Money Laundering and Terrorist Financing Risks in The Bahamas

 “Zero Tolerance On Money Laundering”

By:Jones Bahamas:

Attorney General and Minister of Legal Affairs Allyson Maynard-Gibson yesterday reiterated the government’s zero-tolerance position on money laundering as she opened a two-day workshop to address the risks associated with this practice.

With the growing recognition that illegally earned funds are being concealed more and more throughout the Bahamas, officials met to continue the first of three phases of the National Money Laundering Risk Assessment at the Melia Resort early yesterday morning.

“My presence here this morning indicates the commitment of the government to Financial Services and doing all that it takes to correct the ease of doing business ratings – it’s very very low…lower than we ought to have,” the attorney general said.

Bahamas Anti-Money Laundering Coordinator, Stephen Thompson, said the sole purpose of the National Risk Assessment is to identify money laundering and terrorist financing risks in the Bahamas. The two day workshop facilitated by the World Bank will consist of training on exactly how to identify the risks.

“This is a workshop where once we would have determined the money laundering terrorists and financing risks, we will determine how we go about putting mechanisms in place to strengthen what already exists or put in place mechanisms to identify areas that are not currently regulated. We will move in that direction” said Thompson.

Mr. Thompson told reporters that all financial services legislations will be reviewed for the assessment to determine the risk of money laundering and terrorist financing risks in the Bahamas.

“What we do is we look at what is called Typologies, Money Laundering Typologies. These would be the means by which people have laundered money in the past” said Mr. Thompson, “Those will be the areas, obviously, that we will focus on. In addition to that, we will look at any other areas of vulnerabilities. Meaning, any area that is susceptible to criminal activity, obviously, cash intensive businesses will be very critical for us to look at. Any area that we know from a global perspective poses as a risk for money laundering.”

Attorney General Alyson Maynard was also present at the assessment this morning. She said As the risk assessment continues, Mr. Thompson and his team hope to find any area that is vulnerable to money laundering and terrorist financing within the country.

October 09, 2014

Jones Bahamas

Suisse Security Bank and Trust Ltd (SSBT) Loses Privy Council Appeal on Its License Revocation By The Central Bank of The Bahamas

Harajchi Loses Appeal 

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

14 March 2006

...the Central Bank governor was well within his legal rights to shut the bank down.

Saying that it would have been "inconceivable" for the Central Bank governor to have allowed Mohamad Harajchi’s Suisse Security Bank to continue operating, the Privy Council yesterday rejected the bank’s bid to have the decision of then governor Julian Francis overturned.

The high court said that SSBT’s audited accounts and its most recent quarterly reports to the Central Bank were "evidently erroneous".

"SSBT did not have cash on hand and in banks in the sums stated," said the ruling, which was written by Lord Mance.

The ruling said "the state of affairs disclosed by the evidence before their Lordships makes it inconceivable that SSBT could be allowed to continue as an operating bank", and the high court said it saw no basis on which to set aside or remit the governor’s decision to revoke SSBT’s licence and dismissed the appeal.

The bank’s licence was granted on July 20, 1993, and on March 5, 2001, Mr. Francis gave notice that he was of the opinion that the licence should be revoked on the ground that SSBT was carrying on its business in a manner detrimental to the public interest and to the interests of its depositors and other creditors.

Also on March 5, 2001, the governor appointed Raymond Winder as receiver of SSBT, but Mr. Winder had been unable to share the bank’s assets among its depositors and creditors because the appeal had been outstanding.

Mr. Harajchi had appealed a June 29, 2004 decision from the Court of Appeal, which dismissed an appeal filed as a result of the April 25, 2003 ruling handed down by Justice Austin Davis.  Justice Davis refused to overturn Mr. Francis’s decision to revoke the licence.

In a press release issued yesterday after the ruling was handed down, the Central Bank said it will take immediate steps to have Mr. Winder (now the provisional liquidator) appointed as liquidator of SSBT so that the company may be wound up and its assets duly distributed.

Attorneys for SSBT had argued before the Privy Council that by suspending, then revoking SSBT’s licence, the governor acted in breach of an interlocutory injunction granted by Justice Hartman Longley on March 2, 2001 in separate judicial review proceedings commenced by SSBT against the governor on February 22, 2001.

They had also argued that the governor, in breach of principals of procedural fairness, failed to give notice to SSBT prior to or on March 5, 2001 that he was minded to suspend its licence on the grounds on which he actually suspended it on that date, together with an opportunity to respond before he took any such step.

The third issue that the Privy Council considered was whether the governor, in breach of principals of procedural fairness revoked SSBT’s licence on April 2, 2001 on grounds different from, or additional to, those of which he had given notice on March 5, 2001, without giving SSBT an opportunity to respond to such new grounds, and in circumstances in which he did not regard the grounds of which he had given notice on March 5, 2001 as justifying such revocation.

In outlining the facts of the case, the ruling said during the second half of 2000 and early 2001 the Central Bank in correspondence and meetings insisted to SSBT that SSBT should as quickly as possible attract a significant institutional shareholder, that it should maintain a ratio of deposits to capital of 5 to 1 and that SSBT should commission a special audit of its debit card activities.

The ruling said it is the requirement to maintain the 5 to 1 ratio that was "particularly relevant" to the appeal before the Privy Council.

In a letter dated May 6, 1993, which preceded the issue of the bank’s licence, the Central Bank said that the ratio was the first "prudential norm" to which SSBT was to adhere.

The ruling said that as at September 30, 1999 SSBT’s audited accounts showed shareholders funds of $5,891,280.

In a note headed "contingency", the ruling said, SSBT had disclosed a United States judgment and stated that SSBT was appealing, but that it had paid $1.6 million into a trust account and that ‘the bank’s principal shareholder has committed to underwrite any potential loss resulting from this matter’.

In July 2000 the Central Bank sought explanations regarding SSBT’s apparently increased profitability shown by its quarterly return as at March 31, 2000 and a Visa debit card operation, about which it had not previously been informed and of which it feared use might be made by criminal elements for money laundering.

The ruling also said that at a meeting between Mr. Francis and Mr. Harajchi on August 21, 2000, the governor also objected to SSBT’s ownership being in the hands of a single family, the extent of 77.5 percent of its share capital, and urged the introduction of a significant institutional shareholder, which Mr. Harajchi refused.

The Central Bank ordered SSBT to find such a shareholder within six months.  It also confirmed its concern about SSBT’s Visa operation.

The Central Bank also ordered SSBT not to exceed the 5:1 ratio pending introduction of a credible institutional shareholder, but the ruling said SSBT soon exceeded the ratio.

On December 7, 2000, the governor expressed his disappointment in the bank’s failure to respect the Central Bank’s directive with regard to a prudential limit of $30 million it had placed on customer deposits and other funding activities, even though Mr. Harajchi had agreed to this limit and cautioned that "it is a very dangerous strategy to violate limits placed on the bank" and that "this clearly indicates as a complete failure to monitor our limit placed on the bank".

The ruling then goes into a lengthy series of correspondence between the parties, determining ultimately that based on the bank’s state of affairs, the Central Bank governor was well within his legal rights to shut the bank down.

The Privy Council said that the parties involved in the appeal have 14 days in which to make submissions in writing on costs in light of its opinion.

Leadenhall Bank and Trust Company Limited Licence Suspended

Craig A. Gomez has been appointed as receiver of Leadenhall Bank and Trust Company Limited, and is authorized to assume control of Leadenhall’s affairs in the interest of its creditors - and to exercise all the powers of a receiver under the Companies Act, 1992 

Bank Licence Suspended

 

By Candia Dames

Nassau, The Bahamas

19th July 2005

 

 

 

 

The Central Bank of The Bahamas announced late yesterday that it has suspended the bank and trust licence of Leadenhall Bank and Trust Company Limited to protect the interests of depositors of the bank.

In addition, Craig A. Gomez has been appointed as receiver of the bank and is authorized to assume control of Leadenhall’s affairs in the interest of its creditors and to exercise all the powers of a receiver under the Companies Act, 1992.

The Central Bank did not go into specifics regarding why it took this action.

But Leadenhall in recent years has been plagued with legal troubles.

In 2003, federal authorities in the United States filed petitions in seven federal courts in an attempt to secure the records from MasterCard accounts at Leadenhall.

The U.S. government has been targeting persons it believes used credit and debit cards issued by offshore banks to hide income from U.S. tax collectors.

The Internal Revenue Service has already announced that more than 1,200 people have admitted that they used offshore accounts or credit cards to avoid paying over $100 million in taxes.

U.S. authorities believe these cards allowed tax evaders and fraudsters to access their offshore funds by using the card in the United States for cash withdrawals and purchases.

In 2004, a New York doctor pleaded guilty to money laundering charges.  It is alleged that he ran more than $200,000 of taxable income through Leadenhall accounts and other accounts.

Earlier that year, Leadenhall had been thrust at the centre of a major fraud case in which a U.S court appointed receiver had been seeking to recover millions of dollars allegedly owed to creditors and investors in an elaborate scheme involving the channeling of funds into Bahamas-based accounts.

Leadenhall Bank provided credit card and other financial services to residents in the United States and provided a broad array of services to and engaged in nefarious activities with an entity in the Cayman Islands called Morningstar Ltd., a suit had alleged.

The Bahamian bank was also the partner of AXXESS INTERNATIONAL, which provided credit and debit card services around the world.

Liquidators and receivers had been seeking to hold Leadenhall and AXXESS INTERNATIONAL accountable for being a part of "a conspiracy to defraud."

It was alleged that the U.S-based operators of a business enterprise called "Cash 4 Titles" developed a multi tier marketing enterprise, which eventually involved the use of the Cayman Islands, Bahamas and United States entities - and individuals in a joint venture to defraud investors in the scheme.

It was further alleged that between 1993 and December 1994, the Cash 4 Titles made loans of up to $1,000 to consumers with poor credit histories, and charged interest rates as high as 25 percent per month.

Liquidators at the time had insisted that certain clients were being bilked in the process.  It was a claim William Jenings, managing director of Leadenhall, had dismissed as "totally spurious".

Executives of The Bahamas-based bank could not be reached last night to respond to the Central Bank’s decision to suspend their licence.

The Central Bank announced that the suspension became effective yesterday and will last for a period of 90 days or such shorter period as shall be determined.

In the past, the Central Bank has taken action to suspend a bank’s licence before revoking it, but there has been no indication that that will be the case in this particular instance.

The Government of The Bahamas has been fighting to avoid the kind of publicity that has surrounding certain alleged transactions of Leadenhall, seeking to protect the reputation of The Bahamas as a well-regulated financial services jurisdiction with a zero tolerance approach to money laundering and other financial crimes.

It’s why the parliament of The Bahamas passed a controversial package of financial bills in 2000 after being blacklisted by the Financial Action Task Force.