We talk to the CEO of BVI Finance about the jurisdiction's approach to publicly accessible registers of beneficial ownership - a thorny issue as it can raise questions about the boundaries of legitimate financial privacy.

The government of the British Virgin Islands, an international financial centre that has come under pressure to roll back privacy in the name of beneficial ownership disclosure (BO), recently said that it supported access to such information, although with certain reservations. The BVI commented on a report issued by the UK-based Royal United Services Institute for Defence and Security Studies.

This is a major international issue – the US Senate last week voted to ban anonymous “shell companies”, for example, while some lawyers argue that without controls, public disclosure would threaten legitimate privacy. 

This news service recently spoke to Elise Donovan, chief executive of BVI Finance, the organisation representing the BVI’s financial services sector. BVI Finance has been spreading the word about the jurisdiction’s advantages to regions such as Asia in recent months.

WealthBriefing: The BVI’s Premier recently spoke about the BVI’s commitment to beneficial ownership, but also mentioned his continued “reservations.” Can you spell out what those reservations are? 
Donovan: As you know, the discussion on publicly accessible registers of beneficial ownership has become an ever-evolving standard. The BVI Government committed to work towards a publicly accessible register of beneficial ownership in a format that must be in line with international standards and best practices as they develop globally and, at least, as implemented by European Union Member States by 2023, in furtherance of the EU Fifth Anti-Money Laundering Directive (AMLD5)

The Premier elaborated by saying that the BVI’s commitment is made with all due regard to the protection of, and proportionate safeguards for, all rights secured under our Territory’s Constitution, and without prejudice to any interpretation of our constitution expounded by a court of law, whether in the past, pending, or in the future.

The RUSI report talked about a number of steps that should be taken by international financial centres, such as harmonising standards between IFCs on beneficial ownership; external validation of standards, and so on. What in your view is the most important of RUSI’s recommendations, and why? 
The RUSI report provides a range of important recommendations that Governments and policymakers can consider when looking to implement the most effective systems of beneficial ownership disclosure. Perhaps the most significant of these recommendations is the assertion that public accessibility of beneficial ownership information is rarely, if ever, held out as an end in itself. 

The report is clear in stating that what does matter, however, is understanding what the users of such information require, securing its accuracy and ensuring it does not acquire a totemic status which obscures other meaningful efforts against financial crime.

I am particularly pleased to see that the domestic verification of data is one of the key principles advocated in the report. For beneficial ownership information to be credible and accurate, the report clearly states that one of the ways is through placing the burden of verification on the state, and centralised through a registrar or other state authority.

The BVI has been at the forefront of this field for close to three decades. Currently, all companies incorporated in the jurisdiction have to be verified by licensed and regulated corporate service providers. In practice, this means that the British Virgin Islands is better placed than most jurisdictions to provide accurate beneficial ownership information to competent authorities and global law enforcement agencies. The report is a step in the right direction.

In the BVI’s case, our Beneficial Ownership Secure Search system (BOSSs) represents a unique database without equal. BOSSs is a fully searchable platform that holds verified data on the beneficial owners of companies incorporated in the BVI and enables direct access by BVI competent authorities to beneficial ownership information on corporate entities incorporated in the BVI. This information is subject to meeting strict due diligence guidelines governed by the FATF, including know your customer (KYC) and anti-money laundering (AML) checks in line with global standards. Furthermore, the platform demonstrates the BVI’s ability to innovate and adapt to evolving standards without serious detriment to its clients.  

What further steps at an international level do you think need to be taken to provide an objective measure of whether BO public registers are effective?
For public registers of beneficial ownership to be fully effective, they must be in line with international standards and best practices as they develop, and they must be adopted globally. The Premier has pointed out alternative models which allow access to the various levels of data (that would be contained in a register), but that contain built-in safeguards such as the use of court-approved warrants based on the demonstration of probable cause-to-grant access to sensitive personal information. These models pose significantly less risk to the financial services industry while satisfying the objectives of law enforcement to identify and prosecute terrorists, tax evaders and money launderers, while not disproportionately infringing the rights of the innocent and law-abiding.  BVI’s BOSSs is an example that has been lauded by law enforcement authorities as being effective.
 

In recent years, a concern raised has been threats to legitimate financial privacy. We have seen a number of “leaks” from IFCs. Do you think the need for financial privacy is becoming more appreciated these days? How far can demands for transparency go before hitting a big problem?
The BVI continues to adhere to global standards in combatting money laundering and countering the financing of terrorism. However, there is a legitimate ground for concern that, without appropriate checks and balances, publicly accessible registers could be abused by persons with ill intent. There needs to be prudence and balance in the systems so that the rights of law-abiding taxpayers, who are far greater in number than the targeted law-breakers, are not breached.

Furthermore, there are concerns that unrestricted access to beneficial ownership information by the general public is in clear violation of some of the express provisions of the General Data Protection Regulation (GDPR), which came into effect in the European Union in 2018.  

Governments the world over are going to be even keener to hunt for supposed “pots of gold” in IFCs in order to fill their ravaged public coffers. Does this make you concerned about threats to IFCs such as the BVI? 
While there are no pots of gold in IFCs, IFCs facilitating global trade and investment do bring significant benefits to the global economy.  According to the Creating Value: The BVI’s Global Contribution report by Capital Economics, which highlights the impact on global tax receipts, and the economic and fiscal contribution related to investment mediated by BVI Business Companies, for example, the BVI is a net contributor to the economic activity. The incomes generated by 2.2 million jobs worldwide are likely to contribute over $15 billion annually to government coffers globally. The governments of the European Union, including the United Kingdom, are estimated to benefit to the tune of over $8 billion each year.

Furthermore, International finance centres, such as the BVI, play a crucial role in addressing the need for developing countries to mobilise finance to facilitate economic development. IFCs help the mitigation of the risks associated with investing in developing countries for private investors, thus mobilising private finance to regions such as Africa. This is achieved through sound rule of law, providing a neutral location for funds to be amalgamated, and by offering tax neutrality so that investors are not taxed in multiple jurisdictions.

In addition, the BVI has taken a strong lead in robust financial processes, and the BVI adheres to global standards in combatting money laundering and countering the financing of terrorism. The BVI is a fully compliant, “white-listed” jurisdiction as recognised by the FATF, the OECD, the EU and similar bodies, and our jurisdiction remains highly committed to the transparency and international cooperation agenda. We believe that the regulatory standards must be adhered to globally in order for them to be effective. In fact, the BVI’s long-term commitment to transparency, is in line with international standards and best practices. 

The BVI and some of its peers have been promoting themselves to investors in regions such as Asia, the Middle East, etc. How do you think the “brand” of the BVI now looks to people in different parts of the world? How can you differentiate yourselves from other IFCs?
The consensus among the global business community is clear, the BVI is recognised as a globally respected jurisdiction and as a world leader for excellence and innovation in financial services. Echoing this sentiment, a report by VISTRA 2030 that highlights the key trends within the financial services industry, ranked the BVI as the number one offshore jurisdiction, 10 years after the first study was launched.

According to the VISTRA 2030 report, the British Virgin Islands’ most valued attributes are its stability, expertise, flexibility and ability to offer global reach, which the report states accounts for the BVI’s “enduring stickiness.” Ultimately, we maintain key attributes that people around the world in Asia, the Middle East and Africa appreciate, such as a familiar legal system based on English common law, internationally compliant regulations, and jurisdictional and tax neutrality. All these elements make the BVI a desirable jurisdiction for pooling capital globally and investing it in markets where legal barriers or political risks would otherwise deter investment.

A report by East & Partners published earlier this year echoes this sentiment and shows that the British Virgin Islands (BVI) is often at the forefront of minds for these crucial segments. This is due to its reputation as an international investment and trade hub that adheres to all global standards, deploys leading-edge technology for clients and compliance, and attracts and retains a dynamic and internationally-minded talent pool.

We are also top of the agenda for many Asian investors thanks to the market’s confidence in the BVI and the long-standing role we have played in the region’s growth over the last three decades. This is now all about how the BVI can help structure growth in the future and we look forward to increasing these relationships and partnerships in future.