Enactment of the Caribbean Basin initiative would offer a big boost to U.S. attempts to penetrate offshore tax havens, according to speakers at yesterday's session of the National Institute on Illicit Money Laundering and Asset Conversion.
The initiative is now attached to the withholding-repeal legislation. Even if it does not pass as a package, it is likely to pass later this year, Capitol Hill sources say.
One condition for acceptance of American aid contained in the Caribbean rider to withholding is a requirement that countries disclose to the United States hitherto secret information, including bank records and identification of holders of shares made out to bearer.
This is the first attempt at a collective breaking down of the bank secrecy laws in foreign countries that are the major barrier to law enforcement.
Some of the biggest tax havens, like the Bahamas, may elect to forego aid rather than exchange tax information with U.S. authorities. But the government is offering another carrot to foreign countries in exchange for disclosure: forfeiture.
Michael Abbell, associate director of the Justice Department's Office of International Affairs, criminal division, said the United States is just beginning to negotiate treaties similar to the one signed a few years ago with Switzerland.
That permits the country in which the illegal monies are deposited to keep them in exchange for helping the United States to provide information to prosecute the owners of those funds. In the past two years, Switzerland has frozen, as a prelude to seizing and keeping, approximately $20 million in drug money, so-called "narco-dollars."
The government hopes that the possibility of such forfeitures will provide a significant incentive to countries to enter into mutual assistance treaties to stamp out the drug trade.
Charles Morley, chief investigator of the Senate permanent subcommittee on investigations, observed that $1 billion in currency came back from Panama to the United States last year, making that country, in his words, the "up and coming dope laundering operation."
He said the amount surpasses that of any other country except Argentina. The subcommittee is now trying to trace the Panamanian connection.
In addition to narcotics profits, money laundering in offshore facilities is now used by all levels of society, Morley said.
Among the crimes they seek to hide are commodity and insurance frauds, Medicare and Medicaid frauds, fencing operations, embezzlement, and auto theft rings as well as tax cheating.
Besides the Caribbean, Switzerland and Panama, the favored tax havens are Liechtenstein, Luxembourg, Hong Kong, Nauru, Singapore, Vanuatu, Bahrein and Liberia.