British Virgin Islands: Law of Offshore
The British Virgin Islands banking sector, which has been limited to a small number of international banks as part of the BVI's determination to exclude money-laundering, is regulated under the Banks and Trust Companies Act 1990 (The Act).
Under The Act, banks are licensed in three categories:
- A General Banking License permits all forms of banking activity; the minimum paid-up capital must be $2m, and the bank must deposit US$500,000 in a way prescribed by the Governor. The annual fee is US$50,000.
- A Class 1 Restricted Banking License permits international business only; a licensee may not transact business with BVI residents, other than another licensee or an IBC; the minimum paid-up capital is US$1m and US$500,000 must be deposited as the Governor requires. The annual license fee is US$32,000.
- A Class 2 Restricted Banking License permits the conduct of banking business only with counterparties named in the license; the minimum paid-up capital is US$1m and US$500,000 must be deposited as the Governor requires. The annual license fee is US$32,000.
Amendments to The Act in 1995 incorporated 'gateways' into the legislation which provide for the disclosure of information to the regulatory authorities and law enforcement agencies in other countries to assist the investigation of illegal or criminal activities. The BVI authorities however do not respond to 'fishing expedition' enquiries from other jurisdictions.
Banks are supervised by the Inspector of Banks, Trusts and Company, an official of the Financial Services Commission, which was created by the BVI Government as an independent regulatory body on 1 January 2002.
The establishment of the FSC followed recommendations published in 2000 by KPMG, which identified the key components of a well-run financial centre. The establishment of an independent regulatory authority satisfies these KPMG requirements.
The formation of the FSC saw the division of the marketing and regulatory functions within the BVI offshore financial services centre. In practical terms the formation of the FSC means maintenance of the clear regulatory standards set out in previous legislation such as the Anti-Money Laundering Code of Practice (2000) and the Financial Services (International Co-operation) Act 2000(subsequently updated with the issuance of a new Anti-Money Laundering Code of Practice in 2008).