THE Bank of Bermuda alerted local financial authorities when it detected unusual transactions involving an account which was ? according to allegations made in court this year ? involved in a money laundering operation.

The account, in the name of Bellwood and controlled by Antigua Opposition MP Asot Michael, was closed down in March 2003, less than two months after the Bank filed a Suspicious Activity Report on it.

As a report on the OffShore Alert web site of KYC News highlighted last week, the Government of Antigua is alleging in court proceedings that it lost millions of dollars through the corruption of the Caribbean island's former Prime Minister Lester Bird and his associates.

And the Antigua High Court was told that that some of that money passed through two Bermuda accounts ? a Butterfield Bank account controlled by banker Bruce Rappaport and the Bank of Bermuda account controlled by Mr. Michael, Mr. Bird's former chief of staff.

A Bank of Bermuda spokesman said: "We have no comment to make on the Offshore Alert article. We can confirm, however, that the Bank of Bermuda fully complies with local anti-money laundering legislative and regulatory requirements and adheres to international standards in this area."

In an action filed on February 20 this year, the Antigua Government is seeking $41.4 million in damages from a group of defendants including principal targets Mr. Bird, Mr. Rappaport and Mr. Michael.

It was alleged that Mr. Rappaport had negotiated a loan on behalf of the Government of Antigua to repay some $56 million it owed. But the repayments paid by the Government to Mr. Rappaport's IHI Debt Settlement Company would amount to $61 million more than the loan he negotiated, according to allegations made in court filings.

This money was paid into the Butterfield Bank account of Mr. Rappaport and $33,333 of it was then moved on into Mr. Michael's Bank of Bermuda account monthly, the court heard.

"From the Bellwood account, Michael transferred to Giddie's Wachovia bank account, for the attention of Ayman Hanna, $850,000 to First Union National Bank (now Wachovia) in Jacksonville, Florida and $37,000 to this same bank/recipient in Miami, Florida; transferred more than $3 million to himself; transferred $100,000 to the Antiguan Labour Party; and $1.2 million to Trafalgar Holdings Ltd., an offshore company registered in Antigua," it was claimed in court documents.

Court documents cited by OffShore Alert stated that on January 31, 2003, the Bank of Bermuda filed a Suspicious Activity Report (SAR) with Bermuda's Financial Investigation Unit (FIU) about money transfers and disbursements from the Bellwood account. The SAR filing allegedly caused Mr. Michael to close down Bellwood's account on March 11, 2003.

Subsequently Mr. Michael and Bellwood Services S.A. filed an action at Bermuda Supreme Court against the Bank of Bermuda and the Commissioner of Police in an apparent attempt to prevent them from co-operating with investigators in Antigua. The plaintiffs filed an additional action against Bermuda's Attorney General at the same court on January 6, 2005.

According to the court documents, Bermuda's FIU followed up the Bank of Bermuda report by informing the Antigua and Barbuda Office of National Drug and Money Laundering Control Policy (ONDCP) and the two bodies agreed to investigate jointly.

However, according to a sworn affidavit from the director of the ONDCP, Alec Vanderpoole, in February 2006, Mr. Michael was informed of the Bank's report and the Bermuda FIU's request of Antigua to investigate by the ONDCP director of the time, Wrenford Ferrance.

"Informing the subject of an investigation of its existence is grossly improper, and unlawful under the provisions of existing legislation," Mr. Vanderpoole told the court. "Wrenford Ferrance, to the best of knowledge, information and belief, also directed that the ONDCP's investigation of Asot Michael be terminated."

Mr. Ferrance resigned the month after the Antigua Labour Party lost the election of March 2004.

Mr. Vanderpoole added that he had reopened the investigation into Mr. Michael when he took over as ONDCP director.