Virgin Islands urged to match other OTs on company registers

The Virgin Islands could face an economic hit if it does not keep pace with other overseas territories as they expand access to their company registers in the coming months, financial industry experts have claimed.

The warning comes as the Cayman Islands moves to introduce greater transparency to its register of beneficial ownership.

Cayman legislation expected to come into full force at the start of next year aims to shed more light on individuals who own or control at least 25 percent of a business registered there. However, Cayman’s ultimate stance remains ambiguous pending the finalisation of formal guidelines on how the new register will operate and what level of access will be granted to it.

The beneficial ownership issue has long been controversial in the OTs, and while the VI stance remains similarly unclear, Premier Dr. Natalio “Sowande” Wheatley risked a clash with London last month when he told the House of Assembly that “uninhibited” public access will not be allowed when the VI expands access to its register in mid-2025.

The Cayman Islands looks likely to adopt similar restrictions ahead of the VI in the coming months, testing the waters as the newly elected Labour administration in the United Kingdom has demanded greater financial transparency in Britain and the OTs in order to combat money crime. In the meantime, experts say the VI would do well to keep an eye on the Cayman situation in order to calculate the best way forward.

With the VI government’s ultimate register intentions remaining vague, Robert Briant, partner and head of VI corporate practice at Conyers, said the territory would be at a disadvantage if it does not align itself with the transparency policies decided by the Cayman Islands and other OTs in the coming months.

“The legislation is Cayman playing catch-up and does not change the BVI position,” Mr. Briant said. “However, of note in Cayman is the threshold of 25 percent for beneficial ownership and the reference to public registers. It appears that public disclosure of beneficial ownership in Cayman, if it happens, will be on 25-percent-or-greater beneficial owners.”

Mr. Briant said the VI should watch the Cayman moves closely.

“Hopefully, BVI adopts a similar threshold for public disclosures,” he said, adding, “If BVI were to adopt a lower threshold — say ten percent — this would be a serious handicap to the BVI.”

VI-based asset-recovery lawyer Martin Kenney said the territory is engaged in a waiting game on the issue.

“I do not see any course to change plan in the BVI: to wait and see if others open up their [ultimate beneficial ownership] registers,” he said. “By ‘others,’ I mean not only UK territories, but the likes of Delaware, Nevada and South Dakota too. In those places, no UBO data is being collected, let alone registered or disclosed.”

Referring to media reports on the position of the Cayman Islands, Mr. Kenney said the situation in that OT remains unclear.

“I think Cayman is also sitting on the fence and watching as well,” he said. “And even if they have an open UBO register someday, it will only be open to those with a ‘legitimate interest.’ Goodness knows what that will mean.”

Tom Keatinge, director of the London-based Royal United Services Institute’s Centre for Financial Crime and Security Studies, said the Cayman and the VI alike appear to be waiting for the “last possible moment” to introduce reform.

“I’d say that Cayman is ensuring firstly that all relevant entities are in scope, and secondly that it has the option to provide transparency,” he said. “However, the legislation suggests that they are opting for a wait-and-see approach, which might mean that they’ll wait until the last possible moment to take action.”

But Mr. Keatinge said that even if the VI mirrors moves by the Cayman Islands, that course of action will have no impact on whether the VI will soon face increased international scrutiny following a scathing February report from the Caribbean Financial Action Task Force. In light of that report, the Paris-based Financial Action Task Force may place the VI on its so-called “grey list” of jurisdictions that require additional monitoring.

“VI could follow a similar approach [to the Cayman Islands], but it won’t impact the grey-listing process,” Mr. Keatinge said.

Dr. Peter Clegg, a professor at the University of the West of England who specialises in the relationship between the OTs and the UK, agreed that any moves by the Cayman Islands will impact this territory.

“It is interesting and signifies the likely direction of travel for the OTs, whether they like it or not,” Dr. Clegg said. “There have been examples in the past when a controversial measure has been floated by the UK. For example, the Frameworks for Fiscal Responsibility: Initially, there was opposition, but slowly each of the Caribbean OTs agreed to implement the legislation. In other words, a critical mass built up, which made it very difficult, if not impossible, for the remaining territories to remain apart.”

In such instances, he said, taking pre-emptive action allows the OTs to avoid legislation imposed from London through an order in council.

Dr. Clegg added that the VI has some latitude to go its own way.

“It is always preferable that the OTs act themselves rather than the UK,” he said. “This gives them agency, which can be seen in the Cayman Islands example with beneficial ownership. They have designed the legislation themselves to best suit their particular circumstances. It is possible the UK might ask them to go further, but it has certainly been seen as a positive step by the UK.”

Dr. Clegg said the VI would likely benefit from addressing the matter in a similar manner as the Cayman Islands.

“So, for the BVI, following suit could well be advantageous in that they can design their own legislation that recognises and accommodates their financial services sector and be seen as proactive in tackling the issue,” he said.

Under UK pressure, the VI government grudgingly agreed in September 2020 to sign on to a UK plan for the OTs and crown dependencies to implement public company registers by the end of 2023. The VI government subsequently began laying the groundwork for the move, but in November 2022 the European Union Court of Justice issued a ruling that threw the plan into question.

In a case involving Luxembourg’s then-public registry, the court ruled that a key provision of the EU’s own anti-money-laundering directive — which required beneficial ownership information to be available to the public — was invalid.

After that, countries including Luxembourg, Austria and the Netherlands quickly took their public registers offline, and VI leaders have largely avoided taking a firm position on the way forward for this territory. Meanwhile, only one UK territory — Gibraltar — has established a public register of beneficial ownership.

Dr. Wheatley said in July that the government was in negotiations with the UK on the issue.

“We have until 2025 to put some form of register in place,” he said, adding, “Uninhibited access to the register is unacceptable, … and therefore we must consider legitimate-interest tests for our register.”

The premier stressed that law enforcers will still be able to obtain information from the register on request — as is currently the case under the existing Beneficial Ownership Secure Search System, which is closed to the public.