As Virgin Islands firms scramble to implement sanctions against Russian financial institutions and individuals in the wake of the Ukraine invasion, BVI Finance CEO Elise Donovan is clapping back at a United Kingdom newspaper that painted the VI as a “light touch” on Russia.
In a letter to the editor of The Guardian, Ms. Donovan wrote that the territory is following UK sanctions and has some of the strictest controls of any financial centre globally.
“There is no evidence of illicit use of BVI companies being used (by Russian or other nationalities) to purchase property in the UK,” Ms. Donovan wrote.
The newspaper’s story claimed that “nearly 30,000 properties in England and Wales, including mansions owned by the Russian elite, are registered to companies and individuals based in the [VI].”
Most of the owners were unknown, The Guardian added.
Ms. Donovan said the VI does not host a disproportionate number of Russian companies compared with other financial centres, claiming that only about three percent of VI companies worldwide are owned by Russians.
Furthermore, the VI is “actively implementing UK-imposed sanctions on Russia,” she wrote. “As a leading financial centre, we will continue to tackle money laundering and corruption, while making a positive economic contribution globally in the UK and in the BVI,” Ms. Donovan added.
On Friday, a Harneys webinar sought to explain how practitioners must comply with the new sanctions.
Peter Tarn, a partner at Harneys, called the measures “quite frankly a dizzying, sort of almost unprecedented, rollout of sanctions across the world, which will impact every one of you.”
Aki Corsoni-Husain, head of regulatory in the firm’s global tax and regulatory department, explained in the webinar that all major Russian banks will have their UK assets frozen and will be excluded from the UK financial system, stopping them from accessing sterling and clearing payments from the UK.
This means they cannot raise finance or borrow money on UK markets, he said. Further, 100 individuals or entities connected to Russia will be added to the UK’s sanctions list, he added, citing UK government announcements.
“I think what we’ve seen with the Russia-Ukraine crisis has been that the world has taken notice [and] the West has been galvanised to act in a totally unified way. And we can certainly have the overseas territories into that as well,” said Mr. Corsoni-Husain.
He added that Russian oligarchs have already had their assets frozen around the world, including “yachts registered in places like Cayman and BVI.”
According to the presenters, following the introduction of the post-Brexit UK Sanctions and Anti-Money Laundering Act 2018, the UK more closely oversees the implementation of sanctions measures in the overseas territories.
The UK’s cornerstone 2019 Russia Regulations, as amended over time, are directly extended to most OTs, according to Mr. Corsoni-Husain’s presentation. Furthermore, under a 2020 UK order in council, sanctions on Russia are now automatically extended to the VI and other territories.
Under the VI Financial Sanctions Guidelines produced by the Office of the Governor, all firms are required to check whether they maintain any accounts for individuals listed in the Annex to the Financial Sanctions Notice and freeze them, reporting findings to the office.
Those findings may then be passed on to other regulatory authorities or law enforcement.
Failing to comply with financial sanctions legislation or seeking to circumvent its provisions is a crime, according to the guidelines.
Late last month, Governor John Rankin called the UK sanctions “the largest and most severe package of sanctions ever imposed on Russia.”
Not only will the sanctions cut off Russia from the VI financial system, he said, but “all aircraft owned, operated or chartered by a person connected with Russia or registered in Russia is banned from flying in the air space of the Virgin Islands.”
Shortly after the Ukraine invasion, Western countries also agreed to ban several large Russian banks from the SWIFT international payments network, with the potential threat of banning additional banks.
However, some experts expect Russia will find ways around the ban, perhaps by using intermediaries in other countries.
“It adds a bit of grit in the wheels, but for the larger sums it would make no difference,” Alistair Milne, a professor of financial economics at the UK’s Loughborough University who studies payment systems, told The New Yorker.
“I’m not against doing it, but you want to be realistic about what it will achieve.”