Anguilla Private Bank Seeks to Shield Client Names in Bankruptcy

  • Lawyers cite Alaska case involving clergy sex-abuse claims
  • Bank says $175 million in client funds at issue in New York

Lawyers seeking to recover $175 million for clients of a bankrupt Caribbean offshore bank are asking a U.S. judge to grant those customers the same confidentiality protections a court extended to people claiming clergy sex abuse.

U.S. Bankruptcy Judge Martin Glenn will weigh the matter Friday when he considers whether the private-client unit of the National Bank of Anguilla can keep its customers’ names secret while it tries to get their money back. Creditors typically must be identified in U.S. bankruptcies.

The National Bank of Anguilla’s private banking and trust division of filed for Chapter 11 bankruptcy in New York Wednesday. It’s asking for permission to investigate its parent, as well as the National Commercial Bank of Anguilla, which took over its banking business, and the Eastern Caribbean Central Bank. A hearing is set for Friday in Manhattan on the requests for the probes and client confidentiality.

The case arises as U.S. authorities are lifting the veil that has long obscured the identities of offshore banking clients, including customers of Swiss banks seeking to hide their assets from tax collectors. This year’s leak of the so-called Panama Papers -- a trove of documents from a law firm specializing in setting up offshore companies -- has shed further light on the financial arrangements of people who would rather pass unnoticed.

Nothing in court documents suggests that the private bank’s clients are involved in tax evasion or other wrongdoing.

Money Transfers

The National Bank of Anguilla came under control of the ECCB, the monetary authority for eight countries in the Caribbean, in 2013 after the financial crisis left it with a batch of poorly performing loans. Since then, $175 million has been transferred from the private bank to the parent at the instruction of directors appointed by the regulator, according to the bankruptcy court papers. 

James McCarroll, a bankruptcy lawyer for the National Bank of Anguilla as well as the private bank unit, didn’t immediately return a call and e-mail seeking comment on the case. ECCB governor Timothy Antoine didn’t immediately return an e-mail seeking comment and the ECCB declined to give phone contact information for him.

The private bank wants to use the U.S. bankruptcy process to get the money back. It says 500 of its 819 depositors have positive balances, making them creditors. The money is held in a U.S. account with Bank of America Corp., according to the filing. Bank of America representatives weren’t immediately able to comment on the case.

Disclosure Criminalized

The private bank argued in court papers that its customers’ identities should be kept confidential because Anguillan law criminalizes disclosing information about depositors. 

That’s where the sex-abuse claimants come in.

In requesting client confidentiality, the private bank cited the 2008 bankruptcy of the Diocese of Fairbanks, Alaska, in which a judge said information about creditors who claimed they were sexually abused could be kept under wraps.

It also pointed to a 1977 ruling in the bankruptcy of a Swiss corporation. A lower court had dismissed that bankruptcy because the bank refused to file a list of creditors. A New York-based federal appeals court reversed the decision.

But times have changed. Swiss banks, including UBS Group AG and Credit Suisse Group AG, have agreed to pay about $5 billion to the U.S. in penalties and fines. In the past year, 80 Swiss banks paid penalties to avoid prosecution for helping U.S. clients hide assets from the Internal Revenue Service. They also provided authorities with detailed information about account holders.

National Bank

The National Bank of Anguilla was formed in 1984 and began operating in 1985, when it acquired the Anguilla branch of the Bank of America National Trust & Savings Association, according to its website. The private-banking unit provides financial services to offshore clients around the world and is wholly owned by its parent.

The parent ceased banking operations on April 22. It began liquidating in an Anguillan court the following month. On May 26, it petitioned for bankruptcy court protection from U.S. creditors. Banking operations were transferred to the National Commercial Bank of Anguilla, which is wholly owned by the government, according to court papers.

The private bank’s case is In re National Bank of Anguilla (Private Banking & Trust Ltd.), 16-11806, U.S. Bankruptcy Court, Southern District of New York. (Manhattan) The parent’s case is 16-11529.

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