Financial Crime World

Money Laundering Risk Assessment Reveals Concerns in Virgin Islands

A recent report by the BVI Financial Services Commission has identified several areas of concern regarding money laundering (ML) and terrorist financing (TF) risks associated with various products and sectors in the Virgin Islands.

The report highlights vulnerabilities in legal persons, including business companies, partnerships, and trusts. These structures are often used to conceal the source of assets and identity of beneficial owners. The complexity of these structures and their use by high-risk customers, including politically exposed persons (PEPs), increase the ML risk.

Emerging Products and Technologies

The report also notes the risks associated with emerging products and technologies, such as decentralized financial products (DeFi) and mobile phone app transfers. These new technologies can facilitate illegal activities, and the lack of regulation and oversight in these areas exacerbates the ML risk.

Examples of Concerns

  • Gaming and betting activities remain a concern, particularly with regards to “keeping numbers,” which is being used as a form of money laundering.
  • The legalization of medicinal marijuana has raised concerns about its potential impact on ML risks.

Mitigation Strategies

To mitigate these risks, the Commission expects all regulated sectors to:

  • Review and adjust their policies, procedures, and internal controls
  • Enhance monitoring of clients based on risk factors
  • Demonstrate an understanding of client behavior and ability to identify potential areas of concern

Essential Measures

  • Institutional risk assessment frameworks
  • Timely submission of statistical returns
  • Adequate procedures for verifying and maintaining information on legal persons, legal arrangements, and beneficial owners
  • Staff training and client education

Conclusion

The full report is available on the BVI Financial Services Commission’s website, providing further insight into the ML risks facing the Virgin Islands and recommendations for mitigating these risks.

Key Takeaways

  • Legal persons pose a significant ML risk due to their complexity and use by high-risk customers.
  • Emerging products and technologies require greater regulation and oversight.
  • Gaming and betting activities remain a concern, particularly with regards to “keeping numbers.”
  • Medicinal marijuana legalization raises concerns about its potential impact on ML risks.
  • Regulated sectors must review and adjust policies, procedures, and internal controls to mitigate ML risks.
  • Institutional risk assessment frameworks, timely statistical returns, and adequate procedures for verifying information are crucial in minimizing ML risks.