Having seized control of Robert Allen Stanford's two banks in recent days, Antiguan government officials are now pledging to work closely with U.S. regulators to investigate their offshore banking system, long suspected by U.S. officials of being a center for laundering money from around the region.
"We need to investigate our own backyard to see if it needs cleaning up," Attorney General Justin Simon said during an interview.
That acknowledgement came as a break from statements only last week by local bank regulators that the financial system was absolutely clean even as the U.S. Securities and Exchange Commission accused Stanford of engaging in an $8 billion fraud involving high-yielding certificates of deposit sold by an offshore bank here.
A run on both the onshore and offshore banks Stanford operated in Antigua began last week after a U.S. judge froze the assets of Stanford Financial Group, the Houston-based company through which the offshore bank sold the certificates. U.S. investigators are examining the possibility that Stanford was involved in a Ponzi scheme.
Concerned that the Antiguan economy, which is already hurting from a downturn in tourism due to the global economic crisis, could suffer further from a financial breakdown, government officials have taken actions that are unprecedented for the country's largely unregulated banking system.
On Friday, the island nation's Financial Services Regulatory Commission appointed two receivers employed by a British accounting firm to manage Stanford's offshore operation, Stanford International Bank. Meanwhile, the Eastern Caribbean Central Bank has assumed control of the Bank of Antigua, an onshore bank used mostly by Antiguans and residents of other Caribbean countries.
The seizures, which came even before Stanford was criminally charged in the United States, could mark a major turn in Caribbean offshore banking, which along with tourism is a major economic engine for many island nations. And it comes only days after the UBS agreed to pay a $780 million fine and turn over to U.S. authorities the names of hundreds of American depositors to settle a criminal investigation into its offshore private banking services.
Jonathan Winer, a former U.S. deputy assistant secretary of state who worked diplomatically to strengthen banking regulations in Antigua, said the Stanford scandal and the American and Antiguan response to it 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."
Simon said the government would seek to work with U.S. 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."
Such tough talk is exceptional on an island where Stanford has been the largest private employer for more than a decade, with an empire that includes the country's largest newspaper, two banks and a large development company. He has at least 600 employees, but many more jobs are indirectly tied to his operations in this tiny country of 85,000 people, which is plagued by high unemployment.
According to a State Department report last year, the twin-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.
Cooperation between the U.S. and Antiguan governments has had its ups and downs in recent years, but never has the offshore banking system faced such a crisis.
"We are concerned about the fallout," Simon said. "This is a very serious situation."
Madoff statements a fantasy
The clients who trusted Bernard Madoff still do not know exactly what he did with their money. But they know what he did not do with it: He did not buy any of those blue-chip stocks and Treasury bills listed on their account statements over the past 13 years.
The court-appointed trustee who is winding down Madoff's business said Friday that his team had searched records going back almost to 1993 and found no evidence that any securities were bought for investors during that time.
The report from Irving Picard of the law firm of Baker Hostetler demolishes the theory that Madoff was an honest man driven into fraud by the relentless market strain of recent years.
