Shutdown of economist Peter Schiff’s online financial institution on suspicion of tax evasion and money laundering.
Summary
Peter Schiff’s Euro Pacific Bank gets shut down
The Office of the Commissioner of Financial Institutions in Puerto Rico on Thursday issued a cease-and-desist order against San Juan-based Euro Pacific Bank, the bank founded in 2017 by financial analyst Peter Schiff, for lack of capital levels and inadequate compliance controls.
Despite no evidence of crimes, Puerto Rico regulators closed my bank anyway for net capital issues, rather than allow a sale to a highly qualified buyer promising to inject capital far in excess of regulatory minimums. As a result accounts are frozen and customers may lose money.
— Peter Schiff (@PeterSchiff) July 3, 2022
Schiff wrote on Twitter stating that the allegations are without any basis in truth, but at the same time informed that he will seek to sell the bank he founded.
The decision by Puerto Rico authorities follows a lengthy investigation opened two years ago by an international group of tax authorities, the J5, for alleged tax evasion and money laundering of dubious origin.
Joint Chiefs of Global Tax Enforcement (J5) is formed by the tax authorities of the United States, Australia, the Netherlands, Canada and Britain, which was formed specifically to combat evasion and money laundering crimes internationally.
In a note, the head of the investigation, Natalia Zequeira Díaz, said:
“Euro Pacific has a long history of noncompliance”.
She added that the bank’s regulator:
“Will not allow or tolerate any financial entity with a license issued by the government of Puerto Rico to operate outside the law or ignore the clear mandates of applicable laws and regulations”.
According to the New York Times, which first broke the news of the investigation, Peter Schiff was reportedly heard by investigators, denying any charges.
Operation Atlantis: the lengthy investigation into the activities of Euro Pacific Bank
The investigation into Euro Pacific, known as Operation Atlantis, was one of the first major investigations by the multi-jurisdictional task force, which is coordinated by Australian and US tax authorities.
The bank, after opening about 15,000 accounts in its first two years of operation, has been hit hard by the news of the opening of the investigation, as Schiff himself said in a note:
“We lost a lot of things because people were afraid”.
He added later, that while he does not have great sympathy for anti-money laundering rules, regulations or taxes, he respects them:
“The fact that I’m so willing to publicly criticize rules, you better believe I’m doing all I can not to break them”.
For J5 financial authorities, the bank reportedly posted a net loss of nearly $751,000 in 2019 and an accumulated total loss of nearly $4 million.
According to some rumors, it would appear that at the end of 2020 the bank had negative capital of $1.3 million. Instead, in the first quarter of 2022, the bank would post a net loss of nearly $550,000.
Schiff said he would inject $7 million in liquidity into the bank over the past two years and that customer accounts would be safe.
But on 7 July, the bank is likely to be put into liquidation, according to financial authority sources, although Schiff has already announced that he will appeal the decision to the Court of Appeals.
