Transparency needed around the world
The recent negative coverage of the global financial services industry perhaps focuses disproportionately on offshore centres like the Virgin Islands, but it also shows why reform is needed worldwide.
The reports, which are based on an extensive investigation by dozens of international journalists, paint a picture of a global financial system where secrecy has facilitated tax evasion, money laundering, corruption and human rights abuses.
Unfortunately, some of the media accounts — and some world leaders’ responses to them — imply that the VI and other offshore financial centres are the primary culprits. This portrayal is patently unfair, particularly given the VI’s position as a small jurisdiction that must operate within the ever-changing parameters established by larger countries.
Moreover, though OFCs are often branded as “tax havens,” their practices are not out of keeping with many mainland jurisdictions, as a recent editorial in The Economist pointed out. “If you define a tax haven as a place that tries to attract non-resident funds by offering light regulation, low (or zero) taxation and secrecy, then the world has 50-60 such havens,” the newspaper asserted, adding that London and Delaware are among them.
Still, reform is needed across the board. The recent media reports have shed light on practices that are questionable at best: The use of “nominee” directors and shareholders, for example, appears to allow shady characters to hide the true source of their money. The Economist rightly argues for cracking down on this practice around the world, and for requiring companies to disclose their true beneficial owners.
Such steps towards transparency, we believe, are a good idea. Large-scale reform, however, would have to come from much larger countries than the VI. And this territory, we trust, will continue to work diligently to keep up with all global standards, as it has always done.
VI financial insiders often stress that the vast majority of the half-million companies registered here break no laws. Greater transparency, then, would simply help weed out the few bad apples. It would also help assure the world that the VI is not a renegade outlier, but a legitimate player providing a valuable service in an increasingly global economy.
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