Nearshore Americas

Antigua’s Robust Recovery from the Stanford International Scandal

Although the Stanford International scandal hit Antigua and Barbuda hard toward the end of the last decade, this need no longer be taken as a reason for investors to steer clear of the dual-island nation. On the contrary, as a result of the affair, Antigua is now a much safer place to invest. The authorities have sought to create a more robust regulatory environment by retraining staff, enhancing the legal powers of supervisory bodies, and prioritizing stricter enforcement of existing legislation. Moreover, potential investors looking for skilled, English-speaking staff will find there is a surplus of workers trained in the financial services industry as a result of the collapse of Stanford, then Antigua’s largest private employer.

The Stanford Scandal

Just when the world had been plunged into the depths of an economic crisis in late 2008, Antigua and Barbuda was hit doubly hard in early 2009, when the Caribbean nation’s largest private employer was accused of being behind an enormous $7 billion Ponzi scheme. U.S. citizen Allen Stanford was eventually convicted of fraud in March 2012 and given a 110-year prison sentence. The Stanford Financial Group collapsed, while the affiliated Bank of Antigua was taken over by the Eastern Caribbean Central Bank. Thousands of Antiguans lost their jobs and the nation’s financial reputation was severely damaged.

Never Again

But, almost five years on from the Stanford scandal, the Antiguan authorities have learned from past mistakes and taken stringent measures to ensure that nothing like this happens again. The main problem was not so much a lack of regulations in Antigua; but a lack of supervision and a failure to strictly enforce the laws that were already in place, according to Kem Warner, an expert in compliance and a leading figure in the fight against fraud and money laundering in the Caribbean.

“The laws were there all the time. The problem was more one of enforcement. The will to do so was lacking, mainly because of a lack of both human and financial resources,” says Warner, who is a professional member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) and the Association of Certified Fraud Examiners (ACFE). “After the Stanford breakdown, the authorities stepped up their game. In terms of legislation there were several amendments, but more importantly, there was more supervision.”

“The (legislative) changes that were made were in terms of giving more authority and more power to the Office of National Drug and Money Laundering Control Policy (ONDCP) in terms of enforcing these regulations,” Warner – who is also an advisory board member of Allied Compliance Consultants and director of the newly formed Antigua and Barbuda Association of Compliance Officers – tells Nearshore Americas. “Both the Financial Services Regulatory Commission (FSRC) and the Financial Intelligence Unit (FIU) have made a tremendous effort in terms of enforcing the guidelines, and in terms of structure, both departments have been retooled and restructured with more competent individuals,” he adds.

Before it was exposed as a fraudulent organization, Warner had worked for the Stanford Financial Group in compliance for several years, but left the company in 2007. He now runs his own business, KAW Management Services, which specializes primarily in anti-money laundering, anti-fraud and risk management. The manner in which Warner has not only moved on from the Stanford affair, but actively built a successful career out of preventing any such disaster from reoccurring, is illustrative of the progress that Antigua has made in turning things around.

KAW Management Services has been closely involved with the efforts of Antiguan and international bodies to ensure that regulations are abided by. A Certified Fraud Examiner (CFE) and a Certified Anti-Money Laundering Specialist (CAMS), Warner has led the training of staff in Antigua and other neighboring islands. “My company has made tremendous steps working along with these bodies and training those regulators through the anti-money laundering specialists, to equip them with the necessary tools (to complement) the other training that they would have received overseas,” Warner says.

“In terms of a regulatory department, I don’t think any jurisdiction now has more certified anti-money-laundering specialists than the Financial Services Institute (FSI) in the Caribbean,” he adds.

A Different Mindset

The Antiguan authorities must now demonstrate that things have changed since the Stanford scandal, says Charles Walwyn, managing partner in Antigua and St. Kitts at Grant Thornton International.  “They need to service the damage as best they can. They need to control it and conduct the different bodies in a way that demonstrates that they have checks and balances in place and that they’re strict about who they do business with and under what basis,” he tells Nearshore Americas. “They need some opportunities to demonstrate to people that there is a different mindset now.”

“I think they’ve taken a lot of action on paper,” Walwyn adds. “I think a lot of it comes down to the people filling positions conducting themselves appropriately in the circumstances and I think the jury is out over whether the qualifications and integrity of all the people put in these various positions will really help.”

Warner believes it is still “too early to pass judgment” on the changes made, as departments such as the FSRC and the FIU have undergone “major transformations.” Their staff “have been retooled and re-trained and now you cannot work in certain departments unless you have certain qualifications,” he notes. Financial security in Antigua has also been heightened by changes made to the ONDCP, which in the past has been mostly focused on drug busts, but now has new financial intelligence units dedicated to investigating irregularities in the worlds of banking, trust and insurance.

Warner actually believes that the Antiguan authorities have put such emphasis on supervision and enforcing regulations that they must now be careful not to over-regulate and stifle the business community. “We have to be mindful of not creating a structure that will dissuade ethical investors from coming into our economy,” he says. “But on the whole I think the regulatory regime is strong and Antigua is a place where investors want to be if they’re looking for a stable environment.”

The Attractions of Antigua

Despite the damage done by Stanford scandal, Walwyn remains optimistic about Antigua’s future, given the attractiveness of the island, the strengths of its workforce and the simplicity of its tax system.

“Our role in Antigua’s business community is quite substantial,” he says of Grant Thornton, which took over PriceWaterhouseCooper’s operations on the island in July 2013. “We provide professional services across the spectrum, we do everything from audits, to tax to consultancy services for a large number of businesses on the island.”

Antigua’s corporate tax system is “routine” and “uncomplicated,” Walwyn says. “I don’t think there’s anything out of the ordinary that one would have to do to comply. You just need to be aware what the tax regime is if you’re looking for concessions in relation to any of the taxes. You need to be familiar with the costs of doing business on the tax side before you can approach the government for benefits.”

“We have quite a lot of incentives and things to try to attract people and I think the island itself and the people are particularly attractive,” he adds. “It’s a good thinking entrepreneurial community. I think some of the best brains in business are actually here, whereas some people feel that everything intelligent has to be external. It’s a very resilient economy. I think it’s that way because of the savvy nature of the people here. They’re quite clever, pretty well educated and hardworking.”

Surplus of Skilled Workers

As a result of the collapse of Stanford, Antigua now has many skilled workers who performed at a very high standard in the financial service sector, but who are currently under-utilized and ready to seize any opportunities that might arise through business process outsourcing. Likewise, Antigua has a surplus of highly skilled tech-savvy workers who used to be employed in the island’s Internet gaming industry, but were laid off following a dispute with the United States before the World Trade Organization (Antigua and Barbuda won the dispute but to date the US has not complied with the WTO rulings or negotiated what A&B considers a reasonable compromise of the dispute).

Sign up for our Nearshore Americas newsletter:

“We believe that we are a good destination for outsourcing, a good number of our population is very efficient and competent in technology,” says Dr. McChesney Emmanuel, of the board of management of the Antigua and Barbuda Investment Authority (ABIA). “We have had a very successful Internet gaming sector, which has suffered quite a bit because of our dispute with the United States. However, we do have competent people who have become very highly experienced in computer technology. We believe that we can enhance our competitive advantage by putting these people to work in back-office support, web design and in building apps.”

“We have a workforce of highly professional and competent people in accounting and engineering. We have a surplus of people in these areas who would be suitable for marketing their skills to companies and organizations in the developing world, where they will be able to utilize these services at a competitive cost in Antigua and Barbuda,” Emmanuel adds. “So outsourcing is one area where we feel we have certain advantages over places like India and other parts of the Far East and even Latin America. As English is our first language we can attract potential companies coming to do business in Antigua.”

Duncan Tucker

Add comment