Guide to Finance

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Big Brother Is Watching

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In recent years there has been increased emphasis of the need for financial service providers to “Know Your Customer”. This has come to refer the need to obtain satisfactory proof of identity and address documents and to take up references and may in some cases have obscured the necessity for such persons to have a greater in depth knowledge of their clients, their assets and their activities. Why, you may ask? One reason is that such knowledge is invaluable in ensuring that any advice given is appropriate to the circumstances and another that the advisor is increasingly at risk of prosecution if the tax authority already has information relating to a possible fraud and which the advisor might be expected to discover if it is conducted thorough due diligence.



In the U.K. the tax authorities take the view that offshore structures present a major risk of serious fraud and devote considerable resources to uncovering such arrangements and adopt an increasingly robust approach to existing reporting requirements. We outline some of their methods in this article and although reference is to the U.K. this is a subject, which is equally relevant to other countries, which also adopt sophisticated methods and allocate extensive resources for the same purpose.

Undisclosed offshore banking accounts

The Offshore Fraud Projects Team (OFPT) is seeking information from financial advisors about their customers and the movement of funds offshore. In particular, it is asking banks for information in respect of customers' for whom they have moved funds offshore using third parties or suspense accounts, thereby bypassing the customers' own accounts.

The OFPT is also writing to taxpayers whom it has reason to suspect have offshore banking accounts, enquiring why there is no tax liability in respect of those accounts. The holding of such accounts is not itself evidence of fraud but in the absence of a prompt reply, a formal investigation may be opened.

Offshore credit and debit cards

Following the example of the U.S. Internal Revenue Service, the tax authority is establishing a project to identify taxpayers who have credit cards or debit cards issued by offshore banks, investigating the use of those cards in the U.K. and obtaining information directly from the credit card companies.

Once again, possession of a card such as these is not evidence of fraud, but it is another way of obtaining additional information. Persons who are resident in the U.K. but not domiciled there, will need to be extra vigilant and ensure that use, in the U.K., of cards issued offshore does not inadvertently constitute a remittance for income tax or capital gains tax purposes.

European Saving Tax Directive

The Directive requires paying agents (banks etc.) to report any savings income they pay to individuals resident in a prescribed territory. Prescribed territories are the 25 EU member states, Aruba, British Virgin Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat and the Netherlands Antilles. Paying agents in these territories make similar reports thereby establishing a network for the exchange of information.

Existing reporting arrangements

These are under close scrutiny. The objective is to identify unreported offshore structures, how they were funded and where their income arises and to check whether taxpayers have failed to report and pay tax on income or capital distributions.

There is an obligation on any person resident in the U.K. (other than a barrister), who in the course of a trade or profession has been concerned with the making of a settlement by a U.K. domiciled settlor, where the trustees are non-resident, to provide details to the Revenue. The report must be made within three months. We understand that the words “concerned with” are being widely interpreted to include persons through whom funds are remitted, which would include banks and professional firms.

We also understand that the Revenue have been writing to U.K. parent companies to enquire whether their offshore subsidiaries have made these returns and that a number of non-U.K. financial institutions have provided information leading to the discovery of previously unreported trusts.

Where the Revenue has been unsuccessful in obtaining information from non-resident trustees, it will generally put pressure, under threat of penalties, upon U.K. resident settlors and beneficiaries, even though these persons may have no power to compel provision of the information.

Other sources of information

The Revenue has power to obtain information from third parties and of course from the targeted taxpayer.

The Centre for Revenue Intelligence holds an extensive database, including the registration of aircraft, yachts and motor vehicles and on gold and silver and car valuations, bank, building society and mortgage interest and property transactions

Finally, or perhaps not, information is gathered from informers, information exchange agreements, double taxation treaties and surveillance operations.

Ref: CO130606
Big Brother Is Watching
You've seen it in the movies and on American television shows such as "24". Jack Bauer puts a trace on a mobile number and in minutes they have the suspect's exact position displayed on a hi-tech phone map. It all sounds like Hollywood fiction or a secret service spying fantasy, but you may be surprised to learn that not only does such technology exist, it is also now available for anyone to use in mainland Great Britain!

Mobile phone tracking was quietly launched in mainland Great Britain during 2003. Currently it works on T-Mobile, Vodafone, Orange and O2 standard GSM networks and that includes Pay As You Go phones, but other networks such as 3 and Virgin will follow soon, along with support for 3G networks. Surprisingly no extra hardware is required and it will work on any standard handset - even older models - providing you have the permission of the person you want to track. You don't even have to use the internet, although many tracking services require you to register and view the location maps online.

The technology behind this new tracking service is surprisingly simple. All mobile phones work by being constantly in touch with the nearest phone mast to maintain good reception. You can sometimes even hear these signals as funny chirruping/clicking sounds if you place a mobile phone close to a loudspeaker or radio. What mobile tracking does is measure the distance the signal travels from the phone to the phone mast. A bit like counting how long it takes to hear a clap of thunder, after a flash of lighting, to calculate how far away a storm is, only in this case it's a lot more sophisticated as it uses more than one mast to triangulate the position. The one drawback is the phone has to be switched on, so it won't work on a lost mobile after the battery has run down!

GSM mobile phone tracking is cheaper, but less accurate than GPS satellite tracking which has been used for many years by the road haulage industry and in car Sat Navigators. Unlike GPS, GSM won't show you what street the mobile is on. What it will do though is show you a radius of where it is likely to be. The accuracy will vary on a number of factors, such as the landscape (i.e. is it flat or hilly), how many phone masts are nearby (towns are much better than the countryside in this respect for network coverage) and even the weather will affect the results slightly, but the best accuracy is usually up to 50 to 100 metres. Obviously this is enough to find a person or stolen vehicle, but not always a lost phone.

Setting up mobile phone tracking is easy and normally only takes a few minute to complete. Registration methods vary depending on which company you choose, but they all share similar guidelines. These codes of conduct have been laid down by the phone network operators to prevent misuse, such as by paedophiles. The first is that you must provide your full name and address and a valid form of online payment (either a credit or debit card) which must match the address of the person making the application.

You also need the permission of the person you intend to track! This is usually taken care of for you by the service provider automatically sending an SMS text message to the mobile number. This normally includes a password, or short code, which you'll need to be able to activate the phone. Once you have done that you can start tracking! Most service providers allow you to view the maps as a web page and some services such as http://www.traceamobile.co.uk also allow you to see it as a text message on your mobile.

Sales of mobile phone tracking have been brisk, according to Trace A Mobile's Managing Director Jonathan Cook. "Since launching in October 2003, we have signed up thousands of customers who are both family and business users. We have also covered major sporting events, like the London Marathon and the Great North Run for the BBC, who wanted to track the location of celebrity fun runners, such as Nell McAndrew and Ranulph Fiennes, who were carrying mobiles. All of this has generated a lot of media interest and publicity."

Business users have also been quick to spot the advantages of mobile phone tracking to find people on the move. Obvious business benefits include being able to track the location of deliveries, eg van drivers, or monitor sales reps or staff on call outs. It is even being used to retrieve stolen assets where a "tracked" phone has been placed somewhere out of sight inside a vehicle acting as a passive "phone finder" unit.

One of the leading mobile phone tracking companies catering for this growing B2B market is http://www.mobilelocators.com, although they are keen to stress - just like the domestic versions of the service - that employees have to give their consent to being tracked. It would seem though that employees are happy to be tracked, as long as they are kept informed and made aware of the potential safety benefits it offers them, eg not needing to answer so many calls from head office while driving or should they get into difficulties in a medical emergency, or if they find their life is in danger and they are unable to call for help.

So how much will mobile phone tracking cost you or your business? Probably less than you think. There are a number of different pricing models. Some are subscription based and include free location tracks. Others are Pay As You Go allowing you to pre-pay for credits.

Nevertheless prices are competitive and are broadly similar for private and commercial users. For example, Trace A Mobile offers 10 free searches a month for a subscription of £5 a month. This covers up to 5 mobile phones and is aimed at families and children. Locate Mobiles offers a similar option. The cost of each location search varies from company to company, but is in the range of 20-50p, depending on the volume purchased. What is mobile tracking not? Well it is not a mobile phone directory so you can't look up mobile devices or create a phone tracking list. It only works on individual mobile devices that have a SIM card and unique mobile number. So can you look up a mobile number? Mobile tracking services don't keep lists of mobile numbers or mobile device details, such as the make or model of phone. The idea is you can only find people like friends or family via their mobile numbers. You can though register multiple mobile numbers as long as each phone passes the security checks, eg it accepts the text message sent to it.

Although consent was given by the UK's major mobile phone networks to run this service in mainland Great Britain, this has not been the case for the whole of Europe or the rest of the world for that matter. Currently in Europe only Germany, Netherlands and Norway have similar services, with the US still lagging behind in GSM tracking technology.

Mobile phone number tracking technology may be new, but it looks set to be around for a long time. With improvements in how the phones are tracked, using a new system called Timing Advanced software (which increases accuracy by up to 300%) and fitting of GPS chips as standard in new phones and tracker devices no bigger than a grain of rice, it really does look like Big Brother will be watching you. So perhaps, at long last, a lost phone will soon be a thing of the past...

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About Author
Both Michael Yates & Jason Smith are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Michael Yates has sinced written about articles on various topics from Finances. . Michael Yates's top article generates over 22200 views. Bookmark Michael Yates to your Favourites.

Jason Smith has sinced written about articles on various topics from Computers and The Internet, Finances and Hair Care. http://www.mobilelocators.comhttp://www.mobilelocators.com. Jason Smith's top article generates over 22200 views. Bookmark Jason Smith to your Favourites.
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