[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[Extensions of Remarks]
[Pages 23746-23747]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 23746]]

                      THREATS TO FINANCIAL FREEDOM

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                       Thursday, October 19, 2000

  Mr. PAUL. Mr. Speaker, I recently had the pleasure of hearing remarks 
made by our former House colleague, Bob Bauman of Maryland, at a 
meeting of the Eris Society in Colorado. Since his talk centered on 
banking, financial and related privacy issues pending before the 
Congress, I want to share his view with the House as an informed 
statement of the threats to financial freedom posed by the Clinton 
administration's policies.
  Mr. Bauman, the author of several books on offshore financial topics, 
serves as legal counsel to The Sovereign Society (http://
www.sovereignsaociety.com), an international group of citizens 
concerned with the government encroachment on financial freedom.
  Remarks of Robert E. Bauman, Eris Conference, Durango, Colorado, 
August 12, 2000.

          The New Imperialism: The Attack on World Tax Havens

       I take as my theme two quotations, one from the Gospel of 
     St. Matthew, 20:15--``Do not I have the right to do what I 
     want with my own money?''
       The second is from Mayer Amschel Rothchild (1743-1812), 
     founder of the famous banking dynasty, the House of 
     Rothchild, who said: ``Give me control over a nation's 
     currency and I care not who makes its laws.'' Both quotes 
     have relevance to what I have to say.


                           Wealth Is Suspect

       If you are fortunate enough to fall into the estimated 
     group of six million millionaires worldwide now in existence, 
     a number noted in a study by Merrill Lynch last year, you 
     automatically may be a criminal suspect.
       I say ``suspect'' because Citibank views these wealthy 
     people, who control approximately 21 trillion-six hundred 
     billion dollars, as potential financial criminals simply 
     because of their wealth. Citibank announced last year that 
     their 40,000 private banking clients, each of whom had to 
     prove a personal net worth of $3 million in order to qualify 
     for the bank's services, are watched every minute of every 
     day to see if they may be engaged in money laundering or 
     other financial crimes. I am certain other banks do as well.
       The constant surveillance is accomplished, as is most 
     privacy invasion these days, by a special banking computer 
     software program called ``America's Software'' which allows 
     every transaction in any account to be watched constantly. It 
     produces a daily record for bank officials, who now have 
     certain obligations imposed by US law that require the 
     reporting of ``suspicious activities'' to federal agents. 
     Transfers of large amounts of cash or other unusual account 
     activity rings alarm bells and results in an investigation 
     not revealed to the ``suspect'' banking client under penalty 
     of law.
       We can conclude from this Draconian arrangement, for one 
     thing, that a person of great wealth who establishes a 
     private banking relationship with a major bank now is 
     presumed to be a possible criminal; that accumulated wealth 
     is not treated as potential evidence of crime; that in this 
     instance, the traditional American constitutional presumption 
     of innocence has been reversed; that the American banking 
     system is no longer safe for even honest people of wealth who 
     simply value their privacy.


                  It's Official: Offshore Means Crime

       I was at a conference on April 22, 1999 in Miami sponsored 
     by the respected publication, Money Laundering Alert. Lester 
     Joseph, Assistant Chief of Asset Forfeiture and Money 
     Laundering for the Criminal Division of the U.S. Department 
     of Justice, said that the U.S. Government officially views 
     any offshore financial activity by US persons--any offshore 
     financial activity--especially the use of tax havens, as 
     potential criminal money laundering activity.
       Now, it's quite obvious that financial activities in which 
     a person engages when wealth is moved offshore for asset 
     protection, for broader investment potential, for any number 
     of legitimate reasons, for possible tax savings, any of these 
     moves, are innocent in themselves. Former Secretary of the US 
     Treasury, Robert Rubin, admitted in congressional testimony 
     last year, it is the intention behind these innocent 
     financial moves that government agents want to police for 
     possible criminal investigation and prosecution.
       So now we have the government money police targeting normal 
     financial activities that until recently have been perfectly 
     legal, simply because a person decides in his own best 
     interests, to go offshore. We all know that in the US, 
     African-American, Latino, Asian-American and other racial 
     minorities have been unfairly subject to police 
     ``profiling.'' Add to that list of ``presumed guilty,'' 
     Americans who engaged in offshore financial activity.
       I'm not a defender of wealth per se. I wish I had wealth to 
     defend, but I am a defender of freedom. There can be no 
     freedom, personal or otherwise, without wealth, without the 
     right to own and use one's own property as one see fit. 
     Remove property rights and you have no means to sustain life 
     for yourself or your family. But now the acquisition and 
     accumulation of productive wealth has become officially 
     suspect in America.


                       War of Drugs=War on Wealth

       For the last 20 years the policies adopted by the United 
     States and allied governments have constituted a stealth war 
     against wealth and against financial privacy. While the free 
     flow of capital is extolled as appropriate and essential, the 
     governments of major nations have turned upside down the 
     traditional role of banks and banking. As a child I was made 
     to believe that the people you dealt with at your bank and 
     other financial institutions were fiduciaries to whom you 
     could entrust your money.
       Now we have what I call the ``Nazification'' of the 
     financial system, not only in America but worldwide. I don't 
     use that term lightly. As a matter of historic fact, the 
     civil forfeiture laws in this country mirror in many major 
     respects the Nazi forfeiture laws that were used to 
     confiscate the property of the Jews. I am a member of the 
     board of directors of Forfeiture Endangers American Rights, 
     (www.fear.org on the Internet) and you can find out more 
     information.
       The genesis of this ``wealth=crime'' policy can be found in 
     that infamous political and moral failure, the so-called 
     ``war on drugs.'' One of the primary weapons of this ill-
     begotten war has been civil forfeiture, where police seize 
     cash and property based on rumor or hearsay. In 80% of the 
     cases, the owner is never charged with any crime, but usually 
     the police keep the loot. Many police have long since turned 
     their attention away from drugs, and instead pursue the cash 
     and property they use to lard their budgets. Thankfully, my 
     former colleague, Henry Hyde of Illinois, led the successful 
     legislative battle for some much needed civil forfeiture 
     reform which recently became law.


                     An All-Purposes New ``Crime''

       As part of the drug war that progressed and expanded (but 
     is never victorious), the catch all crime of ``money 
     laundering'' was invented: an all purpose federal 
     prosecutors' dream. The anti-money laundering statutes that 
     have grown like a malignancy. Charges of money laundering now 
     routinely are shown in with almost every possible criminal 
     indictment, often as a bargaining chip and/or a means to 
     confiscate the wealth of the accused even before trial. Try 
     hiring a good defense attorney when your bank account has 
     been frozen.
       Laws enacted under the banner of the war on drugs 
     intentionally have forced bankers to become spies for the 
     federal financial police. The bankers' primary allegiance now 
     is not to customers or clients, but to the government.
       At the Miami conference, scores of bank officials were 
     instructed how to question clients, watch account activity, 
     and report any ``suspicious activity''. Suspicious activity 
     reports (SARs) are filed by the tens of thousands every 
     month, produce voluminous computer records, encourage 
     potential criminal investigations, allow prosecutors to bully 
     citizens, but in the end very few SARs put criminals in jail. 
     What this success process has produced is the mushrooming of 
     federal prosecutorial staffs, US attorneys budgets, the power 
     and costs of the US Department of Justice and the welfare of 
     the bureaucrats and lawyers who feast at the taxpayers' 
     trough.


                         Offshore As Scape Goat

       That great economist, Wilhelm Roepke, once wrote: ``It is 
     very easy to awaken resentment against people who not only 
     have money, but also the boldness to send that money abroad 
     in order to protect it against all manner of domestic 
     insecurity. It's vital that people in their means of 
     existence, that is, capital, still have the chance to move 
     about internationally, and when absolutely necessary, to 
     escape the arbitrariness of government policy by means of 
     secret back doors.''
       Consider that expressed view in the context of what is 
     known as ``expatriation,'' the human right to acquire a new 
     nationality and renounce one's old citizenship. We, as a 
     nation of immigrants, should cherish that right.
       In November 1994 Forbes magazine published an infamous 
     article which identified a handful of wealthy ex-Americans 
     who had formally renounced their U.S. citizenship and saved 
     themselves and their families hundreds of millions of dollars 
     in U.S. income, capital gains and estate taxes and produced a 
     sudden frenzy in Congress, willingly aided and abetted by one 
     Larry Summers, then Assistant Secretary of the Treasury. 
     (There had been a federal law that claimed U.S. tax 
     jurisdiction over tax expatriates if it could be proven they 
     left the country with the express intent to avoid U.S. taxes, 
     but it was never enforced.) A supposedly ``conservative'' 
     Congress passed legislation in 1995 penalizing heavily those 
     who renounced U.S.

[[Page 23747]]

     citizenship for the purpose of avoiding taxes. A 1996 change 
     provided that any ex-American who left to avoid taxes could 
     be forever stopped from returning to the U.S. Immigration 
     officials were empowered to stop these culprits at the 
     border. This drastic sort of exclusion previously had been 
     confined only to people suffering from communicable diseases, 
     Communists and certain terrorists. Needless to say, this 
     inane provision, has never been enforced although it's still 
     on the statute books.


                    Needed Offshore Asset Protection

       In truth, there are very legitimate financial reasons for 
     an American citizen to ``go offshore''. These include 
     avoiding exposure to costly domestic litigation and excessive 
     court damage judgements and jury awards, protection of 
     assets, unreasonable SEC restrictions on foreign investments, 
     the availability of more attractive and private offshore bank 
     accounts, life insurance policies and annuities, avoidance of 
     probate and reduction of estate taxes.
       But Americans who have followed this prudent course now 
     find themselves lumped together with drug lords, tax cheats, 
     dirty money launderers, disease carriers and assorted 
     criminals. What is legal and legitimate is made to look 
     sinister and evil.


                 OECD--FATF World Intimidation Campaign

       There is a decided international dimension to this domestic 
     U.S. campaign against wealth. Beginning last June, the news 
     media took belated notice of offshore tax havens and their 
     thriving financial centers as a newly discovered 
     international threat. A frenzy of publicity surrounded the 
     serial publication of spurious ``blacklists'' by previously 
     unnoticed international organizations. None of these self-
     appointed, self-important groups enjoy any legal standing, 
     but they proceeded to announce exactly how the international 
     financial world should conduct its affairs. Those nations in 
     disagreement with the OECD world view were threatened with 
     financial boycotts and unexplained ``sanctions'' to be 
     imposed by June 2001.
       These organizations include the Paris-based organization 
     for Economic Cooperation and Development (OECD), which loudly 
     denounces what it calls ``harmful tax competition'' is 
     composed of representatives from major high tax nations. An 
     OECD subsidiary is the Financial Action Task Force (FATF), a 
     sort of financial Gestapo that pronounces who is legal and 
     who is not legal in terms of money laundering activity.
       Yet a third group without no basis in international law 
     calls itself the ``Financial Stability Forum.'' This is a 
     subgroup of the G-7 nations and has taken it upon itself to 
     decide which nations are good or bad in cooperation for 
     capital flows.
       All of these organizations are self-anointed and don't have 
     any more standing than the International Tennis Association 
     as far as legal capacity to impose their decisions. They are 
     little more than public relations mouthpieces of an 
     international cartel of rich nations trying to suppress tax 
     havens and other nations that have profited from fully legal 
     tax competition.
       In an obviously co-ordinated effort starting last May, 
     these organizations each issued its own ``blacklist'' of 
     nations it found deficient in various ways. The FSF attached 
     those it claimed were disruptive to international financial 
     activity. FATF issued a list of countries allegedly lax on 
     money laundering. The OECD came out with list of nations 
     engaged in ``unfair tax competition''. It was no coincidence 
     that most of the world's no-tax financial haven nations were 
     on all these phony lists. A small coterie of statist 
     bureaucrats in the financial ministries of the major nations 
     had coordinated their propaganda work well: an uneducated, 
     gullible global news media swallowed this phony story whole.
       Every one of the wealthy nations that are pushing this 
     attack on tax havens are controlled by high-tax, socialist 
     governments who see a tax and wealth hemorrhage occurring 
     among their citizens. Yes, millions, billions of dollars, 
     pounds and francs are pouring out of high tax nations flowing 
     to offshore tax havens--and for very good reasons. Why would 
     anyone in his right mind continue to pay confiscatory taxes 
     when you can move your financial activity to another nation 
     where you pay no personal or corporate income tax, no estate 
     tax, no capital gains tax?
       Ignored in this concerted attack on small tax haven nations 
     is the simple fact that under current U.S. and UK tax laws 
     the biggest tax savings for foreigners can be found in 
     Britain and in the United States. The United States is one of 
     the biggest tax havens in the world--but only for non-U.S. 
     persons. And in spite of the known fact that most of the 
     dirty money laundering in the world takes place in London and 
     New York, neither nation is on the FATF money laundering 
     blacklist.
       All this is really a smoke screen for increased tax 
     collection. Feeling the tax drain, the rich nations want an 
     end to all those factors that make tax haven attractive: They 
     demand that taxes be imposed where there are none, want an 
     end to financial and banking privacy and ``free exchange'' of 
     information, want complete ``transparency'', and want these 
     small nations to become tax collectors for the rich, welfare 
     state nations. In other words, they want tax havens to become 
     just like the profligate major nations.
       This new cartel of high-tax nations, limping along with 
     their huge, unsustainable welfare state budgets, are engaged 
     in a grotesque rebirth of colonialism and imperialism of a 
     financial nature. They are willing to trample the sovereignty 
     of small nations. In fact, the United Nations last year said 
     national sovereignty must be compromised in order to impose a 
     world financial order of high taxes and no financial privacy. 
     Such a radical demand mocks international law. It makes 
     vassal states out of sovereign nations.
       This wrong headed approach flies in the face of every 
     development that is producing the new prosperity: the 
     Internet, e-commerce, globalization, cross border investment 
     worldwide. For that reason alone, this effort will fail. Just 
     as the legendary King Canute could not hold back the ocean 
     tides, the rich nations will be swept away in their effort to 
     impose their will on the world.

     

                          ____________________