REPORT #227 April 2000

Produced by the Belize Development Trust

Belize being a tax haven country is concerned about bills before the USA Congress to penalize tax haven countries that are found guilty of money laundering operations.

The USA Courts has identified money-laundering, as the transfer of funds earned in an illegal enterprise, to a legitimate business, as washing money, or money laundering.

Obviously, in the context of the laws of Belize, if we accept this definition, then accusations and allegations coming from any foreign country would have to be accompanied with evidence that any money in any accounts, had actually been earned in an illegal enterprise.

The most common illegal enterprise today is drug production, smuggling and sales. These span several countries in such operations, wherein the local laws may differ. If one were to use illegal drug sales as an allegation against money in an account, then the accuser would have the burden of proof to prove that said money did actually come from an illegal enterprise.

Let us presume that the DEA and Justice Department of the USA, did trace drug sale money in their country to an offshore account in a tax haven. Perhaps Belize. Would they be correct in asking that account be seized? Probably so, if first they presented evidence that was indisputable by USA court cases with guilty verdicts, to courts of Belize, that the money was indeed coming from the sale of illegal drugs in their country. A local ruling on the evidence would have to be found first. Then the account frozen, but not before. There are a lot of seizures and false accusations being done in the USA today under wierd laws, that put the burden of proof on the accused, after the property, or money has been seized. This is so obviously a wrong approach, that in Belize it should not be condoned. Local courts must be satisfied with evidence that any account alleged to be illegal gains from a foreign country is actually that, by the evidence with proof and not by accusations and allegations that are unproved.

There is also the problem of tax havens. A tax haven is exactly that, a country providing offshore accounts and banking services for people in other countries to apply legally through various legal maneuverings and tax laws which differ in different countries, a method of moving money from LEGAL enterprises, to other LEGAL enterprises, via the mechanism of complying with the laws of various legal jurisdictions, including the country of origin. The goal to minimize legal taxes and increase legal profits. This is not money-laundering! It is the astute use of law and different legal jurisdictions to maximize the returns on a legal enterprise called a profit. Again, this is not money- laundering. It is just the use of tax law in a legal framework.

For example, in the USA, the IRS would not tell you about any deductions you failed to declare, that are spelled in an ever changing tax code. They would charge you tax and take your money, knowing that you did not owe all those taxes. The law would specify that you could reduce your taxes by various loopholes and deductions, but it is up to you and the ingenuity of your tax accountant to find them. Tax havens cater to this sort of legal moving of money from one tax jurisdiction, or the other and it is perfectly legal and honest. The responsibility under USA tax law, is on the person with the money, to protect their profits, or earnings using the tax laws in a legal manner.

There are other uses for tax havens. How about Corporations and Trusts that the owners are not known? Perhaps a person could use a foreign tax haven corporation to purchase shares in BEL in Belize, and at the same time because of the hidden nature of the ownership of IBC's, actually act as middleman in the deal and collect a commission as a broker? A double whammy so to speak. Buy something you wanted and at the same time get the overall price reduced more, by charging a sales commission in the process of finding a buyer.

There is the problem of a foreign country tracing illegal enterprise money, that they can prove, to a tax haven country court with suitable evidence to be from an illegal enterprise, but when the IBC account is seized it is found to be nearly empty. The parties involved with that IBC and the illegal enterprise may have other ventures that were legal in all countries as well as host country and have other tax haven accounts with money. Would it be right to seize any other accounts in the tax haven country on the original evidence? I don't think so. There is no way to separate the good honest money from legal enterprises from the money supposedly coming from an illegal enterprise. If you cannot prove, or show the chain of money flow, to a second, or third account, you would have no legal grounds for seizing those accounts, solely on the basis of alleged ownership.

The bottom line is, that to prove money-laundering there has to be evidence that this particular account, this particular batch of money, came from an illegal enterprise and that this has been shown to be true by a court of law in the originating country. Unsubstantiated accusations and allegations are slander and not enough. There are overzealous bureaucrats in many countries that would bend and break the law themselves to achieve their goals. It is the responsibility of tax haven countries to see that the "rule of law" is applied. Not act on bureaucratic irrational unfounded suspicions and allegations. That is the business of being a tax haven country. To obey the laws. Not act on allegations of foreign countries, without direct proof and guilty verdicts in the host country law systems.

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