Since its implementation at the end of June, the Beneficial Ownership Secure Search System has been heralded as the sleek, balanced future of the Virgin Islands’ financial services industry.
The BOSSS, officials argued, satisfied United Kingdom demands for more vigilance against international money laundering — but without implementing a public ownership register that they believe could cripple the sector responsible for some 60 percent of government revenue.
“[The BOSSS] should be not seen as some kind of halfway house,” former Governor John Duncan said in his final interview with the Beacon in July. “I think it is by far the best instrument I’ve seen in terms of tracking that sort of activity, while protecting the human right of privacy.”
Despite this praise, portions of the industry have been slow to adopt the BOSSS’s requirements.
Shortly after the initial June 31 deadline for registered agents to import all of their beneficial ownership information, government acknowledged the difficulty of the task — the territory is home to some 400,000 active companies — and extended the deadline to Dec. 31.
‘Totally unacceptable’
Nearly two months later, Neil Smith, government’s BOSSS coordinator, sent a letter to stakeholders revealing that financial services providers had only imported information for about 54 percent of the companies registered in the territory.
Mr. Smith urged registered agents to speed up their onboarding processes, noting that some had not even begun importing information into the BOSSS’s cloud-based platform.
“This is totally unacceptable, and it bears repeating that there will be no extension given beyond” Dec. 31, Mr. Smith wrote in August.
Six days later, Hurricane Irma struck the territory and forced many registered agents to deal with damaged offices and evacuated workforces, potentially delaying the importation process.
In the nearly three months since, however, many industry leaders publicly and privately vouched for the viability of their business’s continuity plans, and government seems to have taken those statements to heart: Mr. Smith distributed another letter on Nov. 22, again urging registered agents to comply with the Dec. 31 deadline.
“I would like to take the opportunity, therefore, to convey the absolute critical nature of having BOSSS fully populated by industry practitioners by this stated deadline and to stress the very real reputational risk posed if we are unable to meet this extension,” wrote Mr. Smith, who also serves as the executive director of the Office of International Business (Regulations).
As of Nov. 24, registered agents had imported beneficial ownership information for more than 60 percent of the companies in the territory, Mr. Smith told the Beacon.
Background
In attempts to increase the transparency of business entities in its overseas territories, the UK spent years pressuring the VI and other OTs to adopt publicly searchable registries containing beneficial ownership details for each company formed on their shores.
Supporters of the effort say public registers would help prevent the offshore finance industry from being used for international money laundering, terrorist financing and tax evasion. Financial services stakeholders, however, argue that such a requirement would violate their clients’ rights to privacy, which in turn could cripple the industry.
Due to both public and backroom pushback from the VI and other OTs, the VI government instead signed an exchange-of-notes agreement with the UK in April 2016, and thus the BOSSS was born.
The cloud-based system requires each registered agent to digitise and upload current ownership information for companies they have incorporated, and it theoretically equips government investigators with the ability to rapidly provide that information to UK law enforcement upon request.
However, the system is not public and can only be accessed by a designated person working for the territory’s Financial Investigation Agency.
Possible UK requests
In his August letter, Mr. Smith reminded registered agents that the exchange-of-notes agreement called for the BOSSS to go live in July, not this upcoming January, and that UK requests could come at any time.
“Should the person within the FIA charged with the responsibility for providing the information to [Her Majesty’s Government] not find information sought, this would have immediate significant consequences for this jurisdiction,” he warned.
The BOSSS coordinator also expressed hope that providers were not taking their feet off the gas pedal just because of the extension.
“The extension of time was given not to encourage complacency but to facilitate those few companies that might need more time to onboard the requisite information due to clients’ unavoidable tardiness and the like,” Mr. Smith wrote.
The UK’s July 1 mandate was made official when VI lawmakers unanimously passed the Secure Search (Beneficial Ownership) System Act, 2017 on May 12.
The act slaps a fine of up to $40,000 for any registered agent that fails to log all of the names, birthdates, addresses and nationalities of the beneficial owners of each company it incorporates.
Moving forward
Due the Criminal Finance Act passed in the UK in April, the British government will be reviewing the VI’s BOSSS legislation along with the platforms in other OTs to see if they satisfy the exchange-of-notes agreement signed in April 2016, Mr. Duncan explained in his exit interview in July.
That review would likely happen before the end of this year, the former governor added. Whether Hurricane Irma affects that timeline remains to be seen.
Mr. Smith told the Beacon in August that he is not generally concerned about the UK’s review, noting that the British had been impressed with the BOSSS.
It’s not entirely clear what will happen to companies that don’t meet the deadline.
“What happens to the registered agent will depend on the reasons for their non-compliance,” Mr. Smith wrote in an e-mail to the Beacon last week.
Agents
Some firms have already submitted the necessary information.
Robert Briant, a partner at Conyers Dill & Pearman’s VI office, noted that Conyers was compliant months ago.
“I understand the big trust companies have more work to do,” Mr. Briant said. “But I agree with the contents of the letter.”
Michelle Le Herissier, the managing director of JTC’s VI office, said she believes her company will meet the Dec. 25 deadline.
Four registered agents declined to comment, and attempts to reach more than a dozen others were unsuccessful.
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