Euro Pacific Bank in San Juan “has a long history of non-compliance,” said the head of Puerto Rico’s banking regulator. Thanks… Gabriella N. for the New York Times. beige
A banking regulator in Puerto Rico says it has shut down an online boutique bank that has been at the center of an international tax evasion investigation and is owned by outspoken liberal economist and wealth manager Peter Schiff.
The regulator, the Puerto Rico Office of the Commissioner for Financial Institutions, issued a cease-and-desist order Thursday against San Juan-based Euro Pacific Bank over inadequate capitalization and compliance controls. Two years ago, an international group of tax officials called J5 launched an investigation into activities that allowed the bank to act as a vehicle for alleged tax evasion and money laundering.
“Euro Pacific has a long history of non-compliance,” the bureau’s commissioner, Natalia Zequeira Diaz, said in a statement. She said banking regulators “will not permit or tolerate any financial entity with a license issued by the Puerto Rico government to operate outside of the law or to disobey the express mandate of applicable laws and regulations.”
J5’s investigation into Euro Pacific and some of its offshore clients was first reported by the New York Times and two Australian media organizations in autumn 2020. At the time, Mr. Schiff admitted he was interviewed by Internal Revenue Service agents, but added that neither he nor the bank was the subject of an investigation.
In a comment emailed on Thursday, Mr Schiff, who said he is the full owner of the now privately owned bank, expressed surprise at the bank regulator’s decision and said there was “no warning”. He said it “makes no sense” because “the bank didn’t do anything wrong”. When asked if the bank would contest the stay order, Mr Schiff said: “I’m doing what I can. I don’t know what drives it.”
He later said the order related to “insufficient capital” and said there was nothing about money laundering or tax evasion.
J5, or Joint Chiefs of Global Tax Enforcement, was established in 2018 by tax authorities in the United States, Australia, United Kingdom, Canada and the Netherlands. The group came together in response to some of the revelations in the so-called Panama Papers, leaked documents from a Panamanian law firm detailing the shell companies and tax tricks used by the wealthy to hide their wealth.
The Euro Pacific J5 investigation – known as Operation Atlantis – was one of the first major investigations by the multi-jurisdictional task force, which is led by tax officials from Australia and the United States.
Before the investigation was reported by The Times, Euro Pacific had approximately 8,000 depositors around the world and had $140 million in deposits. The Age, an Australian newspaper; and the Australian version of “60 Minutes”. A former employee reportedly said Euro Pacific did not conduct further background checks on its customers.
Mr Schiff said reports of the investigation had caused the bank to lose business and many of its customers to close accounts.
“The bank has done nothing wrong,” said Euro-Pacific boss Peter Schiff on Thursday. Credit…Joe Buglewicz/Bloomberg
Mr. Schiff is known for his deep hostility to paying taxes, and after correctly predicting the 2008 financial crisis, Dr. the name Doom. Until recently, he was a prominent critic of Bitcoin. Mr. Schiff founded Euro Pacific in 2011 in the lush Caribbean outpost of St. Vincent and the Grenadines. The bank then moved to Puerto Rico in 2017. He promoted the Euro Pacific as an alternative to the established banking system.
J5 issued a statement welcoming the actions of the Puerto Rico banking regulator and said it sent a strong message to financial institutions that provide a safe haven for tax fraud.
“There is no doubt that OCIF’s work sends a strong message to others that the Puerto Rican financial industry will not be a haven for tax evaders or illegal conduct,” said Jim Lee, Chief of Criminal Investigation for the IRS.
Mr Lee said the actions taken by the banking regulator were different from the J5 investigation. He added that J5 continues to work on over a hundred inquiries related to organizations and individuals with connections to the Euro Pacific.
The Puerto Rican action is notable as banking regulators have gained a reputation for little oversight of financial institutions on the island. As of fall 2020, the regulator had yet to officially review Euro Pacific, even though the bank had operated in Puerto Rico for three years.