the FATF since its inception."

Meanwhile, one person who has not been afraidto voice his dissent alongside a collection of United States GovernmentCongressmen, to the actions of the OECD is local attorney Mr.Michael Alberga, who has written numerous treatises on the CaymanIslands success as a Financial Planning Centre.

Letters voicing concerns by some of themembers of the US Congress and other bodies can be viewed on theInternet at the Freedom and Prosperity web site - www.freedomandprosperty.org.

Mr. Alberga is a third generation attorneyand has been practicing law in the Cayman Islands for over 20years as a partner in the firm of Myers & Alberga. He is amember of various organisations and institutions including theAmerican Bar Association, International Tax Planning Association,State Capital Law Firm Group, McIntyre Strater, InternationalBar Association, Center for International Legal Studies, InternationalBusiness Law Consortium, Society of Trusts and Estate Practitionersand was President of the Cayman Islands Law Society for 4 yearsending in 1997.

As a member of the Private Sector Committee,he was appointed to review the updated anti-money laundering legislationintroduced in the Cayman Islands in 1997 and has been involvedin analyzing various aspects of the OECD harmful tax competitioninitiatives.

Mr. Alberga speaks at various conferencesand has written numerous articles over the years.

One of his commentaries appears below.

The Financial Action Task Force (FATF),a body created by the G-7, has spent many years urging and coercingcountries to tighten their regulatory mechanisms and to join thefight to make it more difficult for unscrupulous persons to usethe world's financial systems for illegal purposes.

This worthy cause has been embraced moreor less on a global basis. The campaign which began with theobject of stamping out the use by drug barons of financial institutionsexpanded into other areas of recognised international criminalactivity with groups from various countries examining the progresswhich had been made in legislative changes towards achieving thisgoal.

The Caribbean Action Task Force (CATF) wasformed with a high degree of co-operation from Caribbean countries. Cayman was one of the first countries to submit to self-assessmentand received extremely high marks for its efforts in this regard.

A couple of years after the effort was wellunderway the OECD, in a departure from its usual helpful assessmentsand its stated purpose of encouraging economic co-operation anddevelopment among member nations, issued its intended newly foundpurpose of harmonizing tax rates on a global basis. Low taxand no tax nations in a globalised world were unfairly encouragingcapital to move to more productive areas. This threatened thehigh tax socialistic systems of many European countries who areunable to encourage necessary structural reforms. Unless agreementwas reached with low tax and no tax financial centres to ceasethese disruptive practices and to become more transparent by agreeingto become tax policemen, they would be sanctioned and hopefullyeliminated. This despite accepted principles of internationallaw relative to the sovereignty of nations and numerous decisionsby courts that one country will not allow itself to be subjectedto the fiscal regime of another country except through treatyarrangements. Unperturbed by these principles the OECD pushedahead towards achieving its goals by threatening sanctions againstnon-members who did not readily agree to become tax police, gatherinformation and assist in the collection of revenue for its membercountries. At the very best this transparent attempt threatenedfree trade and the growing movement towards globalization.

As criticism mounted against the OECD'seffort, now concentrated on small helpless countries, FATF beganto expand its ambit and insisted that recognised offences whichshould be accorded mutual co-operation and enforcement includefiscal offences. They demanded mechanisms be put into placefor the gathering of information by regulatory and other governmentalbodies which would assist in the easy transfer of fiscal informationto various tax authorities in OECD countries sovereignty and therule of law, insignificant hurdles.

At a meeting some time ago in the CaymanIslands of CATF, FATF representatives urged and encouraged theCaribbean Action Task Force to endorse the OECD principles andto move towards including fiscal offences in the various piecesof legislation being put into place to enhance the fight againstmoney laundering. This was not met with any degree of enthusiasmfrom the CATF countries and the rebuff by small helpless Caribbeannations was met with great indignation. Shortly thereafter itbecame apparent that FATF and the OECD had joined forces and weremoving towards including the failure to assist and report fiscalinformation to OECD countries without the benefit of a doubletaxation treaty as one of the world's most foremost global evils.

The bureaucrats were summoned and readilymounted their unruly Caribbean horses with the stated goal ofgalloping flat-out to the finishing line. Threats of blacklists,economic embargoes and other draconian measures were issued toall who did not surrender their sovereignty to the OECD and FATFinitiatives. Surrender to one organisation as in the case ofCayman (the OECD) was not good enough. Legislation far beyondanything which existed in the majority of the OECD and FATF countrieswas absolutely necessary. New organisations sprang to lightovernight. The FSF, the Financial Stability Forum, issued a mostamazing communiqué, the effect of which was that globalfinancial systems were threatened by financial centres (a findingwhich IMF had to later admit was without any substance). Countriesscrambled to deal with the raft of demands and the effects ofblacklists on their economies and citizens while the jockeys sharedoffices in Paris enjoying tax-free status, the Owners and Trainerssipped champagne at the impending victory.

Unfortunately, bureaucrats, whose abilityto think outside the box is limited at the best of times, muchless when at full gallop on top of a colonial or ex-colonial horsewith whips out and the finish line in sight, had failed to recognisethat the Euro-horse was beginning to become restless in the homestable. Not only had it fallen 20% behind the pace but it wasalso due for its major debut with the public.

The owners (the Prime Ministers and Presidents)and the trainers (the Finance Ministers) huddled in urgent meetings. A crisis was at hand, the jockeys had ridden the Caribbean horsetoo fast at an early stage in the race.

The carefully bred European steed was indanger of collapse just after the starting gates opened, withdisastrous results for the European Union.

Their socialistic and high tax economieshad developed a sophisticated black market economy much largerthan the jockeys' ability to imagine. Should the public failto accept the Euro and continue to exchange the various individualEuropean currencies for United States Dollars, there would belight betting on the tote board on opening day. The heads ofthe Owners and Trainers would roll and in a strange turn of events,the jockeys would remain unperturbed but directed by new Ownersand Trainers.

The Germans, astute thinkers, realised thatthe United States of America had dealt with a similar problemof a different nature. Prior to the reconfiguration of theircurrency they embarked on a worldwide educational problem whichhad been extremely successful. There were billions of Deutchmarksheld by Russians and nationals of other EU and non-EU memberson the black market. Teams were dispatched and paperwork preparedto explain that these would be exchanged without question forEuro's after its initial debut.

The Bank of Spain, fearing a liquidity crisisas estimates began to emerge that between four and ten percentof their GDP, some four thousand billion to ten thousand billionPesetas (twenty one billion to fifty three billion dollars) happilycirculated out of the reach of the taxman and in an undergroundeconomy. Known as the dinero "B", this paid for cars,travel, wages, construction, agriculture and a host of other goodsand services which were essential to their economic viability. To alleviate this crises the Central Bank of Spain issued a communiquéthat as of the 1st January 2002 any person could change up totwo and a half million dinero "B"s (pesetas) for Euro'swithout identification and cheques up to five hundred thousandcould be exchanged in a similar manner.

The black market problem in Italy is estimatedto be as large if not larger than Spain and that of France largebut yet unknown. The problem is so enormous that in Spain therehas been a noticeable increase in the funneling of funds intoreal estate causing prices to rise between twenty-seven and fiftyfive percent over the last eighteen months. The fear that conversionto United States Dollars and other hard currencies is so greatthat no longer is money laundering, tax avoidance, tax evasion,know your customer rules, reporting to FIU's, etc of any materialimportance.

As all of this develops, Cayman and otherCaribbean countries will be the subject of visits from the stewardswho are coming out onto the track to examine whether the Ownersand Trainers can instruct their jockeys to sheath their whipsas the Caribbean horse has collapsed over the finish line or whethera few more stripes will urge it towards that goal before it collapses.

Before the inauguration of the Euro is complete,the world's largest exchange of black market currency would havebeen completed. The total amount exchanged will more than likelyexceed all the assets held in the Caribbean financial centresand many others as a whole ­ a super laundromat of giganticproportions will have been mobilised. FATF and the OECD initiativestemporarily immobilised, except as they relate to the Caribbean.

If this is not Imperialism at its finestmoment, then China must be a democratic under populated nation,President Fidel Castro-an advocate of capitalism, Black Beardthe Pirate-a missionary, the FMOC- communists and the childrenof Saddam Hussein -heirs to the British throne.

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