This month symbolises a proud moment for me, witnessing the conviction of the people of our beloved Virgin Islands — not so much because I am for or against a march for our economic freedom, but because I see our people rising with conviction at a time that tests our strength as a nation. We have no idea how this march will transform our lives, but it’s our human right to demonstrate and give our views peacefully for the change we desire, especially when our livelihood is at stake. Although a very serious constitutional challenge has arisen, it’s important to note that the survival of the VI financial services industry is not wholly reliant on whether or not we have public registers of beneficial owners.

Our social and economic storms are so loud that I am also in tune with other national matters, including the pros and cons of a medical marijuana movement; the protection of our youth; our infrastructure; housing; the state of our tourism product; commerce; unemployment; our education system and facilities; agriculture; risk management; the well-being of our people; a national investment plan; revenue and debt; health; and financial services products, among other things.

A think-tank

The purpose of this article, however, is to recommend the development of a critical think-tank among ourselves. This effort, which requires true government support, would explore ways to maximise our territory’s wealth in the area of financial services, including an exploration of existing products such as VI trusts and mutual funds. Key to the future economic growth of the financial services industry is recognising the need to consistently develop our local talents and improve the standard of living for our people and the visitor experience — and by extension, attract international business and professionals to our territory with a long-term goal in mind.

I wrote in my book Secret Code: British Virgin Islands that “the last thing that a prosperous nation wants to hear is that they need a bailout to make ends meet.” I also posed the question, “How did the BVI survive its past economic storms?” The answer is highlighted throughout the book, which presents a foundation of courage and faith plus a reminder that we should never forget who we are as a people through any storm that this life presents. My hope is that we pass on our knowledge about our territory from generation to generation, thereby reinforcing our national values and resilience so that we can have prosperity for all.

“I choose to stand” is a great message from my pastor which resonates in my mind. I believe that once we place our heavenly father first, then we have all the protection and wisdom through Christ, who strengthens us. Hope is never lost even when the fire is burning. So, my people, our engines are still running.

Into ‘the Dungeon’

About 20 years ago, I was “thrown” into “the Dungeon,” as it was called at the time, to work for a fund lawyer at a prestigious law firm. I also have fond memories of a time when I found myself working as a trust officer for a number of years alongside some of the most talented fiduciary people in a local trust company. To keep this piece short, I’m just as excited and positive about the prosperity of my territory as I was back when I was freshly working and having fun in the Dungeon! The challenges our financial services industry has faced include blacklisting, international pressure, increased regulations, offshore leaks and competition, among other things.

The United Kingdom’s planned imposition of a public register of beneficial owners for business companies in all its overseas territories obviously does not sit well with assiduous practitioners, governments and people in the North Atlantic/Caribbean. As a territory, we must do what is necessary to move forward for a brighter tomorrow. I’m also a firm believer in mitigating risk. While we aim to protect the industry from all these challenges, there is much work to do otherwise to maximise our potential wealth from the industry. It’s unlikely that incorporations of BVI Business Companies will ever reach the levels that we enjoyed before for years to come. The demand for standalone international companies is just not there anymore, and we also face the reality that there are other competitive players in the game vying for a slice of our market share. Notwithstanding, we still rank number one for international company incorporations by far.

Vulnerable tourism

We also saw how vulnerable tourism, our second pillar, can be after a natural disaster. It also takes time to gestate a new product, such as the recently established International Arbitration Centre, which may take years to bring in any real revenue. Nevertheless, I believe that our best hope is still financial services as the main source of government revenue for the short to medium term, and I also believe that we can increase our revenue from existing products within the industry. We did pretty well after hurricanes Irma and Maria with minimal to no interruption in our financial services sector. The VIRRGIN electronic system, for example, was a superb innovation that we ought to be very proud of.

Innovation of products is vital for the growth of our financial services sector. We don’t need to reinvent the industry, but we have to make some strong choices to be a more attractive jurisdiction. We must create a business friendly think-tank to keep the wheels turning and strive to be regarded as the most prestigious financial services jurisdiction, with affluent clients and top professionals (local and international talents) who are in the business for the long haul.

‘Attraction theory’

We can sum up my attraction theory in three words: “Quality,” “Reputation” and “Infrastructure.”

Have we done enough to maximise our revenue stream from our financial services products? I believe that, with the right research and expertise, the government can seek to maximise revenue from products that the industry has already developed to substantive levels. The VI is a leader not only in incorporations but in trust products including discretionary trusts, VISTA trusts, charitable trusts and private trust companies, investment funds, investment business and captive insurance. Undoubtedly, there are thousands of trusts that have VI governing law, which are exempt from current regulations.

Trust fee structure

Our government ought to take a closer look at the current fee structure for VI trusts, which currently only pay a one-time revenue stamp duty of $200 at set up. Is this $200 stamp duty sufficient for the prestigious trust service the VI has developed? It’s worth exploring the implementation of an annual government fee payable by every trustee for each VI law trust for which they act as trustee. This fee should apply to both VI trustees and non-VI trustees once the trust is governed by VI law. I recommend that the government annual fee be around $600 per annum or an amount equivalent to what the government now charges for business companies. Whatever fee is decided, it should be competitive in comparison to other jurisdictions.

With my proposal, the first thing that may come to mind is privacy, but this proposal has nothing to do with imposing regulations or registration requirements on the current or future trust structures, so VI trust settlors and beneficiaries should continue to enjoy the privacy offered under the Trustee Act and related trust legislation. The introduction of a new and attractive trust structure — such as an exempt trust that provides the client with certain official guarantees — may also add value, since that type of trust would justify an annual fee. Compared to what is now being charged by service providers for annual trustee fees, which can range from $1,500 to $10,000, based on the value of assets in the trust, I doubt an annual stipend to our treasury would have an impact on the continued use of our VI trust products, but could go a long way economically.

Mutual funds

The significant decline of VI mutual funds — by over 40 percent within the last five years — has been disappointing. Is it possible that over regulation, bank account difficulties and insufficient marketing and processing time for new mutual funds may be stifling growth? It’s certainly not the establishment fees, which are generally lower than those in other jurisdictions such as the Cayman Islands. Responsible regulation generally fuels growth, but what we are seeing is the opposite. I believe this requires careful seeding to facilitate growth.

The potential revenue stream that more mutual funds can bring to our territory is worth investing in. Also, in order to attract top fund managers, banks and other service providers to actually set up office here in the VI, our government may wish to consider some sophisticated incentives, attractive legislation, waiver of fees, extended work permits and increased improvement of our infrastructure, in addition to having expert and savvy fund regulators.

I believe that giant asset management companies such as Blackstone Group and Bain Capital, for instance, do not choose a jurisdiction to establish new funds because of modest fees alone. They seek a business-friendly environment, reputation, quality and a quick turnaround time in order to satisfy their business interests. Affluent clients can facilitate an economic impact that is great enough to bring an abundance of resources and wealth behind them.

Fee increase

The slight increase in fees over the last few years for registration of charges, for annual licence fees for business companies, and for some post-incorporation services has paid off in revenue maintenance. However, the bottom line is that we need to maximise revenues from our existing products. In particular, we should take a good look at VI trusts and mutual funds while we continue to meet any market challenge. Several factors will play a central role in the uniqueness and growth of our financial services sector, which can only benefit our territory as a whole: a continued link with the United Kingdom, a highly regarded legal system based on English Common Law; political stability; a business-friendly financial services sector; our ability to attract top professionals; and our willingness to create optimal regulatory solutions.