The government has scrambled to put a brave face on the news that the Virgin Islands was recently placed on a “grey list” of jurisdictions subject to increased scrutiny by a global financial watchdog.
Lorna Smith, the junior minister of financial services and economic development, insisted during a Monday press conference that the move by the Paris-based Financial Action Task Force is not a “setback” for the territory as it doubles down on reforms designed to exit the list within two years.
“This process is an opportunity, not a setback, and we will seize it to ensure continued confidence in our financial services sector and the wider community,” Ms. Smith said.
‘It’s tough stuff’
At the same press conference, Premier Natalio “Sowande” Wheatley would not be drawn on the level of reputational damage that could result from the June 13 FATF decision, but he admitted that developments leading up to the announcement had been difficult for the territory.
“These reports, yeah, they’re tough,” he said. “They’re tough processes when you have these evaluations. It’s tough stuff.”
But Mr. Wheatley said the listing will spur the government to better itself.
“When we don’t do as well as we would like to do, it’s really instructive in terms of what we need to do … to be able to improve as a jurisdiction,” he said.
The premier expressed confidence in the government’s strategy to get the territory off the list within two years.
“This government remains fully committed to delivering the required reforms,” he said. “Our goal is to exit the grey list as quickly and responsibly as possible. We have a clear, coordinated road map.”
The grey-list threat had loomed since February 2024, when the FATF’s regional branch, the Caribbean Financial Action Task Force, released a critical report following its mutual evaluation of the VI.
Currently, the only other Caribbean jurisdiction on the 24-member grey list is Haiti.
‘High risk’ lists
Tom Keatinge, director of the Centre for Finance and Security at the Royal United Services Institute in the United Kingdom, said the grey-listing means the territory will now be automatically added to the United Kingdom and European Union lists of “high-risk” jurisdictions.
“This requires UK- and EU-regulated entities to conduct [enhanced due diligence] on BVI entities,” he told the Beacon. “Of course, they may already do that as a result of the original FATF report or BVI’s reputation in general, but now it is a legal requirement.”
However, he added that the VI could use the added scrutiny of being on the grey list to eventually improve its reputation.
“As the saying goes, what doesn’t kill you makes you stronger, and so the BVI should take this opportunity to emerge stronger and put to bed the reputational issues that still dog the islands,” Mr. Keatinge said.
He added that he believes the territory is “engaging constructively” with the reform process.
“There is no escaping, and thus leaning into the challenge and working efficiently and swiftly to address the FATF’s concerns is the only way forward,” he said.
Despite the enhanced due-diligence requirements, Mr. Wheatley said Monday that he does not think the grey list will deter companies from doing business in the territory.
Ms. Smith agreed, saying she expects the financial sector to continue to prosper.
“When we consider other jurisdictions throughout the Caribbean that have been grey-listed [before], none of them lost any business,” she said. “You think of Cayman that was grey-listed up to 2023, 2024 — their business increased.”
She added that the government had been expecting the move.
“Given our close collaboration with the FATF over the last year, it was no surprise,” Ms. Smith stated.
Like the premier, she said she expects the VI to leave the grey list within two years. She also stressed that the FATF had recognised the territory’s progress in tightening money-crime laws since the release of the CFATF report last year.
“We were commended on our commitment, our transparency, and the high level of political support demonstrated throughout the process,” she said.
The junior minister added that many reforms have already been completed or are under way.
Renewed emphasis, she said, will be put on areas like creating an enhanced beneficial ownership register, improving risk-based supervision of financial service providers, and raising the quality of suspicious activities reports.
