The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RBC Royal Bank (Bahamas) is battling to recover $1.854m that it wired to a California money transmission business one month after the latter was ordered to cease business by the state’s regulator.

The Bahamian financial institution is now locked in a legal fight in the central California federal court over its bid to reclaim the funds as Preferred Bank, a Los Angeles-headquartered institution, seeks a declaration that it has “absolute rights” to these monies held in an account beneficially owned by Sigue Corporation.

Preferred Bank, which alleges it is owed some $27.632m by Sigue via a mixture of principal, interest, collection and other fees associated with loans the former money transmitter has defaulted on, is claiming it has the right to use the funds wired by RBC Bahamas to partially offset the sum due to it.

Asserting that it has the ability to do this because the account that received the wired money was owned by Sigue, and not designated as a trust or escrow account holding money on behalf of the money transmission company’s clients, Preferred Bank is requesting the California court to also declare that RBC Bahamas “is without rights” to the funds.

The Bahamas-based, Canadian-owned financial institution had demanded last August that the $1.854m be returned to it. It asserted that the wired money was supposed to be forwarded by Sigue to one of its clients, British Commercial Bank, and RBC Bahamas instead ultimately had to use its own funds to make that institution whole while it waited for Preferred Bank to return the monies.

An RBC Royal Bank Bahamas spokesperson, responding to Tribune Business inquiries, said: “RBC Bahamas acknowledges that legal action has been filed and our legal team is reviewing the matter. As this is an ongoing legal issue, we cannot provide any further comment.”

It is unclear why RBC Bahamas had to send funds to British Commercial Bank, whose website describes it as a London-based institution focused on corporate banking and trade finance, via a California-based money transmission business. And it is also uncertain how RBC Bahamas was unaware that Sigue Corporation had been ordered to shut down by California state regulators a month before it wired the funds.

Preferred Bank, in its action demanding a judicial declaration, said RBC Bahamas sent the wires to the same account it held for Sigue Corporation via three transactions over an eight-day period last April. “On or about March 22, 2024, the California Department of Financial Protection and Innovation (the DFPI) issued an order requiring Sigue to cease all money transmission activity,” Preferred Bank asserted.

“Sigue did not immediately inform Preferred Bank about the Order. Preferred Bank first learned about the Order in or about September 2024. On April 23, 2024, RBC Bahamas sent a SWIFT transfer in the amount of $1.819m to the... account.

“On April 25, 2024, RBC Bahamas sent another SWIFT transfer to the Account in the amount of $31,635. On April 30, 2024, RBC Bahamas sent a third SWIFT transfer to the account in the amount of $3,400. In total, RBC Bahamas sent $1.854m in wired funds to Preferred Bank for deposit to Sigue’s account.”

Highlighting the basis of its dispute with RBC Bahamas, Preferred Bank added: “Preferred Bank claimed - and continues to claim - its rights to the funds as, in accordance with its contractual set-off rights, it had the right to apply the funds to the accelerated amounts owed under the credit agreements.

“Because the three loans [to Sigue] were accelerated and became immediately due and payable on February 29, 2024, Preferred Bank was owed sums far greater than the amount of the funds at the time they were transferred to Preferred Bank.....

“In or about August 2024, RBC Bahamas claimed rights to the funds and demanded Preferred Bank return the funds to RBC Bahamas. RBC Bahamas claimed that Sigue was supposed to send the funds to one of RBC Bahamas’ customers, British Commercial Bank, as the ultimate beneficiary,” legal papers filed with the central California federal court last Thursday allege.

“RBC Bahamas further claimed that on or about May 9, 2024, although not required to do so, RBC Bahamas voluntarily transferred three sums in the same amount of the funds to British Commercial Bank in order to purportedly make British Commercial Bank whole.”

As a result, the California institution added: “An actual controversy has arisen and now exists between Preferred Bank and RBC Bahamas with respect to their respective rights and duties to the funds in the sum of $1.854m

“As alleged herein, the disposition of the funds [is] subject to competing claims by Preferred Bank and RBC Bahamas. Preferred Bank seeks a declaratory judgment about the disposition of the funds, declaring that Preferred Bank has absolute rights to the funds, whereas RBC Bahamas has no rights to the funds.

“A judicial declaration concerning the controversy is necessary and appropriate at this time so that the parties may ascertain their respective rights, duties and obligations. Such declaration would inform the parties’ future conduct and reduce the burden placed on Preferred Bank caused by the current unsettled state of affairs.”