Financial Crime World

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Criminals Exploit Loopholes in BVI Financial Sector to Distance Themselves from Illicit Gains

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A recent report by the Anti-Money Laundering (AML) Unit of the BVI Financial Services Commission has highlighted the vulnerabilities in the territory’s financial sector that allow criminals to distance themselves from their illicit gains.

The report, titled “Virgin Islands Money Laundering Risk Assessment 2022”, found that complex legal structures, lack of registration requirements, and inadequate monitoring of clients and transactions have created an environment conducive to money laundering and terrorist financing (ML/TF).

High-Risk Customers Exploit Vulnerabilities

According to the report, high-risk customers, including foreign Politically Exposed Persons (PEPs), are able to exploit these vulnerabilities to conceal their assets and identities.

The report also found that legal arrangements, such as trusts, are not always subject to registration requirements, making it difficult to identify existing trustees and beneficiaries.

Gaming and Betting Activities Also a Concern

The report highlights the risks posed by gaming and betting activities in the territory, which remain prohibited except for specific forms such as medicinal marijuana. The sale of foreign lottery tickets, including those from the United States Virgin Islands (USVI), has seen an increase, while other forms of gambling, such as sports betting and “keeping numbers” (betting on lottery numbers from various US states), are also prevalent.

Intelligence Suggests “Keeping Numbers” May be Used for Money Laundering

Intelligence suggests that activities related to “keeping numbers” may be used for money laundering purposes.

Decentralised Financial Products Pose Elevated Risk

The report warns about the elevated ML risk posed by decentralized financial products (DeFi), which facilitate the transfer of funds and purchase and exchange of financial assets. The lack of regulation in this space makes it vulnerable to abuse, while the territory’s ability to identify BVI entities involved in DeFi activities is uncertain.

Expectations for Regulated Sectors

The AML Unit has set out a series of expectations for regulated sectors to mitigate these risks, including:

  • Review and adjust policies, procedures, and internal controls
  • Enhanced monitoring of clients based on risk
  • Demonstrable understanding of client behavior and ability to identify potential areas of concern
  • Proper monitoring of financial sanctions notices and actions taken relative to potential breaches

Access the Report

The report can be accessed at bvifsc.vg/risk-assessments.

Disclaimer

This article is intended for informational purposes only and should not be considered legal or financial advice.