By Mellica McPherson
“What we are asking for is a level playing field…Our business is legitimate business,” Director of the BVI London Office (BVILO), Elise Donovan announced in response to accusations that the British Virgin Islands was pushing back against the United Kingdom Parliament order for the 2020 implementation of public registers of beneficial ownership because the Territory wants to maintain secrecy.
Donovan was well prepared to defend the BVI position to defer for now from implementing public registers when she appeared as a witness before the United Kingdom Parliament’s Special Select Committee. The session was mainly to discuss the future relationships between the United Kingdom and the 14 Overseas Territories (OTs); however, the conversation somehow lingered on the Territory’s financial services sector and Donovan was tasked to respond to criticism about the BVI’s bread and butter industry.
The BVI has and continues to air concerns since the 21 May passage of the UK Sanctions and Anti Money Laundering Bill in the House of Lords; specifically, the amendment that was added to Clause 22 (Amendment 22A) of that legislation which forces the Territories to implement public registers of beneficial ownerships by December 2020 and the stipulation that if the BVI did not comply implementation will be done via an Order in Council.
Considering the public register could spell doom for the heavily depended on financial services sector, Premier and Minister for Finance, Dr. the Hon. D. Orlando Smith announced that the Territory is seeking legal advice and that the BVI does not intend to implement a public register until this action has become the global standard.
However, the Territory’s position does not seem appealing to UK Parliamentarians as this week some Members of Parliament made it clear that they are not pleased with the position the Territory is taking. The brunt of the concerns was heaped on the Director of the BVI London Office as she stood before the Foreign Affairs Committee.
UK Representatives Critical of BVI Call for Global Standard
The United Kingdom representatives said that they are making calls for public registries because they accept that the United Kingdom has shared liability with the BVI. Further one representative claimed that the BVI call for global standards is not possible.
The representative stressed that the BVI call for global standards is unattainable as it was explained that there would be a flight to the bottom as there will always been a shelter where people will go to hide money. It was however, agreed that the Territory request for a set of standard including the Crown Dependencies is understandable.
However, Donovan said that she disagreed with the UK representatives view that global standards were unattainable and she cited the fact that the United States passed the Foreign Affairs Tax Compliance Act and while it was a unilateral action, she said that it was a universally or globally applied standard which means that every country in the world that has US persons living there must ensure that they account as US tax payers. That Donovan noted is an example of a global standard. Similarly, she said that there is the common reporting standard, which is as close to global as can be attained. Further Donovan said that global standards is not going to be a flight to the bottom, but a flight to quality
The BVI London Office Director further told the Foreign Affairs Committee said the BVI welcomes the raising of standards, and is always one of the early adopters when it comes to compliance with the international standards. “Whenever the bench markers have moved, we moved with them, wherever the hoops are, we move to those hoops. The reputation that we have here in England is not the reputation that we have in Asia. We are a respected financial jurisdiction… We will want you as part of our British Family to defend us from some of this information that has been promulgated against our Territory,” she urged.
Clean or Dirty Money
During the session Donovan was asked to more or less assure that the BVI deals with “clean money,” a rather maligning and baseless accusation that critics of the Territory have pushed over the years.
In response Donovan said: “The BVI grounds itself on a strong reputation. We comply with all the international standards, the regulatory standards. Any business BVI does we have licence and corporate services. She said that any company registered is required by law to go through the customer due diligence – know your customer.”
Further Donovan was asked to explain how effective the BVI current form of register of beneficial ownership has been in combatting money laundering. In fact, one UK representative alleged that Russian money was being funnelled through the BVI. In making such a claim he said, “Why is there such resistance in the BVI to a public register of beneficial ownership. Is it really that there is a secrecy in these matters, by people putting money through BVI registered companies and as a result dirty money has come from Russia and elsewhere through companies registered in BVI that is the essence of the debate that we are having in this parliament and internationally.”
This mention of secrecy and Russian money was fiercely rebutted by Donovan, who made it clear that the BVI operates on regulations and standards: “The premise of that assertion is categorically false. It is false and misinformed because the BVI complies with international standards as set out by the Financial Action Task Force and that is the standard setting body for anti-money laundering, terrorist financing and the proliferation of terrorist financing. When studies were done, the other organizations that have done studies that examined BVI’s compliance with the Financial Action Task Force with respect to money laundering and beneficial ownership 95 percent of the BVI’s were checked compared to the UK where only 51 percent or the US 40 something percent’. When you look at the records and the truth,” she said.
The UK Representative however doubled down on his accusations and criticism of the Territory’s financial services sector. He went on to accuse the BVI of resisting implemented best practices: “So in the meantime you are happy for your position to be complete secrecy about money that comes from Russia and elsewhere through BVI and you do not want to be in the best practice our parliament has called for. You would rather be resisting that best practice to keep secrecy for as long as possible,” the UK Representative stated.
In response Donovan stressed that the BVI has always adhered to best practices. She however insisted that the request for public registers is not the answer to the issues with financial crimes: “Public registries are not the answer or the solution or the key or the silver bullet to deterring,” she declared.
Nonetheless, the same UK Representative went on to accuse the BVI of defying an order that was made by the United Kingdom Parliament. He declared: “This parliament has legislated. Are you opposing the decision of the UK Parliament that there will be a public register. We have legislated that by 2020 it would have to be public. What was the position of the BVI on this matter?”
The Director of the BVI London Office responded as follows: “The position has been stated publicly by the British Virgin Islands Premier who has said that the BVI will explore all opportunities and all positions to protect the interest of our financial services industry…We respect the UK Parliament but we will explore options including as the Premier has said legal options unless it becomes a global standard where we feel we will not be put in a disadvantageous position. We do not feel that public registries are the answer or the solution to deterring and detecting financial crime.”
Another UK Representative asked: “What’s wrong with being public?”
To which Donovan stated: “There is nothing wrong with being public as long as it is a global standard.” Further Donovan told the UK representatives that the call for public registers is disadvantageous when one set of jurisdictions are being held to one standard and others another standard: “Unless a standard is global…In our market there are a number of risks that need to be mitigating risks,” she added.
Furthermore Donovan pointed out that there is a difference between secrecy and privacy; she noted that privacy is a fundamental right that is afforded to individuals, “to businesses…I don’t want you to conflate privacy with secrecy we are not a secrecy jurisdiction.”