When Manuel Noriega died in Panama in May 2017 an Anguillan friend who loves to tease me, wrote asking whether we in the BVI were flying our flags at half-mast in honour of all we owed that now notorious former President of Panama! Although the BVI had been the beneficiary of a double taxation treaty with the United States up to 1982, when the Reagan Government unilaterally terminated it, and although the International Business Companies Act had been introduced in 1984 in response to that termination, more than a few people agree that it was the fall of Noriega in Panama in 1989 that really gave the BVI IBC a shot in the arm - so ‘trouble’ in Panama turned out to be a ‘triumph’ in the BVI.
It is useful to observe that from 1988 through to 1998, the BVI enjoyed unprecedented growth on the strength of the radical new corporate vehicle introduced in 1984 as the International Business Company (IBC). The attraction of this innovative corporate vehicle was based, not only on the very nature of the company itself, but also on the environment from which that company was being sold. The political stability of the BVI, the fact that the US Dollar was legal tender, and the fact that the Queen of England was Head of State, were all listed as part of what came to be called ‘the BVI Advantage’. Economic prosperity attracted some scepticism and was of some concern to the Foreign and Commonwealth Office of the Government of the UK. A Review of Financial Regulation in the Caribbean Overseas Territories and Bermuda, published in 1998 and known in financial services folklore as the Edwards Report’, highlighted the lack of regulation in the trust and company service provider industry and raised some alarms at the number of companies then incorporated in the BVI (then about 100,000).
Happily, the BVI had the capacity and capability to be immediately responsive to the implied criticism and a suite of legislation already on the drawing board that would begin the regulation of the industry, was quickly introduced. Also in response to the Edwards Report, the Government was advised to separate the regulatory responsibilities for the industry from the practical aspects of all promotional activity. The International Finance Centre as a unit within the Ministry of Finance, responsible inter alia for the marketing and promotion of the BVI’s financial services industry, was launched in the late 1990s. Regulatory responsibility fell to the Financial Services Commission. And these units helped to earn the BVI a reputation for excellence – ‘admired at home and respected abroad’.
The BVI was diligent, vigilant and resilient. Subtle pressures brought to bear by the UK were met with stoicism and professionalism. In addition to implementing stricter regulation, the BVI took its show on the road. Finally in full and open collaboration with the private sector, the BVI embarked on promotional events in all of our key markets. The BVI IFC bore all of the costs of hosting these events, but the private sector provided advocates for the various sectors of the industry, meeting our clients and their governments on their own turf and bringing the BVI to them in order solidify relationships and reinforce our commitment.
At home deeper co-operation between the regulator and the industry began to result in the updating of all legislation, giving new life to new ‘products’. The IBC Act was modernised and morphed into the BVI Business Companies Act, the Trustee Act, and some attendant regulatory statutes were updated as well and a new trust was introduced under the Virgin Islands Special Trusts Act (VISTA) The establishment of Private Trust Companies was facilitated by the introduction of amendments to the regulatory regime that exempted a BVI Business Company from licensing requirements. New revenue streams were realised as insolvency laws were modernised and the BVI moved rapidly and efficiently to get itself on and off the right and wrong lists. But negotiating Tax Information Exchange Agreements (TIEAs) and attending all the right international fora at which transparency and confidentiality were being decimated, was not enough. The BVI was targeted over and over again as being a danger to the global economy. Tax efficiency was deemed to be a mortal sin and the BVI was tarred and feathered as a ‘tax haven’.
Beginning in 2008, the global financial crisis was eventually blamed on all IFCs, as the BVI and others were accused of seducing tax revenues away from European governments, hungry for cash, which fantasised that everything they needed was being hoarded by the ‘offshore’ world. Soon, incorporation rates, having hit an all-time high in the mid-2000s, began to slow and it was feared that the industry was shrinking. Before long another wolf was baying at their heels. In the metropolitan centres, advances in technology brought a threat that could not have been foreseen. Activism by ‘investigative journalists’ aided by disgruntled employees and by the ‘evil geniuses’ of the IT world began to wreak mayhem on the BVI’s financial services industry. Weaponising the very transparency advocated for by the international initiatives, ‘journalists’ and hackers colluded to breach the very confidentiality that the BVI had fought so long and hard to preserve. By the stroke of a few pens and more than a few keyboards, the BVI’s unique selling proposition was attacked as the ICIJ waged war on all IFCs – with the BVI featuring large in their sights. The BVI could do little to avoid the relentless tide of international criticism. It seemed that the BVI was front page news in Europe all day every day! So more regulation, more measures to curb the ‘opaqueness’ of the ‘offshore shell companies’ that were the plague of Europe, were introduced. The BVI reeled under the multi-pronged attacks – from journalists, from European civil servants, from the difficult global economy, from hackers from the UK Government itself – all designed to negatively impact the industry that had long overtaken tourism as the stronger of the two pillars of the BVI economy.
Now, in the wake of intense global pressure for disclosure of the identity of beneficial owners, the BVI remains determined to retain its image as a robust, well-regulated and thriving international business centre, so it has responded forcefully to the challenges and has embraced an opportunity for reinvention, refocusing on its strengths, regrouping and rebuilding for the future. In fact, the BVI’s response has been nothing short of heroic. The BVI Government has made huge investments in protecting the industry. Setting up a Hong Kong Office in 2010 was seen as a hugely important step towards cementing the BVI’s relationship with Asia and provided the base for new relationships with China. But more recently, investments in research that will guide government policies on the way forward for the financial services industry have been very effective. The McKinsey Report, published in late 2014 made recommendations about internal restructuring geared towards re-positioning the BVI at the top of the class. More effort has been put into winning the support of the public sector for making changes that will facilitate the growth and development of the industry and the jurisdiction. The Financial Services Implementation Unit was tasked with facilitating improvements in the delivery of vital immigration and labour services, as well as a focussed education programme designed to win the support of the population for the financial services sector.
A second study commissioned from international business development consultants Capital Economics and published in early 2017 has reinforced BVI’s image as a valuable contributor to the global economy – not as a much derided tax haven, but as “a sound and reliable financial services centre which has worked harder than many of the world’s leading nations to meet international standards”. Renewed efforts at the marketing and promotion of the financial services industry has now formalised a long-standing collaborative partnership between the public and private sectors in the form of BVI Finance Limited (BVIFL), an entity that will now take up where the government’s International Finance Centre (more recently known as BVI Finance) has left off. Armed with the results of the Capital Economics study, BVIFL will move forward to promote the business proposition that the BVI, “as home to a unique cluster of financial and professional services firms that form an ‘international business and finance centre’”, continues to be a valuable partner in the development of the global economy on the basis of “the ‘BVI Business Company’ - a widely used and dependable vehicle that facilitates cross-border trade, investment and business”.
With a stated mission “to be an innovative, efficient and respected international marketing and promotions organization”, BVIFL is charting a course that will achieve, not only the strengthening of the BVI’s reputation as a reliable, solutions driven and well-regulated financial services centre, but also the diversification of the BVI’s financial services industry. By making membership opportunities widely available within the industry and embracing the opportunity to involve all service providers in the jurisdiction, BVIFL hopes to benefit from the deep pool of expertise that makes its home ‘in and from within’ the BVI. With the current threat level at ‘crisis’, there is an urgent need for a creative and proactive counter-attack. All mature corporate citizens of the BVI are being challenged to use their own global reach to support the Government in its determination to achieve and maintain the long term stability of the jurisdiction. BVI Finance Limited offers new opportunities for the manifestation of the strength of the new BVI Advantages and represents the most viable vehicle for sustaining, protecting and enhancing the image and reputation of the BVI as a premier financial services centre. Their message is ‘BVI Forward’, and with the manifest level of commitment of both industry and government to this mission, it is easy to believe in the BVI once again!
Hélène Anne Lewis