Certified General Accountant’s Association of Barbados Annual Conference Wealth Creation

1. Certified General Accountant’s Association of Barbados Annual ConferenceWealth Creation James A. Lavorgna, J.D., LL.M, CFP Distinguished Fellow - Royal Society of Fellows Business Services International, Inc.

2. Introduction The Royal Society of Fellows (RSOF) is the premier professional cross-disciplinary society structured as a global think-tank, that educates, trains and certifies professionals in international tax, compliance, anti-money laundering and corporate and computer security. A distinguished specialist faculty of academics and practitioners provide its membership opportunities for networking, practical instruction, education, training and intelligence on cross-border tax planning, financial and estate planning and compliance for individuals and companies.

3. The RSOF: Provides professional and social networking events. Establishes professional ethical and quality standards through academically accredited professional development programs Provides a forum for recognition of an individual’s level of quality contribution to his profession and academia.

4. What type of membership is available in the RSOF? The RSOF recognizes the following levels of membership: RSOF Member; Associate Fellow; Fellow; and Distinguished Fellow. What are the annual dues to become an RSOF member? Currently the annual dues are $200.00.

5. Annual Conferences The Society hosts conferences that provide education, resources and networking opportunities through both formal and social interaction. Many friendships and alliances occur at these conferences. The conferences have been held in the following destinations: • First Annual Global Conference - Nassau Bahamas • Second Annual Global Conference - Miami, Florida • Third Annual Global Conference - Cayman Islands • Fourth Annual Global Conference - Miami, Florida • Geneva Summit (9th & 10th December 2004, Geneva)

6. Proposed Destinations • Miami, FL November 2005 • Anguilla May 2006 • BVI November 2006 • Barbados May 2007 ?

7. Law Review The Society hosts a law review, issued through Lexis-Nexis and Westlaw, as well as to the members electronically, twice a year. The law review is the only non-law school member of the National Conference of Law Reviews (NCLR), and presents high quality, footnoted academic and professional papers.

8. Education And Training • The Society has partnered with accredited academic institutions to provide its members a Diploma program and Advanced Certification with high quality interactive education and training in the fields of • International Taxation • Anti-Money Laundering & Compliance • Trusts and Administration • Companies and Administration • International Estate Planning • U.S. Taxation • E-Commerce

9. Recognized Designations The RSOF and the American Academy of Financial Management have partnered to confer joint designations for: • Chartered Wealth Manager – International Tax • Chartered Trust and Estate Planner-Global Estate Planning • Certified Compliance Analyst – Anti-money Laundering In-house Executive Training Classes are held for groups of 10 or more. Designations are recognized world-wide and by the National Association of Securities Dealers in the United States.

10. Master Financial Professional RSOF/AAFM accepts graduates of university Finance Programs on a case-by-case basis for the MFP Designation.  When a University is state sponsored and recognized, we usually recognize the business school, etc. Thus, Graduates from University of West Indies with a degree in finance, tax, economics, or accounting and another advanced degree, and 5 years professional experience would be eligible for the MFP (no additional courses would be necessary). RSOF membership and AAFM certification fee required. In addition, holders of this designation would receive credit towards the CWM and CTEP designations and would qualify for a 25% tuition deduction.

11. Master of Laws Program The Society's academic partner, St. Thomas University School of Law in Miami, Florida provides an ABA approved, on-line LL.M Master of Laws in International Taxation with concentrations in Offshore Financial Centers, Global Estate Planning, U.S. Taxation, and E-commerce to lawyers and non-lawyers. The Society has also developed an accredited J.S.D. (doctoral) program in the above fields.

12. U.S. Patriot Act The Patriot Act - Title III : “The International Money Laundering Abatement And Financial Anti-Terrorism Act of 2001” • Grants sweepingpowers to the U.S. Treasury • Significantly enhances the Bank Secrecy Act by imposing more stringent recordkeeping and anti-money laundering requirements on certain financial institutions • Expands BSA to include war against international terrorism and political corruption • Expands forfeiture and subpoena powers

13. Targeted Vulnerable Systems • U.S. Financial Sector - Bulk Currency, Courier Hubs, Banks, Money Service Businesses, Casinos, Insurance Companies, Internet, NGOs, Charities, and Alternate Money Remittal Systems • Commercial & Trade Sector - Importers, Manufacturers, High Technology Industries, Bio-technology Companies, Chemical Companies, Health Care Industries, IT Services, and Munitions and Defense Industries • Transportation Sector - Brokers and Freight Forwarders, and International and Domestic Carriers and Express Parcel Courtier Hubs (Air, Rail and Sea).

14. Immigration and Customs Enforcement Strategy • Identify domestic and international methods used by criminal and terrorist organizations to earn, move and store their illicit profits. • Establish national and international networks with private industry and combine ICE Investigative divisions under the umbrella of Economic Security. • Recommend security enhancements to the private sector and to existing regulations and statutes.

15. Financial Investigations • Attack the systems, both where the system itself is corrupt or where the system is being exploited by criminal organizations (money orders, wire transfers). • Apply a multi-faceted approach to investigating these systems, going beyond enforcement and involving industry outreach and working groups with associated law enforcement, regulatory, and industry partners. • Investigate the susceptibility and use of “Trade Based Money Laundering Systems” as a means of facilitating the financing and support of criminal organizations, to include terrorist financiers.

16. Utilized Bank Secrecy Act (BSA) information • as a source of developing targets and • enhancing criminal investigations. • Suspicious Activity Reports (SAR) • Currency Transaction Reports (CTR) • Currency or Monetary Instruments • Reports (CMIR) • Foreign Bank Account Reports (FBAR) • Reports of Cash Payment Over $10,000 • Received in a Trade or Business

17. USA PATRIOT Act Money Laundering Sections Section 314(a)Cooperative Efforts to Deter Money Laundering Section 315 Foreign Corruption Offenses Section 317 Long-Arm Jurisdiction over Foreign Money Launderers Section 319 Subpoena and Summons Authority Over Corresponding Accounts Section 320 Proceeds of Foreign Crimes Section 353 Penalties for Violating Geographic Targeting Orders Section 371 Bulk Cash Smuggling Section 373 Illegal Money Transmitting Businesses

18. Section 314 (a) Requests Section 314(a) - encourages the sharing of financial information with government authorities. With the assistance of FinCEN this is accomplished by requesting that financial institutions conduct cross-checks to identify any and all accounts associated with the target(s) of investigation. In an effort to minimize the burden placed on financial institutions, ICE has employed a three prong vetting system to ensure that only the most important and necessary requests are forward to financial institutions. 1 - requests must be approved by the local SAC field office 2 - approved by the Headquarters Financial Investigations Unit 3 - reviewed by FinCEN Chief Counsel Office The 314(a) request has proven to be an invaluable investigative tool. In one of the larger cases, information was requested on 48 subjects of investigation and allowed investigators to identify an additional 287 individuals/entities from 100 different financial institutions.

19. 314(a) Case Example • The Virginia Based Charities investigation is an ICE-led, multi agency task force investigation of suspected money laundering, tax fraud, and terrorist material support violations allegedly being committed by individuals and companies associated with SAFA TRUST, INC. Hundreds of charitable organizations of SAFA TRUST are suspected of channeling funds to Hamas, and Palestine Islamic Jihad terrorist groups. • The task force continues to examine and analyze records obtained from thirty- three search warrants executed on businesses and residences associated with SAFA TRUST and Internet servers used by targets of this investigation. • As of 2004 33 search warrants were executed, 547 boxes of documentary evidence seized, 420 Grand Jury subpoenas issued for bank accounts and brokerage accounts. Two suspects of been arrested, one has been convicted of immigrations violations and one suspect has been indicted for violations of immigration law and the International Emergency Economic Powers Act (IEEPA). • The USA PATRIOT Act eliminated judicial geographical limitations on search warrants, which allowed warrants signed in Virginia, to be executed in seven other judicial districts during this investigation. It also allowed for FinCEN to use Section 314a (Request for Information) to identify over 200 additional bank and other financial institution accounts.

20. Section 315 – Foreign Corruption Offenses • Section 315 amended 18 USC 1956 to include foreign corruption crimes as predicate money laundering offenses. Section 320 provides for the Civil Forfeiture of criminally derived proceeds of foreign corrupt practices. • Crimes to include, under Section 315 of the USA PATRIOT Act: 1) bribery of a foreign public official or misappropriation of public funds by a foreign public official 2) smuggling munitions or technology with military applications 3) any “offense with the respect to which the United States would be obligated by multilateral treaty” to extradite or prosecute the offender

21. Foreign Public Corruption Unit Due to an increasing trend of criminal referrals from Central, South American and Caribbean governments seeking US assistance, an ICE-led multi agency foreign public corruption unit was created in South Florida to identify, locate and seize assets of corrupt government officials involved in the theft of embezzlement of governmental funds. ICE investigations have indicated that the criminally derived proceeds are being funneled to the United States for the purchase of assets. Foreign corruption investigations were enhanced by the new enforcement provisions provided for by the USA PATRIOT Act Sections 315 and 320.

22. Section 371 - Bulk Cash Smuggling • 31 USC 5332 - Bulk Cash Smuggling Makes it a crime to for anyone knowingly to conceal more than $10,000 in currency or monetary instruments on their person or in any conveyance, article of luggage, merchandise, or other container, and to transport or transfer or attempt to transport or transfer monetary instruments into or out of the U.S. for the purpose of evading the CMIR Reporting requirement. Agent should seek to add this charge along with the failure to report – 31 USC 5316(a).**It should also be noted that 31 USC 5332 can be charged during pipeline stops involving the concealment of currency of more than $10,000, if it can be established the currency was going to be imported or exported into or out of the U.S. to avoid the reporting requirement in violation of 31 USC 5316(a). NO BORDER CROSSING is required.Additionally, the USA PATRIOT Act (Section 371) enhanced ICE’s ability to investigate the inbound/outbound smuggling of bulk cash by authorizing exclusive investigative jurisdiction of 31 USC 5332 offenses

23. Foreign Public Corruption Unit Case Study In the courts of Nicaragua, former government officials were accused of the following criminal offenses: • Laundering of money and/or assets derived from illicit activities • Fraud • Theft of government property • Embezzlement of public funds • Public corruption May 10, 2002, Nicaraguan Prosecutor files an official request for US assistance to identify and recover assets in the US Investigative efforts have revealed that funds obtained by these illicit activities were funneled through bank accounts in Panama, and used to purchase high value assets in the United States.

24. Section 371 - Bulk Cash Smuggling • 31 USC 5332 - Bulk Cash SmugglingThree Elements : 1. More than $10,000 2. Concealed 3. To evade the reporting requirement in violation of Title 31 USC 5316

25. Bulk Cash Smuggling Case Examples Border Related - In December 2002, ICE agents initiated an investigation following the interception of two DHL packages destined for a country of concern. The packages contained approximately $280,000 concealed in articles of clothing. ICE agents subsequently conducted search warrants at a residence and retail businesses involved in the distribution of counterfeit clothing. The search warrants resulted in the seizure of $2 million in additional U.S. currency. The primary subject was indicted on 31 USC 5332 bulk cash smuggling charges and is scheduled for trial in May 2004. A civil complaint has been filed by the Assistant United States Attorney’s office for the forfeiture of the currency. Non-Border Related - On August 15, 2003, the Mississippi Highway Patrol stopped an individual for traffic violations. A search of the vehicle resulted in the seizure of $1,100,000 concealed within the vehicle. ICE agents conducted a follow-up investigation and determined the individual was traveling to Mexico, from North Carolina, to deliver the currency. On October 8, 2002, subject was indicted for violations of 18 USC 1956 and 31 USC 5332. On November 28, 2002, subject pled guilty to 31 USC 5332 (BCS) and was sentenced to 42 months incarceration.

26. Section 373- Illegal Money Service Business Amended 18 USC 1960 by providing three ways a MSB can be prosecuted: • MSB operates without a state license.* • MSB operates in violation of Treasury regulation requiring registration with FinCEN • MSB knowingly transfers money derived from a criminal offense, or transfers money intended to be used for unlawful purpose. Investigator does not need to trace the money. *Knowledge requirement removed; not necessary to prove target knew license was required or operating without a license was a crime.

27. Section 373- Illegal Money Service Business Case Example • USA PATRIOT Act enhanced 18USC1960 which allowed searches for a wider range of documents than would have been allowed under other criminal violations. • A referral from the financial community initiated an investigation into a business unlawfully transmitting funds from the U. S. to a country of concern via the United Arab Emirates. • This investigation has resulted in the execution of 34 search warrants, three wire intercepts, 13 individuals and one corporation indicted for transferring $12 million to Iraq in violation of money laundering laws, six arrests and the seizure of 4 businesses/bank accounts ($12 million in substitute assets from bank accounts). The issuance of sanctions/penalties totaling $12 million is pending. • The primary subject has been convicted of money laundering.

28. Major Money Laundering Countries in 2004 Antigua and Barbuda, Australia, Austria, Bahamas, Belize, Bosnia and Herzegovina, Brazil, Burma, Cambodia, Canada, Cayman Islands, China, Colombia, Costa Rica, Cyprus, Dominican Republic, France, Germany, Greece, Guernsey, Haiti, Hong Kong, Hungary, India, Indonesia, Isle of Man, Israel, Italy, Japan, Jersey, Latvia, Lebanon, Liechtenstein, Luxembourg, Macau, Mexico, Netherlands, Nigeria, Pakistan, Panama, Paraguay, Philippines, Russia, Singapore, Spain, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, and Venezuela.

29. Barbados Anti-Terrorism Act • The Barbados Anti-Terrorism Act, 2002-6, Section 4, gazetted on May 30, 2002, criminalizes the financing of terrorism. The Government Of Barbados circulates lists of terrorists and terrorist entities to all financial institutions in Barbados. During 2003 and 2004, no evidence of terrorist financing was discovered in Barbados.

30. Doing Business With The U.S.

31. Domicile • U.S. citizens and U.S. domiciliaries (USDs) are subject to U.S. estate, gift and generation-skipping transfer taxation on their worldwide assets. Nondomiciliary aliens are subject to these taxes only on situs assets. The test is whether he or she is "domiciled" in the U.S.

32. Domicile Acquired • Domicile is acquired in the U.S. if a person is present in the U.S., even for a short period of time, if he or she has no present intention of ever leaving. • Residence, without the intent to remain permanently in the U.S., does not result in domicile. • Once an individual is domiciled, the intention to change domicile will not change domicile unless accompanies by actual removal

33. Establishing Domicile • Domicile is established when physical presence and the intent to remain in that place permanently coincide

34. U.S. Income Taxes • –Federal, State, Local, Sales, Use • –State Tax – Highest state tax is Vermont at 9.5%. • –Capital Gains – Maximum 15% • –Dividends – Maximum 15%

35. Income Tax Rates

36. Corporate Tax Rates • Taxable income over Not over Tax rate • $ 0 $ 50,000 15% 50,000 75,000 25% 75,000 100,000 34% 100,000 335,000 39% 335,000 10,000,000 34% 10,000,000 15,000,000 35% 15,000,000 18,333,333 38% 18,333,333 .......... 35%

37. Personal Service And Holding Companies • Personal Service Corporations • Personal service corporations are subject to a flat tax of 35% regardless of their income. • Personal Holding Company • Personal holding companies are subject to an additional tax on any undistributed personal holding company income. (Code Sec. 541) • Year Rate • 2005 15.0% • 2000 and prior years 39.6%

38. Accumulated Earnings Tax • In addition to the regular tax, a corporation may be liable for an additional tax on accumulated taxable income in excess of $250,000 ($150,000 for personal service corporations). (Code Sec. 531) • Year Rate • 2005 15.0% • 2000 and prior years 39.6%

39. Transfer Taxes • Probate - State • Income With Respect To A Decedent • Estate Taxes – Federal & State • Inheritance Tax -State • Gift Tax – Federal & State • Generation Skipping Tax –Federal

40. Probate • Probate is a legal process that takes place after someone dies. It includes: • proving in court that a deceased person's will is valid (usually a routine matter) • identifying and inventorying the deceased person's property • having the property appraised • paying debts and taxes, and • distributing the remaining property as the will (or state law, if there's no will) directs.

41. Federal Estate Tax • Federal estate tax rates are steep, starting at 39%. The highest marginal rate, for the largest estates, is 47%. • The maximum rate is scheduled to decline gradually to 45% in 2009. • There will be no estate tax in 2010, if the current tax law is not amended.

42. Estate Tax Exemption

43. Gifts • If you give away more than $11,000 per year to any one person or non-charitable institution, you are assessed federal "gift tax," which applies at the same rate as the estate tax. • Making gifts of $11,000 or less, however, can yield substantial estate tax savings if you keep at it for several years. You can give an unlimited amount of property to your spouse. • If your spouse is not a U.S. citizen, you can give away up to $114,000 per year free of gift tax. Any property given to a tax-exempt charity avoids federal gift taxes. And money spent directly for someone's medical bills or school tuition is exempt as well.

44. Gifts (Continued) Notice of Large Gifts For tax years beginning in 2003, recipients of gifts from certain foreign persons may have to report gifts under Sec. 6039F if the total value received in a taxable year exceeds $11,827; in 2002 it was $11,642; in 2001 it was $11,273.

45. Generation Skipping Tax • The generation-skipping transfer (GST) tax applies with respect to gifts or bequests of property through wills or trusts. It applies when gifts are made or property that is left to a donee or beneficiary who is two or more generations below the donor or decedent. • Generally, a GST occurs when property benefits a "skip" person or when only the skip persons may benefit from the property in the future. • A skip person is an individual assigned to a generation more than one generation below the generation of the transferor. The taxes are payable by the transferor or trustee.

46. The GST Exemption Each transferor/decedent has a cumulative $1.5 million exemption from the GST. The exemption is allocated among gifts and bequests by the transferor or his estate. In other words, if a $750,000 exemption is used for lifetime transfers, $750,000 remains for death transfers.

47. Transfer of U.S. Situs Property The testamentary transfer of U.S. situs property is subject to the GST tax provisions to the extent such property is includable in the gross estate of an NRA decedent. An inter vivos (lifetime) transfer by an NRA transferor is subject to the GST tax provisions where the property is situated in the U.S. and the transfer is otherwise subject to the gift tax provisions of I.R.C. Section 2501(a). These rules apply no matter what the citizenship of the donee or beneficiary.

48. NRA Subject to GST Tax Only for U.S. Situs Property The GST tax may apply to an NRA decedent making transfers during lifetime or at death. However, the GST tax applies primarily to the transfer of U.S. situs property.

49. State Estate & Inheritance Tax • Inheritance Tax – Some States • Estate Tax – Sponge Tax Disappearing

50. CONTROLLED FOREIGN CORPORATION A controlled foreign corporation (CFC) is a foreign corporation that is controlled by "U.S. shareholders."  Control means that the U.S. shareholders own more than 50% of the voting stock or value of the foreign corporation.