Offshore Voice: British Virgin Islands - The Unreported Benefits of ‘Offshore’

By (01/12/2012)

Elise Donovan, the Executive Director of the BVI IFC, speaks to the IFC Review about the success of the British Virgin Islands as an international finance centre and about how the BVI IFC addresses the negative premise of being ‘offshore’.

How important is the BVI within the financial services industry and within the global movement of wealth?

ED: The British Virgin Islands (BVI) is an important global financial centre that has established proven leadership in meeting the needs of international businesses and high net worth individuals that contribute to the management of global wealth and global financial markets. It is one of the safest, most trustworthy and reliable financial centres in the world and is able to attract top quality business based on its model of providing transparent, cooperative and integrated business solutions.

The BVI is the pre-eminent corporate domicile and its corporate register is the largest of its kind in the world with more than 450,000 active companies registered. Undoubtedly, BVI companies doing a range of business are likely to be found almost anywhere in the world in major transactions.

In addition to being the premier corporate domicile, the BVI is a frontrunner in providing a sophisticated array of diverse wealth management solutions in trust and estate planning, funds and investment business, captive insurance and ship registration services. Offering these financial services in the BVI, is a pool of highly qualified expert professionals from the world’s leading trust companies, law firms and accounting firms.

Evidence points to a strong correlation between successful economic growth and doing business with the BVI. We provide advantages and value to businesses, individuals and countries to successfully navigate the global landscape and maximise their economic growth and increase their wealth potential. A clear example of this is the Asia/Pacific region and its expanding class of high net worth individuals for whom the BVI is the preferred jurisdiction of choice. Asia-Pacific is the fastest growing economic region and, arguably, this may be partly due to the region’s professionals’ business acumen in choosing BVI structures.


What are the main strengths and weaknesses of the BVI as an international finance centre?

ED: The BVI has a world-class brand and it offers a very attractive business model. Its services are provided in a secure, safe, well-regulated and business friendly environment. It has a proven track record of providing excellence in delivery, exemplary regulatory standards, innovative legislation, state-of-the-art technology, and its firms and agencies are run and staffed by experienced and highly qualified professionals. These are the strengths and advantages that we provide and is why top-tier firms are based in and do business with the BVI. The BVI’s strengths also include competitive and cost-efficient fees, highly efficient turnaround times, 24-hour services in some areas and the fact that the BVI’s corporate registry is the largest of its kind in the world.

There are several areas that we are working on to improve our financial services product and make it more sustainable for the long-term. The Government has introduced financial services education in the secondary school curricula to allow our students to be more prepared to pursue careers and training in the financial services industry so as to provide a sustained pool of local professionals in the industry. Investments in infrastructure, such as business hotels and conferencing facilities, are also priorities for enhancing the industry. We are also strengthening and expanding in our current markets and exploring new products and emerging markets to diversify our industry.


China and other BRIC nations have seen significant economic growth in the past decade, what role has the BVI played in this?

ED: The BVI is a popular jurisdiction for investors from the emerging markets of China and the other BRIC countries. Many industry leaders have noted that no other corporate vehicle has had quite the impact in Asia as the BVI Business Company (BC), which in China is simply referred to as ‘a BVI’. It is standard practice for the expanding class of high net worth individuals (HNWIs), businesses and even governments of the BRIC countries to acquire BVI BCs for a multiplicity of investing and other cross-border transactions.

BVI BCs are an integral part of business in these jurisdictions to such an extent that, for example, the BVI has the second largest foreign direct investment in China after Hong Kong. China is experiencing economic growth that outpaces global averages and it is investing in mineral rich countries to feed its need for more resources.

It uses the BVI BC to make many of these investments. BVI trusts and fiduciary services and funds and investment business are also popular in the BRIC countries for wealth management, investing, structuring ownership and control, and for planning for the succession of assets. By using BVI structures globally that are easy-to-use, flexible, widely-accepted and cost competitive, the BRIC countries are able to stimulate their economic growth and increase wealth creation. Conversely, the BVI has also benefited from their growth; it shares a symbiotic relationship with the BRIC countries.


How do you feel the BVI is perceived within the financial services industry?

ED: Within the financial services industry, the BVI has a long-standing reputation as a reliable and efficient international financial centre. As a matter of fact, in a recent industry research report, Offshore 2020, which surveyed financial services industry participants in Asia, Europe and the Caribbean, the BVI was ranked as the most important offshore financial services jurisdiction. The BVI achieved top ranking out of 26 offshore jurisdictions and was also first for asset protection and estate planning, individual tax planning, special purpose vehicles, and investment holding for corporations.

The BVI also was ranked among the top offshore financial centres in the Global Financial Centres Index, was voted International Finance Centre of the Year by Caribbean World Magazine, and has been short-listed as International Finance Centre of the Year by Citywealth International Financial Centre Awards.

The BVI is also the preferred jurisdiction of choice of many industry leaders and service providers globally. All these endorsements give credence to the BVI’s stellar reputation and attest to how well the jurisdiction is regarded in the financial services industry.


Do you think it has suffered due to the stigma associated with offshore?

ED: The lines of distinction between offshore and onshore have been blurred. Most jurisdictions in the financial services industry, whether called ‘onshore’ or ‘offshore’ provide the same or similar cross-border, multijurisdictional transaction services. Our ‘offshore’ jurisdiction provides corporate business and wealth planning strategies in a safe, secure, transparent, tax neutral, accountable, and politically and economically stable environment that facilitates and promotes global economic growth. These ‘offshore’ benefits, however, often go unreported. There is certainly a bias when it comes to who has access to the mainstream media and who does not.

There has been a loss of journalistic objectivity, and in some respects integrity, with regards to the reporting on the activities of international ‘offshore’ finance centres. Consistently reporting on the opponents’ viewpoints without getting a more balanced perspective is not journalism as we expect to be practiced in democratic societies. In spite of that, however, misguided opinions do not distort the facts nor can they stigmatise the BVI, which is a world-class international finance centre.

The BVI’s strict anti-money laundering laws and know-your customer requirements and our compliance with international standards of regulation, supervision and information exchange make us (unlike some onshore jurisdictions) extremely unattractive to money launderers, tax evaders and those involved in nefarious activities. The BVI provides excellence in delivery, robust and exemplary regulatory standards, innovative legislation, and experienced and expertly qualified professionals and pre-eminent firms work in our upstanding jurisdiction. Objective reviews of our jurisdiction by independent bodies, such as the OECD, IMF, FATF and the FSB, often reveal these facts, but, of course, good news does not often make for good headlines.


How important have financial services been to the BVI economy?

ED: The British Virgin Islands is a service-driven economy, which relies on the two main pillars of tourism and financial services. Both of these industries have far-reaching implications on the territory’s economic well-being, but financial services in particular has contributed to GDP growth and development in infrastructure, business expansion, human capital and generally to commerce and the investment climate.

During the last almost three decades, the financial services industry has grown exponentially to where it now contributes approximately 60 per cent of the BVI Government’s revenues. The new government headed by Premier Dr the Hon D Orlando Smith OBE, has placed a renewed emphasis on strengthening and improving the financial services industry through fortified public/private sector partnerships and expanding the BVI’s financial services offerings.


What more can financial centres such as the BVI do to improve the way they are perceived in the mainstream media?

ED: We have to find ways to actually educate the mainstream media about financial services and the work we do in the industry. The onus certainly lies on us to provide them with information that would disabuse them of the negative notions and prejudices that they hold and that are being primarily fuelled by opponents of international financial services centres. Not to sound condescending, but it seems that much of the negative reporting comes from lack of knowledge and understanding. We have to be proactive about getting the accurate information and positive message out there about our benefits to the global economy and not wait for negative stories in the media to respond.

Also important, is the fact that while international financial services centres generally view each other as business competitors, the assault against them is often unified, so centres too must be unified in their defence. Our combined voices will be much louder and stronger than our individual ones in penetrating the information barriers and the challenges that we collectively face.