Financial Crime World

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Virgin Islands Lacks Effective Measures to Combat Money Laundering and Terrorist Financing

A recent assessment has revealed that the Virgin Islands (British) is struggling to effectively combat money laundering (ML) and terrorist financing (TF). The territory’s corporate and financial services sector faces a high threat from foreign predicate crimes, including corruption, fraud, tax evasion, and ML.

Deficiencies in AML/CFT Controls

Despite efforts to improve, the VI’s system for holding adequate, accurate, and up-to-date basic and beneficial ownership information is dependent on information collected by Trust Companies Supervision Department (TCSPs), which has led to shortcomings in the effective implementation of customer due diligence (CDD) measures. The Registrar of Companies holds basic information, but this is only accessible to the public based on search requests submitted via email at a fee.

  • Market entry controls do not effectively prevent criminals and associates from owning, controlling, or managing licensees in any sector.
  • Penalties imposed by the Financial Services Commission (FSC) are often considered ineffective, disproportionate, and not deterrent enough to combat ML/TF risks.

Remedial Action Plans

To address these deficiencies, remedial action plans (RAPs) have been implemented in the TCSP sector, but to a lesser extent in the investment business sector. The FIA has increasingly applied RAPs in response to identified deficiencies in AML/CFT controls.

The VI’s system for mutual legal assistance (MLA) is generally good, but there are concerns about resource constraints, including those caused by external events such as hurricanes and pandemics, which impact the effectiveness of law enforcement and supervision. The assessment also highlighted the need for a better understanding of ML/TF risks among competent authorities.

Key Findings

  • The VI’s corporate and financial services sector faces a high threat from foreign predicate crimes.
  • The territory’s system for holding adequate, accurate, and up-to-date basic and beneficial ownership information is dependent on TCSPs’ information collection.
  • Market entry controls do not effectively prevent criminals and associates from owning, controlling, or managing licensees in any sector.
  • Penalties imposed by the FSC are often considered ineffective, disproportionate, and not deterrent enough to combat ML/TF risks.
  • Resource constraints, including those caused by external events such as hurricanes and pandemics, impact the effectiveness of law enforcement and supervision.

Recommendations

  • Improve understanding of ML/TF risks among competent authorities.
  • Enhance CDD measures for legal persons and legal arrangements specific to the VI’s context.
  • Strengthen market entry controls to prevent criminals and associates from owning, controlling, or managing licensees in any sector.
  • Increase penalties for non-compliance with AML/CFT regulations.
  • Prioritize investigating proceeds from foreign predicate offenses and those facilitated by VI legal persons and legal arrangements.