KPMG Recognizes BVI Efforts To Streamline Its Financial Regulatory System
The government of the BVI sees the implementation of the KPMG Report on the financial services sector as integral to the territory's commitment to being in the top echelon of offshore financial services centres. The KPMG Review of the BVI Financial Services Industry was tabled in the Legislative Council on October 20th and the full report for the Caribbean Overseas Territories and Bermuda laid before the House of Commons in the United Kingdom a week later. Copies of the BVI Report are now available from the Financial Services Department.
Chief Minister and Minister for Finance the Honourable Ralph T. O'Neal said government welcomes this comprehensive report and view it most positively. "We are delighted that it reaffirms the...orderly manner in which we have developed our financial services industry and that it recognizes how we are striving for continuous improvement." KPMG recognized that the BVI has made demonstrable efforts to bring its financial regulatory system into line with international standards. "It is gratifying to receive such public recognition of our attempts to make the BVI a top echelon financial centre," said Hon. O'Neal. The Report began by recognizing the BVI's Financial Services Department as a "well run regulator with a strong commitment to achieving international standards". On Trusts, KPMG said: "we do not consider that there are any features of the Trustee Act that are likely to lead to trust structures in the BVI being considered particularly attractive to those wishing to engage in criminal conduct." On administration of mutual funds, the BVI's efforts were singled out as "credible" and representing "good practice"; on confidentiality and international co-operation, KPMG said, "The legislation in place...substantially meets the international and good practice standards" and in the area of money laundering, KPMG reinforced the recent findings of the Financial Action Task Force that the BVI is fully co-operative in the fight against this international evil.
"I was particularly pleased to see KPMG's recognition that in places, the BVI is ahead of the field," the Chief Minister noted. For example, on company service providers, the BVI's regulatory provisions were praised as "a positive feature of the BVI regulatory structure and one that exists only in a limited number of other jurisdictions." Equally, in choosing to regulate trust providers, the BVI was described as acting "unlike a number of jurisdictions, both on and offshore." On limited partnerships, KPMG said: "The legislation and systems in place...met and in some respects, exceed good practice." On international co-operation, the BVI government was described as "progressive in enacting legislation that will assist the regulators in the BVI to co-operate with foreign regulatory authorities." Even where measures do not yet exist, KPMG praised the BVI government's determination to introduce them, recognizing for example that "the BVI is committed to continuing to improve the quality of its banking supervision." The Report described BVI's intention to insert gateways into the Mutual Funds Act as a "positive" response to current weaknesses.
Referring to some outstanding problems with company service providers, KPMG said: "We are pleased to note that many of these deficiencies have already been identified by the FSD and efforts are already being made to rectify them." Chief Minister O'Neal said this is indeed welcome and well-deserved praise, but should not however blind us to the failings that the report also identified. A top line criticism is that the BVI will not be seen to attain international standards of regulation until it makes the Financial Services Department an "independent regulatory body". KPMG also recommended "an increase in staffing resources", particularly for mutual fund supervision and urges that "the marketing role of the FSD is transferred to another body". In other areas, words of praise were followed by calls for improvement in on-site and off-site monitoring and inspection, for example, or in giving stronger enforcement powers to regulators and introducing more transparency. In particular, the BVI's Companies Act was said to be out of date and the IBC Act and the treatment of bearer shares "in need of review". "The government is committed to developing appropriate responses to all these matters," the Chief Minister pledged. "And I am confident that they will receive the full and serious consideration of the legislature, the BVI services industry and the international community committed to operating in well regulated centres." According to Mr. O'Neal, many of the steps KPMG recommended are ones that the BVI has already set in train. "For example, we are urged to introduce state-of-the-art insolvency legislation and this is already under discussion in our Financial Services Legislation Advisory Committee. With the cooperation of the Legislative Council, compulsory powers legislation and the Anti-Money Laundering Code of Practice can be on the statute books shortly."
In this regard, he said it will be necessary for government's response to the Report to be informed by the views of the local industry and the wider international business and regulatory communities, thus his request that the Report is widely circulated. He said in taking the recommendations forward, it is also his intention to apply three criteria to each recommendation. These include knowing whether the BVI is being called upon to do more than what is being done elsewhere, whether it will enable BVI to maintain highest international standards of regulation or universally agreed best practice where such standards do not exist and whether it would enhance the reputation and economic interests of BVI.
Her Majesty's Government has recommended that all territories spell out, by 15th January 2001, how they intend to respond to its recommendations and that they introduce the necessary measures by 30th September 2001. "The KPMG report, of course, is not happening in isolation," Chief Minister O'Neal pointed out. He said unlike other countries, the BVI does not have the Financial Action Task Force to contend with, rightly not being on their money laundering blacklist. However, the OECD has asked the BVI and others to say by June 2001 how they intend to respond to its own criticisms and recommendations. "Clearly, the actions we take in response to KPMG, will feed into this process." Hon. O'Neal said while the KPMG report presents challenges for the BVI, it also presents great opportunities to show the world how the BVI intends not just to "talk the talk" but "walk the walk". "I have every confidence that this most thorough review of BVI's financial services industry...will inspire confidence in the public at large and institutions that we are moving on the right track, enacting the right laws and establishing the right regulatory and supervisory oversight mechanisms to enhance and protect our international competitiveness as a financial centre."