Elise Donovan, executive director of the BVI International Finance Centre, the organisation representing the jurisdiction’s financial services industry, looks backwards and into the future for the offshore hub.

This article, written exclusively for this publication, is by Elise Donovan, who is executive director of the BVI International Finance Centre, the organisation representing the jurisdiction’s financial services industry. As ever, while the editors of this news service do not necessarily endorse all the views expressed we are pleased to share insights with readers.

This year marks the 30th anniversary of the introduction of the British Virgin Islands (BVI) International Business Companies Act – the innovative piece of legislation that helped paved the way for the BVI to become of the leading global centre for company incorporations - something the BVI has become synonymous with all over the world.

Key to the jurisdiction's success over the past 30 years has been its innovative business model coupled with its robust yet flexible legal and regulatory framework that has stayed ahead of strong competition while keeping pace and adapting to demands for greater transparency from international standard setters like the Organisation for Economic Cooperation and Development and the International Monetary Fund.

Good regulation is good for business

Maintaining a good reputation has been a hallmark of the BVI’s 30 year reign in the global financial services industry. Regulation has been one of the main themes of the past decades and the BVI has been at the forefront of efforts to comply with international standards. Recent acknowledgements include a top tier ranking by the Financial Stability Board in its latest evaluation on the adherence of all countries and jurisdictions to global regulatory standards. In the FSB’s annual assessment, the BVI was listed as demonstrating “sufficiently strong adherence” to internationally agreed standards of information exchange and cooperation in the areas of banking supervision, insurance supervision and securities regulation. 

The BVI’s independent and autonomous regulator, the BVI FSC, was established in 2001 and is responsible for the regulation, supervision and inspection of all financial services in and from within the BVI. The BVI FSC also plays a key role in reducing financial crime and preventing market abuse while safeguarding the privacy and confidentiality of legitimate business transactions.

In the last two years, the BVI has brought in the highest standards of regulation including the United Nations Convention Against Transnational Organised Crime (also known as the Palermo Convention) and the UN International Convention for the Suppression of the Financing of Terrorism (the Terrorist Financing Convention).

In addition to the rating from the FSB, the BVI FSC was recently endorsed by UK Member of Parliament, Mark Simmonds. In November 2013, Simmonds said the BVI’s regulator was “extremely impressive” and will “ensure that the British Virgin Islands has the highest possible international reputation”.  He added, “The (BVI) regulator wants it to be seen as a well regulated jurisdiction in order to encourage, rather than inhibit or hinder, further investment.”

Tax, trade and transparency

Another prevalent theme in the last three decades has been the focus on tax transparency and international trade and investment.  Most recently, this was one of the main agenda items for both the G8 summit in June and the G20 summit in September of last year – with the aim of bringing about a universal standard for sharing information on tax to reduce tax evasion and criminal activity.

This process has been supervised by the Organisation for Economic Cooperation and Development and for over 10 years the BVI has been actively engaged as a member of OECD Global Forum. Today the jurisdiction has 25 tax information exchange agreements and continues to negotiate with several other countries. As part of this process, the BVI shares information when legitimate requests are made by relevant treaty partners.

Perhaps most significantly, the BVI was one of the first of a group of countries to engage in progressive discussions with the US around the Foreign Account Tax Compliance Act, or FATCA.  In November 2013 the BVI’s Premier signed an intergovernmental agreement with the UK government to enable the exchange of information for tax purposes, including on an automatic basis. A similar agreement with the US will be signed shortly.

The Asia connection

Over the years, the BVI has played a significant role in the global financial system with notable impact in emerging economies in Asia, especially China. The importance of Asia to the British Virgin Islands should not be underestimated. Growth and development in both countries has been inextricably linked over the last 30 years.

The BVI has acted as a conduit for growth for Asia, which in turn has benefitted its own economic development. Between 1979 and 2011, for example, $1.2 trillion entered China in the form of foreign direct investment overall and, of this, $112 billion was channelled through BVI structures. 

Today approximately 40 per cent of BVI business comes from the Asian region. In September 2013, the BVI took a significant step in forging stronger links with the opening of an office in Hong Kong. The office was set up to be a hub for mainland China and across the Asia Pacific allowing the BVI to be more responsive to the needs of clients, a critical factor in developing the BVI’s products, services and legislation.

BVI companies and structures have become as popular for small, targeted investments as they are for cross border deals involving billions of dollars. Wealth planning, specifically the securing of wealth for future generations, has become a particular growth area, mirroring the surge over the past 30 years in the numbers of Asian entrepreneurs and successful business owners.

A new generation of high net worth Individuals (HNWIs) from Asia now looks to the BVI for its innovative wealth management solutions such as Private Trust Companies, Discretionary Trusts and the innovative VISTA Trust. These structures have given easy and flexible solutions for Asian HNWIs who wish to structure ownership and control of their BVI companies.

Behind this success is the BVI advantage – providing a safe, secure and stable environment from which companies and individuals can manage their worldwide financial concerns.

Responsive to the business community

With 30 years of fortitude, the BVI has built a reputation for being responsive to the business community, innovative in its approach to legislation and scrupulous in its regulation.

The BVI recognises that as a well-regulated international finance centre it plays a pivotal role in world trade and commerce. That role comes with certain responsibilities and the BVI will continue to be engaged with relevant international authorities in the global fight against financial crime.  It is this dedicated professionalism that will ensure the BVI will keep its good reputation and remain one of the world’s most successful financial centres for the next 30 years.