Financial Crime World

Money Laundering and Terrorist Financing Risks in the British Virgin Islands

Contextual Factors

The British Virgin Islands have been severely impacted by natural disasters and the COVID-19 pandemic, affecting their resources and capabilities in fighting money laundering (ML) and terrorist financing (TF). This has resulted in a high threat area for foreign predicate crimes, including corruption, fraud, tax evasion, and ML.

  • Natural Disasters and Pandemics: The VI’s resources have been strained by natural disasters such as Hurricanes Irma and Maria, and the COVID-19 pandemic.
  • Corporate and Financial Services Sector: The corporate and financial services sector in the VI is a high-threat area for foreign predicate crimes.

Risks and General Situation

The main domestic proceeds-generating crimes in the British Virgin Islands are drug trafficking, smuggling, and domestic corruption. While domestic TF and PF risks are broadly low, they are elevated at the international level due to the misuse of VI entities.

  • Domestic Proceeds-Generating Crimes: Drug trafficking, smuggling, and domestic corruption are the main proceeds-generating crimes in the VI.
  • Elevated International Risks: Domestic TF and PF risks are elevated at the international level due to the misuse of VI entities.

Overall Level of Compliance and Effectiveness

The overall understanding of ML/TF risks among competent authorities is fair but narrow, focusing mainly on mitigation rather than appreciation of vulnerabilities. Authorities have conducted written risk assessments, but these have not fully addressed the significant threats from foreign crimes misusing VI entities.

  • Understanding of Risks: The overall understanding of ML/TF risks among competent authorities is fair but narrow.
  • Risk Assessments: Authorities have conducted written risk assessments, but these have not fully addressed significant threats.

Vulnerabilities

The British Virgin Islands face several vulnerabilities in their efforts to combat money laundering and terrorist financing.

  • Large-Scale Reliance on Professional Business Introducers: The large-scale reliance on professional business introducers without adequate safeguards to protect against ML/TF risks is a vulnerability.
  • Resource Constraints: Resource constraints, caused by external events such as hurricanes and pandemics, are a significant vulnerability impacting law enforcement and supervision effectiveness.
  • Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs): VAs and VASPs are identified as emerging and high-risk areas, mostly related to entities established in the VI conducting virtual activities outside the country.