The first six months of 2013 saw an unprecedented level of international media criticism levelled at ‘offshore centres’. In April, a coordinated attack based on leaked confidential financial records, a global media network published a series of stories relating to individuals and companies who use ‘offshore’ structures as part of their wealth and business planning. The implicit tone of much of this reporting was that anyone with an ‘offshore’ account was doing so for illicit purposes. Yet, the head of the organisation that obtained the stolen information admitted himself that: “There is nothing illegal in owning an entity in an offshore centre.”
But the intense surge of media articles concerning offshore centres has brought the public’s attention to the wider discussion about global taxation and the role of ‘offshore centres’ in cross-border finance. This has been exemplified too in the corridors of political power, not least in the run up to the G8 Summit in June.
The British Virgin Islands has welcomed the high-level discussion. “We see the spotlight pointed towards IFCs as an opportunity to put the record straight and present the facts on the legitimate and vital role centres like the BVI play in maintaining a stable and efficient global economy,” said Ms Elise Donovan Executive Director of the BVI International Finance Centre (BVI IFC). “Our aim is to evidence the fact that over three decades the BVI, in particular, has become a progressive, professional financial centre offering a broad range of services and products underpinned by some of the toughest regulation in the world. The same cannot be said of many countries, including several of those involved in the G8 discussions.”
The G8 Summit focused on David Cameron’s three ‘Ts’ – tax, transparency and trade and campaigned for the introduction of higher regulatory standards. The tone of the political and media rhetoric implied that smaller ‘offshore’ financial centres were in some way below those of larger more established ‘on-shore’ centres. Far from being behind the curve on implementing international standards, the BVI has used the debate to reiterate its 20-year track record of developing regulations to combat financial crime.
The BVI was one of the first jurisdictions to introduce anti-money laundering legislation in 1999 and one of the first to sign on to the OECD principles of transparency, accountability and information exchange on tax in 2002. The BVI has now signed 24 tax information exchange agreements (TIEAs) and continues to negotiate with several countries. On top of this, the outcome of the G8 meeting saw the BVI and the other British Territories agreeing to three important steps:
To play an active part in the new pilot initiative of multilateral automatic tax information exchange launched by the UK, France, Germany, Italy and Spain;
To prepare national action plans on Beneficial Ownership to meet the FATF standards; and
To commit in principle to joining the Multilateral Convention on Mutual Administrative Assistance on Tax Matters.
The Multilateral Convention on Mutual Administrative Assistance on Tax Matters, which the BVI has agreed to sign up to in principle and pending further discussion, is very similar to the 24 TIEAs the jurisdictions has already put in place. It will build upon the BVI’s existing network of multiple bilateral agreements as well as the other existing arrangements that enable the exchanging of information between countries.
Ms Donovan said: “The BVI IFC’s policy is to ensure that the BVI is in a position where both its competitiveness and reputation are maintained. Good regulation is good for business. We are fully committed to ensuring that the financial services industry in the BVI continues to be vibrant and internationally well regarded. We are confident in our industry and our regulatory history and we will aggressively uphold and defend the BVI’s reputation with all interested stakeholders.”
“Where wrong-doing is discovered appropriate enforcement action is and will be taken,” said Ms Donovan. “We continually review our existing legislative regime to ensure transparency, effective cooperation and compliance with established international standards.”
Financial transparency has been one of the key talking points in global politics over the last six months, culminating in the G8 summit in June. Ms Donovan explained: “There has been widespread campaigning against IFCs by anti-offshore quarters. This has been well-funded and organised, but largely based on misinformation and reliance on dated stereotypes.”
Looking ahead, Ms Donovan is highly confident that the BVI will continue to grow and remain at the heart of international finance and global trade. The jurisdiction’s political stability and legal system backed by an efficient and respected court structure continue to attract business, including major multinational corporations, while the extensive level of regulation and push into new markets and lines of business also draws in new clients. According to Ms Donovan These qualities have led to the BVI becoming one of the world’s leading centres for financial services.
The BVI plays a significant role in the global economy and the jurisdiction remains highly committed to the transparency and international cooperation agenda and recognise that regulatory standards must be adhered to across the globe. Ms Donovan said, “we will continue to cooperate with our international partners to ensure that we maintain and enhance the quality of our regulatory regime. We stand resolute in the knowledge that the BVI will continue to go from strength-to-strength both as a respected and responsible jurisdiction and also as a world leader for excellence and innovation in financial services.”