FATF sets out 'priority actions' to improve BVI’s AML measures

Thursday, 29 February 2024
The Financial Action Task Force (FATF) has published its mutual evaluation report on the British Virgin Islands' (BVI’s) anti-money laundering (AML) controls.
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The mutual evaluation was conducted by FATF's Caribbean branch (Caribbean Financial Action Task Force, CFATF), which conducted an on-site visit to the BVI in March and April 2023. It found the jurisdiction only partially compliant on Recommendations 24 (transparency and beneficial ownership of legal entities), 26 (regulation of financial institutions) and 28 (regulation of non-financial businesses and professions). It was also assessed as non-compliant on FATF Recommendation 8 concerning non-profit organisations.

FATF found that the greatest AML risks came from the trust and company services provider (TCSP) sector, particularly the services offered to establish legal persons and legal arrangements for foreign customers. Significant risks also came from foreign criminal activities such as tax evasion, corruption and fraud through the misuse of BVI entities. However, the authorities regarded illicit activities committed abroad by foreign beneficial owners as not having a sufficient nexus with the country and BVI entities were not directly involved in the foreign predicate offences, despite their risk potential.

Limitations in the transparency of beneficial ownership were evident during the period under review, although important deficiencies in the definition of beneficial ownership have since been addressed. Moreover, the BVI Financial Services Commission's (BVI FSC’s) supervisory actions had increased compliance with the AML requirements among TCSPs.

The FATF report contains a list of 20 'priority actions' for the BVI to take before the next follow-up assessment.

Among these is the need to improving the authorities' understanding of risks, particularly with respect to BVI legal persons and legal arrangements, through a comprehensive analysis of their potential for misuse, especially abroad.

FATF suggests increasing resources for various measures. First, resources for investigative and prosecutorial authorities to deal with large-scale and cross-border cases of AML and predicate offences related to serious crime, as well as those committed by BVI business companies and those involving virtual assets. Second, resources of competent authorities that are dealing with the TCSP sector and related services such as the company registry.

The report recommends amending the law to provide for the full range of powers to carry out financial and complex investigations (including powers to obtain information directly from public bodies and reporting entities) as well as ‘effective, proportionate, and dissuasive’ sanctions for AML breaches. The necessary legal powers, it says, should be created for effective and speedy confiscation of proceeds, either located in the jurisdiction or abroad.

A further action for the BVI to undertake is ensuring that financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs), especially higher risk TCSPs and investment businesses, implement an adequate risk classification of their customers to drive the application of customer due-diligence measures. Targeted supervisory action would ensure that all categories of FIs and DNFBPs strengthen their customer- and transaction-monitoring systems to allow for the proactive identification and submission of suspicious activity reports commensurate with the threats.

The BVI FSC should continue to raise awareness of virtual asset service providers (VASPs) operating in or from the BVI about their AML risks and obligations, FATF says, as well as ensuring that VASPs implement preventive measures. The BVI FSC has already begun implementation of a VASP regulatory framework.

A further priority action is to ensure that competent authorities can obtain adequate, accurate and current beneficial ownership information in a timely manner. This could be by putting in place a beneficial ownership register of persons with significant control with a designated public authority responsible for receiving, holding and verifying information, with appropriate sanctioning powers if the information is not adequate or up to date.

The BVI has already begun a revision of its National Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Policy and implementation of the National Action Plan has started, said the government. It is establishing a specific Sanctions Unit within the Attorney General's Chambers to ensure greater efficiency in dealing with all sanctions related matters.

'We have a strong legislative framework in place', said the government. 'This, together with the robust partnership between the public and private sectors, means that we will be able to safeguard the integrity of our business and financial services sector and implement the CFATF recommendations in good time and to its satisfaction.'

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