This, according to a 2012 U.S. State Department report:
” The British Virgin Islands (BVI) is a United Kingdom (UK) overseas territory with a population of approximately 22,000. The economy depends greatly on tourism and its offshore financial sector.
BVI is a well-established financial center offering accounting; banking and legal services; captive insurance; company incorporations; mutual funds administration; trust formation; and shipping registration.
The Financial Services Commission (FSC) is the sole supervisory authority responsible for the licensing and supervision of financial institutions under the relevant statutes.
As of March 2011, there were 45,666 active companies, seven licensed banks, 216 other fiduciary companies and 2,627 investment businesses registered with the FSC. The banking sector has assets valued at $2.4 billion as of September 2011. Exploitation of its offshore financial services, BVI’s unique share structure that does not require a statement of authorized capital, and the lack of mandatory filing of ownership information pose significant money laundering risks.
Tourism accounts for 45% of the economy and employs the majority of the workforce; however, financial services contribute over half of government revenues. BVI’s proximity to the U.S. Virgin Islands and the use of the U.S. dollar for its currency pose additional risk factors for money laundering.
The BVI are a major target for drug traffickers, who use the area as a gateway to the United States. Drug trafficking in general is a serious problem.
Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES
BVI is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf– gafic.org/downloadables/mer/Virgin_Islands_3rd_Round_MER_ (Final)_English.pdf
Enforcement and implementation issues and comments
The BVI has improved its international cooperation and information exchange regime and has concluded and enforced Tax Information Exchange Agreements with 20 countries, including the U.S., which all contain provisions sufficient to allow the BVI to exchange relevant information.
While BVI legislation has strengthened due diligence requirements where a representative is acting on another person’ s behalf, or when the customer is resident in another country, and has extended regulation to money value transfer service operators, these laws are too recent to be evaluated. The FSC has increased its staffing in order to meet the recommended inspection and reporting requirements, especially in light of the new entities covered under the law. The lack of prosecutions for money laundering and a reported decline in number of inspections suggests the FSC should work closely with law enforcement and other authorities.
BVI needs to urgently clarify its publication of data – no data was available for the number of STRs and prosecutions for 2011. In addition, while real estate agents, lawyers, other independent legal advisers, accountants, and dealers in precious metals and stones are covered by the AML/CFT regulations, there appears to be no effective mechanism (i.e., supervision) to ensure compliance with AML/CFT requirements.
The British Virgin Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the BVI’s international affairs and may arrange for the ratification of any convention to be extended to the BVI. The 1988 Drug Convention was extended to the BVI in 1995. The UN Convention against Corruption was extended to the BVI in 2006. The International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime have not yet been extended to the BVI.”