The financial services sector in the British Virgin Islands (BVI) is an interesting mix of services....
The financial services sector in the British Virgin Islands (BVI) is an interesting mix of services.
They are best known for their international business company incorporated under the pace-setting International Business Companies Act of 1984. However, the jurisdiction has, over the years, shaken its reputation as a 'one-product jurisdiction' and has been named the fastest growing offshore domicile for insurance captives by the Best's Captives Directory 2000 edition of the Captive Insurance Formation Report. This accolade came with the formation of 51 new captives in the BVI in 1999.
The islands have also been the 'phantom' domicile for many mutual funds for the past several years - phantom because, while the BVI was decidedly one of the more popular jurisdictions for the incorporation of mutual funds, little actual fund business was conducted there. Most of the management and administration of the funds were lost to places such as the Caymans and Bermuda.
All this has been changing over the past couple of years since the introduction of regulatory legislation for mutual funds and related activities.
However, the BVI still likes to think of itself as slightly discriminatory when it comes to banks. And while it would no doubt welcome more brass-plate names where commercial banking is concerned, it remains highly selective in who it licences to conduct banking activity from within the territory.
Action against crime
The BVI also encourages a culture among its licensed service providers to be equally discriminating in who they accept as clients.
To this end, the Proceeds of Criminal Conduct Act was passed in 1997. This Act criminalises money laundering that involves any serious crime and provides for a reporting mechanism for suspicious financial transactions.
The BVI presently serves as the chair of the Caribbean Financial Action Task Force.
On 29 September 1999, an Anti-Money Laundering Code of Practice was published by the Executive Council under the all-crimes Proceeds of Criminal Conduct Act, 1997. The Code is complemented by the Anti-Money Laundering Guidance Notes for the BVI financial services sector, which are based on those of the UK's.
When the Code comes into force, it will put on a more structured and legal footing the Code of Ethics that the Association of Registered Agents has promulgated for itself since the early 1990s. It clearly defines the standards required for record keeping, client acceptance, training and other relevant matters.
The Code represents a mandatory legislative regime with monetary sanctions for non-compliance. It mandates the appointment of compliance officers for ensuring compliance with the Code and all other related anti-money laundering laws.
The Proceeds of Criminal Conduct (Designated Countries and Territories) Order also came into force in 1999 to set out procedures for the registration, under the Proceeds of Criminal Conduct Act 1997, of external confiscation orders. Similar orders were made under the Drug Trafficking Offences Act in 1996 and the Criminal Justice (International Cooperation) Act, also passed in 1996.
Gateway provisions for the purpose of enhancing regulator-to-regulator assistance were provided in the Insurance Act of 1994 and both the Banks and Trust Companies Act 1990 and the Company Management Act 1990 were amended in 1995 to include identical provisions.
Such provisions facilitate regulator-to-regulator assistance on a relatively unencumbered administrative but confidential basis where the regulator is already in possession of pertinent information.
The draft Information Assistance (Financial Services) Act will shortly be revisited with the aim of enhancing the present ability of regulators to access information by providing an efficient administrative procedure that factors in a role for the courts.
The terms of the 1988 UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances are relevant to the BVI. As such, and in keeping with the islands' commitment not to open itself to abuse by those wishing to engage in various criminal practices, the Criminal Justice (International Cooperation) (Amendment) Act 2000 was passed to effect ship rider provisions for the better regulation of drug trafficking by sea.
The BVI is firm in its resolve to do what is right when it is right. This is why it has made structured and well-timed changes to its legislative framework and to the way in which it does business, gradual but necessary changes that enable it to maintain a competitive advantage. This philosophy has and will continue to serve it well.
Lisa Penn-Lettsome is deputy director of financial services, British Virgin Islands
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