ARTICLES, INTERVIEWS, PRESS RELEASES & MEDIA BUZZ
ARTICLES
Your odds of falling victim to financial crime? Try 1 in 2
SOURCE: OffshoreAlert, March 21, 2007
ABSTRACT
Do you think that financial crime is unlikely to happen to your firm and, therefore, why should you spend money on preventing and detecting it? If you do, think again.
When accounting firm PricewaterhouseCoopers surveyed 3,634 companies worldwide for its 2005 Global Economic Crime Survey, it found that 45% of them had been victims of financial crime in the previous two years. That represented an 8% increase compared with a similar PwC study in 2003.
“No industry is safe – whether regulated or unregulated,” commented PwC in its 2005 Executive Summary. “From 38% to 60% of the companies in each of the sectors we surveyed reported significant frauds.”
Jurisdiction & Liability: The twin defenses of offshore defendants
SOURCE: OffshoreAlert, March 15, 2007
ABSTRACT
When the Bank of Bermuda (Cayman) Ltd. was sued in the United States in 2000 on behalf of victims of a Ponzi scheme known as Cash 4 Titles, it did what almost all offshore-based defendants do - it challenged jurisdiction.
The result was equally as predictable, i.e. the U. S. District Court for the Southern District of Florida ruled that it did indeed have jurisdiction over the bank, notwithstanding the fact that the financial institution was headquartered in a foreign country and had no subsidiaries in the U. S.
Among the reasons given by U. S. District Court Judge Paul C. Huck were:
The Bank had once used the Florida court system to sue a Florida resident;
Bank officers visited Florida, spent money, and then claimed it back as business expenses when they returned offshore;
The Bank maintained a mailing address in Florida; and
The Bank “engages in routine bank services such as mailing of checks and wiring funds into Florida”
Bear Stearns Counts Cost of Due Diligence Failure
SOURCE: OffshoreAlert, March 8, 2007
ABSTRACT
Bear Stearns Securities Corp. has learned the hard way about the dire financial consequences of failing to conduct proper due diligence on a client and ignoring red-flags.
On February 20, 2007, the U. S.-based securities broker was ordered by a U. S. Bankruptcy Judge in New York to repay $159 million to the Trustee of Manhattan Investment Fund Ltd., a New York-based, British Virgin Islands-registered hedge fund that collapsed in 2000 amid allegations of fraud and with an estimated net insolvency of approximately $400 million.
The $159 million award against Bear Stearns is a whopping $156.6 million more than the total fees of $2.4 million that the broker received for providing services to the fund from 1996 to 2000 and provides a stark example of the huge risk-to-reward gulf if your company’s due diligence procedures are not what they should be.
U. S. legislation targets company formation agents and hedge fund operators
SOURCE: OffshoreAlert, February 28, 2007
ABSTRACT
Offshore Financial Centers have become better regulated from within over the last few years, largely due to political pressure from the world’s major countries, whose governments were concerned about tax evasion. Now there is a proposal to regulate them from without.
In a bill co-sponsored by U. S. presidential hopeful Senator Barack Obama that was tabled before the U. S. Senate on February 17, 2007, U. S.-based company formation agents and operators of hedge funds and private equity funds that accept business from foreign clients will be legally required to ‘know their offshore clients’.
Essentially, they will have to conduct due diligence on foreign sources of revenue – or face regulatory penalties. For example, “all unregistered investment companies” will be required “at a minimum” to “use due diligence to identify and evaluate any foreign person (including the nominal and beneficial owner or beneficiary of a foreign corporation, partnership, trust, or other foreign entity) planning to supply or supplying funds to be invested with the advice or assistance of that unregistered company”.
A Crash Course in Offshore Financial Centers
SOURCE: OffshoreAlert, February 20, 2007
ABSTRACT
It is a common misconception among residents of major countries that all offshore financial centers are the same or, at the very least, similar.
In reality, nothing could be further from the truth. There are significant differences in the types of business that are transacted, the infrastructure, the legal system, and the quality of regulation.
Hedge Funds: Fraud is a common reason for failure
SOURCE: OffshoreAlert, February 15, 2007
ABSTRACT
Given that hedge funds tend to be complicated and unregulated, it should come as no surprise to investors to learn that fraud is one of the principal reasons they fail, as evidenced by such high-profile collapses as Long-Term Capital Management, Lancer Offshore, Beacon Hill, and Amaranth Advisors.
These failures amid allegations that, collectively, billions of dollars of assets were misappropriated emphasize the need for investors and service providers to conduct thorough due diligence before investing or entering into a business relationship with hedge funds.
Hedge Funds: Growing in Popularity
SOURCE: OffshoreAlert, February 13, 2007
ABSTRACT
It may come as a surprise to many investors that hedge funds – noted for the risky and exotic nature of their investments – performed worse last year than the much more conservative Standard & Poor’s 500 Index, which tracks the biggest corporations listed on the New York Stock Exchange.
Hedge funds returned 13% in 2006, compared with the 15.8% return of the S&P 500 Index, according to industry tracker Hedge Fund Research, Inc., of Chicago.
That still didn’t stop money pouring into them, however, with assets under management for hedge funds at December 31, 2006 swelling to $1.43 trillion – nearly three times the $500 billion give years earlier.
MEDIA BUZZ
Hedge funds remain attractive regardless of returns
SOURCE: Cayman Net News, February 26, 2007
ABSTRACT
According to a number of reports, one of the Cayman Islands’ leading financial products, hedge funds, is not as lucrative as many have supposed, but its popularity remains at an all time high.
Noted for the risky and exotic nature of their investments, hedge funds actually performed worse last year than the much more conservative Standard & Poor’s 500 Index, which tracks the biggest corporations listed on the New York Stock Exchange. David Marchant, the editor of OffshoreAlert, a leading newsletter on the ins and outs of in the world of offshore finance, reported on this statistic.
Hedge funds returned some 13 percent in 2006, compared with the 15.8 percent return of the S&P 500 Index, according to industry tracker Hedge Fund research, Inc., of Chicago.
However, OffshoreAlert notes that this has not stopped money from pouring into the specialists funds assets under management for hedge funds, which were at a staggering $1.43 trillion at the end of 2006...
Offshore ‘watchdog’ criticises Bermuda
SOURCE: Cayman Net News, February 19, 2007
ABSTRACT
With two months to go before the fifth OffshoreAlert’s Financial Due Diligence Conference, organisers said they expect a favourable turn-out from the Cayman Islands, but not necessarily from its rival, Bermuda.
“I am expecting a healthy turn-out from Cayman’s financial services sector,” said David Marchant, OffshoreAlert’s editor and conference organiser.
However, Mr Marchant pointed out that this is not so much the case in our rival jurisdiction and fellow overseas territory...
Offshore financial conference will not bash Cayman
SOURCE: Cayman Net News, February 5, 2007
ABSTRACT
The organisers of the Financial Due Diligence Conference, which will take place in Miami later this year, said the conference would not focus on criticising the Cayman Islands or the business of offshore finance itself.
In regards to questions raised over the presence of Bob Roach - who was the primary researcher behind a report (published last year by the US subcommittee on investigations) that severely criticised the Cayman Islands and other offshore jurisdictions for helping wealthy Americans to circumvent US securities, money laundering and tax laws - David Marchant of OffshoreAlert has said the symposium will not overly criticise any one jurisdiction or individual, but rather the goal is to educate the attendees of the conference...
Fighting financial crime and due diligence
SOURCE: Cayman Net News, Monday, January 29, 2007
ABSTRACT
Experts from the Cayman Islands as well as other offshore and onshore financial centres will focus on financial crime and due diligence within the financial industry in Miami. Chairman of the Cayman Islands Monetary Authority, (CIMA) Timothy Ridley, Deloitte (Cayman) partner Stuart Sybersma, and Bodden Corporate Services compliance officer Nancy Saur will join high-level speakers from other offshore jurisdictions and the United States at the 5th Offshore Alert Financial Due Diligence Conference on 24-25 April...
Publicity shines a light on fraud
SOURCE: Cayman Net News, January 10, 2006
ABSTRACT
It is harder to get away with financial crime now than in the past because of more international regulations and publicity, according to Offshore Alert publisher David Marchant.
“One reason that it is more difficult to get away with financial crime is because offshore financial centres are being forced to be more responsible in the last few years as a result of international pressure,” said Mr Marchant...
