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British Virgin Islands: Offshore Business Sectors

Introduction

The British Virgin Islands seem to have got as close to being a perfect 'private' offshore international financial centre as can be imagined. For 25 years the Government has welcomed offshore business, and has created a world-standard regulatory structure to avoid money-laundering and other criminal activity. Like Bermuda, the BVI decided not to encourage the growth of offshore banking, but the BVI International Business Company has probably been the world's most successful offshore entity, and is used extensively in financial holding and investment structures, as well as in trust management. The IBC Act was replaced by the BVI Business Companies Act 2004, which came into full force on January 1, 2007, the change was not expected to stem the tide of company registrations, quite the reverse in fact. The BVI have also been successful in developing mutual funds and captives, although not being the leading jurisdiction in either case. Finally, the BVI have a strong position in yachting both as a registry and as an operating base.

This section of the lowtax.net site describes the most important types of offshore business activity carried out from the British Virgin Islands.

In common with many other offshore jurisdictions, the British Virgin Islands responded to pressure from the OECD and FATF by tightening up its regulatory regime. The BVI Government established an independent regulatory body - the Financial Services Commission (FSC) - on 1 January 2002. Then, in October, 2002, the BVI Finance Centre was established under the FSC as a dedicated financial services marketing unit designed to promote the BVI as a premier international centre for financial services.

The Finance Centre is responsible for providing information on the BVI and its activities, co-ordinating BVI participation at industry conferences and events, liaising with the media and producing marketing material including advertising, brochures and a new web-site.

The British Virgin Islands has not escaped the contagion of the global financial and economic crisis however, and Premier and Minister for Finance Ralph T. O'Neal disclosed to parliament that 2008 was "a year of little or no growth in financial services."

Responding to a question in the First House of Assembly, O'Neal revealed that company incorporations were down by 20% in 2008 compared with the record year of 2007, when 75,000 companies registered in the jurisdiction. Nonetheless, the 2008 figures are still the third-best on record, with corresponding revenue holding up well, he said.

However, it is the captive insurance and mutual fund sectors of the BVI's financial services industry that are being most badly affected by the global events, he relayed to the Assembly.

"The [Financial Services] Commission has already seen evidence of this in the increased number of requests by funds for voluntary cancellation and by notification of suspensions of redemptions as well as a downturn in the number of new applications for recognition," O'Neal said.

In December 2008, the British Virgin Islands received praise in a Caribbean Financial Action Task Force Evaluation Report.

The report concluded that the BVI is largely compliant with the FATF 40+9 Recommendations and that, as a territory, it has maintained a robust public policy commitment to ensuring that it plays its part in the global fight against money laundering and the financing of terrorism.

According to the BVI Financial Services Commission, the CFATF report highlighted the efforts undertaken by the BVI since the last CFATF mutual evaluation of the Territory in 2002 to ensure compliance with established Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) principles and the Territory’s commitment to the establishment of standards in legal, law enforcement, regulatory and international cooperation matters.

The Report specifically notes that:

“The [British] Virgin Islands has maintained a robust public policy commitment to ensuring that the Territory plays its part in the global fight against money laundering and the financing of terrorism. Successive Virgin Islands governments have promoted policies to ensure that the jurisdiction can play its part to effectively combat cross border financial crimes, maintain a reputation of being a clean jurisdiction, and where it is found that the jurisdiction has been used by criminals, to fully cooperate with the international community. This government commitment has led to the jurisdiction being in the forefront in the introduction of modern financial services legislation such as a licensing regime for trust and corporate service providers, immobilisation of bearer shares and the introduction of mandatory suspicious activity reporting obligations.”

In a statement the Financial Services Commission (FSC) said it was “pleased with the outcome of the mutual evaluation and the recognition given to the Territory’s adherence to AML/CFT standards."

The statement added:

"However, the FSC recognises that there are areas highlighted by the Report which call for improvement. In this context and in the context of the continuing changing circumstances and improvements to the global AML/CFT regime, the FSC is now focused on the adoption of appropriate measures to effect necessary improvements to its areas of AML/CFT responsibility in order to strengthen the Territory’s continued adherence to established standards relating to the global war against money laundering and terrorist financing.”

“The British Virgin Islands strives to ensure its continued place in the international community as a leading and reputable international finance centre. The Territory will continue to be a strong cooperative partner in the shaping and implementation of compliance standards and supervision pertaining to money laundering and terrorist financing, while ensuring a modern and conducive atmosphere for the conduct of legitimate business.”

 

 

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