[ISN] Encryption Expert Says U.S. Laws Led to Renouncing of Citizenship

From: mea culpa (jerichoat_private)
Date: Thu Sep 10 1998 - 02:22:28 PDT

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    Encryption Expert Says U.S. Laws Led to Renouncing of Citizenship
    By PETER WAYNER, waynerat_private
    Most people who leave the United States and move to the Caribbean dream of
    the freedom of perfect beaches, warm winters and tropical fruits. Vince
    Cate says he sees a world where he has complete freedom to write computer
    software and send it around the world. 
    In 1994, Cate [ http://www.offshore.com.ai/vince/ ] moved to Anguilla and
    helped bring Internet service to the tiny island. Last Sunday night, he
    went a step further and flew to Barbados, site of the nearest American
    consulate, to fill out the paperwork to renounce his U.S. citizenship. 
    Cate, an encryption expert and one of the sponsors of an annual academic
    conference on financial cryptography in Anguilla [ http://fc98.ai/ ], said
    he made the decision because he's setting up a new company, Secure
    Accounts, that will design and build basic software to handle electronic
    transactions [ http://www.secureaccounts.com/ ]. The software will rely
    heavily on encryption to scramble the data traveling between users in
    order to prevent fraud, theft and embezzlement. After renouncing his
    citizenship, Cate said in an e-mail message that he wanted "to be free
    from the silly U.S. laws on crypto." 
    Normally, setting up an international company does not require forgoing
    citizenship in the United States, but Cate's expertise in creating
    encryption software places him in a special class. If he were to offer any
    advice to non-U.S. citizens about the encryption work built into his
    financial transaction software, he would violate U.S. laws, which treat
    the transfer of such encryption as illegal international arms traffic.
    These laws apply throughout the world and are intended to stop U.S.
    citizens from assisting others in developing encryption software. 
    "I'm not actually writing any crypto code," Cate said in a telephone
    interview on Thursday. "But I'm supervising people who are." 
    The U.S. government treats secret coding software in the same way it
    treats howitzers, tanks and chemical weapons because it can allow
    foreigners to hide their communications from U.S. intelligence-gathering
    organizations.  In past wars, the United States gained important
    advantages in the field of battle through carefully gathered information,
    and the government does not want to lose what it sees as technical high
    Many American software companies, however, see themselves losing market
    share to foreign competitors who are able to create encryption products
    unhampered by U.S. laws. They argue that good cryptographic expertise is
    already well distributed around the world and that the laws only give
    foreign competitors an advantage. 
    "We can provide a solution that works over the whole planet." Cate said of
    his company. "U.S. companies can only provide a solution that is U.S.
    only.  We certainly have a competitive edge by being offshore." 
    Recently, many leading software companies like Sun Microsystems and C2 Net
    have opened branches outside the United States, hiring foreign nationals
    to do the work. This has required a complicated dance to avoid breaking
    U.S.  export laws like the ones that Cate is escaping. 
    Steve Walker [ http://www.stevewalker.com/ ], the former president of the
    encryption manufacturer Trusted Information Systems [ http://www.tis.com/
    ], said of Cate's move, "All of us have thought from time to time that
    we're fed up with things, but in reality it doesn't accomplish much and
    you give up a lot." 
    Sameer Parekh, the president of the Web server company C2 Net
    http://www.c2.net/ ] said: "I think it's essential if you want business
    that you're doing your development overseas. It's pretty clear to anyone
    internationally that anything exportable [from the United States] is a
    C2 Net has development offices in Anguilla and Newbury, England. Parekh
    says that there is great demand overseas for programmers who know
    Walker agreed that American companies are hurt by the existing laws.
    "There are foreign companies out there who are doing very well," he said,
    "in part because they're selling products out there that the U.S. can't
    Rozell Thompson, a lawyer who specializes in negotiating export licenses,
    said of Cate's decision: " I think that's pretty unnecessary in this
    particular case. If you're developing crypto for financial applications,
    it's exportable anyways. There's a recognition that cryptography for
    electronic commerce applications is going to be exportable." 
    The government is more lenient with software used by banks and other
    financial institutions, in part because it recognizes the great need for
    such software and in part because it already receives reports about much
    of the transaction data cloaked by the encryption. Thompson said that Cate
    would probably have been able to negotiate some sort of license with the
    U.S. government, although this would have taken months and would need to
    be repeated for each new project. 
    Cate's move also illuminates a bit of the international market for
    citizenship. Before renouncing his U.S. citizenship, Cate became a citizen
    of Mozambique for a fee of about $5,000. "This makes me an
    American-African," he joked. 
    Cate's current home, Anguilla, requires people to wait 15 years before
    applying for citizenship. He moved there in 1994 and has worked to
    establish strong ties. In his spare time, he runs a computer club
    http://web.ai/club/ ] that places old computers in the island's schools. 
    "The computer club is also my best source of talent searching," he said.
    "I have hired three students right out of high school because I knew them
    from the computer club." 
    Edward Betancourt, a lawyer for the U.S. Department of State, said that
    the notion that a person could freely choose their citizenship dates back
    to the war of 1812, when British warships would often capture Americans
    under the argument that they were really British subjects. He said: "Most
    people seem to renounce for family reasons. They haven't lived in the U.S.
    for some time and they don't want to deal with another bureaucracy.
    Whether a person articulates [the decision] to us or not is up to them. In
    most instances, people say 'I'm grateful to the U.S. and it's not done in
    In 1996, the latest year for which data is available, 612 people lost
    their citizenship. This number includes people like Cate who renounced
    their citizenship, as well as others who expatriated themselves by serving
    in foreign governments. The government requires a lengthy interview, in
    part to determine whether people are leaving for tax reasons and to ensure
    that the decision is made correctly. 
    Right now, Cate sees several advantages in his choice. "There's less
    chance of getting in any trouble with the U.S. government and there's also
    less chance of getting shot by a terrorist," he said, referring to the
    recent actions targeting U.S. citizens. 
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