31. October 2009 by Dan Walkow, CFA, CMT.

For all the bluster about cracking down on Americans who hide money overseas, the U.S. turns a virtual blind eye to foreign tax cheats who are parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in Washington.

It’s not that the U.S. has no policies in place to stem the flow of illicit monies into the U.S. banking system. American banks are in fact required to file suspicious activity reports (SARs) for cash deposits over $10,000 or when they detect deposit patterns in lower amounts, known as “structuring.” The problem is that the U.S. government is overwhelmed by more than a million of these reports a year. Computers can detect some irregularities, but these need to be combed through carefully by 85 SAR review teams — combining FBI, IRS, DEA and U.S. Attorneys — across the country. That’s why, says international white collar crime lawyer Bruce Zagaris, “U.S. officials have practically begged banks to call them when they have something really good.”

This could change significantly with a seemingly simple regulatory adjustment, which Mexico has requested: they want the same information-exchange arrangement that Washington exclusively has with Canada, which automatically reports interest income paid by U.S. banks to Canadian account holders.

Look for even tigher reporting regulations and make absolutlely sure you file reports and disclosures to the IRS in a timely fashion.. Read More here.

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31. October 2009 by Dan Walkow, CFA, CMT.

Ottawa did not promise a guarantee fund in the pension-reform package announced this week. Such a promise might only have made matters worse.Instead, the measures unveiled by federal Finance Minister Jim Flaherty would inch companies that are under federal watch toward making their promise to employees of a future income in retirement more storm-proof, more reliable.

Ottawa will block banks, airlines, railways, telecommunications and other federally regulated companies from taking contribution holidays when their pension plans are less than 105 per cent funded.

It will block those companies from improving benefit promises when their plans are less than 85 per cent funded.

It will require the companies to top up within five years the plans they deliberately terminate, without the company going out of business, as the provinces already require.

Other countries have pension guarantee funds that cover employees of bankrupt companies.

Ontario also has a guarantee fund, such as it is. But the Pension Benefits Guarantee Fund (PBGF) also has no money.

So, in the last provincial budget, the government emphasized it has no obligation to make up the shortfall or extend loans as it has in the past.

The pension issue is front and center for most Canadians. If you belong to a defined benifit program you really want to understand the health of your plan and if it is a signifigant portion of your retirement wealth you may want to take proactive action. 

It does little good after the fact, ask any Nortel pensioner who are faced with tough decisions at this point in time. Read more.

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