TBO.com - TBO is Tampa Bay Online

ANTIGUA COOPERATIVE

ADVERTISEMENT

The New York Times

The Tampa Tribune

Published: March 1, 2009

ST. JOHN'S, Antigua - Having seized control of Robert Allen Stanford's two banks in recent days, Antiguan government officials are now pledging to work closely with American regulators to investigate their offshore banking system, long suspected by federal officials of being a center for laundering money from around the region.

"We are prepared to cooperate fully with the Americans in probing this whole affair," Prime Minister Winston Baldwin Spencer said last week. He added that the scandal "has serious implications" for the offshore banking sector.

That acknowledgment countered statements only two weeks ago by local bank regulators that the financial system in Antigua was absolutely clean. It comes after the Securities and Exchange Commission accused Stanford in a civil complaint of engaging in an $8 billion fraud involving high-yielding certificates of deposit sold by an offshore bank here. Stanford has not been criminally charged.

A run on both of Stanford's banks in Antigua began two weeks ago as news spread that a judge in the United States had frozen the assets of Stanford Financial Group, the company based in Houston that sold the offshore bank's certificates.

Antiguan government officials have taken the actions, unprecedented in its largely unregulated banking system. because they are concerned that Antigua's economy, which is already hurting from a downturn in tourism tied to the global economic crisis, could suffer further from a financial breakdown.

On Feb. 20, the island nation's Financial Services Regulatory Commission appointed two receivers employed by a British accounting firm to manage Stanford's offshore bank, known as Stanford International Bank. Meanwhile, the Eastern Caribbean Central Bank has assumed control of Stanford's local bank, the Bank of Antigua, which is used mostly by Antiguans and residents of other Caribbean countries.

The seizures could represent a major turn in Caribbean offshore banking, which, along with tourism, is a major economic engine for many island nations here. It comes only days after the Swiss bank UBS agreed to pay a $780 million fine and turn over the names of hundreds of American depositors to settle a criminal inquiry into its offshore private banking services.

Jonathan M. Winer, a former deputy assistant secretary of state who worked to strengthen banking regulations in Antigua, said the Stanford scandal and the American and Antiguan response were part of a new direction for offshore banking.

"We are on the verge of an emerging new global regime to demand financial transparency across all sectors and across all jurisdictions as the price of access to the international financial system," Winer said. "One outcome will be that finally everyone will have to be under the same level of regulatory and enforcement controls if their activities touch financial markets."

David Marchant, publisher of the OffshoreAlert newsletter, however, said he was "skeptical the Antiguan authorities will honestly cooperate" with American authorities. "What is surprising is that the Antiguans didn't investigate and close down these Stanford banks" before the United States seized Stanford's American operations, which he said reflected the laxity of regulation in Antigua.

An investigation of the Stanford banks could be good politically for Prime Minister Baldwin Spencer, who is in a tough re-election campaign against the former prime minister, Lester Bird. Most of Stanford's deals were made under the Bird government, which lost the last election in 2004.

"I'm sure various other offshore companies are going to worry exactly how far SEC control will go," said Justin L. Simon, the attorney general. He added that his government intends to investigate where billions of dollars that had been deposited in Stanford's banks had gone. He said the government would seek to work with American regulators to find the money and uncover any possible crimes.

"I trust there will be cooperation," he said. "If there was fraud, we also have jurisdiction and we will take action."

Cooperation between the United States and Antiguan governments has had its ups and downs in recent years, but never has the offshore banking system faced such a crisis. John Nester, a spokesman for the SEC, said, "We always welcome cooperation in combating cross-border fraud."

According to a State Department report last year, the two-island nation of Antigua and Barbuda "remains susceptible to money-laundering because of its offshore financial sectors and Internet gaming industry." It noted that Antigua had 17 offshore banks, three offshore trusts, two offshore insurance companies and 23 licensed Internet gaming companies.

Most of these companies are tiny, but they operate in a freewheeling environment that American regulators have long sought to tighten, especially in the latter days of the Clinton administration, when concerns mounted that Russian organized crime was moving into the offshore banking sector.

Although Antigua tightened some of its offshore banking regulations in order to be removed from a Treasury Department money-laundering watch list around the same time, Antiguan regulations still allow a company with only $5 million to open a bank, and charge only $15,000 for a banking license. There are also sweeping confidentiality laws that include criminal penalties for whistle-blowers.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT