Banking in Anguilla

 

Most nights, I awaken early, shaken by fear for the National Commercial Bank of Anguilla (NCBA). It boasts that it controls more than half of the banking business in Anguilla. This year, after only seven years of operating, it claims to have accumulated assets of over one billion EC dollars.

Each morning before the radio news, there is an advertisement for the bank. A perky female voice falsely claims that NCBA is the oldest indigenous bank in Anguilla. NCBA was in fact incorporated in Anguilla and commenced business only in 2016, making it the youngest bank.

Scotia Bank Anguilla was incorporated in Anguilla and commenced business as far back as the year 1989. As it is still in operation, it qualifies as the oldest indigenous Anguillian bank. It was acquired by Republic Bank of Trinidad in 2019 and changed its name, but by virtue of its incorporation in Anguilla in 1989 it qualifies as an indigenous bank and is by far the older.

National Bank of Anguilla (NBA) made the same boast of controlling more than half of the banking business in Anguilla up to the day it was taken over by the conservators in 2013 and ceased to do business. Its board of directors recklessly lent out the bank’s depositors’ money to borrowers who were rich in land but who had very little prospect of being able to pay back the loans: a mortal sin in banking business as any reputable banker will tell you.

At the time then, as now, there was little market for distressed properties, and attempts to sell the real estate of defaulting borrowers at full market value had no success. Yet, the directors continued to accept real estate as security for increasingly insecure loans, even as the bank approached bankruptcy. In my opinion, even today, only a badly advised and managed bank would make a loan backed only or mainly by real property in Anguilla.

Full disclosure, I was a founding member and the first legal adviser of National Bank of Anguilla from its formation in 1985 when I signed the Memorandum and Articles of Incorporation which I had drafted. I remained legal adviser until about 1995 when my law partner took over primary responsibility for that client. After I retired and we wound up the partnership in 1999, another law firm was retained as its adviser.

Edmund Lawrence was the bank’s banking advisor in the early days of the late 1980s. He admonished the directors, that it was unsafe to make a loan based mainly or entirely on Anguillian real property security. I recall he provided them with a policy paper to that effect. I now regret that during the time I was the bank’s legal adviser in the 1980s and 1990s, I did not repeatedly remind the directors of his advice. They appear to have entirely forgotten his warning by the time the central bank moved in.

By 2013, so many of the bank’s loans were in default that the Central Bank sent in the conservators, and it was effectively shut down and ceased to function. Indeed, up until the year 2013 I was unaware that nearly 50% of the bank’s loans were in default. At that time, the NBA claimed to hold assets and obligations of over a billion EC dollars. The directors lent out almost all the money deposited with the bank, or some EC$500 million of which some 49% was in default at the time it ceased to operate. At that time, the bank was worth a billion dollars on paper. My late mother and I owned 10% of the equity in the bank. Would somebody remind me what 10% of a billion is? Of course, the shares are now entirely worthless.

We do not know the details of the bank’s default at the time the central bank closed it down. The then Chief Minister, in resisting public demands for the forensic report on the bank to be published, explained on the radio that if he were to do so his main critics would be embarrassed. All Anguillians would learn that they were among the five elite families who were principally responsible for the bank’s failure. The directors awarded them huge loans secured only by land. They should have been aware the securities would never sell, and the loans could never be paid back.

An effective central bank would not tolerate a bank with bad loans of more than 5%, far less approaching 50%. That would be a breach of the Basel Committee on Banking Supervision’s Core Principles for Effective Banking Supervision, issued in September 2012. Due to the absence of appropriate legislation in Anguilla the ECCB was unable to effectively supervise the NBA. As a result, the central bank was unable to rein in the directors of NBA prior to the take-over in 2013. That default was only remedied by a raft of new laws in 2015.

These Core Principles are the minimum standards applied to judge how sound are the prudential regulation and supervision of banks and banking systems in all the regions of the world. They are the benchmark used by the IMF and the World Bank for testing the quality of supervisory banking systems. There have been core principles for many decades. The 2012 version is merely the latest version.

The principal reason why land and houses in Anguilla are a bad security for a loan is that real estate is, by law and for all practical purposes, almost unsellable by a lender for its full market value. If distressed land is successfully sold at auction in Anguilla today, it is probably only because the auctioneer is taking the risk of being sued for not following the rules. Any purchaser of real estate at auction in Anguilla today risks having his purchase declared fraudulent and invalid. He succeeds only because Anguillian borrowers are reluctant to defend their interests, relying instead on the illiterate and superstitious victim of injustice’s frequently heard refrain when failing to seek legal redress, “I leaving he to God, I leaving he to God.”

By the Registered Land Act, a chargee (usually the lender) does not hold title to the land security, but only holds a “charge” over it. Common law mortgages have been abolished in Anguilla. A mortgage was a transfer of title to the lender, with the borrower holding a right to have the land transferred back to him after he paid off the loan. With a land mortgage, the lender could relatively easily foreclose on mortgaged property and sell it either privately or by auction. By contrast, a charge in Anguilla operates as a security only, and the lender obtains no title or right to foreclose on the borrower’s property.

In Anguilla, when the lender exercises his right of sale of a land security in the case of a default by the borrower, he is obliged by the statute to act in good faith and have regard to the interests of the chargor/borrower. This means that he must properly advertise the property to ensure that the best possible market price is obtained at the auction sale.

If a borrower challenges in court a successful auction, the bank must be able to show that it honestly attempted to obtain the true market value of the property. It cannot value it at a lower price or, even worse, as I observe from the newspaper advertisements it seems to be done today, advertise its auction with a very low reserve price, presumably merely the amount it is owed. If that occurred and the auction was challenged, such a sale would likely be held to be illegal and liable to be overturned by a court.

An additional restriction on the lender’s right to sell is that the statute does not allow it to engage in a private sale agreement with a purchaser, as he could under a mortgage. The sale must be by public auction only, by a competent auctioneer, and with the reserve price set at the true amount of the market value, unless a judge orders the amount to be reduced. I have known would-be purchasers privately offer a bank to purchase a distressed property, with the bank having to refuse the offer. The purchaser then attends the subsequent auction and wins the bid at half the price he offered privately. This was the case with Flag Luxury Properties a few years ago.

In Anguilla there was, when I practised law, no requirement for auctioneers to be professionally qualified. Nor was there any institute providing a qualification for licensing qualified land valuers. Local land valuers were then, and probably still are, unqualified and unregulated.

It was only in 2017 that the ECCB first published valuation prudential standards for licensed financial institutions under the Banking Act. It insisted that member banks of the currency region must use the services of qualified valuers such as members of the London-based Royal Institute of Chartered Surveyors (RICS). Yet, so far as I am aware, there is no RICS valuer providing services in Anguilla. There does not appear to be any regional institute of similar reputation acceptable to the ECCB.

In my experience, our local “valuers” put up a good show, producing magnificent and expensive reports for their clients’ use. The reality is that they are generally unqualified, unlicensed, unregulated, and susceptible to pressure from their client to set either a higher or a lower price, depending on who they represent, and how ethical they are.

Any successful auction of charged property in Anguilla is liable to challenge if it is alleged that the bank is not obeying its statutory duty to the borrower. A sale of charged property by a bank can be stopped by a court order if the bank is unable to prove that it satisfied its obligations towards the owner/borrower.

The Virgin Islands have the same Registered Land Act as Anguilla. See the 2012 judgment of the Court of Appeal in the Tortola case of Hilda Elizabeth Stoutt v First Bank of Puerto Rico [HCVAP 2010/0016]. In that case, the consequence of an attempt to sell was that the court declared that the bank’s claim against an elderly widow, who had been unduly influenced by her son to use her land and house to secure his commercial borrowing, was unenforceable. Applying the principles of undue influence to the bank in this case, the court held that the bank was fixed with constructive knowledge of the existence of undue influence exercised over Mrs. Stoutt in her offering up her property as security for her son’s company’s indebtedness to the bank. The bank’s manager was the elderly widow’s relative and knew that she had no interest in her son’s business. As a result, the court deprived the bank of its right to sell her property that she had put up to secure his borrowing.

The ECCB is under an international obligation to implement the Basel Core Principles in our region. It is required to ensure that the regulatory framework, that is, the standards it demands of the banks it regulates, meet the minimum standards established by the Core Principles. Prior to the passage of the 2015 Banking Act, it failed to do so, and risked being categorised as a sub-standard central bank.

The 2015 Banking Act of Anguilla, like most modern Banking Acts, is based on the Core Principles. There are 29 Core Principles. They are divided into two areas. Principles 1-13 deal with the supervisory powers, responsibilities, and functions of central banks. Principles 14-29 deal with the expectations made of banks, emphasising the importance of good corporate governance, risk management, and compliance with supervisory standards.

Any international investor who does business in Anguilla knows that our professional standards are lax. Generally, the only professions and trades that are legally regulated are food handlers, liquor licence retailers, land surveyors, physicians and nurses, lawyers, accountants, and auditors. All other professions, so far as I am aware, operate on a caveat emptor basis. Anyone may with impunity call himself an architect, engineer, land valuer, real estate agent, auctioneer, or banker. None of these professions is by law in Anguilla subject to any form of professional licensing or regulation.

The Core Principles require that the legal system ensures that banks can unobstructedly exercise their rights over real estate put up as security for a loan in the case of a loan in default. Anguilla fails this test. In practice in Anguilla, a foreign purchaser of charged property sold at auction, must apply for, and be granted, a First World War era Aliens Landholding Licence.

This requirement places an insurmountable barrier in the way of a bank selling the property of a politically well-connected borrower. That obstacle was meant to be overcome by the creation of the Eastern Caribbean Asset Management Company (ECAMC), which would purchase the loan in default and sell the charged property free of the obstruction that binds the hands of the bank.

The law was passed by the House of Assembly in Anguilla since 2015, but as with most politically risky laws, has been in hibernation since the day it was enacted. So far as I am aware, the government has succumbed to public pressure not to allow this company to operate in Anguilla. Anguillians object to their lands that they put up to secure a bank loan being sold when they default.

Since we in Anguilla do not seem capable of or interested in correcting our professional and ethical deficiencies, it is hardly surprising that external agencies will force internationally recognised standards on us. If they don’t, then our banks will continue to fail. I fear that may include the National Commercial Bank of Anguilla Ltd.

Obeah and the Attorney-General

 

 

CORRECTION

It has come to my attention that I was wrong in law in an earlier version of the essay below to state that the A-G has the power to direct the Commissioner of Police to withdraw the charge against the Minister.

I was unaware of the 16 April 2014 advice of the Privy Council in the case of the Commissioner of Police v Steadroy Benjamin [2014] UKPC 8.  In that case the PC asked the question, “Does the Director of Public Prosecutions have a general power to prevent the police from instituting criminal proceedings?”  They held that the DPP has no power to instruct the police who to prosecute, nor who not to prosecute.  There is nothing in any Act nor in the Constitution giving this power to the DPP.  The Constitution gives him the power once a complaint has been filed in the court, to take over the case and then to discontinue it, as was done by the Anguilla A-G in the Minister’s case.  The procedure followed by the A-G in the Minister’s case was therefore unimpeachable.

I was in error when I stated in the earlier, erroneous version of this essay that “As legal adviser to the police and lead prosecutor in Anguilla, the A-G already has control of all police prosecutions.  The normal way for an A-G to discontinue a police case is for him to instruct the Commissioner of Police to withdraw the charges.”  As the PC was at pains to explain, the A-G can advise the police to withdraw a case, but he cannot instruct them to do so.  Normally, the police would be expected to act in accordance with the advice of the A-G, but they are not obliged to do so. 

The A-G of Anguilla was therefore quite correct in law when he took over the police prosecution and formally discontinued it in the case I reference below.

I apologise to all persons whom I accidentally misled.  My research should have been more thorough.

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The connection between Obeah and the Attorney-General (A-G) of Anguilla is a long and tortuous one.  It is an epic story of misbehaviour and character flaws among Ministers of Government in Anguilla, and the intervention of the justice system.  I shall tell you the story.  I’ll try to keep it short.

If I thought there was the slightest chance of either Magistrate’s Court or High Court criminal, appeal, judicial review, or civil proceedings continuing in court in this matter, I would hold my peace.  It is unseemly for an ex-judge to express publicly an opinion on any proceedings that are or might come before any court.  But, since I am convinced that there is little chance of any further proceedings being brought in this matter, I feel free to express my personal views.

The now notorious events of 23 May 2023, when a Minister of Government struck a citizen with a chair, all the while uttering the foulest and most indecent threatening language that can be imagined, resulted in the police carrying out a criminal investigation.  Besides the evidence of the witnesses, mainly the Minister’s colleagues, there are two videos.  The entire event was caught silently by a surveillance camera. There was also video film captured from the mobile device of a Minister containing the language of the impugned Minister.  Commencing on the day of the incident, the latter video was widely circulated throughout Anguilla and the region.  I venture to say that no adult in Anguilla with a smart phone has not seen the video.  We have all seen and heard substantially all the video evidence there is.

Subsequently, after an unexplained delay of some three months, the police finally laid charges against both the Minister and the victim.  The victim was hurriedly arrested at his home on the day of the incident for an alleged breach of the peace and released from custody the same day.  By contrast, the Minister was never arrested or questioned, so far as we know.  It would be fair to say that the delay was unusual given the nature of the offences and the available evidence.  Even the specifics of the now discontinued charges against both parties have never been publicly disclosed.

The constitutional power of the A-G to take over and discontinue any prosecution is undoubted.  It is an ancient power inherited from the British Government that has found its way in all our Commonwealth Caribbean Constitutions.  It is generally exercised “in the public interest” where the A-G judges that the evidence is insufficient to secure a conviction and where he believes continued prosecution would be an abuse of the legal process and a waste of the Magistrate’s time.

The Minister engaged in behaviour caught on film that in the case of any private citizen would have resulted in likely more serious charges immediately being brought and vigorously prosecuted.  Even if she and her friends claim that she was acting in self-defence, the video tape evidence is clear.  Whatever happened before the filming began, the evidence on the tape shows that her conduct was at best retaliatory, at worst an unprovoked assault.

Members of the public are understandably upset at the Minister appearing to get off scot-free from filmed conduct that in any other case would have resulted in immediate criminal proceedings.  The airwaves from Klass FM 92.9 are filled almost daily with commentators condemning the police force, the Premier, his Government, the A-G, and the Governor, for sweeping under the carpet allegedly criminal conduct by a Minister.

Other commentators are now calling on the victim to bring an application before the High Court asking for judicial review of the A-G’s decision.  The problem is that that remedy is an exceptional one; it is only available in very limited circumstances.

We all remember when a few years ago in another island a police officer accused the Prime Minister whose house she was guarding of having sexually assaulted her.  The victim brought her own criminal complaint in the Magistrate’s Court.  The Director of Public Prosecutions, who in that country performs the duties that in Anguilla are performed by the A-G, immediately “took over” and discontinued the case.  That was a private criminal prosecution.  The police could not discontinue it, as they had no control over it.  The victim subsequently applied to the High Court for judicial review of the DPP’s action.  The High Court dismissed the application.  The police officer then appealed to the Court of Appeal.  That Court of Appeal held that the judge was right.

The decision of the A-G to take over and discontinue a private criminal prosecution is not normally subject to judicial review.  Save, for example, in a case of bad faith, such as where a bribe was paid, or where there is proof that the A-G acted under the influence of any other person, the decision of the A-G is not reviewable by a court in Anguilla.

In this Anguillian case, the only realistic recourse the victim now has is to file a civil claim in either the Magistrate’s Court or the High Court for damages for civil assault.  He is unlikely to do either.  If he files the case in the Magistrate’s Court, a small claims court, the damages he can be awarded for the injury he received would be minimal.  He would probably feel publicly humiliated by what he would view as a contemptuous judgment in his favour.  The High Court would not serve him any better.  The High Court deals with damages cases where the amount claimed is more than EC$20,000.00, the amount in the Magistrate’s Court.

The only alternative to court action available to the victim is political action.  Those in opposition to the Government have taken up his cause as a free, government-supplied, opportunity to flog the present Administration.  The Government’s main remedy is to ignore the chatter and hope the problem will go away, as these things usually do.  Occasionally, when confronted by a journalist at a press conference for failing to act, the Premier gives unconvincing excuses and explanations, such as waiting for the police investigation to be completed.  This whole epic is Anguillian popular theatre at its best.  We all love it so and encourage it for our entertainment.

Friends of the citizen in question have now launched an on-line petition calling on the A-G to go back on his decision, and to reinstitute the original criminal proceedings.  Can anyone seriously contemplate the A-G of any country going back on a decision of this nature and pleading, “I beg your pardon.  I made a mistake.  It was wrong of me to discontinue the case.  I am going to revive it as you request.”  Merely to set out what the petition asks the A-G to do reveals how preposterous and unlikely it is.  Yet even though I know it is futile, I have signed the petition.  This is to demonstrate my general dissatisfaction at how the authorities have mishandled the conduct of the Minister.

I have heard it hinted on the public media that the A-G acted improperly in this matter.  The suggestion is that either the Governor or the Premier leaned on him to persuade him to save the government by discontinuing the case against the Minister.  The suggestion is that he gave in to the pressure.  In my view, it is pure mischief to suggest such a thing.  Anyone with any knowledge of the character of the A-G in question knows that this is rubbish.  The constitutional power to take over and discontinue any court proceedings is an ancient constitutional device.  The British invented it years ago as an instrument for the protection of those at the top of the UK’s political life.  We have merely automatically inherited this power.  It is found in all our Constitutions.

The latest development in the saga of the cursing, chair-swinging Minister is a voice note from her father.  It has been in wide circulation in Anguilla in the past week.  It appears to be addressed to the proprietor of Klass FM, the most popular privately owned radio station in Anguilla.  The proprietor of this station regularly hosts citizens who are concerned about an issue.  He permits them to air their views and to solicit public support.  This radio station is virtually the only medium through which Anguillians can call for public support for whatever their project is.  In recent weeks the epic story of the Minister has consumed airtime daily.

The voice note in question from the Minister’s father is in the form and style of a Biblical curse.  Although I have long ago emancipated my mind from religious slavery, I found the contents of this voice note an epic of impropriety.  It is particularly disturbing coming from a well-known Anguillian Christian preacher and one-time pastor.  He knows his Old Testament, and revels in its Bronze Age violence and brutality.  These were his words, apparently addressed to the radio station proprietor and some of his recent guests:

In as much as you have taken the light in troubling the country with evil, and saying hurtful and dangerous things endangering the lives of private and public officers, this day I have found it compelling to invoke the judgment of God on you, two women, and four men, with whom you have conspired to do this evil.  May the judgment of God be upon you and your generations for evermore.

The pastor’s tone of voice throughout his invocation of the judgment of God was solemn and sonorous, redolent of a twisted religiosity.  Does anyone know of a single incident where either Christ or one of his disciples invoked a curse upon any opponent?  Does the New Testament recognise the right of a Minister of Religion to curse anyone “unto his generations for evermore”?  Is this even Christian?  It could not be.  In truth, this “Christian pastor” calling down a curse as he did echoed more like the incantations of an Obeah man or a Voodoo priest who is paid to put evil curses on his client’s enemies.  What next from a Christian pastor!