David Bolden and his wife Antoinette of Emerald Financial Group have learned a couple of business lessons the hard way: Check and recheck everything after the computer technicians have left and secondly, don't trust computer technicians with your business.

The two launched their online trading facility Directrade only to find that customers were downloading forms which signed them up to an onshore account with Pershing Ltd., a division of US-based Donaldson, Luftkin & Jenrette Securities.

Apparently the Pershing computer technicians who created the site under contract assumed that the same forms Pershing used was the same forms Directrade was going to use. That was not the case and apparently no one completely tested the site and downloaded the forms before it went live on September 13.

The result is that customers who wanted to remain offshore were confused, and the Boldens lost two weeks of business. Investors have every reason to be worried. While they may not be subject to US taxes, their assets will be exposed to US estate taxes in the event they die, even if they do not reside in the US and are not citizens.

Apparently the correct forms should be available on the site (www.directrade.bm) this week. Mrs. Bolden assures investors that the accounts will all be based offshore in Bermuda and will be held through Emerald Financial.

"They really harmed our business,'' Mrs. Bolden said. Directrade is currently 100 percent owned by Emerald but the firm is considering bringing private investment on board. Previously David Bolden had told The Royal Gazette that the firm was separate from Emerald and held in his and Antoinette's names and that of other private investors.

For a look at the approach one offshore haven is taking in attracting business, check out Anguilla's registrar of companies site at www.anguillaoffshore.com where you can download the island's financial services legislation in as a pdf file and even complete company registration online.

However the attention the site attracted from Wired magazine is the kind of story Bermuda would do best to avoid. Probably Allan Jones, registrar of companies, in the British colony is regretting his all too candid words.

`It's my business to allow people to trade anonymously and avoid paying tax,` he said about the Web site, as quoted by Wired. The magazine continued to hammer away at the tax evasion aspect in the story.

"To lure offshore investors hoping to dodge the IRS or conceal assets from a divorcing spouse, the government recently opened a Web site that lets registered users form a completely official Anguilla-based corporation online,'' the story claimed. "It takes about five minutes and costs US$250.

When you're done, you get a certificate of incorporation with a bright red seal on the bottom of the screen that you can print out -- and, believe it or not, that's all you need under Anguillan law to go into business or to open an account at a US bank.'' The Wired story stated that investors can then transfer assets such as cars, houses, or bank accounts to the offshore corporation where they'll be outside the reach of all but the most determined tax authorities. The form requests no information about directors or shareholders.

Mr. Jones was then asked how an investor could then get money from Anguilla back into the US undetected. "Stuff it down your trousers and look innocent when you're going through customs,' he is reported to have advised. `There is no other way of doing this. It is very difficult.'' However, the story noted that setting up an anonymous bank account in Anguilla is difficult due to the island's requirement that account holders and beneficial owners be identified.

This is perhaps the true nature of the message Anguilla hoped it was getting out but unfortunately didn't. If you go to the site, you'll read that the online facility, called Acorn, was created as an agreement between the British and Anguillian Governments to develop a "reputable, high quality financial services industry''. The British Government also provided technical assistance in setting up the site. Registration through Acorn is only available to "authorised professional agents'', according to the site.

"Commercial confidentiality is of course guaranteed, but the use of Anguilla and ACORN as a means of money laundering or other illegal activities will simply not be tolerated,'' the site states.

Minister of Finance Victor states that the site has allowed Government to significantly reduce the cost of offshore company registration. Anguilla has in turn attracted technology companies such as the Offshore Information Services Ltd. (http:/www.offshore.com.ai/) and Hushmail (www.hushmail.com), which avoids US restrictions on encryption exports because the site's crypto products were developed in Anguilla. Anguilla now holds an annual financial cryptography conference. Now why can't Anguilla or for that matter Bermuda promote itself as offering tax savings with the proper money laundering controls, such as having "know your customer'' rules? Every jurisdiction has been walking a tenuous line in promoting themselves due to a worldwide crackdown on offshore havens. Unfortunately the good are getting thrown in with the bad.

Tech Tattle deals with topics relating to technology. Contact Ahmed at techtattle ygazette.newsmedia.bm or 295-5881 ext. 248 or 238-3854.