Anguilla is an efficient tax friendly financial center serving both local and international professionals. The interim stabilization levy on income and property tax are the only notable taxes in the country making it an interesting jurisdiction to attract foreign direct investment. Two domestic banks and three commercial offshore banks make up the financial sector. In Anguilla, offshore banks are licensed and supervised by the Anguilla Financial Services Commission (FSC). They cannot transact with local residents and can accept deposits and remit withdrawals in foreign currency only.
The financial sector was plagued by the global financial crisis and the failure of two locally supervised banks. Rules and regulations were tightened while the Banking Act was aligned in line with current risk factors. Meanwhile, the traditional Financial Services Commission Act and the ECCB Agreement remain the foundation for sector wide regulation and supervision. The country is relatively small in size with only 15.000 inhabitants. Like most Caribbean islands, the economy heavily relies on the services industry. Foreign direct investment is stimulated for international professionals to set up a business friendly limited liability company.
Traditional Bank Deposit Insurance
The failure of a financial institution disrupts the payment system. It undermines public confidence and thus changes the safety perception of the users of the financial system. Bank resolution procedures are managed by official and external administration to identify appropriate measures in the public interest and avoid a depreciation of the value of the financial institution. The complexity of bank resolution and the desire to resolve the matter in a (cost) efficient and effective way substantiates the debate for bank deposit insurance. Traditional bank deposit insurance repays insured account balances to eligible creditors of supervised credit institutions in distress. Whilst membership of most schemes is obligatory for licensed credit institutions, the scheme exclusively applies to its members. Several jurisdictions however have not yet implemented such schemes and therefore traditional bank deposit insurance is not a universal right.
Bank Supervision and Early Intervention
Bank Deposit protection serves as a transition between the moratorium on payments placed on distressed institutions and the execution of a resolution plan that resolves the institutional challenges of the bank. A lack of traditional deposit protection in Anguilla requires strict bank supervision and the possibility of early intervention by the respective supervisor. The ECCB Act allows the central bank to intervene when the financial system in one of its member states is in danger of disruption, substantial change or impairment. Official administration may be imposed provided that the interests of creditors of a financial institution is threatened, a financial institution is likely to become unable to meet its obligations or is about to suspend payment to its creditors, or when a financial institution is not maintaining high standards or financial probity or sound business practices.
The Trust Companies and Offshore Banking Act as well as the Anguillan Banking Act of 2015 allow an official administrator to take over and manage the licensed business in times of institutional financial distress. The duty of the official administrator involves any action necessary or appropriate to carry on the business of the licensed financial institution, to preserve and safeguard its assets and property, and to implement a plan of action to resolve the underlying issues. Strict timeframes apply to the terms of the official administration. Parallel to the appointment of the administrator, dividend payments to shareholders and a moratorium on payments is imposed so that the capital position of the bank remains intact and creditor interest is protected.
During the official administration of a financial institution in Anguilla, all claims against the bank are frozen. The Banking Act prohibits creditors from taking legal or administrative action and seek to enforce judgments or orders obtained against the credit institution to ultimately recover their claim. The objective of these restrictions is to preserve the value of the institution so that it can be either returned to comply with the regulation and restart its operations, or to resolve or liquidate the institution via a fair and impartial distribution of assets to the creditors.
Receivership and Compulsory Liquidation
A receiver is appointed when the financial institution is insolvent, not viable, experiences a decline in capital or is in any other way unsound and loses its license to operate. The Banking Act outlines most reasons to appoint a receiver and initiate compulsory liquidation. The appointment of a receiver terminates all contracts with the financial institution, stops the calculation of interest and other penalties on outstanding obligations, stays all the legal proceedings against the institution and creditors are prohibited from taking possession of the assets of the financial institution. Settlement and repayment of creditor claims depends on the resolution strategy, the available liquidity and the applicable insolvency hierarchy. Collaboration between the official administrator, receiver and central bank is needed to determine the validity and priority of claims. Claims can be awarded or rejected.
Asset and Fund Recovery for Anguilla Bank Account Holders
Since Anguilla has yet to implement a deposit protection scheme for creditors of failed financial institutions it relies on its legal framework to resolve troubled banks. This legal framework is in general terms explained in this article and seeks to protect all stakeholders and ensure a fair distribution of assets to creditors. Even though the Banking Act strictly forbids creditors to take legal action to secure repayment, other laws may supersede the Banking Act. Therefore, creditors are encouraged to explore their options and avoid expensive mistakes.
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This website is an initiative of Legal Floris LLC. Since more than a decade, we have helped international creditors recover money when their bank fails or their investments disappear. Due to our vast experience in dozens of bank failures in different countries, we are able to maximize repayments and minimize risks for our clients. Contact us right now to find out how we can help you too to reclaim your account balance:
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