Puerto Rico’s banking regulator says it has shut down a boutique online bank owned by Peter Schiff, a frank libertarian economist and money manager, who is the focus of international tax evasion investigations.
The regulatory agency, Puerto Rico’s Office of Financial Institutions, issued a cease and desist order Thursday to San Juan-based EuroPacific Bank for inadequate capital levels and compliance management. Two years ago, an international tax authority group known as J5 began investigating activities that would allow banks to act as a suspected means of tax evasion and money laundering.
“Euro Pacific has a long history of violations,” office commissioner Natalia Zequeira Diaz said in a statement. She said that banking regulators allowed or tolerated licensed financial institutions issued by the Government of Puerto Rico to operate outside the scope of the law or to ignore the explicit obligations of applicable laws and regulations. I will not do it. “
J5’s survey of EuroPacific and some of its offshore clients was first reported by the New York Times and two Australian media organizations in the fall of 2020. At the time, Mr. Schiff admitted that an Internal Revenue Service agent had interviewed him, but said he and the bank were not the subject of the investigation.
In a comment sent by email Thursday, Mr. Schiff, who said he is now the full owner of a private bank, expressed surprise in the banking regulator’s decision, saying, “No prior warning. “. He added that “it doesn’t make sense” because “banks aren’t doing anything wrong.” When asked if the bank would challenge the suspension order, Mr. Schiff said: I don’t know what is driving this. “
He later said the order referred to “insufficient capital” and nothing about money laundering or tax evasion.
J5, or Co-Chief of Global Tax Enforcement, was established in 2018 by tax authorities in the United States, Australia, the United Kingdom, Canada and the Netherlands. This group gathered in response to some of the disclosures in the so-called Panama Papers. A leaked document from a Panama law firm details a wealth of uses for shell companies and tax offices to hide their wealth.
The J5 investigation into EuroPacific (known as Operation Atlantis) was one of the first major investigations by a multi-jurisdiction task force led by Australian and US tax authorities.
EuroPacific has approximately 8,000 depositors from around the world, holding $ 140 million in deposits before the Times reported the investigation. Age, Australian newspaper; and the Australian version of “60 Minutes”. According to reports, a former employee said EuroPacific had not scrutinized the customer background very much.
Schiff said reports of the investigation lost the bank’s business and many of its customers closed their accounts.
Mr. Schiff is well known for his deep-seated hostility to paying taxes, and he won the name. Doctor Doom After correctly predicting the 2008 financial crisis. These days, he was a major critic of Bitcoin. Schiff founded EuroPacific in 2011 at the lush Caribbean outposts of St. Vincent and the Grenadines, and moved the bank to Puerto Rico in 2017. He was promoting EuroPacific as an alternative to the established banking system.
J5 said it issued a statement praising Puerto Rico’s banking regulators’ actions and sent a strong message to financial institutions that provide safe shelters for tax evasion.
Jim Lee, head of the IRS’s criminal investigation department, said:
Lee said the actions taken by banking regulators were separate from the J5 investigation. He said J5 continues to work on more than 100 inquiries related to EuroPacific-related entities and individuals.
Puerto Rico’s actions are noteworthy. This is because banking regulators have a reputation for downplaying the island’s financial institutions. In the fall of 2020, despite the bank’s three-year operation in Puerto Rico, regulators have not yet conducted an official EuroPacific review.
