August 1, 2000- How To Leave A False Paper trail

Dear Subscriber,

How To Leave A False Paper trail Hiding your tracks by not leaving a traceable paper trail is one way of keeping your private affairs secret from prying official eyes. Another approach is to deliberately leave a track to be followed.

Always assume you are being investigated. Perhaps you are not. But if you are, you probably won't know until the fiscal thought police are ready to pounce, and accuse you of incorrect financial thinking. Remember that in money laundering and similar accusations, the acts in themselves not be unlawful - only the intentions behind them. It is not illegal to open an account with a subsidiary of a British high street bank in Guernsey or Gibraltar. It is illegal not to declare it, to launder money through it or to use it for evading taxes.

Note the important distinction between evading taxes - not paying taxes you are legally obliged to - and avoiding taxes, which is reducing your tax obligations through careful money management. An in-depth probe into your banking affairs will lead to the hotel where you paid by cheque, or the shop where you used your debit card for an expensive purchase. Even if on every other occasion you paid cash, a single piece of paper leaves a trail to every transaction. The hotel register will then reveal all the other times you stayed there and paid with "untraceable" cash. If you are known in a shop as a regular customer, that one debit card payment gives the investigators the opportunity to quiz the assistants about other expensive purchases, all made using "untraceable" cash.

Paying for petrol with your credit card leaves a countrywide paper trail - leading through each service station to the shopping centre where it is situated, or a nearby hotel or restaurant, where you signed the register or are a well-known face. (Early in the investigation you will have been photographed using a telephoto lens.) Even a cheque donating money to a church will reveal further cash donations. A golf club subscription will lead to business contacts. Don't think you are safe when travelling abroad. A holiday paid for by credit card will lead via the travel agent to your foreign hotel. If your alleged evasion is considered serious enough, the taxman or woman will jump at the chance of booking in at the same hotel to investigate nearby bars and restaurants, armed with your photo. A holiday paid for in cash, at an agency away from your home, will still leave a trail - if passport details are provided, or an address for travel insurance. A better option is buying a flight for cash, plus vouchers for hotels and car hire.

One fatal thoughtless action may lie dormant for years, ready to start an investigation which will be embarrassing and time-consuming, even though your conscience is clear. Your banking records can be considered "third party records" In some countries, including the USA. In this case permission will not be needed to examine them. You can even accidentally fall into the net while the tax officials are fishing for someone else. All your cash expenditure will be added to money passing through your bank account, and the total compared with your tax return.

Remember, in tax cases it is up to you to disprove the Revenue's assessment of your income. So it is best not to do anything which provides grounds. Or is it?

Another school of thought is that you are probably going to be investigated anyway, so it is better to leave a trail, which can be followed. Tax officials will smell blood, and rise to the bait. The trails can either lead nowhere or to harmless assets in an offshore location.

Harmless assets are those, which have gone through your bank account and can be proved to be squeaky clean. Most people in Britain have an account with one of the large banks or building societies. Many banks, and a few building societies, have offshore branches in places like Gibraltar. Open a second account with your bank in, say Gibraltar, and use the money in it for a holiday just over the border in Spain.

Next, when you fill in a tax return, put the numbers of both accounts, linked by a dash, or with the offshore account number in brackets, but without the address, or with the Street but not the word "Gibraltar." The trap has now been set. You have to rely on other people to spring it, mentioning Spain and how convenient it is to have an account in Gibraltar, just a few times. Then every time you travel abroad, talk about your "trip to the sun," without specifying where. It's not necessary to lie. People will jump to conclusions.

Don't limit dropping apparently indiscreet hints to known enemies. Are you certain which "friends" you can really trust? Your spouse in particular could be your best friend today and your bitter adversary tomorrow. Or the strange number on your tax return might attract the attention of some faceless functionary. Or the same diligent bureaucrat might wonder why there is a transfer to Gibraltar from your onshore account.

One of two things may happen. You may never know an investigation has been made. You will be checked out, found to be clean, and nothing will be said. Or accusations may be made, and you will refuse to give any information, protesting your innocence vigorously.

Suddenly you will have a change of heart. As you have nothing to hide, you will provide masses of paper for the authorities to check out. You will insist that an investigation is made to clear your name. The investigators will already have copies of most of the documents you give them, but they will waste more time cross-checking, just in case. Eventually red-faced officials will be forced to admit that you have done nothing illegal.

The principle is the same as having a hidden safe with a few wads of low-denomination notes in an obvious location. A thief finds this money and gives up the search, leaving untouched a really well-concealed hiding place stuffed with cash. The Gibraltar scenario is just one possibility. Everyone has a different life-pattern. For someone who really did have undeclared money in Gibraltar, directing investigators to a clean account in the same location would be playing with fire. But if the secret account were in a different name, the double bluff might work. Then it would be necessary to lay a false trail away from the Costa del Sol.

One method would be to use a trusted friend - yes, I know you should never trust anyone, but alike-minded soul-mate in the same situation could be an exception. Even this person need not know where you really are. Simply ask your friend to use your onshore debit card and PIN code to withdraw small amounts of cash or make purchases some other location in the sun - perhaps the south of France, spending it as he or she pleases. The only condition is that you want all the receipts -for a restaurant, a bottle of perfume, a few litres of petrol. The dates for the transactions could be arranged in advance, or requested by an untraceable call from a public phone box.

A debit card such as a Visa Gold card used with an account containing a small balance would be perfect. There are daily cash limits for withdrawals, so even if your friend turned out to be dishonest, you would not lose much money. Sounds like a lot of trouble and effort? Not if you go about it in the right frame of mind, imagining some grey little time-server in a government office shuffling your papers round and round in circles. Then it's fun!

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