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FOREWORD

In accordance with the provisions of the Commonwealth of Dominica Offshore Banking

·

Act 1996 (No. 8 of 1996), as amended, an examination of British Trade & Commerce Bank Limited was undertaken during the period 30 January 2 February 2001. The examination was conducted at the request of the Minister for Finance, Industry & Planning under Section 13 of the Act to assess the current state of the bank's affairs. The examination was based on data and information included in the books and records of the bank as at 31 December 2000, as well as representations made by management and staff of

the bank.

The detailed report on the findings is appended hereto. In reviewing the report, it should be borne in mind that while the examination includes some audit tests, it is not to be construed as an audit, and this report should not be considered an audit report.

The report is prepared for the Minister for Finance - Commonwealth of Dominica. If it is provided, in whole or in part, to the bank examined, then this is for the bank's confidential use. Under no circumstances should the bank or its staff disclose or make

public, in any manner, the report or any portion thereof.

BANK SUPERVISION DEPARTMENT

EASTERN CARIBBEAN CENTRAL BANK

FEBRUARY 2001

The British Trade & Commerce Limited (BTCB) is an offshore bank and trust company, incorporated in February 1997 under the Companies Act, Chapter 318 of the Laws of the Commonwealth of Dominica. The bank was granted a licence under Commonwealth of Dominica Offshore Banking Act 1996 (No. 8 of 1996) (the Offshore Banking Act), in July 1997, and commenced business in January

1998.

On 20 March 2000, a team from the Bank Supervision Department of the Central Bank carried out a preliminary assessment of the institutions licensed in Dominica to carry on offshore banking business. The objective of this exercise was to determine the extent of their operations, in order to plan a course of action to facilitate the transition to a new regulatory and supervisory framework, consequent on the amendment to the Offshore Banking Act 1996, No 8 of 1996.

The assessment revealed that the bank's adherence to the Ministry's reporting requirements was unsatisfactory. Reporting on the quarterly reporting cycle was

sporadic, and there was no evidence that audited financial statements were submitted.

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Of great concern was the number of complaints and/or allegations of fraudulent or otherwise unsavoury practices and disreputable behaviour against the bank, that were received both by the Ministry of Finance and the Central Bank. These complaints or allegations ranged from the refusal to repay or otherwise acknowledge depositors' claims to false advertising calculated to mislead the unwary investor.

It was therefore recommended that a full examination of the bank be conducted, which, in addition to assessing the financial soundness of the bank, would attempt to determine the nature of the activities that give rise to these complaints and allegations.

It was further recommended that this exercise be undertaken and completed with some degree of urgency, to ensure that the weaknesses/deficiencies identified could be promptly addressed.

At the request of the Minister for Finance, in accordance with section 13 of the Offshore Banking Act, the Central Bank conducted an examination of the bank during the period 30 January to 2 February 2001. The examination was undertaken in conjunction with the Supervisor of Financial Institutions of the Commonwealth of

Dominica.

The scope of the examination included a review and assessment of:

The progress of the examination was hampered by the absence of the Executive
Vice President & Chief Financial Officer to whom the team was directed for

answers to most of its queries. As a result, it was not possible to determine the
precise relationship between the bank and its numerous subsidiaries and affiliates,
and to fully investigate a number of issues.

The bank is insolvent and has been facing a liquidity crisis for several months. Despite promises made to the Ministry of Finance several months ago to seek capital injection, the bank has failed to attract new capital funds In addition, since the completion of the examination, a US Senate Committee report has implicated the institution in financial fraud and money laundering.

The bank's accounts, financial transactions and records are primarily denomirtated in United States currency. Accordingly, unless otherwise specified, all amounts stated in this report refer to US dollars.