In pushing through Congress the Comprehensive Money Laundering Prevention Act of 1986, the chairman of the House Banking Committee announced that this far reaching legislation would serve notice to "drug dealers, tax evaders, illegal aliens, prostitutes, organized crime and illegal gamblers" that the government means business. Interpreted broadly enough, these categories of "criminal" activity would, I suspect, include a good many Americans.
This new law, as well as the tax-reform legislation, is bound to enlarge the federal leviathan, especially in your financial affairs. Central to the war on drugs, tax evaders, and other "dregs" of society is the effort to attack financial middlemen. Many innocent investors are going to be harmed by these draconian measures.
Be prepared for the following in 1987:
Reporting at the $3,000 level The old $10,000 rule for cash transactions is out. Now, any cash transaction-including cashier's checks and money orders-by a banker, stockbroker, coin dealer, car dealer, or other business in excess of $3,000 must be reported to the Treasury. Imagine the trouble and invasion of privacy associated with real estate and other transactions that require cashier's checks.
The reporting requirement is worth avoiding at all costs because it in essence provides the government a list of suspected drug dealers. If your name appears several times, you could be investigated by the feds without your knowledge or permission. Unfortunately, it's going to get harder to avoid.
A new informer program. The money laundering act makes it illegal for businesses to accept money from a "known drug dealer." This makes hearsay part of the law! Undoubtedly there will be lawsuits over defamation of character, but the law protects banks and businesses from liability if they disclose information to the government about suspected crimes. Henceforth, banks and other businesses can discriminate with impunity. They may start turning away people who appear to be the "drug dealer type" or who speak with a foreign accent. You might have to take a drug test before doing business with your stockbroker or banker!
Your wealth will also be affected by the new tax law. Now you'll have to list Social Security numbers for your dependents five years of age and older. In addition, starting on the 1987 tax return, you'll be required to list tax-free municipal-bond income. Finally, the IRS budget is going up $700 million a year for the next five years, and most penalties (over 50 are in the tax code) are going to double. Expect the IRS to hire thousands more agents to harass and intimidate those with high income.
What to do? It's time to create a private investment portfolio while you can still legally do so. By this I mean private, nonreportable investments that can be hidden from government, relatives, lawsuit-happy individuals, and other privacy invaders. I recommend the following:
- Gold and silver coins. We are in the beginning of a new inflationary trend, and precious metals are bound to move up. Buy popular gold, silver, and platinum coins. For maximum privacy, buy locally with cash at a reputable coin shop or a coin show. Store your coins in several safe-deposit boxes.
Recommended gold coins include the new American eagles, Chinese pandas, Canadian maple leafs, and Krugerrands, as well as the pre-1933 $20 and $10 eagle gold coins in brilliant uncirculated condition. However, stay away from high-grade MS65 coins-it's a phony market created by greedy promoters. Stick with common-dated uncirculated coins. I also recommend uncirculated U.S. silver dollars and half-dollars.
Two platinum coins worth investigating are the Isle of Man Noble and the Swiss Shooting Taler. (It's especially important to buy platinum confidentially because it is a strategic metal that the government will demand for its own purposes during a military or financial crisis).
- Junior growth stocks. Junior industrial and mining stocks can be a good investment if you're selective. Most won't pay any dividends, so they remain a quiet investment. Plan on holding for the long term. (For maximum privacy and safety, take possession of all junior stock certificates.) For a list of prospects, write for a sample issue of Dave Remark's monthly newsletter, National Securities Corp., 500 Union St., Seattle, WA 98101.
- Foreign investments. The private investor always seeks to protect his wealth from his government by investing outside his country. I recommend Swiss bank accounts, either in Switzerland or in the Bahamas. Other low-profile alternatives include England, Austria, Luxembourg, and Hong Kong. Foreign investments that qualify as private are precious metals, nondividend-paying stocks, insurance products, and real estate for personal use. For recommended banks and private investment alternatives, see my special report, "Secrets of Creating Private, Tax-free Wealth," P.O. Box 2488, Winter Park, FL 32790, $20.
You must report more than $5,000 in a foreign bank account to the Treasury. But you can avoid this limitation by purchasing Mocatta metal certificates, which represent ownership of gold or silver in Switzerland. You buy the certificates in the United States and the metals are stored in Switzerland, and most tax experts argue that this is not a foreign bank account. For more information, contact Rhyne Precious Metals, 110 Cherry St., Seattle, WA 98104, 800/426-7835.
Also consider purchasing a second home in a foreign country or opening a safe-deposit box in a country you frequently visit. All of these privacy-enhancing measures will help protect you from the advancing federal leviathan.
Mark Skousen, editor of the investment newsletter Forecasts & Strategies, is the author of The Complete Guide to Financial Privacy, Simon & Schuster (1983).