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BELIZE BROKERAGES NAMED IN FIRST FATCA CONVICTION

BELIZE BROKERAGES NAMED IN FIRST FATCA CONVICTION
September 14
12:10 2018
REPORTER: News Staff, -

An investigation by US authorities into stock fraud involving multiple Belize-based brokerages has resulted in the first ever conviction for violation of the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010.

UK citizen and CEO of offshore Loyal Bank Ltd., Adrian Baron, 63, was convicted on Monday of setting up multiple opaque bank accounts for a purported stock fraudster in order to evade detection by U.S. authorities. Baron plead guilty to one count of conspiring to defraud the US.

At the hearing in the US District Court for the Eastern District of New York on Monday, Baron admitted to directing others at Loyal Bank, which had offices in St. Vincent and the Grenadines, Budapest and Hungary, to set up bank accounts for an individual identified in court papers as an undercover law enforcement agent, who posed as a US fraudster involved in multiple stock manipulation schemes on the hunt for corporate bank accounts he could control but that couldn’t be traced back to him.

Baron admitted to agreeing not to submit a FATCA declaration to regulators unless the paperwork indicated “obvious US involvement,” joking at one point that the agent had no obvious US ties, despite clear information to the contrary. FATCA requires foreign financial institutions, including all in Belize, to identify US customers and report information about the financial accounts of US tax payers to the Internal Revenue Service (IRS).

Shell companies, otherwise known as an International Business Corporation (IBC) are legitimate companies registered in various financial jurisdictions that offer offshore banking services. IBCs, however, are also often used by fraudsters to hide and launder money because its ownership records are typically not publicly available and offers a level an anonymity. The International Business Companies Registry of Belize provides offshore services to many international clients.

The undercover agent also told Baron he needed the accounts to pay kickbacks to US brokers involved in stock manipulations scams, which Baron described as “pump-and-dump” or “share-ramping schemes.” Baron is facing two-and-half to three years in US federal prison and has agreed not to appeal if his sentence is less than three-and-a-half years. Conspiracy to defraud the US carries a maximum incarceration penalty of five years in prison. His sentencing hearing is scheduled for December 10.

Several other companies and players were identified in the investigation, including Loyal Bank’s offshore management company, London-based Beaufort Securities Ltd., Beaufort Management Securities Ltd., and several of their employees. The companies’ managers, Panayiotis Kyriacou and Arvinsigh Canaye, stand accused of a $50 million pump-and-dump racket that saw proceeds laundered through offshore bank accounts.

The extensive investigation even included a “Belize Investigation” component. According to court documents, a Belizean citizen cooperated with the investigation as a confidential source. According to the documents, the source helped to arrange the opening of accounts in the name of Belizean offshore entities using Belizean nominees as shareholders so no US citizen’s name would need to appear in order to avoid FATCA.

Belize has been FATCA compliant since 2014. Belize has also enacted a number of recommended Anti Money Laundering/Counter Terrorism Financing (AML/CTF) legislation to improve Belize’s standing on international watch lists for money laundering and tax evasion. This most recent case, and first conviction for FATCA violation, certainly does not help to boost the country’s image as an above board offshore financial jurisdiction. It may also cause Belize’s financial regulations to once again come under scrutiny from larger foreign financial jurisdictions.

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