“Commune di Campione,” as the Italians call it, is located on the shores of beautiful Lake Lugano. This unique little haven is a little plot of Italian soil, completely surrounded by Swiss territory. There are no border controls and complete freedom of travel.

Home to about 3,000 people (including a thousand foreigners), Campione d’Italia is about 16 miles north of the Italian border. It’s also five miles by road from Lugano, Switzerland, and makes a beautiful scenic drive around the lake. I’m sure you’ll enjoy it as much as I have.

With no Campione border controls, there is complete freedom of transit. The village uses Swiss banks, currency, postal service, and telephone system. Even automobile license plates are Swiss. Strangely enough, because of ancient history and treaties, the enclave legally is part of the Republic of Italy territory.

Campione is a pleasant place to live. It’s located in the heart of one of the best Swiss and nearby Italian tourist areas. The region boasts lakes, winter sports and the cultural activities of Milan, Italy, only an hour away by car.

If you want to become an official resident, you just need to rent or buy property there, although formal registration is required. Unlike in Switzerland, foreigners can buy real estate there without restrictions. But real estate prices are well above those in surrounding Ticino. A small townhouse may cost US$750,000 or more. Condominiums range from US$5,500 to $6,500 per square meter, and broker fees add a 3% commission. The same apartment across the lake in Switzerland can easily cost half of what it costs in Campione.

Be careful buying there as a foreigner. This small real estate market is served by a few local real estate agents — and some of them operate without a license. If you’re interested in a residence in Campione and purchasing real estate, you should be represented by a competent lawyer from the beginning.

BOB BAUMAN, Legal Counsel

P.S. Interested in this tiny Italian haven? I have a full chapter all about Campione d’Italia in my new book, just published, Swiss Money Secrets. Click here to get the full details.

Recently, the German government illegally bribed a disgruntled former Liechtenstein bank employee for confidential bank information stolen from LGT Bank in Liechtenstein. Since this bribery hit the press three weeks ago, I’ve spoken to many of my offshore contacts around the world about the matter.

In my many interviews, I received a particularly interesting observation from attorney Cathy Odgers, legal counsel and compliance officer for Global Consultants & Services Ltd. in Hong Kong. I am indebted to Cathy for her thoughts. In fact, allow me to paraphrase her informative comments in my own words:

According to Cathy, the central culprit in this plot is a crook named Heinrich Kieber.

Offshore’s Most Wanted Man: Heinrich Kieber

Herr Kieber worked for the LGT Group at LGT Treuhand (Bank) AG, in Vaduz, Liechtenstein until 2002. A man of questionable background, he allegedly has a 1997 international arrest warrant for a fraudulent real estate deal. He left Liechtenstein in November 2002, after stealing confidential data from his employer, LGT Bank, and making copies on a DVD disc.

The German secret police later paid Kieber €5 million (US$7.9 million) for the stolen data. The data, containing about 1,400 “client relationships,” 600 of them Germans, was a major haul for German tax collectors. Germany apparently also sold or gave the information to the governments of Britain, France, Italy, Spain, Norway, Ireland, Netherlands, Sweden, Canada, the USA, Australia and New Zealand.

Reports say that Kieber had access in 2001-2002 to the bank records because his job was to digitize the bank’s paper archives. Any LGT bank records on structures or other files from after 2002, were not compromised or stolen, according to the LGT Group.

Public Enemy #1

Kieber, currently in the German witness protection program, is public enemy number one in the Principality of Liechtenstein.

Liechtenstein’s billionaire royal family manages and controls LGT Bank and LGT Group. The nation’s financial services sector produces 30% of Liechtenstein’s gross domestic product and 14.3% of all people employed there work in the financial services sector.

Banking secrecy and the government’s refusal to share financial information, except in criminal cases, has been one of Liechtenstein’s leading selling points.

Denmark Respects the Law

While most governments have been happy to pay to receive stolen information in this case, Denmark is a notable exception. Its tax minister, Kristian Jensen, described the Liechtenstein affair as an “advanced form of handling stolen goods.” He added: “I think it’s a moral problem to reward a criminal for information that he stole. I don’t think this ethically is the best way to ensure that taxes are paid correctly.”

Germany, on the other hand, has threatened to extend its bribery and anti-privacy campaign to Switzerland, Luxembourg and Austria, each of which have some form of banking confidentiality guaranteed by law.

These Gung-Ho Tax Collectors Are Missing the Point

LGT Bank and Liechtenstein authorities rightfully have advanced the theory that high-tax governments are using misinformation to scare people away from the principality and the bank.

High-tax governments apparently are coordinating a “surrender now” phase in their years long anti-tax haven campaign. In all their loud anti-privacy propaganda these tax hungry politicians miss one basic point:

It is fully legitimate for free citizens to desire and establish confidential bank accounts for legal purposes.

As Cathy Odgers notes: “Indeed most of us like to believe that our bank accounts are private information, while even at a friendly local branch of Bank of America there could be a Kieber working overtime in the copy room, ready to sell your client data to the highest bidder, whether it be criminal gangs, or based on Germany’s unashamed recent conduct, arguably the biggest criminal gang of them all – the government.”

Not to Worry

As one who knows the principality and its professionals, I’ve been asked: “Is Liechtenstein still safe for banking and asset protection?”

My considered opinion: “Yes, now more than ever.”

The principality has been an established offshore financial center since the 1920’s – indeed, it was one of the first such havens in the world.

It still offers an impressive array of corporations, trusts, family and other foundations, as well as private banking in strict secrecy. No doubt its banking security will be increased greatly after this event.

Assuming that you honestly are complying with the tax and reporting laws of your nation, you need not worry about your name being revealed if you are doing business in Liechtenstein.

BOB BAUMAN, Legal Counsel

P.S. I’ll be commenting on this Liechtenstein affair further in my April article in our members-only newsletter, The Sovereign Individual. But for now, please rest assure that as long as you’re following the law, and meeting your tax requirements, this unfortunate incident will not affect you or your Liechtenstein holdings in the least.

Citing “strategic reasons,” an ABN AMRO spokesman in Amsterdam condescendingly said the bank would still allow U.S. passport holders to have checking and savings accounts at ABN AMRO. But any Americans would have to close their ABN AMRO investment accounts. Investment accounts include funds investing in stocks. The spokesman did not say who would cover losses if they resulted from this abrupt action.

This decision has nothing to do with individual clients, but it’s “part of a strategic assessment and affects only a very small part of the client base,” the spokesman said without giving any details. De Telegraaf reported that the decision to cancel the accounts was a result of high costs in complying with American and IRS regulatory laws.

So what’s the significance of one of the world’s largest banks rejecting all American investment clients?

It means that, by indirection, the IRS is slowly succeeding in imposing de facto currency controls on Americans. It has become so onerous for foreign banks to comply with U.S. regulations, they don’t even want to try anymore.

Throughout the 10 years of The Sovereign Society’s existence, we have repeatedly underscored one basic fact: Politicians and bureaucrats who run the United States government have done everything they can to prevent Americans from “going offshore” financially.

Beginning with the New Deal in the 1930s, restrictive SEC rules cut off most U.S. investors from direct foreign investments. Now IRS “qualified intermediary” rules claim U.S. jurisdiction over foreign banks’ operations and demand they follow Washington’s rules. The U.S. government, and especially the IRS, have done all they can to keep you and your money at home – where, under the PATRIOT Act, they can confiscate cash at will and in secret.

It seems the handwriting is on the bank wall. With over 105,000 employees during 1991-2007, ABN AMRO became one of the largest banks in Europe, with operations in 63 countries around the world. One of the world’s leading asset managers, the bank managed over €175 billion (US$265 billion) in assets worldwide. ABM AMRO was a Dutch bank with a history dating back to the founding of the Nederlandsche Handel-Maatschappij in 1824. ABN Amro never has been a bank we recommended to our members and readers, but we do strongly recommend offshore bank accounts for asset protection and as investment vehicles.

It is indeed a sad commentary on how far the United States has fallen in the world when a major foreign bank no longer wants Americans as clients. And that rejection happened on the very day that the dollar reached a new low of US$1.50 against the euro. That, also, tells us something.

In her A-Letter remarks, our Managing Director Erika Nolan rightfully warned: “If you do nothing else in the next six months, at the very least, open an offshore bank account to gain access to global markets and foreign currencies while securing an additional bit of asset protection. You’ll be able to sleep better at night knowing that you have a path around the Wall Street monopoly.”

The Sovereign Society can provide you with an offshore bank account securely located in places such as Switzerland, Liechtenstein, Hong Kong, Singapore or Panama, to mention only a few.

But as Erika says, you had better act now.

BOB BAUMAN, Legal Counsel

P.S. Next week, a small elite group of individuals will meet in Whistler, Canada for their own personalized wealth protection retreat. We’ve invited wealth preservation experts (including offshore bankers, attorneys and other offshore specialists) from around the globe to meet with these individuals. Each of our guests will sit down one-on-one with each of our wealth preservation specialists privately. And together, they will create personalized wealth protection plans. This is the ONLY event like this in 2008. I hear we have one or two spaces left if you still want to join us. So if you’re interested, please call David Newman today at 866-765-7506 for the full details on our Permanent Wealth Protection Summit.

For purchases of U.S. mutual funds, the IRS receives a report of income or gain on Form 1099. However, offshore funds don’t file Form 1099, so the IRS requires investors to determine their share of the income and pay tax on it.

That’s often impossible for an investor to do. And if you can’t make the necessary calculations, using IRS-approved methods, the IRS imposes punitive taxes and interest payments on whatever taxes you defer.

These calculations are complex, but the bottom line is that after you hold offshore funds for many years, the tax and interest you owe the IRS can easily exceed your total gain. However, the law provides that the tax and interest charge shall not exceed the amount of the distribution. (Gee, thanks IRS!)

Some U.S. investors have tried to avoid these rules by purchasing offshore funds through an offshore trust. I do NOT recommend you do so, unless you receive enough information from the fund to use the IRS-approved methods to calculate your gains.

Let me explain why. Under the U.S. grantor trust rules (I.R.C. 691-697), the income or gain your foreign trust receives is treated as if it was received by the grantor (the person who funded the trust). Since most offshore trusts funded by U.S. persons are taxed as grantor trusts, most of the time, you shouldn’t own offshore funds.

Now, the IRS has published an even more extreme interpretation of the PFIC rules. In a recently released Technical Advice Memorandum (TAM #200733024), the IRS declared U.S. beneficiaries of a foreign trust are subject to the PFIC rules as well, even when non-U.S. persons established and funded the trust.

In this case, the foreign trust, established in 1981, five years before the PFIC rules came into effect, owned a foreign corporation (holding company). The holding company in turn owned the stock of some other foreign corporations.

The IRS decreed the holding company was a PFIC. When it was liquidated and its assets transferred to the foreign trust, the IRS ruled that it was a taxable event under the PFIC “excess distribution” rules. This subjected the U.S. beneficiaries not only to tax on the excess distribution, but to interest charges going back 12 years.

This result doesn’t seem to be fair. It also doesn’t seem to mesh to the rules for this type of trust (called a foreign non-grantor trust). The beneficiaries may well appeal the ruling. But it illustrates the extreme dangers of holding offshore funds in an offshore trust without a thorough analysis of the possible tax consequences.