The centrality of the Virgin Islands to global finance has never been more relevant, or more scrutinised.
But wandering along Main Street in Road Town, the vividly colourful shop fronts and the discreet corporate names give no sense of the central role the VI plays in the industry. Even standing in the Cyril B. Romney Tortola Pier Park in the towering shadow of a giant Disney cruise ship adorned with a magical Mickey Mouse, it is hard to imagine that anyone other than families with young children or North American pensioners show much interest in the VI.
Yet the territory’s reputation is known far and wide, featuring in news stories and the popular imagination, often for unfortunate (and sometimes entirely erroneous) reasons.
This reputation has been scrutinised in Westminster committees, in the press, in the offices of many United Kingdom members of parliament, and in the corridors of the European Union in Brussels. It’s even become its own version of Monopoly.
Yet two events will further elevate this scrutiny in the months ahead: the Russian invasion of Ukraine and resulting deluge of sanctions designations by the UK and its allies; and the impending evaluation of the VI against the standards of the Financial Action Task Force (FATF), the global financial crime watchdog.
Last November, I had the opportunity to contribute in person to the Global Currents Conference, held during a week of events to mark the retirement of Robert Mathavious from decades of service to the BVI Financial Services Commission, an organisation he helped found. At that conference, I observed that the VI had two options: try and swim against the global currents that drive the anti-financial-crime agenda stewarded by the FATF; or find ways of exploiting these currents, not just to capitalise on the business opportunities they present, but also to demonstrate the value the VI and its company register can bring, as a global utility, in support of the desire of the international community to deter dirty money from the financial system and drive out the corrupt, the kleptocrats and other crooks.
In the months since that conference, as a result of the Russian invasion of Ukraine, these global currents have become a torrent. Required to implement the UK’s Russia sanctions regime, the VI — like the UK’s other overseas territories and Crown dependencies — has had no choice but to swim with this particular global tide. The Office of the Governor reported in May that assets with an estimated value of more than $400 million have been frozen, and in April the territory was briefly in the headlines (for the right reasons) when it reportedly provided information that helped identify sanctioned Russian oligarch Roman Abramovich as the owner of two yachts moored in Antigua.
So far, so encouraging, but is this the limit of what the VI has to offer at a moment when its central role in global finance offers a golden opportunity to shine? Whether the territory is merely “going with the flow” or leaning into the opportunity to demonstrate the effectiveness of its (as yet not public) company register, remains to be seen.
Other members of the UK’s global financial empire — Jersey and the Cayman Islands — are ahead in the numbers game, having frozen Russian assets worth approximately $7-8 billion each. Apples cannot be compared with oranges, and this may be an entirely unfair comparison, but the VI’s peers are certainly making the most of the public relations opportunity offered by the tragedy of Putin’s war in Ukraine. Those who persistently criticise the VI will be quick to draw conclusions.
And if the challenges posed by Russia sanctions are not enough, it’s not only the strong winds of the hurricane season that the VI needs to diligently prepare for: It’s also the decennial evaluation of the global financial crime watchdog, the FATF.
You’d be forgiven for responding, “The who?” But the FATF is probably the most powerful organisation you’ve never heard of, and it will dominate the agendas of the territory’s civil service and private sector alike in the months ahead.
The FATF is charged with evaluating the anti-financial-crime standards of every country on the planet. From global financial centres like the UK, Singapore and the United Arab Emirates, to Pacific and Caribbean islands, no jurisdiction escapes its scrutiny as it assesses the integrity of financial systems across the globe.
The FATF’s Standards — the metrics against which jurisdictions are assessed — are on the internet for all to see. So too are the results of the agency’s deliberations once published — results that will publicly reveal strengths and weaknesses. And if the weaknesses are deemed meaningful, jurisdictions may wind up on the FATF grey-list — a form of special measures under which a jurisdiction is publicly monitored until key shortcomings are addressed. The Cayman Islands has been on the list since February 2021; Malta left the list in June this year after a year of hard work; and Panama came off the list in February 2016 before returning in June 2019 until now.
The impact of “grey-listing” can be hard to discern. The International Monetary Fund has previously estimated the magnitude of the effect and found that grey-listing can result in “a large and statistically significant reduction in capital inflows” of as much as 7.6 percent of a jurisdiction’s gross domestic product.
For international financial institutions and other regulated entities, grey-listed countries present a requirement to conduct “enhanced due diligence,” adding costs to their business and, in extremis, providing a reason to take their business elsewhere.
Some jurisdictions rail against the way in which the FATF operates, noting that large “global north” countries that are core members of the FATF seem to be treated more leniently than smaller and less significant jurisdictions that end up on the grey-list. I would agree, but the VI is not a less-significant jurisdiction. Indeed, its own literature highlights the global contribution of the VI in supporting “jobs, prosperity and government revenues worldwide through trade and the facilitation of cross-border business.”
During my most recent visit, a kind host took me on a tour of Tortola. Standing atop the Sky World restaurant with the wind blowing and the storm clouds gathering, it was hard not to draw comparison with the challenges and choices ahead for the VI. That the outlook is challenging is impossible to deny. How those from across both government and industry sectors respond will determine the future.
Mr. Keatinge is the director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute, a British defence and security think tank.