By Candia Dames
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 Leadenhallís 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 Bankís 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 bankís 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.
Itís why the parliament of The Bahamas passed a controversial package of financial bills in 2000 after being blacklisted by the Financial Action Task Force.