Financial Crime World

Terrorist Financing Risks and Mitigation in the BVI: Areas of Concern Identified

The British Virgin Islands (BVI) has made significant strides in its compliance with anti-money laundering and countering terrorist financing (AML/CFT) regulations, according to a recent report by the Caribbean Financial Action Task Force (CFATF). However, despite achieving high levels of overall compliance, the BVI was found to be non-compliant with one key recommendation related to preventing the abuse of non-profit organizations (NPOs) for illicit finance.

Compliance Levels

The CFATF Mutual Evaluation Report assessed the BVI’s adherence to 40 recommendations outlined by the Financial Action Task Force (FATF). The results are as follows:

Fully Compliant Recommendations

  • 11 recommendations were found to be fully compliant, including those related to national cooperation and coordination, terrorist financing offences, and financial intelligence units.

Largely Compliant Recommendations

  • 25 recommendations were deemed “largely compliant”, indicating that while some technical criteria were not fully met, overall compliance levels were satisfactory.

Partial Compliance Recommendations

  • 3 recommendations demonstrated partial compliance, signaling areas where improvements are needed. These include:
    • Transparency and beneficial ownership of legal persons
    • Regulation and supervision of financial institutions

Non-Compliant Recommendation

The BVI was found to be non-compliant with Recommendation 8, which focuses on technical measures to prevent the abuse of NPOs for illicit finance.

Shortcomings in Regulatory Framework and Risk-Based Supervision

  • The CFATF assessment identified shortcomings in the BVI’s regulatory framework and risk-based supervision of its NPO sector.
  • Specifically, the report found that:
    • The BVI has not identified the subset of NPOs at the highest risk for terrorism financing abuse
    • Periodic reassessments of the sector’s terrorist financing vulnerabilities are absent
    • Outreach efforts did not adequately focus on terrorism financing risks until recently

Need for Strengthened Regulatory Framework and Risk-Based Supervision

The BVI’s failure to implement key elements under Recommendation 8 is a significant concern, given the potential risks associated with the abuse of NPOs for illicit finance. The CFATF evaluation highlights the need for the BVI to strengthen its regulatory framework and risk-based supervision of its NPO sector to mitigate these risks.

Next Steps

In response to these findings, the BVI will need to take concrete steps to address the areas of concern identified by the CFATF report. This may involve:

  • Strengthening its regulatory framework
  • Enhancing risk-based supervision of NPOs
  • Improving outreach efforts to focus on terrorism financing risks