A recent report from Berlin-based non-governmental organisation Transparency International explores how businesses and institutions in the United Kingdom help corrupt individuals and regimes launder money, and it draws a “clear correlation” between corruption scandals and the “secretive corporate vehicles” in offshore finance centres like the Virgin Islands.
However, BVI Finance CEO Elise Donovan said the report was misguided.
“We disagree with the conclusions of Transparency International, which once again cites the creation of public registers as a silver bullet in covering international fraud and crime,” Ms. Donovan told the Beacon.
The report mentions specific cases linked to VI companies, including the “Troika Laundromat” through which Russian politicians allegedly have laundered money, evaded taxes and hidden assets abroad. The document also touches on the recent Deutsche Bank money laundering scandal and details several London properties purchased through VI firms that it alleges were used to hide corrupt finances.
The report, issued by TI’s United Kingdom chapter, states that criminals frequently use overseas territories like the VI to hide conflicts of interest, enable embezzlement and bribes, move wealth that was obtained in a corrupt manner, and invest corrupt wealth in luxury property, art, jets and yachts.
It also concludes that more corporate transparency reform is needed in order to prevent criminals from “abusing” companies in the UK and its territories.
The OTs have yet to implement public registers of beneficial ownership, notes TI, which calls for the UK government to provide a specific timeline for providing assistance to the OTs to establish these registers.
“The ultimate owners of companies incorporated in the UK and its offshore financial centres should be reported accurately and open to public scrutiny to make it more difficult for corrupt individuals to use them to obtain and move illicit funds,” the report advises.
Data from 400 cases
The report is based on data collected from more than 400 cases of “high-end corruption and associated money laundering” involving UK institutions. The cases took place across 116 countries and involve least £325 billion worth of funds that were diverted by “rigged procurement, bribery, embezzlement and the unlawful acquisition of state assets,” the document states.
Recently, the UK has been pushing OTs to publicly declare ownership of the companies they register in order to better combat tax evasion, money laundering and terrorist financing. In spring 2018, Parliament passed legislation allowing the UK to order the OTs to implement public registers by 2020.
However, in January, the VI and other OTs learned they would not be required to implement the registers until 2023, after an announcement by Lord Tariq Ahmad, minister of state for the Commonwealth and the United Nations. It is unclear if the requirements will change under the new UK government elected last week.
Meanwhile, VI leaders have continued to stress the territory’s compliance with international transparency standards and said the government will enact a public register when it becomes a global standard.
In response to the report, Ms. Donovan, the BVI Finance CEO, said the VI is a member of the Caribbean Financial Action Task Force and follows its recommendations to counteract money laundering and terrorism financing, in addition to complying with all other international standards.
She added that law enforcement officials can obtain “accurate and timely” information through the territory’s Beneficial Ownership Secure Search System, which has been “lauded” by relevant crime agencies in the UK.
All companies registered in the VI, she explained, have to go through a “highly regulated” verification process conducted by licensed registered agents regulated by the BVI Financial Services Commission. If a company stakeholder is identified as “politically exposed,” the agent is required to do “enhanced customer due diligence,” she said.
Ms. Donovan also took issue with the “pejorative statements” about international finance centres in reports like the recent one from TI, which she said are often “regurgitated” from other documents.
“We are a reputable international business and finance centre. We make a valuable contribution to the global economy,” she said. “We participate in global trade and finance, we help facilitate cross-border trade and business, and we comply with the international standards for anti-money laundering, counter-terrorist financing, and proliferation financing.”
However, the report suggests that existing laws and regulations governing financial crime and corruption may not be sufficient.
The 50-page document alleges that London property is often used by corrupt foreign officials to hide the proceeds of embezzlement and bribery. Those properties are often purchased through VI companies, according to TI.
In one instance the firm Daniel Ford & Co “assisted in the purchase” of a London property through a VI company on behalf of the former petroleum minister of Nigeria, who is alleged to have received bribes in exchange for oil deals, according to the report, which cites United States court documents.
TI’s analysis showed that Daniel Ford & Co was involvedin at least 74 other property purchases involving 10 companies based in the VI, as well as 32 in the Seychelles and five in Nigeria.
It also states that Ali Dabaiba — a former associate ofLibyan dictator Muammar Gadaffi who authorities believe to have stolen billions of pounds while overseeing a public development agency — owns four London properties worth tens of millions of pounds through firms registered in the VI.
Additionally, the report mentions fines levied against Deutsche Bank for laundering money through a subsidiary in the VI.
In the case, a Russian firm bought Russian securities in rubles through the Moscow office of Deutsche Bank, while a VI firm allegedly sold the same amount of securities for dollars via the bank’s London office, according to the document. The UK Financial Conduct Authority suggested that the fact that the same people who were in charge of the Russian firm also controlled the VI firm was “highly suggestive of financial crime.”