Care to bank from a Pacific Island, store your online data in Scandinavia and pay taxes in Barbados? A nicer mix of financial secrecy, data privacy and low government levies would be hard to imagine.
If this multijurisdictional legerdemain appeals to you, James Bennett could be your man. He's in the business of providing, as he calls them, "sovereignty services." For a fee, he'll slice and dice your business or personal affairs to put them in the best mix of global jurisdictions to keep the authorities off your back.
"Anguilla has nice privacy laws and low taxes, but they've had some scams over there," Bennett says. "Meanwhile, Scandinavian countries aren't financial tax havens, but they do have very strong data privacy laws and good courts. It depends on what you're after."
Bennett, who has been mixed up in everything from commercial rocketry as president of American Rocket Company to nanotech research as director of the Foresight Institute, founded Internet Transactions Transnational in 1997. He expects his Virginia-based company to be up and running by the end of this year. Initially the company will focus on arranging the affairs of wealthy individuals, but Bennett plans to branch out later into business services, using virtual private networks, proprietary authentication and arbitration methods and a system of global access points.
"The nice thing about the Internet is that it allows you to link - cheaply - a number of jurisdictions with different characteristics," he says. "We just aim to lower the threshold cost."
Like others, Bennett is an entrepreneur looking to make an Internet buck off of one of our oldest activities: regulatory arbitrage.
Simply put, regulatory arbitrage involves exploiting differing rules in different jurisdictions - for a profit. Think back to when you were a kid. If Mom wouldn't give you a dollar, you asked Dad for one. If they both said no, you asked your aunts and uncles when they visited. The system works in childhood so we use it throughout our lives.
Salesmen seek out the easy marks among buyers in an organization, physicists look for paths of least resistance in experiments and lawyers readily engage in jurisdiction shopping for sympathetic courts. Shipping companies operate under flags of convenience, Switzerland and Liechtenstein profit from discrete domestic banking secrecy laws and multinationals adroitly shift manufacturing to places where safety laws are lenient.
Now entrepreneurial dot-coms are trying their hand at the game. To an arbitrageur, regulations are a price that businesses, consumers of jurisdictional services, pay. Just as the Internet has brutally exposed global product-pricing inefficiencies, the Net's now being used to assault the leather-bound world of national regulations. The enabler here is the near-frictionless ability the Internet provides to shift data-based businesses across fiber cables in search of the friendliest home.
"The sovereignty question is one of the most interesting frontiers in cyberspace," says Bennett. He should know. While his company, IITI, is physically based in northern Virginia, it is incorporated in the Bahamas and operates primarily out of Ireland.
