Strengthening Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures in the British Virgin Islands

The Financial Services Commission (FSC) has made efforts to improve AML/CFT measures, but there are still areas that require attention. This article outlines key findings, recommendations, and action items for enhancing AML/CFT measures in the British Virgin Islands.

Key Findings

Obstacles to Effective Implementation

• The FSC has improved customer due diligence (CDD) measures, but implementation obstacles remain.
• Beneficial ownership requirements are not fully understood or implemented by all sectors, including trust and company service providers (TCSPs) and investment businesses.

Identified Risks

• Reliance on professional business introducers for CDD and record-keeping purposes is common in the TCSP sector, but ML/TF risks associated with this practice are not adequately identified and mitigated.
• The FSC’s risk model does not effectively support the assessment of most important ML/TF risks or prioritize supervisory activities targeting higher-risk licensees.

Inspectors’ Limitations

• Inspections by the FSC do not ensure that residual risks from ownership and control structures of clients and active companies are effectively covered by licensees.

Recommendations

Enhance CDD Measures

Strengthen implementation of CDD requirements, including beneficial ownership requirements and enhanced due diligence (EDD) measures.

Improve Understanding of Beneficial Ownership

Ensure that all sectors fully understand the concept of control over a legal person or arrangement.

Mitigate ML/TF Risks Associated with Business Introducers

Develop and implement measures to identify, mitigate, and monitor ML/TF risks associated with reliance on professional business introducers.

Strengthen FSC’s Risk Model

Enhance the FSC’s risk model to effectively support the assessment of most important ML/TF risks and prioritize supervisory activities targeting higher-risk licensees.

Increase Inspections

Increase onsite inspections by the FSC, particularly for TCSPs, investment businesses, and banks.

Action Items

For the Financial Services Commission (FSC)

• Enhance CDD measures
• Develop a comprehensive understanding of beneficial ownership requirements
• Strengthen its risk model to effectively support the assessment of most important ML/TF risks
• Increase inspections, particularly for TCSPs, investment businesses, and banks

For Supervisors and Licensees

• Implement effective CDD measures, including beneficial ownership requirements and EDD measures
• Mitigate ML/TF risks associated with reliance on professional business introducers

By addressing these key findings and recommendations, the British Virgin Islands can strengthen its AML/CFT framework and reduce the risk of money laundering and terrorist financing in the jurisdiction.