The Tribune

By NEIL HARTNELL Tribune Business Editor BAHAMIAN financial services professionals were yesterday urged to take their responsibilities as International Business Company (IBC) directors seriously and "make sure every transaction is legitimate", one well-known executive saying he had almost paid a hefty price over this. Anthony Howorth (see letter on Page 2B), one of two Bahamas-based financial services professionals cleared by Canadian regulators of allegations they had "acquiesced" in an unregistered $615,000 securities offering that provided investors with "false and misleading" information, said it was vital Bahamians knew "everything that is going on" when acting in a nominee IBC director capacity. He told Tribune Business that IBC beneficial owners were often "doing what they liked" without reference to its Bahamas-based registered agent or directors, and that was "becoming a serious problem". Mr Howorth was last month cleared by the Ontario Securities Commission (OSC) of allegations that he "authorised, permitted or acquiesced" in an unregistered securities offering issued by Bahamian IBC, Ameron Oil & Gas, which was said to have violated Canadian law. Although acting as Ameron's vice-president, the OSC admitted that Mr Howorth never met or corresponded with the IBC's beneficial owners, the masterminds behind the misleading securities offering. Reflecting on his experience, and the fact Bahamian directors had been 'left out of the loop' by the beneficial owners, Mr Howorth told Tribune Business: "It's becoming a serious problem, and a lot of clients don't understand that. They think they can do what they like with it." Acknowledging that there were "several lessons" for the Bahamian financial services industry to learn from the Ameron episode, Mr Howorth said one was that client due diligence was "very important". As for the others, he told Tribune Business: "If you're a director, you have the responsibility to make sure every transaction is legitimate...... It's no good charging $1,000 for becoming a director and doing nothing. "That's the lesson. You've got to take your responsibilities seriously, and monitor what is going on. The mind and management must be with the company, and in this [Ameron's] case the shareholders ran off and did their own thing, without the knowledge of the directors of the company." Pointing out that the attorneys working for Ameron's beneficial owners failed to check the offering with the Bahamian registered office and directors, Mr Howorth said the affair had exposed another regulatory weakness. "I'm absolutely astounded that a certain bank allowed a Bahamian lawyer to open an account, not only in the Bahamas but also in Toronto, which was clearly set up to receive funds, in his knowledge, that were coming from third parties," he added. "It seems a weakness in the regulatory system that lawyers are able to open third party accounts." When it came to due diligence, Mr Howorth conceded it was "a nightmare" to follow-up on client bonafides, and the process was so bureaucratic that legitimate business might be scared away. Clients were often introduced by the likes of attorneys, chartered accountants and banks, and Bahamian financial services providers relied heavily on the introducers, plus references they themselves were able to obtain. When it came to IBCs, Mr Howorth suggested that "maybe a notice should be put out by the Bahamas Financial Services Board that anybody dealing with a Bahamian IBC should check with the registered office before transacting any business with them". Describing the OSC's allegations as "an unwarranted and vicious attack on the model of the IBC and the Bahamas", Mr Howorth said the Canadian regulator "tried to catch us" by accusing them of 'unknowingly acquiescing' in the Ameron offering. He added that her "threw the book" at the OSC over that, and demanded that they call six witnesses on his behalf for any upcoming regulatory hearing on the Ameron matter. And Mr Howorth also complained that the presumption someone was 'innocent until proven guilty' did not appear to apply in his case. He had been effectively barred from the Canadian securities markets for two years, after a temporary 'cease trade order' issued against him in April 2010 was converted into a temporary restraining order in 2011. Mr Howorth's name, and the associated allegations against him, were published on the OSC's website, and he added: "Who knows if we lost any business? There is that danger."