Tuesday was a disheartening day for the Virgin Islands and other British overseas territories.
In a move that represents an existential threat to some OTs’ economic well-being, United Kingdom parliamentarians voted to force them to adopt a much higher level of corporate transparency than the United States, the UK Crown dependencies, and other jurisdictions.
Under an amendment to the Sanctions and Anti-Money Laundering Bill, each territory will have to implement a registry that publicly identifies the beneficial owners of the companies on its shores by the end of 2020.
Given that other jurisdictions — including the Crown dependencies and the US states of Delaware and Nevada — are bound by no such restrictions, some VI financial practitioners now fear a major exodus of the companies that bring in more than half of the government’s revenue.
The UK’s decision — which is an affront to the territory’s constitutional mandate to rule its own internal affairs — is particularly disheartening after the VI and other OTs have worked overtime for decades to conform to international regulations imposed by the UK, the US, the European Union and the Organisation for Economic Cooperation and Development, among others.
Under UK pressure, for example, the VI last year implemented a beneficial ownership register that is accessible by foreign law enforcement officials, and Premier Dr. Orlando Smith has rightly said that the territory would gladly make the register public once such a system becomes a global standard. Currently, however, it is nothing of the kind.
Thus, instead of invoking its colonial power to force the OTs to adopt a measure that could cripple their economies, the UK should advocate for an international system that would see all jurisdictions adopting reasonable reforms simultaneously.
Transparency in itself is not to be feared: In fact, as supporters of the amendment have argued, it can help ensure that offshore centres like the VI are not misused for nefarious purposes.
But it must be implemented fairly and across the board, and it also must be carefully weighed against the right to privacy. Achieving the appropriate balance in this respect is a delicate feat — and one that the UK bungled in a big way on Tuesday, taking a troubling step backward toward colonialism at a time when the OTs should be moving toward self-determination.
In spite of these formidable pressures, the VI should not panic. Instead, it needs to act quickly and efficiently to prepare for an uncertain future — a task that will be especially difficult at a time when it is struggling to recover from two Category Five hurricanes. The UK decision and the harm it will inflict on the people of the VI amount to nothing less than a third Category Five hurricane hitting the territory in eight months. This one will have generational legs.
Moving forward, leaders should start by working closely with their counterparts in other territories to clearly communicate to the UK the implications of Tuesday’s decision, which seems likely to catapult OTs including the VI back into greater financial dependence on the UK. They should also continue to make the territory’s case on the world stage, explaining its role in international finance and bringing attention to the hypocrisy in the UK’s decision not to attempt to force the UK dependencies to adopt the same regime as the OTs.
Additionally, as suggested by Cayman Islands Premier Alden McLaughlin, the VI should consider mounting a legal challenge to the UK directive.
Meanwhile, discussions about independence should be renewed throughout the territory with a new vigour. As part of that dialogue, an in-depth study should be launched to probe whether the existing financial industry would flourish in an independent VI.
Each of the above steps should include close dialogue with other OTs: All are in the same boat, and there may be many useful ways for them to collaborate in the short and long term.
Longstanding efforts to diversify the VI’s financial sector by adding more value-added services should also be accelerated dramatically, as should the other reforms that the 2015 McKinsey Report recommended for bolstering the industry.
No less crucial are wider steps to diversify the territory’s overall economy by exploring areas such as technology, deep-sea fishing, aquaculture and others.
At a time like this, uncertainty is the only certainty, and the territory simply cannot afford to sit back and wait for whatever might come.