The value of deposits in Belize Bank International (BBI) has dropped by almost 75% over the last six months to $31m from $102m (€91m, £76m), according to data from Belize’s central bank.
In April, BBI told the country’s supreme court that it could not pay a $3.3m judgment against it to a former business partner Evergreen without liquid assets falling below the minimum amount required by law.
During the hearing, the bank’s chairman Lyndon Giuseppi said it had received record withdrawal requests after arrangements with Bank of America and Commerzbank were terminated as tougher US anti-evasion laws increased compliance costs for BBI’s partners.
Fatca and BBI
The US government’s crackdown on tax evasion has intensified in recent years with a greater push towards global transparency aimed at citizens based overseas.
Changes introduced in July 2014 to the Foreign Account Tax Compliance Act (Fatca) now require foreign financial institutions (FFIs) from around the world report the finances of all their American clients to US tax authorities.
Last September, the Department of Justice confirmed that they were looking into customers of BBI and sister company Belize Corporate Services (BCS), with officials telling a court in Florida they believed it “very likely” the companies had been used by US citizens and their financial advisers to stash assets and evade tax over a period going as far back as 2006.
However, there is no allegation that BBI or BCS evaded tax, or that the bank knowingly facilitated customers to do so.
According to UK newspaper The Guardian, the bank denied it was in crisis, describing the withdrawals as a short term problem. However, the newspaper also reported cases where some customers have had their accounts with BBI terminated and were often waiting months to receive their deposits.
Ashcroft and BBI
Established in 1902 in what was then British Honduras, BBI is one of the oldest banks in Central America.
After operating as a branch of Royal Bank of Canada for 75 years, it was bought by Michael Ashcroft in 1987. Together with his Caribbean operations, Ashcroft’s Belizean business interests are listed on the London stock exchange as Caribbean Investment Holdings (CIH), in which he has a 75% stake.
The UK businessman, estimated to be worth £1.34bn, lobbied the Belize government into passing laws in 1990 to make the tiny nation – it has population of 350,000 – an offshore financial centre similar to the British Virgin Islands.
In the process, the government also granted Ashcroft a 30-year special tax break, allowing BBI to cater to customers outside the country.
In the UK, Ashcroft is best known as one the Conservative Party’s most generous donors, who famously fell out with former prime minister David Cameron and then went on to write a tell-all biography about him which included allegations of debauchery.