It Is Not Business As Usual, Robert Mathavious Says
With regards to the threat to the BVI's financial services industry, all is not yet clear and it can no longer be business as usual! That's the message from Director of the Financial Services Department Mr. Robert Mathavious to the Association of Registered Agents (ARA). He was the guest speaker Wednesday July 12th at an ARA luncheon held at Maria's By The Sea.
Mr. Mathavious focused on the considerations that have factored into the government's response on the initiatives presently targeting offshore centres. He noted that in addressing the ARA on February 22nd, Chief Minister Hon. Ralph O'Neal outlined the threats that needed a strategic, coherent response in the interest of safeguarding the financial industry. He stated that the most serious threat was the potential for punitive action against all offshore centres by the major developed countries of the world, acting through a number of separate but inter-related initiatives. The major countries of the world have demonstrated their resolve to act together against so-called problematic, irresponsible, poorly regulated, non-cooperative jurisdictions and harmful tax havens. The initiatives cover the areas of taxation, financial regulation, international cooperation and anti-money laundering. "While it may be acknowledged that there have been serious flaws in the manner in which the initiatives have been undertaken and we can talk about a lack of openness and objectivity, no respect for the principles of due process and natural justice, insufficient and inaccurate research and an insufficient and inadequate consultation process and a rush to name and shame jurisdictions without engaging the listed countries in constructive dialogue and on and on and on, nevertheless, the initiatives are real." The Financial Services Director said the targeted jurisdictions must move to reconcile the differences that have been identified by the major players.
"The BVI government has long held the view that proper regulation attracts, it does not deter, good business," he reiterated. He said government has no choice but to take the high road on these issues. "We firmly believe that this is the only way that reputable and responsible jurisdictions should act. We also believe that there will always be an international role for reputable, first tier offshore centres that apply international standards and are committed so to do. This, we believe, should be and will be the course of the British Virgin Islands." Mr. Mathavious noted that the BVI has not yet been targeted for punitive action under any of the initiatives. He believes the territory has in fact benefited on account on being under the microscope, in that it has forced the local authorities to re-evaluate the probity of all financial industry-related policies, programmes and legislation. He said defending the BVI's modus operandi before the various governing bodies has been a gruelling process, but it has enabled them to engage in constructive dialogue with several people on the BVI financial industry regulatory norms. "I have been extremely surprised at how little was known of our regulatory practices and of the wide misconception so many had about the BVI financial services industry."
He said he was equally surprised at the ignorance that prevails in the BVI about the initiatives. The Director of Financial Services said the fact BVI appeared in Group 3 (the lowest listing) of the Financial Stability Forum's list was surprising, but it should not have come as a surprise to the ARA that the BVI appeared on the OECD list of tax havens. He said the BVI chose not to sign up to the OECD initiative, as it is a responsible jurisdiction committed to its long-term economic interest. The present OECD list is not a blacklist and no action is proposed against jurisdictions that appear on the list for the next 12 months. He said it should also not be a surprise that BVI was excluded from the FATF list of non-cooperating countries and territories.
"We too want to see a level playing field across the board. We agree that offshore financial centres and onshore centres alike should be subject to the same standards...the dialogue in this regard has already been started with the OECD and we believe it is fair to say that there is now a better appreciation of our position within the OECD, in Washington and in White Hall," said Mr. Mathavious. However, he warned that the FATF initiative is ongoing and another evaluation is scheduled for October. He said the BVI, because of the sheer volume of International Business Companies on the BVI register, is still under the international spotlight. Mr. Mathavious told the Association of Registered Agents that the BVI's frank dialogue with those organizations undertaking the various initiatives has contributed to this outcome. "I believe we have achieved this by demonstrating that we have good regulatory framework, because we have a good reputation for cooperation with other regulators and law enforcement bodies. Also because we have in place most of the key legislation expected by those organizations and that where this legislation is not yet in place, we are at an advanced stage in the drafting process and hope to have the necessary legislation on the statute books this year and also because we have cooperated with the organizations...and provided the fullest responses possible to them." He mentioned the efforts of the Financial Investigations Unit of the Royal Virgin Islands Police in facilitating the "piercing of the corporate veil".
This year, the Unit assisted overseas authorities in tracing and seizing assets amounting to $35M, £8.5M and 15M French Francs; handled approximately 300 inquiries into the affairs of IBC's and examined 23 suspicious transaction reports made under the Proceeds of Criminal Conduct Act. "I'm here to tell you that much of what we in the BVI have been doing and a lot of what we further propose to do, will become the international standard...this has been acknowledged by the Financial Action task Force," Mr. Mathavious. He said the FATF would be entering into more dialogue with the BVI, with a view to getting a better appreciation and using the territory's approach as the possible international standard. In general, the Director of the Financial Services Department encouraged local companies to "walk the talk" by improving and updating their regulatory regime and being responsive to the ever tightening international standards now evolving.
Recently, the Chief Minister announced several proposed legislative initiatives to demonstrate the territory's commitment to meeting legitimate concerns of the international community. These include amending the Mutual Legal Assistance Treaty (MLAT), amending the IBC Act, enacting draft Companies Investigative Powers Legislation, entering into Memoranda of Understanding and other agreements with international organizations, organizing workshops on the exchange of information, enforcing anti money laundering Code of Practice and committing to a higher standard of regulation and supervision of the financial services industry. Mr. Mathavious reassured the ARA that government is conscious of the importance of these matters to them. "We are confident that by taking a cautiously pragmatic but proactive approach in dealing with the initiatives, there should be no need for any concern about BVI being subjected to the defensive measures and punitive sanctions referred to in the OECD and FATF reports." He said there is every reason to think that BVI industry will continue to be prosperous.