THIS week, Bermuda town is very quiet; buses running almost ahead of schedule, parking spaces available in the centre; little 5 p.m. traffic these last few days. Of course, there is the US national holiday on July 4, so conjecture is that everyone must be away. Are we all on vacation, or is it that those with close connections to the US have taken an island hop off the rock for weekend?We know that there are thousands of intertwined relationships in Bermuda connecting local residents to friends, relatives, assets, and beneficiaries in other countries. Moreover, we Bermuda residents are frequent travellers. "Island Fever" hits all of us hard, at times, and if one can scrape up the cost of a ticket, we are away! Hallelujah!

Big Brother is watching and George Orwell ("Animal Farm") is crying.

Every time you truck through the immigration lines, do you wonder if authorities, both here and there, have a better sense of where you're going than you do and how long you will stay? Or a better question, whether you will be allowed to stay?

Data chips are now embedded in passports, both US and UK Common Market passports, as well as or in progress soon to be issued in Canada, Malaysia, Japan, Sweden, France, Australia, New Zealand, Austria, Singapore, and India. Will non-Euro Europe and the Middle Eastern countries be far behind?

First described for simultaneously tracking sheep in the UK and vehicles in Bermuda by my esteemed co-financial columnist, Roger Crombie, these almost invisible detection devices known as RFID's (Radio-Frequency Identification memory chips) may describe your life from cradle to grave.

One can't help but feel more than a bit like a sheep as we are all herded (without any permission on our part, mind you) into the next phase of being permanently documented. Exactly what will they know about you and your cumulative itineraries, where will they store it, how will they use it and most unnerving of all, who will have access to your personal information.

Will travelling trigger unexpected consequences?

While the chips have been designed to protect the individual's identity from forgery and counterfeiting, there are real concerns about privacy and security of this personal data.

We don't know exactly what these chips may contain because no one "governmental" has been fully forthcoming as to the exact amount of data, kind of data, whether that data accumulated by some remote computer database with your name in it and what that data may be used for in the future. It is a fact that Bermudians travelling abroad have already been subject to fingerprinting by US immigration authorities, while the technology to identify an individual by an iris scan is in routine use.

Are they foolproof>

Now that we know our identification will be tracked through the world, stored on some anonymous supercomputer somewhere in the world, is there a chance that we could be cloned if our RFID identity is stolen?

It appears, that in spite of reassurances of safety and difficulty in forging or overwriting these RFIDs that it can be done. According to www.wired.com, a German computer security consultant has demonstrated how to "clone," or duplicate, a specific RFID chip.

Lukas Grunwald, a security consultant with DN-Systems in Germany and an RFID expert, says the data in the chips is easy to copy, and he demonstrated the technique at the Black Hat Security Conference in Las Vegas in August of 2006. The hack was tested on a new European Union German passport, but the method would work on any country's "e-passport," since all of them will be adhering to the same ICAO standard. And it only took two weeks of significant research, to build a 'cloned' RFID. Right, so that means that a perfectly normal law abiding citizen may have to contemplate having a clone, right down to having a terrorist face reconstructed according to your "facial map". And you thought, regular identify theft was a nightmare no one should have to go through.

In addition to the possibility of counterfeiting, Grunwald notes that the ability to tamper with e-passports opens up the possibility that data written to RFID tags could be used in other ways. Crashing an unprepared inspection system, or even introducing malicious code into the screening computers, is possible, maybe even probable.

In the same article from wired, Frank Moss, Deputy Assistant Secretary of State for passport services at the US State Department, says that designers of the e-passport have long known that the chips can be cloned, but that other security safeguards in the passport design still prevent someone from using a forged or modified passport. Why don't I feel more secure about that statement?

Monitoring illegal activity may have also helped increase the government coffers. Your biometric RFID passport (United States, for instance) may contain your social security number, your picture, facial recognition map, iris scans, fingerprints, and other personal information. Some web-sites also tell us that these passports may help deter/detain money launderers and analyse terrorist activity by reading your "facial map" (the distances between key facial features) and comparing it against similar facial maps of suspected criminal activists.

Instinctively, we wonder if these "chip" passports will be used to further enhance stricter enforcement of tax laws by determining who may be avoiding tax obligations based upon excessive residency over-stays; tracking movements of expatriates, to and from the mother country; cross-matching travel logs and other data against credit card purchases, asset acquisitions in land/property titling and deed registries, car registrations, money wire transfers, and financial deposit activities.

It would also appear to be easy to cross-correlate tax return filings (or lack thereof) along with required filing/reporting of financial data to tax authorities.

US Internal Revenue Service has already been extremely successful in catching (and prosecuting) US citizens laundering money through the shadier island retreats by tracking offshore credit card usage.

This initiative has generated millions of dollars in back taxes, interest and penalties, restitution, felony charges and prison terms.

What does all this mean to you, living in tiny little Bermuda? It depends. What kinds of relationships do you have with our nearby Atlantic neighbours? Do you have a second home, a vacation spot, relatives, trusts and brokerage assets here and there, children and other beneficiaries living abroad?

Are you a dual national or in a dual citizenship marriage/relationship? Your situation may not be the same as it used to be according to the tax laws of other countries. Look for the next article on cross-border planning issues.