A Data Sanctuary Is Born

[William Knowles <wk () C4I ORG>]

http://www.wired.com/news/print/0,1294,36749,00.html

by Declan McCullagh
5:00 p.m. Jun. 4, 2000 PDT

WASHINGTON -- A windswept gun tower anchored six miles off the stormy
coast of England is about to become the first Internet data haven.

A group of American cypherpunks has transformed the rusting fortress,
erected by the British military during World War II to shoot down Nazi
aircraft, into a satellite-linked virtual home for anyone looking for
a secure place to store sensitive or controversial data.

The founders of HavenCo, which will announce operations on Monday,
believe the concept will appeal to individuals and businesses looking
for a "safe haven" from governments around that world that are
becoming more and more interested in Internet regulation and taxation.

It's for "companies that want to have email servers in a location in
which they can consider their email private and not open to scrutiny
by anyone capable of filing a lawsuit," says Sean Hastings, the
32-year-old chief executive of HavenCo.

Hastings says that because a 1968 British court decision effectively
recognized the basketball court-sized island as a sovereign nation
called Sealand, HavenCo can provide more privacy and legal protections
then anyone else on the planet.

To create HavenCo -- which will offer Linux servers for $1,500 a month
-- the founders signed an agreement with Roy Bates, the quirky "crown
prince" of Sealand who landed on the abandoned platform in 1966 and
claimed it as an independent nation with its own currency, stamps, and
flag.

Bates, a former British Army major, has undertaken a string of failed
business ventures in an attempt to make use of the world's tiniest
country -- a platform just 10 by 25 yards that perches atop two cement
caissons in the North Sea.

One plan was to build Sealand into a three-mile-long, man-made island
with an airport and banks. Another venture included working with
German investors to build a $70 million hotel and gambling complex --
a scheme that fell apart with the Germans taking over the fortress in
1978 and Bates regaining control in a dramatic helicopter raid at
dawn.

This time the elder Bates, now about 80 years old, is taking no
chances on his business partners: His son and royal heir-apparent,
Michael, is HavenCo's chief logistics officer and the royal family has
a seat on the board.

But today Sealand's potential adversaries include not merely a few
expansion-minded Germans, but nervous government officials who are
aggressively trying to pull the plug on unapproved offshore
activities.

During a Paris summit in May, for instance, representatives of the
Group of Eight (G8) nations met to hammer out an agreement on
international Net law. "The idea is to produce a global text so there
cannot be 'digital havens' or 'Internet havens' where anyone planning
some shady business could find the facilities to do it," French
Interior Minister Jean-Pierre Chevenement said at the time.

When Sealand was simply an eccentric's hobby, the British government
largely ignored the smallest country in the world. But if HavenCo
becomes a popular destination for gambling, money laundering, or other
socially disapproved activities, governments could move against it.

The Home Office in London could restrict the microwave links that
provide HavenCo with its lifeline to the outside world, and the
companies offering satellite connectivity could come under pressure
from regulators in their home countries. HavenCo could even find its
bank accounts imperiled.

For their part, HavenCo executives say they hope to avoid negative
publicity. "We don't intend to make anyone angry at us. We simply want
to provide online businesses a place with a sane set of rules that are
not constantly changing," Hastings said.

"If larger nations have a problem with unrestricted information flow,
then their problem is with the increase in information technology, and
not with us. They can't put the genie back in the bottle until every
individual on the planet has had their three wishes come true," he
said.

Somewhat ironically, bandits recently set up a fake "Principality of
Sealand" website to sell citizenship to unsuspecting visitors. Spanish
authorities reportedly are investigating a gang involved with drug
smuggling and arms trafficking using those passports.

In a bizarre incident, one "Sealand" passport of dubious origin
surfaced in connection with the July 1997 murder of fashion designer
Gianni Versace in Miami.

The British Embassy in Washington declined to comment on what would
prompt London to take action against the legitimate prince of Sealand.
"What it comes down to is that this is a hypothetical (situation), and
so we cannot speculate on this," said Peter Reed, the embassy's press
officer.  In interviews, U.S. government officials indicated they
would take a more active approach.

Washington is leading international efforts in the area: The Justice
Department chairs the G8 subgroup on high-tech crime, and previously
led the Organization for Economic Cooperation and Development's
financial action task force. That panel in February pressured Austria
to eliminate anonymous bank accounts, saying they aided money
launderers.

"(There) are ways that exist to deal with these kinds of situations,
these kinds of places, that don't necessarily require official
recognition. There are lots of ways to deal with it," said Susan
Elbow, a State Department official.

Elbow said the United States could send warning messages to other
countries to alert them to illicit offshore activities and coordinate
a response through Interpol. "Right now, we aren't even concerned with
something like Sealand because they are not representing any kind of a
threat.... It would not be an issue for us unless, for example, they
are hooking up with Osama bin Laden," she said.

The U.S. Customs Service and the Immigrations and Naturalization
Service deferred questions to the State Department.

Christopher Lamora, an official in the State Department's bureau of
consular affairs, stressed that "we don't recognize any part of
SeaLand."

The U.S. Congress is weighing more action against international
money-laundering centers. The House Banking committee is scheduled to
vote Thursday on a new version of the International Counter-Money
Laundering Act, which has civil and criminal penalties.

"We're going to introduce a bill next week for markup that will give
the Treasury Department the authority to tell banks that if there are
not acceptable regulations in a country -- such as this offshore one
-- then you cannot have financial dealings with them without penalty,"
committee spokesman David Runkel said in an interview last week.

To succeed, HavenCo must use a simple chart to navigate through its
perilous offshore waters: Provide enough freedom to stay in business,
but not enough to draw the world's ire. The company already says it
won't house spammers or child pornography, for instance.

"We are specifically avoiding sleazy businesses such as child
pornographers and spammers, as we think that the potential demand that
exists in protecting legitimate businesses from bad legislation is
very large and we will not need this sort of business to survive and
thrive," said Hastings.

Instead, he envisions customers who want to avoid cryptography
restrictions or far-reaching copyright laws like the Digital
Millennium Copyright Act.

Translation: HavenCo's founders aren't too worried.

For one thing, they've already thought through a lot of these problems
during conversations on the libertarian-leaning cypherpunks mailing
list. They're also quietly planning to erect mirror sites at other
locations that can be activated if necessary.

The founders include Ryan Lackey, a former MIT student and longtime
cypherpunk, Sameer Parekh, who founded the security firm C2Net
software and is the chairman of HavenCo, and Joichi Ito, CEO of the
Neoteny incubator firm.

HavenCo says it has raised $3 million and plans to have a STM1 network
connection in place by September. For $300 a month, customers can rent
space on a virtual machine, or pay $1,500 for a dedicated server.

The parent company is an Anguillan firm, HavenCo Ltd., which owns the
Sealand corporation. Hastings, who was born in Ann Arbor, Michigan,
until recently was a programmer working with Offshore Information
Services in Anguilla.

Bob Bauman, a lawyer with the Sovereign Society, which advocates
offshore banking and tax avoidance, predicts Crown Prince Bates won't
countenance anything that is too controversial. "My impression is that
he wouldn't do anything to jeopardize his own existence," Bauman said

Cryptonomicon, a 1999 novel by Neal Stephenson, outlined a similar
idea: Creating a data haven on a small Pacific island with the backing
of the nation's royal family.

"If they have distributed network technology for the data haven, they
may not be immediately attacked and shut down. If they are depending
on a single location -- the Sealand platform itself -- using a
satellite uplink, then I am sure they will have problems hosting
content objectionable to the UK and European authorities," says a
spokesman for Laissez Faire City. "I would expect attempts by the
governments to interrupt their communications. Data havens are
nigh-on-impossible to do unless you distribute."


*-------------------------------------------------*
"Communications without intelligence is noise;
Intelligence without communications is irrelevant."
Gen. Alfred. M. Gray, USMC
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