STATEMENT BY PREMIER AND MINISTER OF FINANCE DR THE HONOURABLE D. ORLANDO SMITH, OBE ON BVI FINANCIAL SERVICES

Our Financial Services Industry Remains Strong 

Citizens and residents of the British Virgin Islands (BVI).

This week, two events will take place with the potential to impact the financial services of the BVI and I wish to speak today about how the Government is approaching these two matters.

First, we expect that later today there will be another “data dump” of information stolen from Mossack Fonseca. We do not expect anything new or particularly noteworthy to arise from the release, which may contain beneficial ownership information related to many companies domiciled in the BVI.

More significantly, on Thursday, the United Kingdom Government will convene an Anti-Corruption Summit in London, bringing together policymakers, business leaders, NGOs and representatives of law enforcement from around the world.

This first-of-its-kind gathering aims to send a powerful global message that corruption anywhere is a threat to the security, safety and well-being of people everywhere.

The BVI applauds this effort.

Prime Minister Cameron is to be commended for his leadership and commitment to this vital cause.

As a leading international financial centre, the BVI has long understood and embraced our unique responsibility to work with nations around the world to combat the flow of illegal money across the global financial system.

Our track record in this regard is unimpeachable:

Under existing law, intermediaries in the BVI are bound by professional obligation to maintain adequate, accurate and current information regarding the beneficial ownership of any BVI company and to disclose to the BVI Government as required.

A 2014 report found that 94 percent of BVI service providers are compliant with regulations that compel them to refuse to establish companies without proper documentation, as compared to just 6 percent of providers in the US state of Delaware and just 45 percent of providers in the UK. 

As well as strict Anti-Money Laundering rules, due diligence policies, ‘Know Your Client’ protocols and domestic laws, the BVI’s financial regulators are recognised members of the International Organization of Securities Commissions, which is the global standard setter for the securities sector.

The BVI wasone of the first jurisdictions in the world to implement the Organisation for Economic Co-operation and Development’s (OECD’s) Common Reporting Standard for the automatic exchange of tax information.

The BVI has tax transparency agreements with over 100 developed countries including Tax Information Exchange Agreements with 28 countries and multilateral agreements providing for tax cooperation with 76 countries, under the OECD’s Convention on Mutual Administrative Assistance in Tax Matters.

The BVI is ranked by the NGO Tax Justice Network as more compliant in tracking corporate beneficial ownership than half of the G8 countries - ahead of the United States, the United Kingdom, Germany and Japan.

The Financial Action Task Force (FATF) ranks the BVI as more compliant with international regulatory standards than the US and UK

And the BVI has inter-governmental agreements with the US and UK to comply with US FATCA, and UK International Tax Compliance to provide data on financial accounts held by its residents to the United Kingdom.

A recent issue of Offshore Alert makes the observation that the BVI Financial Services Commission is one of the most active offshore regulators that takes enforcement action against its licensees for Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) failures seriously.

We offer these points not as a boast, but rather as a demonstration of this Territory’s sincere and longstanding commitment.

And let me be clear, that commitment is not simply a matter of national ethics. It is also plainly a matter of national self-interest.

Our international finance centre depends on our continued ability to provide high-quality service to legitimate businesses around the world. Whatever miniscule and momentary economic benefit might be derived from doing business with corrupt parties is utterly dwarfed by the existential threat posed by the loss of credibility and legitimacy in the eyes of the global business community.

Our reputation is everything to us. We strive mightily to protect it.

It is against this backdrop that we wish to make clear our position on the question of establishing a new regime for the automatic exchange of beneficial ownership information.

To be sure, the underlying motivation for establishing such a mechanism is positive. Combatting the efforts of criminals and terrorists to flow money through the international financial system can be aided by empowering law enforcement in one jurisdiction to quickly and easily access company ownership information in another jurisdiction.

Indeed, as noted previously, this is precisely the reason the BVI became one of the world’s first jurisdictions to implement the OECD’s Common Reporting Standard for the automatic exchange of tax information and why the BVI has multilateral agreements with nations around the world to allow for the convenient flow of essential information.

However, we also must recognise that legitimate businesses have a right to basic privacy and confidentiality in their affairs, as well as a reasonable expectation regarding the security of their data and information. All of this could be put at risk under a hastily constructed regime for housing and providing access to beneficial ownership information.

Law abiding businesses should never fear unjustified exposure to the eyes of any government, media outlet or other third party.

A global automatic exchange of beneficial ownership information regime might be consistent with this fundamental right. But attaining that standard in an effective manner is not something anyone can take for granted.

And the BVI will be unrelenting in our efforts to advocate for that fundamental right across three dimensions.

First, data security. The moment we begin housing vast amounts of highly sensitive, private business information and then providing access to that information to a wide array of actors, the risk of a breach goes up immeasurably.

If legitimate businesses fear that their international transactions will be exposed to the world, or, worse yet, accessed by criminals or terrorists and used as a weapon of extortion or intimidation – then the gears of international finance will start to grind.

Data security must be at the very top of the international agenda if any system of automatic exchange of beneficial ownership information is to succeed.

Second, appropriate legal constraints. Governments and law enforcement have legitimate reasons for seeking access to otherwise confidential business information. But that does not mean that any such request is, by definition, legitimate. Like all institutions, governments and law enforcement agencies are susceptible to their own corrupting influences and the power to reveal sensitive business information can be abused without appropriate safeguards.

Finally, the system must be truly global. It will not redound to the benefit of anyone if a small number of jurisdictions sign up to this information exchange system while many others do not.

In that scenario, the dollars of criminals, terrorists and tax evaders will simply flow to those jurisdictions that exempt themselves from the information exchange system. The anti-corruption cause will not benefit, even as the rights of legitimate businesses are eroded.

With these reservations noted, the BVI is supportive of the achievement of a global information exchange regime. Done the right way, it can provide a powerful tool in the fight against corruption, criminality and terrorism.

We also view such an effort as a critical defense of the broader cause of economic globalisation.

Of all the many harms caused by corruption and illegal activity, perhaps none is so pernicious as the way it tends to undermine confidence in the value of the globalised economy.

We in the BVI hold firm in the view that globalisation has been a profoundly positive force for the overwhelming majority of humanity. It is the dynamic that has made this era more prosperous, healthy, peaceful and secure than any time in human history.

From China, to Africa, to the Pacific Rim, to South America, to the Caribbean, entire nations and regions that have been mired in grinding poverty for generations have seen a sustained era of economic growth without precedent.

Like all phenomenon in human affairs, globalisation has its negative side effects. The ability of corrupt individuals, illicit businesses and terrorists to use the global financial system in furtherance of their nefarious activities is one such side effect.

As a global community we must be relentless in our efforts to defeat such cancers on the system. But we must do so with a clear and unwavering understanding that we not kill the patient in order to fight the disease.

If the global community by intention or by mistake undermines the ability of financial centres like the BVI to serve our essential function, it will be the economies of the world that suffer.

The criminals will always find another way to do their dirty business. It is far less clear where legitimate businesses will turn if they can no longer efficiently transact investments across and between jurisdictions around the world.

So we speak directly to the leaders gathering this week in London: move forward together toward ever greater international cooperation in the fight against corruption.

And as you do so, never lose sight of the untold billions not necessarily represented in your midst. The people and communities in every part of the globe who have been the greatest beneficiaries of globalisation,make sure that their vested interest in a vibrant global financial system is not lost.

Finally, let me say a word to the people and businesses of the BVI. In the midst of today’s uncertain environment, our financial services industry remains strong and our commitment to it is rock solid. 

We are one of the world’s leading financial centres and will continue to be so for the future.

In partnership with industry, we remain focused on what matters most – creating value for all industry stakeholders including businesses, investors, service providers and the people of the BVI.

That has been our recipe for success for decades and nothing in this current moment will change that.

We have seen controversy come and go in the past. We will see it again. And always, we endure by remaining fixed on the fundamentals.

That is how we serve not only those we represent, but the many who benefit from our industry throughout the world.