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Tax haven network makes UK the top ‘secrecy jurisdiction’, says TJN

2011-10-16 23

Extracts:
"The United Kingdom would ‘easily’ take Switzerland’s place at number one in the Financial Secrecy Index if the ‘British network of secrecy jurisdictions’ were considered, according to an influential campaign group. ...
...
The TJN report noted that Britain’s network of ‘satellite secrecy jurisdictions’ accounted for about a third of the global market in offshore financial services. ...
...
In Treasure Islands: Tax havens and the men who stole the world, published earlier this year, Nicholas Shaxson described a ‘hub-and spoke array of tax havens centred on the City of London’, a grouping that had been estimated to account for ‘well over a third of all international bank assets’.

This network gave the City a global reach, he argued. Much of the money attracted to ‘British havens’, and the business of handling that money, ‘is funnelled through to London’.

The Crown Dependencies ‘are substantially controlled and supported by Britain but have enough independence to allow Britain to say “there is nothing we can do” when other countries complain of abuses run out of these tax havens’, Shaxson wrote.

‘This British spider’s web lets the City get involved in business that might be forbidden in Britain, providing sufficient distance to allow financiers in London plausible deniability of wrongdoing.’

The web was in part, he said, a ‘laundering network’, and ‘by the time the money gets to London ... it has been washed clean’. ..."

This article makes interesting reading. Seems Jersey is the worst offender among the Crown Dependencies, but Guernsey and IOM are not far behind:
"The Isle of Man has become the first of Britain’s offshore dependencies to exchange tax information automatically, as opposed to merely on request. Guernsey may follow, though Jersey remains implacably opposed, fearing a loss of “competitive advantage” "

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Australia: ABC1 Foreign Correspondent

Posted 22/09/2009 - 13:22 by JS

2009-09-21 16

ABC1 doco of Icelands Banks Mess. Includes interview with former Singer & Freidlander CEO,
If in Australia the episode will be repeated on Saurday 26-Sept-09 on ABC1.

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Tories would change FSA

2009-07-18 23
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REPORT ON KSFIOM CREDITORS MEETING: MANX HERALD

2009-07-07 23

Regardless of the legal position, it appears there would have been insufficient support to have made it happen anyway, even if a vote had been allowed; as there was an overwhelming vote, by value, in support of maintaining the status quo.

The attempt by members of the Kaupthing Singer & Friedlander Depositors Action Group (DAG) to have a ‘conflict’ liquidator appointed alongside deemed official receiver, and joint liquidators, Mike Simpson and Peter Spratt, both of PWC, failed to get off the ground at today’s creditors’ meeting (Tuesday 7th July).

The attempt was probably doomed from the beginning as Seth Caine, legal representative of the joint liquidators, pointed out, as a matter of law, the meeting could only vote to replace the liquidator and, if successful, to vote for a replacement.

Regardless of the legal position, it appears there would have been insufficient support to have made it happen anyway, even if a vote had been allowed; as there was an overwhelming vote, by value, in support of maintaining the status quo.

After quite a lengthy delay in producing a result, Mr Simpson announced - whilst 419 people had voted for the resolution, 237 voting against, with 4 abstentions - by value £329.5m had been cast opposing the resolution and only £86.4m was in favour.

Therefore, he said, the resolution “failed on the value test”.

Mr Simpson had commenced proceedings shortly after the 11.00am start time to allow the last few people, of a very small number of attendees, to register. There were about 60 or so people in the meeting - but quite a few of those were either legal representatives, or from the liquidator’s team, observers and the press – so in all probability less than 40 creditors put in an appearance. Many creditors/depositors no doubt decided it would serve little purpose in being there and would just run additional, un-recoverable costs.

Mr Simpson extended apologies on behalf of Mr Spratt, who he said was unable to attend for personal reasons, and introduced a colleague from PWC, two gentlemen from advisors Nabarro and Mr Caine.

Before he moved on to the core business of the meeting he pointed out a number of observers and members of the press were present and asked if any creditors had an objection to them being present; but none did.

He then gave a brief run down on the purpose of the meeting before giving an overview of the current situation. He explained a copy of his report, once finalized, would be distributed as soon as possible after the meeting; which was not particularly well received by a DAG representative, Robert Coates. He felt the liquidator had had plenty of time, since the winding up hearing, to circulate it before the meeting; but Mr Simpson countered this by saying he thought making sure the proxy votes were properly organized for this meeting was a higher priority.

In essence, as of the 27th May 2009, £155m was held in cash by the liquidator with an additional amount, in respect of share sales and loan interest, and repayments, pushing the total up to £263m. However, some of this additional money can only be released for distribution later this year when the indemnity given to JB Morgan Cazenove expires.

He explained all but £270k of the outstanding cash has been recovered, and £23m of loans has been repaid so far. This leaves 174 outstanding loans, owed by 157 customers, with a total amount outstanding of £418m. Of this amount £11.3m will be repaid through set-off claims. Most of these loans, which are interest only, are secured against high value properties, but where it has been assessed the loan to value ratio is insufficient some capital repayments are being sought. All are due to mature by 2017, but the vast majority are due for repayment by 2013. Some loans he said have already been refinanced, and he expects others will probably do the same. Only 28 are in arrears but he said he expected the situation to be regularized shortly.

Mr Simpson invited Jonathon Warne, a Partner at commercial law firm Nabarro, to explain the situation regarding Certificates of Deposit (CD).

Mr Warne stated it is a complex issue but, in summary, Kaupthing UK had acquired CDs on behalf of KSF (IOM) and some of the building societies involved had claimed they were unaware of this arrangement. They had tried to offset claims against KSF (UK) against the CDs and this had been challenged through the courts. In April the court had found in favour of KSF UK, and the company (KSF IOM), and £35m was released. However, owing to the action taken by the UK authorities, when KSF UK was put into administration, and the passing of a Special Banking Provisions Order, clearance is needed by the authorities to transfer the money to the IOM. This has been given, he said.

He moved on to the issue involving the special trust account established in the UK to accept payments received by KSF UK between 2nd & 8th October 2008. The court has heard the case and it had been anticipated a decision would be given today, but it is now expected on Friday. KSF (IOM) is hopeful of recovering money from this trust account if it is accepted it had qualifying deposits.

Mr Simpson up dated the situation regarding the collateral shares taken by the liquidator. As is already well known the JJB and Booker shares have been sold, realizing £99.8m, but dividends of £600k are still being held by a third party. This is being pursued, he said.

3 other shares are held, two of which are not expected to produce any return, and the third is subject to legal and beneficial ownership disputes.

He stated the UK administrators are still expecting to make a 10p in the £ dividend payment soon and an overall return in excess of 50p in due course.

He explained a date for the cancellation of the Repo agreement was still being negotiated as this will have a material effect on the valuation; and 41 derivative contracts, relating to currency swaps, are still un-finalized.

He said a winding up committee has been formed, in Iceland, to deal with the parent company but as of yet no call has been made for claims to be lodged. He also pointed out the moratorium on payments, runs until November 2009 and this may yet be extended. It is expected, when action commences, it will involve an insolvent liquidation or a Scheme of Arrangement (and we have all heard that some where before).

Remarking on the Habana case, he pointed out no trust fund had been established in the same way as the UK bank and inferred the company did not think the challenge would be successful. The decision of Deputy Deemster Andrew Corlett is waited, but no indication had been given as to when a judgment will be handed down. Whatever the result, he suggested an appeal may follow.

Mr Simpson explained there are a number of preferential creditors, including the Income Tax Division and members of staff, who will have to be paid out of the funds of the company but he does not expect this to delay payments to depositors.

The liabilities now total £907m with £863m being owed to in excess of 11,000 depositors. Costs so far of the liquidator PWC, which have not been paid as they need the approval of the court, amount to £3.1m and £1.7m has been spent on legal and professional fees (Cains, Nabarro, Lovells, and two other firms). This is perhaps not surprising when it was revealed, under questioning from Mr Coates, Mr Simpson’s charge out rate is £500/hr and Mr Spratt’s is an even more eye-watering amount of £670/hr.

The 64 members of staff at the bank have now been whittled down to 5, and Mr Simpson said it was important to retain certain key employees, and to incentivize them to stay. This cost has amounted to £900k so far.

Mr Simpson stated the current predicted ultimate dividend lies somewhere between 73% and 88%; although he said this doesn’t allow for a recovery through the parental guarantee or the other amounts being challenged through the courts in the UK.

Mr Simpson put it to the meeting he and his colleague were well aware of the concerns raised by many depositors, but he said they now have full investigatory powers and assured depositors they would use them.

Dan Schwarzmann, a Partner with PWC, who has been brought on board to assist with this aspect of the liquidation also sought to reassure depositors the seriousness that PWC attach to this element of the business. He also insisted conflicts, perceived or otherwise, are rigorously policed and will not arise.

He gave a brief résumé of some of his experience in this field and stated they will be looking at the reason the bank failed, transactions, the inter bank loans & repos, the decisions of the directors, the interaction with the regulators; and will see if any action against third parties is appropriate and could result in recovery of funds.

He also said they would also consider the findings of the judicial review of the collapse of KSF UK.

Having concluded his briefing Mr Simpson invited questions from the floor.

Mr Coates inquired if the directors had been invited to attend; to which Mr Simpson said they had but they had declined the invitation.

Mr Coates also asked why a statement of affairs had not yet been prepared and was informed it was taking time to finalize as it is covering a wider report than they are required to produce; but he did manage to extract the information that the costs of the failed SoA for the liquidator is £620k.

It was at this point Mr Coates tried to get Mr Cohen of BDO Soy Hayward appointed as a conflict liquidator, citing among other things the failure of the liquidator to get an indemnity from Treasury to cover their SoA costs; and the mistakes in the asset figures.

He said DAG had expected better of PWC and the appointment of Mr Cohen to deal with discrete areas of investigation would not add to the costs.

His arguments were rejected by Mr Caine and Mr Schwarzmann; with Mr Caine referring to D. Deemster Corlett’s judgment regarding the costs of the SoA. He put it to Mr Coates it would have been a pointless exercise for the liquidator to try to claim their costs from Treasury as his Honour had made it clear he would not make such an order in the absence of any misconduct.

At this point another depositor interjected they were not there to debate the rights and wrongs of the affair but to vote on the resolutions and having received support from other creditors Mr Simpson said he would move on to the voting.

As previously reported the main resolution was defeated but the setting up of a Committee of Inspection, and that it should consist of 7 members was almost unanimously supported. However, the four nominations for membership of the committee were defeated and a new poll was held to chose the 7 from 11 candidates; which apparently included the four names defeated in the first poll. The results, of the second poll, were not announced at the meeting and will be released in due course.

Whilst some of the votes were being counted Professor Davidson suggested the time could be used to answer some more questions as he wanted to know why the expected return from KSF UK is so low.

Mr Simpson explained the UK bank is much larger with greater exposure to derivatives and loans, some of which are secured against yachts and aircraft rather than real estate.

However, he wanted to make clear they re relying on the information and figures provided by the UK administrator and are not trying to “second guess” what they are being told.

In respect of question about the IOM loan book, he said the offers to buy it had included far too large a discount to make it worth while. However, when the majority of loans have matured in 2013 a further decision will probably be taken then whether to sell the remaining business.

Mr Schwarzmann pointed out this was exactly the same decision taken when they were dealing with the collapse of Lehmans.

The final results having been announced the meeting was called to a close at approximately 1.16pm.

The next date of interest to depositors is next Tuesday when Tynwald sits and they will debate a revised funding arrangement for the Depositors Compensation Scheme.

Treasury Minsiter Allan Bell - who is currently in the USA trying to convince the Obama administration the IOM is a first class offshore finance centre and should be considered to be among the good guys – will attempt to convince his Tynwald colleagues to allow him to now take £193m rather than £150m from reserves to fund the DCS.

This begs the question, if he is prepared to go to that amount now, why didn’t he improve the terms of the DCS before he wasted so much money on a failed SoA?

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Is PWC in trouble?

Posted 08/06/2009 - 15:18 by chris watson

2009-06-08 (All day)

Let's hope this is not going to be a concern to us.

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Taleban Guarantee Bank Deposits

Posted 11/04/2009 - 19:46 by khan12009

2009-04-09 (All day)

Just read in the Frontier Post that the Taleban have guaranteed retail deposits in their jurisdiction which goes to show they realise the importance of a bank failing

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Royal Skandia's release re: £1000 payment

Posted 23/01/2009 - 11:09 by cypheath

2009-01-21 22

For info:-

Isle of Man Government Early Payment Scheme for Kaupthing Singer & Friedlander (Isle of Man) Limited Depositors

Following the 20 January 2009 sitting of Tynwald, the Isle of Man's parliament, the £1,000 early payment previously proposed by the Isle of Man Treasury for Kaupthing Singer & Friedlander (Isle of Man) Limited Depositors has now been formally agreed.

As Royal Skandia understands it, we will receive one lump sum comprising of £1,000 per individual client account; following receipt, it is our intention that each £1,000 payment will then be allocated to the cash account of each affected bond. However, specific details are still to be finalised, and therefore Royal Skandia is due to meet with the Isle of Man Treasury during the week commencing 26 January 2009, at which time the precise arrangements regarding payments will be agreed. At that point we will post further details on our website.

In the interim, if you require any further details we suggest you refer to the Isle of Man Government website (www.gov.im/cso/faq_gfs.xml), where you will find their recent press releases on this matter.

Impact on charges

For all portfolio bonds that have a deposit with Kaupthing Singer and Friedlander we will exclude these assets in calculating any charges due that are based on fund value. Charges will continue to apply as normal on investments in other assets. The waiver on charges will continue until we have confirmation on the value of these deposits with the bank. When this clarification is received we will review the position.

This change took effect immediately following notification of the position at Kaupthing Singer and Friedlander and will be taken into account in the next set of charges that are due to be deducted at the end of November, and will be reflected on the next quarterly valuation statements due to be issued in January.

View a statement from Mike Simpson - Liquidator Provisionally of Kaupthing Singer & Friedlander (Isle of Man) Limited.

Details of the Isle of Man Government's response to the situation can be found at the following web address:
http://www.gov.im/cso/faq_gfs.xml

Last updated 22 January 2009

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British Tax Haven’s Safety, Secrecy Face Brown, Obama Challenge

2009-01-16 (All day)

Jan. 16 (Bloomberg) -- The three-legged emblem on the red Isle of Man flag in Allan Bell’s office has a motto that the British tax haven’s treasury minister hopes stays true.

“Whichever way you throw me, I stand,” Bell said.

That resilience is now being tested. The self-governing island is in a tug-of-war with U.K. Prime Minister Gordon Brown over deposits in collapsed Icelandic lender Kaupthing Bank Hf and will find out Jan. 29 whether it will have to activate a compensation plan for savers. As a senator, U.S. President-elect Barack Obama backed proposed legislation labeling the island as a possible center of tax fraud.

“It’s certainly going to be the most challenging period that the Isle of Man has had in recent times,” Bell, 61, who entered government in 1984, said in an interview. “I can’t tell you where the Isle of Man is going to be in five years.”

The isle between Britain and Ireland, whose parliament traces back more than 1,000 years to Viking settlers, is home to 80,000 people. The island in the Irish Sea also has more than 100 financial companies, which managed a combined $132 billion of deposits and funds as of Sept. 30, according to data compiled by the Isle of Man’s Financial Supervision Commission.

The Isle of Man offers low or no taxes, easy movement of capital, and higher interest rates on accounts. The credit crunch has undermined its status as a safe haven for some investors and Bell is battling to defend its reputation.

U.K. Safety Net

When Reykjavik-based Kaupthing Bank failed in October, it owed about 880 million pounds ($1.3 billion) to depositors in its Isle of Man unit, said John Spellman, a government official on the island.

U.K. Chancellor of the Exchequer Alistair Darling refused to guarantee Kaupthing’s depositors on the Isle of Man.

“If I ever get my money back, I’ll put it in a bank owned by the U.K. government,” said Ziggy Sieczko, 36, who lives in London and had more than 1 million pounds of savings with Kaupthing. “Why would I put my money in the Isle of Man again when only government-backed banks proved to be safe?”

The U.K. invested 20 billion pounds to save Edinburgh-based Royal Bank of Scotland Group Plc, which in turn owns Isle of Man Bank Ltd.

Bell wants Brown’s government to return about 550 million pounds of deposits that he said were frozen in London when Britain seized Kaupthing’s U.K. unit in October. He isn’t optimistic.

Damage Limitation

“That’s Isle of Man money,” Bell said at his office in Douglas, the island’s capital. “The reputational damage to the Isle of Man will be that much greater if we fail to get a satisfactory conclusion.”

The island has committed 150 million pounds, about half its cash reserves, to compensate depositors by as much as 50,000 pounds each. The payment plan will be activated if the island’s High Court rules Kaupthing is bankrupt on Jan. 29. Bell wants to find an alternative to allow time to sell Kaupthing’s assets.

The Kaupthing dispute has triggered a U.K government review of British offshore financial centers, including the Isle of Man, Jersey, Guernsey, Bermuda, the Cayman Islands and the British Virgin Islands. The islands’ sovereign is Queen Elizabeth II, though none elect representatives to the U.K. Parliament.

“These Crown Dependencies, such as the Isle of Man and the Channel Islands, attract banking customers with lower taxes without contributing to the U.K. Exchequer,” Darling told Parliament on Nov. 24. “The British taxpayer cannot be expected to be the guarantor of last resort.”

Brown’s Black Holes

Bell said the islands channel billions of pounds into London’s financial district that would otherwise go to New York, Singapore or Hong Kong. “We are vitally important feeders into the United Kingdom,” Bell said.

Yet the tax havens are a potential obstacle for Brown’s goal to reform the financial system, according to tax campaigners.

“Brown will have to perform a very difficult balancing act,” said John Christensen, director of U.K.-based non-profit Tax Justice Network and economic adviser to Jersey from 1987 to 1998. “He can’t reform the world financial system without reforming the fiscal black holes he is responsible for.”

The Isle of Man also faces a challenge from Washington. Obama supported the Stop Tax Haven Abuse Act introduced to the U.S. Senate in 2007, according to a Feb. 17 statement from Senator Carl Levin’s office in Michigan.

That act blacklisted the Isle of Man and more than 30 other places as “offshore secrecy jurisdictions” and “probable locations for U.S. tax evasion.”

“That’s a good guide to the way legislation is going to go, although the devil is in the detail,” said Reuven Avi- Yonah, a University of Michigan law professor in Ann Arbor. Jen Psaki, a spokeswoman for Obama’s transition office, declined to comment.

Worried Islanders

Isle of Man residents are wary of Obama’s administration.

“It may not be so good for us,” said Brett McLinden, who works in the island’s museum, where Viking trinkets lie next to Celtic stone crosses and stuffed tailless Manx cats.

To remain a finance center, Christensen said Bell will have to prove that what’s good for the Isle of Man is also good for the world. Bell said the island is up to the challenge.

“The only concern we have is the apparent lack of differentiation at the moment in terms of those small finance centers that are fully cooperative and transparent, and those which are opaque and uncooperative,” Bell said. “We are as determined as anyone that our financial system is not abused.”

To contact the reporter on this story: Simon Clark in London at sclark4(?)bloomberg [dot] net

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Kaupthing Luxembourg to be sold to Arab Investors - Belgium and Luxembourg to guarantee deposits

2009-01-14 (All day)

BRUSSELS, Jan 6 (Reuters) - Belgium and Luxembourg will enter talks to create a fund guaranteeing depositors' savings at the Luxembourg arm of collapsed Icelandic bank Kaupthing (KAUP.IC), Belgium's finance minister told Reuters on Tuesday.

Belgium would contribute between 75 and 100 million euros to the fund, Finance Minister Didier Reynders said as he exited a meeting with key ministers where they agreed to propose the idea to Luxembourg.

He said the fund would mean a risk for the states and their taxpayers should Kaupthing Luxembourg fail, but stressed that their primary goal would be for Luxembourg to sell the bank by the beginning of April, likely to a group of Arab investors already in talks to purchase the distressed company.

"We would take a risk, on behalf of the Belgian state, of between 75 and 100 million euros," Reynders said, specifying that the fund would guarantee up to 20,000 euros per account immediately, and ultimately up to 100,000 euros per account should Kaupthing not be taken over. "But our priority remains having the bank bought," he said.

Luxembourg's Budget and Treasury Minister Luc Frieden broadly supports creating such a fund, though details must still be worked out, an official at Luxembourg's Finance Ministry told Reuters.

Reynders declined to say how much Belgium would ask Luxembourg to contribute to the fund, saying only that Belgium would not risk more than 100 million euros.
[continued]

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Latest Statement From Mike Simpson

Posted 22/12/2008 - 20:35 by cottesmore

2008-12-23 (All day)

19 December 2008

General Matters
This update covers the Isle of Man Treasury’s proposals for an interim payment, internet access for accounts and confirmation regarding the issuing of statements.

Due to the Christmas period, in the absence of significant new information, the next planned update will be in the first week of January.

I would draw your attention to the conference call details posted at the end of this update.

Interim Payment from the Isle of Man Treasury
The Isle of Man Treasury has sought approval from Tynwald for making a payment to depositors of £1000. The Treasury have requested that we send a claim form to all customers on their behalf so that depositors can arrange for them to be completed and returned.

All queries relating to the Early Payment Scheme should be directed to the hotline that the Treasury is setting up for this purpose, details of which will be on the Treasury website.

Edge and online Accounts
As stated last week the Edge and online accounts in a “READ ONLY” format will go live as soon as the IT specialists have completed the necessary updates to the system. Online access will remain open until the end of February 2009.

Statements
We have begun to issue Statements. Accompanying the statements will be a letter explaining the treatment on certain accounts such as fixed term deposits, which was explained in my last update.

Together with the statements we will be sending an information sheet to customers requesting confirmation of their details, this is in addition to the form referred to above as it is to ensure that the Bank’s information is accurate. The form will also enable customers to confirm alternative bank account details for any future payments which could be made electronically.

Telephone conference dial in details
Following discussions with the Depositors Action Group I have set up a conference call which will take place on Monday 22 December 2008 at 4.00 pm GMT.

I am making the access details generally available to depositors. If you wish to listen to the call, you will need to register in advance. Please click the link to register.

https://cossprereg.btci.com/prereg/key.process?key=PM84Q9HYV

Participation will be on a listen only basis. The facility is provided by a third party and accordingly there is a cost per head for usage. Should any party register and then not attend the liquidation will be charged.

The lines are also limited and I would request that only those depositors who are able to make the call register as we will make the audio recording of the call available on the website for those of you who are unable to attend. Should depositors choose this route to listen it will significantly reduce the costs

Contacts
As previously, the best way to make contact is to write to the bank or to email branch(?)kaupthing [dot] com. If you need to telephone the bank, please use the main switchboard number +44 1624 699222.

Mike Simpson
Joint Liquidator Provisionally

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