The Caribbean Financial Action Task Force’s long-delayed onsite visit to the the Virgin Islands is scheduled for July 2022, and Financial Services Commission officials said a flurry of activity is ongoing behind the scenes to ensure that the VI complies with the watchdog organisation’s recommendations.
The CFATF, a group of 25 Caribbean jurisdictions, is responsible for regionally implementing standards set by the Paris-based Financial Action Task Force that are aimed at combating money laundering and terrorist financing. Its assessment is likely to affect the VI’s global reputation.
The purpose of the evaluation is to assess whether the territory has implemented a system that adequately prevents the facilitation of money laundering, terrorist financing and proliferation financing; to identify any deficiencies or gaps in implementing that system; and to make recommendations on addressing any such deficiencies, Alva McCall, FSC deputy director for anti-money laundering/combating the financing of terrorism, said during a BVI Finance Breakfast Forum on March 31, according to a BVI Finance press release about the event.
The VI was deemed “largely compliant” during the Third Round Mutual Evaluation that it underwent in 2008. The upcoming site visit is the fourth round evaluation, on which the VI will be assessed on expanded and updated criteria, according to Ms. McCall.
The visit and final report had been scheduled for 2017, but Hurricane Irma postponed those plans, Ms. McCall explained.
In 2008, she added, the Mutual Evaluation team reviewed the VI’s legislative framework surrounding the FATF’s then-“40 plus nine” recommendations for combating financial crime, which originally were drawn up in 1990 and were revised most recently in 2012.
The 2008 review “was instrumental in identifying the existing deficiencies of the territory’s AFL/CFT framework at that time,” Ms. McCall told the Beacon. “The fourth round goes one step further in evaluating the current effectiveness of the territory’s AML/CFT measures.”
Consequences
The task force’s evaluation could have major consequences for the VI’s reputation on the world stage.
As a result of its mutual evaluation reports, the FATF keeps a blacklist of “high risk jurisdictions” — which currently includes only North Korea and Iran — and a grey list of “jurisdictions under increased monitoring,” which includes 19 countries and territories.
Several grey-listed jurisdictions are in the Caribbean, including Jamaica, Barbados and the Cayman Islands, which was added in 2019 after the completion of its mutual evaluation report due to two main shortcomings, FATF President Marcus Pleyer announced at the time.
As a result, Mr. Pleyer demanded that Cayman “place sanctions on financial institutions for AML breaches” and “show that they penalise those who do not provide accurate up-to-date beneficial ownership information.”
The FATF, however, stopped short of echoing the United Kingdom’s call for public registers of beneficial ownership, which the VI and other overseas territories have agreed to work toward implementing.
Although the FATF lists are separate from the European Union’s anti-money laundering blacklist, the two lists include 16 members in common, and last year the EU vowed to revise its blacklisting criteria to more closely align with the FATF.
Methodology
When the VI’s evaluation process starts in July 2022, Ms. McCall said, the CFATF secretariat will work with the territory to agree on a team of four to five assessors from other CFATF member jurisdictions.
The assessors will be trained in the FATF methodology before visiting the territory, she explained, adding that they will present a draft of a mutual evaluation report before they leave. At that point, the territory will be given an opportunity to respond to the findings.
In May 2023, the report will then go on to the CFATF Plenary, and if other jurisdictions have issues with the report, it can be subject to further review at the global FATF Plenary in October 2023 before being published.
VI financial regulators have had a lot to do in order to prepare, Ms. McCall said.
Besides self-assessing the territory’s success in meeting the FATF’s 40 recommendations and developing a national AML/CFT policy, she explained, the Financial Investigation Agency has increased its personnel to speed up its analysis of suspicious activity reports.
The FSC has also drafted and submitted various legislative amendments to the House of Assembly, and the Attorney General’s Chambers has hired staff dedicated to international cooperation, she said.
Pending legislation
Much of this legislation was introduced in the House of Assembly in recent weeks, with several bills focused on bringing the VI up to date with international conventions on AML/CFT and strengthening the FIA’s power to investigate suspicious activity and shut it down.
For example, an amendment to the 1997 Criminal Code Act prescribes a maximum 10 years imprisonment and $500,000 fine for giving false revenue information to the public service, among other offences.
Other bills would stiffen penalties for drug-related money laundering and terrorism.
Industry
Ms. McCall added that industry partners also have roles to play to prepare for the review, by reviewing their policies to bring them in line with the findings of the “sectoral money laundering risk assessments” the FSC performed on its financial institutions in 2020.
To that end, she said, they can conduct their own risk assessments; ensure they can provide timely and accurate returns; properly train personnel; and be sure they can verify beneficial ownership information, which she said can “make or break a jurisdiction.”
“It’s a very subjective test, so it’s up to the jurisdiction to provide as much information as possible and be able to defend itself to convince the assessors it does have an acceptable level of effectiveness to receive a pass rating,” she said.
This article has been amended to correctly identify the Third Round Mutual Evaluation; to remove quotes incorrectly attributed to Ms. McCall; to add the 2012 date of the most recent revision of the FATF’s “40 plus nine” recommendations; to clarify the purpose of the fourth round evaluation; and to attribute information to a BVI Finance press release.