20240226-IMF-British_Virgin_Islands_Detailed_Assessment_Report_on_Anti-Money_Laundering_and_Combating_the_Financing_of_Terrorism_331页_2mb

Summary of the Detailed Assessment Report on AML/CFT in the British Virgin Islands

Core Content

This report evaluates the British Virgin Islands' (BVI) anti-money laundering (AML) and combating the financing of terrorism (CFT) framework, focusing on compliance with the Financial Action Task Force (FATF) 40 Recommendations and the effectiveness of the AML/CFT system as of the IMF assessment mission from March 13 to 30, 2023.

Key Findings

1. Understanding of ML/TF Risks

• The overall understanding of ML and TF risks in the BVI is fair but narrow.
• There is limited recognition of the role of BVI entities in the layering and integration phases of ML/TF activities abroad.
• The perception that foreign beneficial owners are not directly involved in illicit activities within the territory leads to a weak risk assessment and mitigation approach.

2. Financial Intelligence Utilization

• Financial intelligence is used by competent authorities, but primarily for background checks and regulatory compliance rather than for investigative purposes.
• The FIA-AIU's intelligence has had limited impact on ML/TF investigations due to perceived weaknesses in dissemination.
• Collaboration between the FCU and FIA has improved, with eight investigations initiated based on financial intelligence.

3. Investigations, Prosecutions, and Convictions

• The number of ML investigations, prosecutions, and convictions is low for a major financial center.
• Most ML cases involve simple possession of cash from drug trafficking.
• There is a lack of comprehensive financial investigations to identify, locate, and seize criminal assets.
• No large-scale or cross-border ML investigations have been initiated, and no investigations into third-party laundering have occurred.

4. Confiscation and Asset Management

• Confiscation is not treated as a policy objective, and no criminal confiscation procedures have been used.
• Forfeiture is limited to cash seized from arrested individuals.
• Asset management procedures are in their early stages and lack robustness.

5. Terrorist Financing (TF) and Proliferation Financing (PF)

• The BVI has a low TF risk profile, but there are few TF cases investigated and prosecuted.
• The FCU has shown preparedness to identify and prioritize TF cases, though capacity for financial investigations needs improvement.
• UNSCRs have immediate legal effect, and a framework exists for implementing TFS and PF sanctions.
• Implementation of TFS and PF is hindered by inconsistent screening, lack of mechanisms for identifying targets, and insufficient supervisory rigor.

6. Vulnerabilities in the TCSP and Investment Sectors

• The TCSP sector presents the highest ML/TF risk due to the use of nominee shareholder and director services.
• Transparency in beneficial ownership is a major vulnerability, with deficiencies in definitions and implementation.
• The BVI's beneficial ownership regime is not yet fully effective, and information is not readily accessible to competent authorities.

7. Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)

• While the FSC-supervised entities show improved understanding of CDD, the TCSP and investment business sectors remain insufficient.
• CDD and EDD measures are rule-based and not fully aligned with ML/TF risks.
• The implementation of beneficial ownership requirements is still focused on ownership rather than control.

8. Supervisory Framework

• A supervisory framework exists, with the FSC being the most developed.
• Risk-based supervision is limited, and the FSC's risk model does not effectively support prioritization of supervisory activities.
• The number of inspections is low, especially for investment businesses and banks, and does not adequately cover ownership and control structures.

9. International Cooperation

• The BVI generally provides mutual legal assistance (MLA) and international cooperation within a reasonable timeframe.
• Outgoing MLA requests are scarce, inconsistent with the country's medium-high ML risk.
• Information sharing with foreign FIUs is limited, and there are challenges in verifying the criminal history of foreign persons.

10. External Challenges

• Natural disasters (Hurricanes Irma and Maria) and the pandemic have significantly impacted the BVI's capacity to combat ML and TF.
• These events have strained resources and capabilities of competent authorities.

Main Recommendations

• Improve the understanding of ML/TF risks, especially the role of BVI entities in foreign predicate offenses.
• Enhance the use of financial intelligence for investigative purposes and ensure consistent dissemination.
• Strengthen the capacity for ML/TF investigations, including cross-border and third-party laundering cases.
• Develop a more robust and transparent beneficial ownership regime, with accessible information to competent authorities.
• Implement risk-based supervision effectively, especially in the TCSP and investment sectors.
• Improve the implementation of CDD and EDD measures, focusing on both ownership and control.
• Increase the number of inspections, especially in high-risk sectors.
• Enhance international cooperation and information sharing mechanisms.
• Strengthen enforcement actions, including the imposition of monetary penalties.
• Update and align the AML/CFT Policy and Strategy with the new risk assessment and focus on mitigating the misuse of legal persons and arrangements.

Conclusion

The BVI's AML/CFT system is in place but lacks the depth and effectiveness required to address the complex and evolving ML/TF risks, particularly those associated with the TCSP and investment sectors. While there have been some positive developments, such as the publication of the 2022 MLRA and the introduction of a VASP supervisory regime, significant gaps remain in risk assessment, supervision, and the use of financial intelligence. Strengthening these areas is essential for the BVI to meet international standards and enhance its AML/CFT framework.