Financial Crime World

Low Convictions for Money Laundering in British Virgin Islands’ Corporate Hub

The British Virgin Islands (BVI), a major corporate and financial center, has been criticized for its lack of convictions for money laundering (ML) cases. A recent report highlights the limited outcomes of ML investigations, which are often hampered by insufficient resources, inadequate financial investigations, and differing views on the legal requirements for prosecution.

Challenges in Combating Money Laundering

  • Most ML cases involve simple possession of cash proceeds from drug trafficking
  • Limited investigations aimed at identifying, locating, and seizing the proceeds of ML and predicate offenses
  • Insufficient staff resources available to the Financial Intelligence Agency (FIA)
  • Differences in views regarding the required legal nexus between illicit activities and related investigations and prosecutions

Failure to Initiate Large-Scale Investigations

  • Authorities have not initiated large-scale ML investigations, cross-border investigations, or investigations into the potential criminal activities of British Virgin Island Business Companies (BVIBCs) allegedly involved in foreign predicates
  • No investigations aiming to identify and locate criminal assets in the jurisdiction or abroad
  • Confiscation is not treated as a policy objective

Recent Developments

  • The authorities have recently increased investigative staff
  • The consequences of the Commission of Inquiry (CoI) report on corruption have prompted a more forceful approach to ML
  • The Financial Intelligence Agency (FIA) has demonstrated some preparedness to identify, prioritize, and investigate terrorist financing cases

Terrorist Financing Investigations

  • The BVI identified and investigated a small number of terrorist financing cases but did not prosecute or convict any activities during the assessed period
  • While the authorities recognized the low risk profile of the territory, there is still a need to improve financial investigations capacity

Implementation of United Nations Security Resolutions (UNSCRs)

  • UNSCRs have immediate legal effect in the BVI and a framework is in place to implement targeted financial sanctions for terrorist financing and proliferation financing
  • Variances in screening frequency by reporting entities, lack of sufficient mechanisms for identifying potential targets for designation, and inconsistent understanding among reporting entities undermine effective implementation

Non-Profit Organizations (NPOs)

  • The authorities were criticized for not identifying vulnerable NPOs or specific threats facing the NPO sector in the BVI
  • Supervisory activities are not sufficiently rigorous to ensure effective implementation of targeted financial sanctions

Conclusion

While there have been some positive developments, including an increase in investigative staff and improvements in customer due diligence measures, significant challenges remain in the BVI’s efforts to combat money laundering and terrorist financing. Addressing these issues is crucial for maintaining the integrity of the financial system and preventing illicit activities.