Local Bank concerned about EU Tax initiative

The lucrative nature of the BVI's offshore finance services sector was one 
of the main things that attracted FirstBank Virgin Islands to the 
territory, and eventually led to its buy-out, last year, of the local 
branch of Chase Manhatten Bank, in Road Town.

FirstBank's Vice President and BVI Territory Manager Mr.Rahamat Hosein says the area where we saw opportunities for growth, and where we have the expertise and the systems to support it, was in the offshore business, even though domestic banking is quite profitable.

Mr. Hosein, a native of Trinidad, spoke to reporters last week, and 
introduced his new Offshore Banking Manager, Mr. Robbie Hirst, a former BVI Olympian and sailing champion, who had previously worked with Barclays Bank (now First Caribbean International Bank) BVI, and the trust company - Ansbacher (BVI) Ltd.

"I've been working in the offshore business for a number of years and I 
think what attracted me to First Bank was its potential, its systems, the 
way the business is organized and what can be offered to customers", said 
Hirst who took up the appointment with First Bank in January, but had been 
familiarizing himself with the offshore operations as early as mid December 
2002.

A subsidiary of FirstBank in Puerto Rico, FirstBank Virgin Islands now 
offers BVI clients automated and centralized processing designed to provide 
high efficiency banking and product range.
"I think in the BVI, FirstBank has a far better platform (than the other 
banks here), to deliver services and its products and there is fine tuning 
going on, but I think we are in a much better position, and I see that as a 
lever for growth", he said.

FirstBank's Offshore client base is global and there is no particular niche 
market, since the people that use these services are quite mobile, and are 
considered "different" and are affiliated with several countries.
However, BVI Manager Mr. Hosein, says there are projections for a bigger 
cleintele from the Asian market.

As far as government's regulation of the offshore jurisdiction is 
concerned, Mr. Hirst feels the BVI is moving in the right direction, and 
countries that go the other way will not have as bright a future and could 
be excluded from the financial networks of the world.

"I think the things that the BVI is doing now to increase regulation is 
absolutely the way it has to go, and I think it's doing the jurisdiction a 
lot of good to give it a good reputation", Mr. Hirst said.
"You can see what has happened in other jurisdictions which take on 
business but don't do the work they should do and end up with problems", he added.

Where legislation covering Offshore Finance is concerned, Mr. Hirst feels 
there are challenges ahead, but the BVI has done a good job compared with its competitors: the Bahamas, the Cayman Islands, the Channel Islands etc."I think Mr. Robert Mathavious (the Managing Director and Chief Executive of the BVI's Financial Services Commission), has done a very good job in steering the BVI in a way which has made it maintain its good reputation", said Mr.Hirst.

The European Union (EU) is presently considering a Tax Exchange information initiative that threatens to place a costly administrative burden on the BVI jurisdiction. This is one challenge facing the local sector that Mr. 
Hirst is concerned about.

"We don't get anything in return, and it will increase the cost of doing 
business here and make it more inflexible. But, the BVI is not based on 
confidentiality in the way that some other jurisdictions are, like the 
Cayman Islands, the corner stone of the BVI is the formation of IBCs 
(International Business Companies) which are easy to form and cost 
efficient", he said.

Several thousand IBC's are drawn to the BVI every year, because it is a low 
tax jurisdiction. Diverting funds will enable clients to escape from the 
kind of high taxes that they would have to pay in the countries that they 
live in.

If the EU Tax Exchange of Information Inititive is passed, BVI banks may be 
forced to exchange information with EU countries as to the accounts which 
their citizens hold here. However, Mr. Hirst says no one knows at this 
point what will happen.

"It's a complicated issue that is on the horizon", he said.
Mr. Hirst's department consists of four staff members, and will offer a 
full range of banking services to include: custody of client funds, deposit 
(CD/Money Market) products, money transfers, foreign currency dealing, cash management for corporate clients, and free internet banking.
"The reason that the Offshore Department operates is to manage the risks 
associated with dealing with non-residents. You better know why people want to bank with you and understand their business, and that requires a higher level of attention than you would find in a domestic branch", he said.
In response to a government directive, every trust company customer of 
FirstBank has been assigned to an independent compliance officer, in 
particular to safeguard against money laundering, a nefarious activity that 
can harm the reputation of the jurisdiction.

Branch Manager, Mr.Hosein, said "the bank is very conscious of this", and 
Mr. Hirst recalls that "there has not, to my mind, been any large scandals 
or frauds associated with BVI banks that I know of, while there are other 
issues with BVI companies being used outside the BVI, involved in schemes of some sort".

First Bank operates within the regulations of the Anti-Money Laundering 
legislation of the BVI, and has a large compliance team, located in St. 
Thomas, to which the local branch reports along with inspectors associated 
with the head office in Puerto Rico.

In addition, Offshore Banking is governed by its own rules and has what is 
referred to "enhanced due diligence procedures", which supersede operations available in a domestic banking branch.
As such, the Offshore Bank can get a more intimate knowledge of its clients business to ensure that there is no risk of being associated or involved with money laundering and fraud.Transactions are monitored, there is profiling of accounts, and compliance for risk minimization.

While FirstBank Virgin Islands is a regional operation, its savings and 
loans rates are driven by United States markets. Rates for deposits are 
based on trends in New York.

The head office in Puerto Rico is the second largest bank on that island.
The transition from Chase Manhattan Bank (BVI) to FirstBank Virgin Islands 
followed Chase's gradual divestment from the Caribbean region over the past decade. The internationally known bank closed its branches in St. Maarten, Puerto Rico, Panama, and Trinidad. The BVI and USVI had the last remaining branches.

An acquisition by VICB fell through, and Chase agreed to sell all its 
Virgin Islands branches as a package to FirstBank, at market value.
"Because of the mindset to withdraw (from the region), Chase, in the last 
few years, did not invest much in technology for the Off shore Finance 
market, but their name and quality of service kept the customer base, 
people stayed with us because they were banking with a big name", said 
Mr.Hosein.

On the other hand, FirstBank "is a regional bank with cutting edge systems 
that really caters to this type of (offshore) market, so an improvement 
will come in that way".

Mr. Hosein said that free internet banking is the newest service being 
offered to customers, and it is catching on rapidly, with many customers 
subscribing to it, looking and doing things to their accounts.
Mr. Hirst assures that customers will have easy access to their accounts in 
a secure manner.