BVI Among Top Investors According to Chinese FDI Statistics in 2008

The Ministry of Commerce of China said that the growth of foreign direct investment (FDI) into the Chinese economy fell for the third month of 2009. For the whole year 2008, FDI however grew 23.58 percent and made $92.4 billion (compared to 13.59 percent to $74.8 billion of actually used FDI in 2007), due to the intense growth in the first three quarters of the year.

According to the data reported by the Ministry of Commerce, the major source of FDI for China in year 2008 was Hong Kong, which provided the country with $41 billion for a 48 percent annual increase. The second big FDI source was British Virgin Islands, which invested $15.95 billion. However, the percentage of funds invested by the BVI is just 3.62 - that is less than in 2007, reflecting the general trend.

The level of foreign direct investments from Japan rose 1.76 percent and made $3.65 billion in 2008, followed by South Korea with $3.14 billion (14.76 percent), and the US with $2.94 billion – the rise of 12.54 percent.

The industries which received most of all FDI were banking, insurance and securities, which drew $38.1 billion, or 24.23 percent more than in 2007. Actually, in the past decade China has been one of the biggest FDI recipients, but some experts guess that the global financial crisis could change this trend. For example, Mei Xinyu, a senior researcher with the Ministry of Commerce, said he was not optimistic about this year FDI level. Some experts even say that FDI could fall by 5-10 percent in the first half of the year, but positive turn is also expected – in the second half of 2008.

Advisory Warning on BVI Insurance Company issued by the Commission

On 17 February 2009, the British Virgin Islands Financial Services Commission issued Advisory Warning No. 1 of 2009 concerning insurance company Source One Insurance Ltd. The Commission informed the public that the company is no longer licensed under the Insurance Act, 1994, to carry on insurance business from the BVI territory, based on the fact that the licence granted to Source One Insurance Ltd. expired on 31 December 2007 and has not been renewed since that time.

The BVI company tried to continue its operations into another jurisdiction but could not because it has failed to comply with the BVI's laws and requirements to do so.

The BVI FSC advised public to exercise extreme caution in conducting any transactions with Source One Insurance Ltd., as it has no licence to carry on insurance business in or from within the British Virgin Islands.

BVI FSC Makes Changes to BVI AMLTF Code

The BVI FSC has amended the BVI’s Anti Money Laundering and Terrorist Financing Code of Practice which has an impact upon all BVI-registered entities and professionals. The current changes also changed Code’s effects on BVI offshore mutual funds, their managers and administrators. These amendments are the first of a series of changes to the Anti Money Laundering and regulatory regime of the British Virgin Islands. They are effective from February 5, 2009, and will be subject to active enforcement by the FSC from February 22, 2009.

The changes were implemented as a result of financial industry consultations and the recent CFATF report of the BVI, and many of them are expected to be of great practical significance. The Commission produced the list of countries and territories which are acknowledged as “recognized jurisdictions” equivalent to the BVI for anti money laundering purposes. Also, now it is accepted that a BVI entity (including a mutual fund) may outsource many of its Anti Money Laundering Compliance functions to other persons or entities both inside and outside the BVI.

The FSC accepted that an administrator from a recognized jurisdiction from the list, observing its local Anti Money Laundering and know-your-customer regime for a BVI fund, is compatible with that BVI fund’s own obligations under the Code. The Commission removed the presumption that enhanced customer due diligence should be applied in cases of non face to face business, and introduced the Wire Transfer Test to assist the verification of customer due diligence.

Among the new obligations there are: the requirement to have written outsourcing agreements with service providers which set out how Anti Money Laundering compliance is achieved, and the requirement to introduce an independent audit function for Anti Money Laundering and know-your-customer regime compliance.

Robert Mathavious Speaks on Challenges and Developments in the International Regulatory Environment

Robert Mathavious, Managing Director and CEO of the BVI FSC, has made a presentation within Meet the Regulator Forum on the state of the local financial services industry and the developmental changes that confront it. The presentation of Robert Mathavious addressed to financial services providers on the territory, also included general analysis of the situation in the international financial industry in 2008, which proved to be turbulent and troubled year for business.

Among other things, he mentioned that the OECD is now compiling green and black lists of Offshore Financial Centres (OFCs), based on the level of progress in entering Tax Information Exchange Agreements with OECD countries. The British Virgin Islands, Bermuda and other Caribbean overseas territories are excluded; the BVI already has a TIEA with the US, and the BVI authorities made efforts to have the BVI removed from the list which does not distinguish between jurisdictions that comply to international standards, and “uncooperative jurisdictions”. He noted that the long-term success of the BVI financial services industry depends on the international reputation of the jurisdiction.

Mr Mathavious evaluated recent CFATF report as the “most comprehensive and authoritative assessment” that has ever been conducted of BVI's AML/CFT regime. By his words, the effect of the global financial turmoil on international markets and on policymakers' attitudes towards OFCs is a big challenge for the BVI financial industry.

The head of the Commission resumed that some steps are necessary to develop and implement a plan for strengthening the value proposition of the financial services sector, and enhancing its international competitiveness, and the main step would be ensuring compliance with international standards.

Registry of Corporate Affairs Publishes User Guide on CapCos Re-registration

The Registry of Corporate Affairs of the BVI Financial Services Commission has published user guide providing information on re-registration of Companies Act Companies (CapCos) under the BVI Business Companies Act. The User Guide #6 is one of a series of user guides informing about different aspects of the BVI Business Companies Act.

Under the BVI Business Companies Act, which replaced in 2004 the International Business Companies Act and the Companies Act, all IBCs have already been re-registered, and all the CapCos which do not re-register voluntarily go through the automatic procedure. From the re-registration moment, both CapCos and IBCs are named BVI Business Companies.

The deadline of BVI Companies Act Company re-registration was postponed a year ago, from January 1, 2008 to January 1, 2009 for automatic re-registration, and from November 30, 2007 to November 30, 2008 for voluntary applications. The purpose of the User Guide #6 is to inform CapCos directors and shareholders about the difference between automatic and voluntary procedures, which is very significant in the way how the Act applies to CapCos re-registered. So, the Guide clarifies the re-registration process for CapCos and the consequences of voluntary and automatic re-registration. Also, the document contains summary of statutory provisions governing re-registration.

The Guide names the reasons for the requirement to appoint Registered Agent for re-registered BVI BC, taking into consideration that CapCos have never been required to have Registered agent, and states the obligations on CapCos with respect to the appointment of the Agent.

With the purpose to make companies’ directors and shareholders more informed on all the issues of re-registration, on February 9, 2009 the Commission published FAQ on re-registration of former local companies.

First Ombudsman Appointed by the British Virgin Islands

During a ceremony which was attended by the Governor of the British Virgin Islands David Pearey and Premier Ralph O'Neal, Elton Georges was appointed as the first Complaints Commissioner for the territory known as Ombudsman. Prior to this appointment, Elton Georges served as Deputy Governor for two decades, being the right person for the job because of his qualifications, ability, experience and knowledge. Elton Georges was praised both by the Premier and the Governor, Ralph O'Neal also spoke of Georges' outstanding contribution to the territory, and also noted that he won the first scholarship in the territory to study in Canada.

The functions of the Complaints Commissioner are considering and responding to complaints relating to maladministration, appointment of mediators where necessary to help resolve disputes, promoting public awareness, investigating complaints, and protect people's interest among other functions. The BVI Governor said that the appointment of the Complaint Commissioner will raise the standards of governance, administration and service of the territory.