Tax Officials Investigate Euro Pacific Bank in Puerto Rico

Laveta Brigham

Tax authorities from the United States and four other countries have joined forces to stop shadowy global money networks that use international borders to stymie local investigations. Their first coordinated move against a target is not in some far-flung country. It is on U.S. soil. A team of international investigators […]

Tax authorities from the United States and four other countries have joined forces to stop shadowy global money networks that use international borders to stymie local investigations.

Their first coordinated move against a target is not in some far-flung country. It is on U.S. soil.

A team of international investigators is scrutinizing Euro Pacific Bank, a boutique financial firm based in Puerto Rico, a joint collaboration by The Age, an Australian newspaper, the Australian version of “60 Minutes” and The New York Times found. A number of people accused or suspected of tax evasion and money laundering kept accounts at the bank, according to officials involved in the investigation. They want to know what role it may have played in helping them move money illegally.

While obscure, Euro Pacific has ties to some famous names in the financial world. It was founded by Peter Schiff, a well-known libertarian economist with a deep-seated animosity to paying taxes who earned the name Dr. Doom after correctly predicting the 2007-2008 financial collapse. It also has a financial relationship with the Federal Reserve Bank of New York, which is uncommon for its type of financial firm, and links to big institutions in several countries, including Australia, Britain and Canada.

Neither Euro Pacific Bank nor its personnel have been charged with wrongdoing. Daniel Kramer, its spokesman, declined to answer questions about the investigation. Based on the conclusions they make, the agencies can bring criminal charges, civil complaints or other actions in their home countries against their investigative targets.

This is not the first time that global authorities battling dirty money have focused on Puerto Rico. The U.S. territory has long used tax breaks, favorable regulations and other inducements to build up its small financial industry.

Puerto Rico requires that I.F.E.s hire at least four local employees. That low threshold thwarts the government’s intention to create jobs and makes it difficult for the firms to follow money laundering laws, said George Joyner, former chief of the territory’s financial regulator.

“The purpose was to build out a robust international financial sector,” Mr. Joyner said. “But it really hasn’t done that. You can’t have a robust anti-money-laundering program or know your customer program with just four people.”

Mr. Schiff founded Euro Pacific in 2011 in the lush Caribbean outpost of St. Vincent and the Grenadines. He promoted it as an alternative to the established banking system. In one 2011 interview, he promised to issue debit cards backed by individual holdings of gold and silver. In another, from 2014, he said that he had chosen St. Vincent because “you have secrecy, privacy and you have no tax.”

In its early years, Euro Pacific had poorly protected email and file storage programs, said John Ogilvie, the company’s former information technology director, who started in 2014. Mr. Anderson insisted on putting all personal and company passwords in a directory labeled “passwords” on his computer, in a file with “master password” in the title, he said.

“He was just not very careful,” Mr. Ogilvie said.

Mr. Ogilvie, 49, left the company in 2016. In an email to Mr. Schiff that August, he called Euro Pacific “the most unprofessional working environment I have ever had the displeasure in participating.”

By 2017, Mr. Schiff had relocated the firm, his $783 million asset management business and his own official residence to Puerto Rico, taking advantage of a law that permits Americans who move their companies there to reduce tax liability. Mr. Schiff said he wanted to relocate to Puerto Rico in part to make it easier for Euro Pacific to set up an account with the New York Fed.

Euro Pacific also reached deals with Bank of Montreal, NatWest of Britain and Perth Mint, an Australian precious metals dealer, to allow customers to easily transfer funds to it.

Oversight in Puerto Rico was light. The New York Fed does not regulate I.F.E.s, even ones that keep accounts with it. The Fed, a spokeswoman said, does not comment on individual account holders but requires them to provide an independent assessment of their compliance program and an updated know-your-customer questionnaire.

Mr. Kramer, the Euro Pacific spokesman, said the bank “did not endorse” the message from Molyneux. Third-party marketers like Molyneux, he said, receive $25 from Euro Pacific for every new customer they bring to the bank.

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