The US Government has secured its first-ever conviction for failing to comply with the Foreign Account Tax Compliance Act (Fatca) after the former chief business officer of Loyal Bank pleaded guilty to conspiring to defraud the US.
Adrian Baron was extradited to the US from Hungary in July 2018 and entered the guilty plea on 11 September.
According to his LinkedIn profile, Baron was promoted to chief business officer from chief executive in October 2014.
He wrote: “As well as managing the marketing and sales function of the bank, I am the contact point for UK and Gibraltar clients and agents with a focus on single and multiple family offices, wealth managers, investment managers and hedge funds.”
Baron is facing up to five years in prison.
Anonymous accounts
According to court documents, an undercover FBI agent met with Baron in June 2017. He explained that he was a US citizen involved in stock manipulation schemes and was interested in opening multiple corporate accounts with Loyal Bank.
The undercover agent informed Baron that he did not want to appear on any of the documents.
Baron informed him that Loyal Bank, which has operations in Hungary and St Vincent & the Grenadines, could open such accounts and provide debit cards linked to them.
Dodging Fatca
In July 2017, the undercover agent met with Baron for a second time and described how his stock manipulation scheme operated, specifically mentioning the need to circumvent Fatca.
Fatca was introduced in 2010 and requires foreign financial institutions to identify US customers and report information about their accounts to the US tax authorities in a bid to identify potential tax avoiders and evaders.
During the meeting, Baron stated that Loyal Bank would not submit a Fatca declaration to regulators unless the paperwork indicated “obvious” US involvement.
Multiple bank accounts were subsequently opened in July and August 2017, during which time neither Baron nor Loyal Bank requested or collected Fatca information from the undercover agent.
UK connection to Beaufort
In a statement on the US department of justice’s website, it thanks the UK’s Financial Conduct Authority and the Hungarian National Bureau of Investigations for their “significant cooperation and assistance during the investigation”.
In March 2018, Baron was also named in a multi-count indictment along with five others linked to defunct UK discretionary fund manager Beaufort Securities.
The charges include conspiracy to commit securities fraud and money laundering.
The FCA received some criticism after it was revealed that it chose not to act sooner to stop Beaufort from operating in order to give the US investigators more time to build their case.
