The BVI’s Role in the Global Financial System - Finding a Workable Solution for Beneficial Ownership

The British Virgin Islands prides itself on the role it plays in the international financial system. It has a robust regulatory framework, it signs up to international standards for financial services, and it balances the need for both privacy and transparency, while having zero tolerance of wrongdoing.

Tackling corruption is an issue which concerns us all and therefore the outcomes of the 2016 Anti-Corruption Summit are significant.

They are vital to countering the attempts of criminals and terrorist organisations to channel cash through the world’s financial system. We therefore welcome the leadership that the UK has shown in crafting a new global information exchange system for beneficial ownership. The communiqué which followed the Summit, called for the key issue of beneficial ownership to be referred to the international standard setters – this is something that we were calling for and that we fully support. Indeed, as a key stakeholder, we expect to be involved, as we have been in the past, in developing robust international standards.

In order to create a system that will successfully counter corruption and financial wrong-doing, we have proposed what we believe to be a workable solution, which balances the need for appropriate levels of privacy and transparency.

It rests on three pillars: data security, legal constraints, and the principle that any new standard must be applied globally to enable a level playing field.

Firstly, data security. It is easy to see that as soon as we begin storing huge quantities of private, highly sensitive business information, and providing that data to a number of individuals, the risk of a leak increases exponentially. If genuine, law-abiding businesses become concerned that their cross-border transactions are opened up to the world, or worse, obtained by criminals or terrorist organisations, and used as a means of extortion, there is no doubt that the international financial system will stutter.

Secondly, the application of appropriate legal constraints. Governments and law enforcement agencies have legitimate reasons for seeking access to otherwise confidential business information and, therefore, must be subject to appropriate safeguards.

Thirdly, a globally applied standard. Without applying any new standard globally and equitably, there is a real risk that illegal activity will simply find a breeding ground in a non-compliant or less rigorously regulated jurisdiction. A simple but important premise for a global standard to be effective is that it is applied globally. Anything short of this would create an unequal environment, which would be counter-productive.

We, in the BVI, believe that if the global community is to achieve its mission, we need further discussions about the detail that explores how the new standard would be applied and implemented consistently. And, of course, we must have the time to thoroughly assess how it would impact our economy, which we have nurtured and developed over the last three decades

The BVI wants to be part of the global discussion as this standard is developed, and we are committed to implementing the standard as soon as it is agreed by all UK Overseas Territories, Crown Dependencies, the G20, and OECD member states.

My government, and successive BVI governments before, have always been very open to working with other nations to boost transparency to tackle illicit financial activities. We are confident in our position as a well-regulated, transparent and co-operative jurisdiction. We want to work closely with other nations to find solutions to the pressing problems of corruption and financial wrong-doing.

Long before this Summit, the BVI worked to capture beneficial ownership information.. We have long understood that it is in our interests – and that of other governments – to make every effort to do what we can to put a stop to illegally activity. This repository of information is commercially private, but it is not ‘secret’, as the ultimate beneficial ownership information is accessible on request by law enforcement agencies.

We have created tax transparency agreements with more than 100 countries, including tax information exchange agreements with 28, and further multilateral agreements providing for tax cooperation with 76 countries under the OECD convention. What is more, BVI was one of the first jurisdictions in the world to sign up to the OECD’s new Common Reporting Standard for the exchange of tax information.

Given these successes, we were dismayed to be criticised so vehemently in the wake of the release of the so-called ‘Panama Papers’. After all, the BVI is highly regarded in the financial services world, trusted by clients, international partners and global regulators alike. Our country is a leading centre for handling the flow of foreign direct investment.

BVI companies are used because of the highly skilled professional workforce based in the country, combined with our robust regulatory system with stringent anti-money laundering rules and know-your-customer protocols. BVI companies are trusted to operate with integrity, but any companies named within the Panama Papers that are accused of breaking BVI law will be dealt with seriously. We do not tolerate any abuses of our structures that could undermine our reputation and trust.

There is no doubt that combatting the efforts of criminals to pass money through the international financial system can be bolstered by equipping law enforcement in one jurisdiction with quick and easy access to company ownership information in another.

This is why we are focussed on being part of the global conversation about beneficial ownership information exchange as we embark on the road towards setting an international standard. We are clear though, that it is critical that the solution is workable as well as robust. We, along with many other nations, stand ready to put our weight behind the mission to tackle corruption.  

Orlando D Smith, OBE
Former Premier of the British Virgin Islands. He previously served as Chief Minister of the British Virgin Islands