from: http://www.wired.com/news/business/0,1367,36749-2,00.html Click Here: <A HREF="http://www.wired.com/news/business/0,1367,36749,00.html"> A Data Sanctuary is Born</A> ----- A Data Sanctuary Is Born 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 Seal and, 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." Nicholas Morehead contributed to this article. Copyright © 2000 Wired Digital Inc., a Lycos Network site. 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