For more than two years before the government deposited $5 million of public money into the Bank of Asia this year, regulators had been raising red flags about the institution — ultimately commissioning an independent review last December that found it to be insolvent, according to a liquidation application filed in May by the Virgin Islands Deposit Insurance Corporation.
The day after the Commercial Court released the VIDIC application last week, Premier Natalio “Sowande” Wheatley insisted during a July 11 press conference that he had done “nothing wrong” and would not consider resigning over the affair.
He also maintained that neither he nor Financial Services Junior Minister Lorna Smith — a former Bank of Asia deputy chairwoman whose nephew Deon Vanterpool served as a director and vice president — had authorised the $5 million deposit.
But Mr. Wheatley refused to say who did green-light the move — or even to disclose if he knows that information — pending a review by the government’s Internal Audit Department.
“Whether I know or not, I prefer not to provide information piecemeal,” said the premier, who is also the finance minister. “I would prefer for the report to come out and then everybody can have all the information and then they can come to whatever conclusion.”
Mr. Wheatley also sidestepped questions about when he was first alerted to problems at the bank, and he denied that his government had been compromised by the situation.
“I wouldn’t say that we are compromised,” he said. “I would say that of course … this is an unfortunate situation that has to do with the Bank of Asia in terms of it becoming insolvent.”
Liquidation application
The new details about the saga emerged July 10 when the Commercial Court released the VIDIC’s May 26 application to liquidate the Bank of Asia.
In the filing, the VIDIC claimed the bank had failed to comply with regulatory directives since last August and argued that its continued operation could jeopardise the territory’s credit rating and international reputation.
“In the circumstances, VIDIC cannot properly allow BOA to continue to operate as a going concern without taking enforcement action,” the regulator told the court. “If no action is taken, BOA will fail, resulting in damage to the depositors, the territory’s reputation and loss of confidence in the territory as a financial centre.”
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Early warning
The VIDIC — which officially launched operations with the appointment of its first CEO in June 2024 — also provided a timeline of events leading up to its enforcement action against the Bank of Asia in May.
On July 19, 2024, the regulator stated, it received a letter from the Financial Services Commission warning about concerns with the bank’s “financial condition.”
In response, the VIDIC requested more information and a meeting, which was held July 24.
“It was agreed that there was a need for a comprehensive examination of the bank’s safety, soundness and financial condition, particularly as no inspection report in relation to it had been issued since the bank’s opening, and early warning signs of its declining condition had persisted over the previous two years,” the VIDIC application states. “It was also agreed that the FSC would engage a third-party accounting firm to conduct a thorough examination of BOA’s financial condition.”
Eight days after the meeting, the FSC issued a directive on the advice of the VIDIC, warning the bank on Aug. 1 that it had breached regulatory requirements and directing it to remedy capital deficiencies, the VIDIC stated.
‘Insolvent’
The bank failed to comply, and the FSC commissioned an independent report from accounting firm Deloitte on Dec. 2, according to the VIDIC.
In its Feb. 26 report, Deloitte stated that the bank was “insolvent” or “about to become insolvent” and raised an extensive list of concerns dating back to 2022, the VIDIC stated.
For instance, Deloitte found that the bank’s audited 2022 and 2023 financial statements by the Hong Kong accounting firm Crowe (HK) CPA Limited included a “disclaimer of opinion” — a statement issued by auditors when they are unable to obtain enough information to adequately assess an entity’s finances.
In the disclaimer, the Hong Kong firm declined to issue an audit opinion “due to the significance of matters such as loan impairment as well as the amount due from related parties, multiple uncertainties relating to BOA as a going concern, further liabilities that may arise, and the reclassification of non-current versus current assets and liabilities,” the VIDIC told the court. “Nearly half (and potentially more) of the assets of BOA appeared to consist of related-party loans or receivables.”
Deloitte also expressed concerns about these loans, noting that most did not earn interest and no evidence was found that they were recoverable, the VIDIC stated.
The bank’s largest related-party receivable — nearly $19 million as of Dec. 31 — was from BOA International Financial Group Limited (BOAFGL).
But for that entity, Deloitte found no audited accounts since 2020, when BOAFGL was balance-sheet insolvent, according to the VIDIC.
“No audited accounts were found for the years 2021-2024,” the regulator added.
‘Purely a journal entry’
Deloitte also raised questions about preference shares the bank issued in 2022 and 2023 with the hope of boosting its financial position, according to the VIDIC.
“Deloitte had serious concerns about the issuance of these preference shares as only $1,250,000 of the $8,150,000 of the value of the preference shares issued over the two-year period were a cash injection into BOA,” the VIDIC application states. “The remaining $6,900,000 appeared to be purely a journal entry in which the investors borrowed funds from BOA and purchased the preference shares with those funds.”
This tactic, Deloitte found, made the bank’s balance sheet appear healthier by improving the liquidity ratio on paper without corresponding contributions to the bank’s capital and cashflow requirements.
“Further, there was no reference on BOA’s register of members to these preference shares being issued,” the VIDIC stated.
Customer deposits
The Deloitte investigation also raised red flags about the bank’s handling of customer deposits, according to the regulator.
“Deloitte noted that it appeared that BOA comingled its own funds with customer funds and was therefore in breach of section 63 of the Regulatory Code,” the VIDIC stated, adding, “It appears that BOA is funding the wider group and the group’s operational costs almost solely from deposits.”
The VIDIC also alleged that 88 percent of the BOA’s receivables were “due from related entities and do not appear to have any commercial rationale.”
After the Deloitte report was submitted, the FSC issued more directives to the bank on March 21 and May 1 — while also noting a continued failure to comply with the previous directives issued last August.
BOA proposals
Amid the ongoing turmoil, BOA representatives met with FSC and VIDIC officials to present various proposals for resolving the bank’s financial difficulties, according to the VIDIC.
“These included proposals by third-party investors to inject substantial capital into BOA,” the VIDIC told the court. “However, none of these proposals have borne any tangible results, and BOA remains seriously undercapitalised.”
Ultimately, the bank didn’t propose any workable way forward, the VIDIC alleged.
“Despite multiple regulatory directives, engagements, and opportunities to remedy its capital and compliance deficiencies, BOA has not presented a concrete investment proposal, recapitalisation, or turnaround plan capable of restoring solvency or operational viability,” the VIDIC stated. “BOA remains in breach of capital adequacy requirements and has not remedied its non-compliance with the directives.”
Citing “overwhelming evidence that BOA is failing or likely to fail,” the VIDIC told the Commercial Court that urgent action was needed.
“Joint liquidators ought properly to be appointed, because BOA should not be allowed to continue to conduct banking business in these circumstances where it is clearly insolvent and there are a number of questionable transactions which need to be investigated immediately,” the regulator stated.
VI’s credit rating
The VIDIC also detailed possible consequences for the VI if the bank were not put into provisional liquidation.
“The BVI was recently upgraded to investor grade by Moody’s for the first time,” the application states. “This might be at risk if BOA is allowed to continue operating in financial distress.”
The court was also warned that the danger to the territory’s standing could escalate.
“On Feb. 11, 2025, S&P Global Ratings assigned its ‘BBB/A-2’ sovereign credit ratings and ‘AAA’ transfer and convertibility assessment to the British Virgin Islands, saying that the outlook is stable for the BVI,” the VIDIC added. “This recent credit rating would also be at risk if BOA is allowed to continue to operate.”
Three days after the VIDIC’s application, Justice Gerhard Wallbank issued a May 29 order appointing Teneo as joint provisional liquidators. In a notice filed on June 25, the court continued that order to Oct. 23.
The premier
At his July 11 press conference, Mr. Wheatley said he had not yet read news reports about the VIDIC filing, and he deflected several questions by stating that he would leave the matter to the Internal Audit Department to investigate.
The premier also insisted that he stood by Ms. Smith.
“When I gather all the information, I will come to conclusions about everyone’s role in the Bank of Asia situation,” he said. “And until then, of course — until information tells me otherwise — I do continue to stand by Lorna Smith.”
The Bank of Asia, the VIDIC and the FSC did not respond to requests for comment.
The Royal Virgin Islands Police Force did not respond to a question about whether it is investigating the Bank of Asia situation.
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