FSC Amendment Bill Passed by the House of Assembly

On August 11, 2009, the House of Assembly passed the Financial Services Commission (Amendment) Bill, 2009 with significant amendments to certain provisions in the Financial Services Commission Act, 2001. One of the important issues addressed by the Bill is the independence of the Financial Services Commission as a regulatory body, in response to the concerns of the financial services sector about the new duties imposed on authorized or registered agents.

The Bill addresses a loophole in the current legislation which did not allow the BVI FSC to take enforcement action against defaulting licensed entities, due to the inadvertence of their registered agents. However, the House of Assembly passed the final Bill without strict liability provisions for registered agents. When the agents report a breach or offence committed by their licensees to the licensee or the FSC, they are provided immunity. If they fail to comply, they may be subject to a fine not exceeding $25,000.00.

Also, the Bill requires that the reasons should be provided by the Cabinet for removing members of the Board and the Managing Director of the Commission. It should be said that under BVI law there is no requirement that reasons should be given for administrative decisions, and this amendment would bring greater transparency to the decision-making process by the FSC and greater independence to the FSC in conducting its regulatory functions.

When assented by the Governor, the Bill will require the Commission to publish its estimates, work plans, audited accounts and financial statements, and annual reports to ensure greater accountability.

Regular Volume of Statistical Bulletin Issued by the BVI FSC

On July 31, the BVI Financial Services Commission published the fourteenth volume of its Quarterly Statistical Bulletin providing information on financial services activities in the first quarter of the year (ended with March 2009). By the data of the Registry of Corporate Affairs, the number of new offshore company incorporations in this period made 12,307 - meaning there is quite a significant increase compared to the fourth quarter of 2008, but not a very large number compared to the first quarter of 2008, and especially to the same period of 2007. Also, in the first quarter of 2009 just 14 Limited Partnerships were established. The cumulative number of company incorporations as of March 31, 2009 was 435,679, and the number of limited partnerships was 596.

In the first quarter 2009, Banking & Fiduciary Services sector reported total assets of $2,362,258,000 and investments of $4,229,000. Total shareholders equity made $327,500,000. Banking sector reported net income in the amount of $20,060,000, and operating income of $29,463,000. Liquid assets made 25.25% of the total assets, and 35.73% of total deposits; loans made 68.41% of total assets and 103.93% of total deposits.

Investment Business statistics showed 10 licenses were newly issued to investment managers (cumulative number 504), and 61 Certificates of Recognition and Registration. Also, in the first quarter 2009 four Public Mutual Funds (bringing total number to 69) and one Private Mutual Fund (total number 20) were registered. According to the Insurance Services sector, in Qtr1 2009 1 new Captive Insurers license was issued and 265 renewed.

Legal and International Cooperation statistics showed that there were 42 International Cooperation matters, 27 of them requiring the disclosure of public information, 38 Enforcement Matters and 2 Advisory Warnings issued.

BVI Moves Out of OECD “grey list”

After the British Virgin Islands signed tax information exchange agreement with New Zealand, which became its 12th pact, it came in line with OECD standards for moving it to the “white list” of jurisdictions. So, last week BVI and the Cayman Islands joined the list of countries using internationally recognized tax standards, as it was said by the Organization for Economic Cooperation and Development.

Since April 2009, when the G20 group of countries in co-operation with the OECD published a “grey list” of more than 30 countries, including BVI, that had agreed to move towards tax transparency standards but had not signed the necessary international records.

To get off the list, governments of these financial centres had to sign at least 12 bilateral tax agreements in line with OECD standards. Both the British Virgin Islands and the Cayman Islands signed pacts with New Zealand to provide the needed amount of bilateral treaties.

By words of the head of the OECD's Center for Tax Policy and Administration, Jeffrey Owens, the British Virgin Islands and the Cayman Islands took their place “alongside other countries that have substantially implemented the internationally agreed tax standard." He added that since April, six jurisdictions have moved to the “white” list.

By signing the 12th agreement and moving from the “grey list” of jurisdictions, BVI can avoid the accusations of being non-cooperative center favouring tax evaders and harboring those who hide billions of dollars out of reach of their home authorities.

BVI FSC Issues Anti-Money Laundering Code of Practice

In July, the BVI Financial Services Commission published a document relevant to the Anti-Money laundering legislation. The Anti-money Laundering and Terrorist Financing Code of Practice, 2008 is consolidated by the Financial Services Commission on 17 February, 2009, in accordance with section 27 (1) of the Proceeds of Criminal Conduct Act, 1997, and after consultations with the Anti-Money Laundering and Terrorist Financing Advisory Committee.

As it is set in the Code, the objective of the supplementary legislation document is to provide greater understanding and appreciation of “ the current legal, regulatory and enforcement regimes with respect to compliance with anti-money laundering and terrorist financing measures.” The provisions of the Code establish the proportionate duties of the Financial Investigation Agency and the FSC, establish the internal control systems and requirements to customer due diligence, provide information on shell banks and correspondent banking relationships, wire transfers, record keeping and employee training.

The Schedules of the document include: best practices for charities and other non-profit associations, the list of recognized jurisdictions, the types of suspicious activities, and the table of offences and administrative penalties.

The BVI, as one of the major financial services providers, has to ensure compliance with internationally established standards of regulation and enforcement relating to anti-money laundering and countering terrorism financing. The BVI is required to fully comply with the requirements of the 49 FATF Recommendations, and it fully observes the established standards of international organizations of which it has membership - International Organisation of Securities Commissions (IOSCO), International Association of Insurance Supervisors (IAIS), Offshore Group of Banking Supervisors (OGBS) and Egmont group. The Code is aimed at achieving good corporate governance and the promotion of international co-operation to ensure financial stability; the document is setting down minimum standards of compliance, which will assist to develop and implement systems that effectively combat abusing the legitimate tools of business transactions through criminal conduct.

The Code in fact supplements the provisions of the following documents: the Drug Trafficking Act, 1992, Proceeds of Criminal Conduct Act, 1997, Financial Investigation Agency Act, 2003, the Terrorism (United Nations and Other Measures (Overseas Territories) Order 2001, the Anti-terrorism (Financial and Other Measures) (Overseas Territories) Order 2002 and Antimoney Laundering Regulations, 2008.