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Features - July 2011



The Bahamas Investor

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International forensic investigations and asset recovery

International forensic investigations and asset recovery

While confidentiality is still the order of the day, there are tools to bring errant IBCs to account

The Bahamas Investor Magazine
July 13, 2011
July 13, 2011
Ed Rahming

International Business Companies (IBCs) incorporated in The Bahamas are used around the world by business persons and businesses for purposes ranging from asset holding to complex financial transactions. Their popularity is such that they are frequently encountered in multi-jurisdictional proceedings where a forensic accountant or liquidator seeks to trace, freeze or recover assets across international borders.

As is the case in many international financial centres, IBCs are not obliged to make public disclosure of shareholder details. Consequently, there is a myth that when a forensic accountant or liquidator encounters a Bahamian IBC in the course of an investigation, they have reached an impenetrable brick wall.

However, there are a number of options for obtaining information about an IBC, provided the right circumstances exist.

Furthermore, these options have now been enhanced by new anti-money laundering laws and regulations that encourage better corporate governance and cross-border cooperation. Such options are the tools available to the forensic accountant and liquidator in forensic investigations and asset recovery matters.

Available information
In The Bahamas, while shareholder details are confidential, a copy of the register of directors and officers is open to inspection by members of the public. Information on directors and officers can sometimes be a useful starting point in an asset recovery exercise.

Norwich Pharmacal orders, which are orders requiring a third party to disclose details relevant to a matter, can be obtained in The Bahamas against the registered office service provider of an IBC. Production orders or disclosure orders are also quite commonly granted in matters involving a legal basis to review relevant information.

Just as important as obtaining relevant information on an IBC is the process of freezing assets held by an IBC. In The Bahamas, a person can apply to the court to have a freezing injunction order (also known as a Mareva injunction) granted to freeze assets where the assets are the subject of a matter and it can be shown that not freezing the assets may lead to their dissipation. Mareva injunctions are granted where there is a local substantive cause of action and in some cases where there is no local substantive cause of action, but granting an injunction would assist the enforcement of foreign proceedings (Breitenstine v Breitenstine).

International cooperation
In appropriate cases, local courts may make orders to aid foreign proceedings including divorces, insolvency, or other asset recovery matters. In such matters, courts can restrain proceedings, appoint a local representative, assist with the provision of information where appropriate, and grant other relief as the court sees fit.

Liquidators of local companies can also apply to a foreign court to obtain recognition in that respective foreign jurisdiction. In the US such recognition would fall under Section 1517 of the US Bankruptcy Code, Chapter 15. One of the advantages of recognition under Chapter 15 in the US is the ability to obtain relevant information under Discovery and Bankruptcy Rule, 2004. Chapter 15 recognition is dependent on the Bahamian liquidator demonstrating that the centre of main interest (COMI) is outside the US.

While confidentiality and privacy are important, there are legitimate tools available to assist in identifying, freezing, and recovering assets held by Bahamian IBCs.

Bio: Ed Rahming

  • Ed Rahming is managing director of Krys Global’s Bahamas office. He is a certified public accountant and certified fraud examiner. He is also certified in financial forensics by the American Institute of Certified Public Accountants. He holds an MBA degree from the University of Florida and has worked in the UK, the Cayman Islands and the US.
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