## 1vgbea2024001 ## Source details **Canonical URL:** [1vgbea2024001](https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf.json) --- ### Scope and Purpose - Summarizes AML/CFT measures in place in the Virgin Islands (VI) as at onsite visit of March 15–30, 2023. - Assesses compliance with FATF 40 Recommendations and effectiveness of VI’s AML/CFT system; provides recommendations to strengthen the system. ### Executive summary — Core findings - Overall understanding of ML/TF risks: "fair and narrow", especially regarding VI legal persons and legal arrangements and their misuse abroad. - Financial intelligence use: - FIA-AIU disseminations used primarily for background checks, regulatory due diligence, and compliance rather than ML/TF investigations. - Quality/timeliness issues in FIA-AIU intelligence limited FCU operational use; recent coordination produced eight investigations exploiting FIA intelligence. - Investigations, prosecutions, convictions: - Number of ML investigations, prosecutions, and convictions is low for a significant corporate and financial center. - Most ML cases: possession of cash proceeds of drug trafficking; limited large-scale, cross-border, third-party, or BVIBC-related investigations. - Seizures and forfeiture: - Total amount seized (period under review): US$5.7 million. - Total amount forfeited: US$4.4 million. - Forfeiture largely limited to cash seized on arrested persons; criminal confiscation procedures only recently used. - TF/TFS/NPOs: - Small number of TF cases investigated; no TF prosecutions/convictions during assessed period. - UNSCRs have immediate legal effect; framework exists for TFS for TF and PF but implementation weaknesses undermine effectiveness. - NPO sector: TF risk recognized as low; authorities have not identified subset of NPOs vulnerable to TF abuse. - Preventive measures and CDD/EDD: - Banks and some legal practitioners show good ML risk understanding; TCSP and investment business sectors understanding heterogeneous or insufficient. - Reliance on professional business introducers widespread in TCSP sector with insufficient safeguards. - Beneficial ownership requirements improved by recent amendments but remain too focused on ownership thresholds vs. control. - VASPs: - VASP Act came into force February 2023; at time of assessment no evidence VASPs were implementing preventive measures. - Supervision and enforcement: - FSC framework more developed than FIA’s; effective risk-based supervision demonstrated to a limited extent. - Onsite inspections very low for TCSPs and investment businesses; penalties imposed not generally effective, proportionate, and dissuasive. - Registry and BOI: - Basic information held in VIRRGIN; public access only via emailed search request at a fee (US$50 for company info; additional US$75 for director list). - Director information not required at incorporation and may be unavailable to Registry for several months; director information only publicly required beginning January 2023. - System depends primarily on information held by TCSPs; effectiveness impacted by TCSP CDD shortcomings and supervisory capacity. *Source: EXECUTIVE SUMMARY (onsite visit: March 15–30, 2023).* ### Low investigative, prosecutorial, and conviction outcomes for ML (IO.7 / IO.8) - Investigations and prosecutions (2017–2022): - 24 cases prosecuted: 19 cases for possession of proceeds of criminal conduct (PCC) and 5 other cases labelled ML because cash was seized and forfeited. - Convictions in all but one prosecuted case. - No prosecution involved legal persons, legal arrangements, FIs, or DNFBPs. - FCU casework (Table 19 / Table 20 figures preserved): - Number of PCC cases opened by year: 2018: 10; 2019: 18; 2020: 18; 2021: 18; 2022: 36; Total 100. - Cases referred to ODPP: Total 38. - Prosecution cases concluded (2018–2022): 19. - Convictions (cases): 23; Convictions (persons): 34. - Seizures and forfeitures (police statistics): - Total forfeiture cases during period: 43. - Amount seized: US$5,740,989.21. - Value of forfeited assets: US$4,404,575.75. - Biggest seizures: interception of speed boats between USVI and VI coasts. - Non-cash forfeitures: two boats and one car; otherwise forfeiture limited to cash. - Confiscation regime: - Two procedures: forfeiture (civil/balance of probabilities) and criminal confiscation (confiscation in equivalent value); criminal confiscation used only very recently. - ASFMC created but not fully operational at time of assessment; Asset Seizure and Forfeiture Fund amount to date: US$4,418,831. - Identified constraints on investigative outcomes: - constrained resources; insufficient investigative powers (e.g., controlled deliveries, undercover legislation); limited use of financial intelligence until recently; differing views on jurisdictional nexus for prosecuting BVIBCs and foreign predicate offences. ### Financial intelligence, SARs, and FIA-AIU effectiveness (IO.6) - FIA-AIU capacity and outputs: - FIA-AIU staff increased from 6 in 2018 to 15 in 2022 (3 investigating officers, 7 analysts, 3 administrative/support staff). - Two FIA staff have BOSSS portal access; FIA has direct access to VIRRGIN and OTRCIS. - FIA acquired blockchain analytics software; Deputy Director and four analysts certified by CipherTrace. - SARs and reporting patterns (2018–2022 totals): - Grand totals by year: 2018: 437; 2019: 433; 2020: 790; 2021: 418; 2022: 455; Total 2,533. - SARs by reporting sector total (2018–2022): - TCSPs: 1,718 (67.8 percent of SARs). - Banks: 646 (25.5 percent). - Lawyers: 58. - Insolvency Practitioners: 38. - Insurance Business: 31. - Money Services: 27. - Investments Business: 2. - Concentration: 77.3 percent of TCSP SARs filed by 10 TCSPs; 66.2 percent of TCSPs never filed a SAR. - Cryptocurrency SARs (2018–2022): 6,499 total (2018=167; 2019=844; 2020=450; 2021=756; 2022=4,282); increase driven by one BVIBC reporting on European clients. - Domestic vs International SARs (selected totals by year): 2018 Domestic 1,06 / International 504; 2019 Domestic 134 / International 1,156; 2020 Domestic 120 / International 1,134; 2021 Domestic 207 / International 972; 2022 Domestic 142 / International 4,637. - Processing times (ordinary SARs): - 2018: majority in 300+ Days (139) with total received: 443. - 2019: majority 1–5 Days (234) total received: 447. - 2020: majority 1–5 Days (407) total received: 804. - 2021: majority 1–5 Days (224) total received: 423. - 2022: majority 1–5 Days (274) total received: 497. - Observed trend: reduction in processing time to majority 1–5 days by 2022 attributed to increased AIU staff, training, and tools. - Disseminations and use: - FIA domestic disseminations (2018–2022 total 307): RVIPF (FCU) received 68; FSC received 215; GO received 12. - FIA made more than three times the number of disseminations to FSC than to FCU, indicating stronger focus on regulatory use than ML/TF investigations. - FIA international cooperation: 1,314 requests received from foreign FIUs (2018–2022); FIA sent 73 outgoing requests to 33 FIUs via ESW (2018–2022). - Assessment: VI rated "low" level of effectiveness for IO.6; recent improvements in quality/timeliness have not translated into demonstrable prosecution outcomes during review period. ### Risk understanding, coordination, and national risk assessments (IO.1) - NRA timeline and updates: - First NRA 2016 (published 2017); FSC SRA 2020; FIA SRA 2020; TFRA 2020; PF Risk Assessment 2022. - 2022 MLRA provided onsite and results published June 6, 2023. - Key risk ratings (2022 MLRA): - Overall ML threat to VI: medium-high, with higher threat from foreign crimes. - High-risk sectors: TCSP sector, legal persons and arrangements, VASPs, emerging products (gaming, betting, domestic cannabis production for medicinal purposes). - Banking sector: medium-low risk. - DNFBPs: legal practitioners medium-high risk; other DNFBP sub-sectors medium-low risk. - Contextual risk drivers: - Geography and domestic threats: transit point for drug trafficking and cash smuggling; domestic predicate crimes: drug trafficking, smuggling, corruption. - Corporate sector: significant exposure to foreign proceeds of crime (foreign corruption, fraud, tax evasion) via BVIBCs. - Emerging risks: VAs/VASPs high risk; large reliance on professional business introducers; limited transparency of beneficial ownership during review period. - Coordination: - NAMLCC, JALTFAC, IGC, CCA, CLEA established; operational coordination limited by governance vulnerabilities and trust deficits among LEAs. - Effectiveness rating: IO.1 rated "Moderate". ### Legal persons, legal arrangements, registry, and BOI (IO.5) - Scale and types: - Total BVIBCs registered as of end-2022: 349,468 (Total Number of BVIBCs per Table 6: 2018: 380,266; 2019: 361,416; 2020: 343,221; 2021: 351,792; 2022: 349,468; 2023 up to end of March: 341,797). - Express trusts (to 2021): around 6,277; holdings approx. US$183.66 billion (data to 2021). - VISTA trusts (to 2021): about 1,540. - Incorporations and Registrar capacity: - Registrar verification performed by nine staff despite ~30,000 incorporations annually; incorporations can be completed in a few hours. - Director information not required at outset; companies have up to (6 months + 21 days) to submit director info; director info could be unavailable up to 10 months. - Number of companies not filing ROD in year of incorporation (2018–2022 totals preserved): Total not filed at incorporation: 8,335; filed subsequently within permitted period: 7,442; not filed: 893; struck for non-filing in prior years high (e.g., 2018 struck 366). - Public access and costs: - Public searches require email requests; fees: US$50 for company info, US$75 additional for director list. - Public searches requested (VIRRGIN): 2018: 11,876; 2019: 13,674; 2020: 12,862; 2021: 16,096; 2022: 17,473; 2023 (end of March): 5,282. - Beneficial ownership: - Prior to March 2023, BOI primarily held by TCSPs; BOSSS submissions use 25 percent threshold, while AML/CFT CDD uses 10 percent threshold — two different thresholds in law. - March 2023 amendments require companies and foreign companies to hold BOI and file BOI changes with registered agent within 15 days (measure not yet in full effect at onsite). - No dedicated public beneficial ownership register in place at time; draft regulations and plans exist for persons of significant control register. - Nominee and bearer share measures: - Nominee shareholder/director services may be licensed; March 2023 amendments require disclosure of nominator to the legal person. - Bearer shares immobilized and prohibited as of January 1, 2023; existing bearer shares to be converted by July 1, 2023. - Enforcement and outcomes: - No investigations or prosecutions of misuse of legal persons/arrangements during period under review. - Registrar penalties for ROD non-filing (Table 44): 2018 No. of Penalties 14,829; Penalty Value $25,042,050; Average Penalty Value $1,688. 2022: No. of Penalties 4,118; Penalty Value $1,426,100; Average Penalty Value $346. - Effectiveness rating: IO.5 rated "Moderate". ### Supervision, inspections, and enforcement (IO.3 / IO.4) - Supervisors and coverage: - FSC supervises banks, financing and MSBs, TCSPs, insolvency practitioners, insurance, investment businesses, VASPs. - FIA supervises DNFBPs (legal practitioners, accountants, real estate agents, DMPS, HVGD, vehicle dealers, boat buyers/sellers) and NPOs at high risk. - Supervisory resourcing and practice: - FSC collects broad data but RAM weights AML/CFT segment limited to 35 percent of overall risk; heatmap placements showed all banks placed in higher buckets while TCSPs concentrated in lower buckets — raising concerns on calibration and prioritization. - Number of onsite inspections (2018–2022): TCSPs: 36 total onsite exams over 5 years; Investment business: 15; Banks: 3; Inspections extremely low given sector size/materiality. - FSC remedial action plans (RAP): effective in TCSP sector; Invest. business RAP success lower (25 percent concluded successfully within set timeframes). - FIA-SEU supervision of DNFBPs developing; FIA instituted DNFBP registration (applications received: 100; Applications approved: 87; Fit and Proper Tests Completed: 268 — Table 27 counts preserved). - Enforcement and sanctions: - FSC enforcement (2018–2022 average): Warning letters 3.5/year; Directives 0.3/year; Administrative Penalties/Fines 3/year; Average penalty/fine value: $17,250. - Example outlier 2021: one TCSP penalized US$135,000 across four penalties. - FIA remedial actions increased since 2022; limited range of tools; monetary penalties limited (maximum under FIAA where not prescribed: up to US$75,000). - Market entry and fit & proper: - FSC applies fit and proper to directors and senior officers but limited application to beneficial owners historically; Table 26 provides UBO fit and proper counts by sector and year (2018–2022 totals preserved). - Effectiveness ratings: - IO.3 (Supervision): Low. - IO.4 (Preventive measures): Low. - IO.11 (PF financial sanctions): Low. - IO.9 (TF investigation/prosecution): Moderate. ### Priority actions (paragraphs 61–80) — concise enumerated recommendations (preserve exact text intent) - Deepen overall understanding of risks, particularly misuse of VI legal persons and arrangements; conduct typologies and country risk assessments of professional business introducers. - FCU and FIA: coordinate to improve use of FIA intelligence to support FCU ML/TF investigations and ensure disseminations align with VI’s assessed risks. - Enhance operational cooperation and information sharing between competent authorities; establish task forces and joint investigations. - Provide necessary resources to investigative and prosecutorial authorities for large-scale and cross-border ML and predicate offences involving BVIBCs and VAs. - Amend law to provide full range of powers for financial and complex investigations (including powers to obtain information directly from public bodies and reporting entities) and ensure effective, proportionate, and dissuasive sanctions for ML. - Make confiscation a fundamental objective of serious and organized crime policies; identify and locate criminal proceeds laundered in the jurisdiction and assets abroad; grant powers for speedy confiscation. - Improve effectiveness of TFS: increase awareness among reporting entities of TFS obligations; expand supervision coverage; proactively follow up on lead information that may prompt domestic designations. - Conduct NPO sector risk assessment to identify subset/types of NPOs at risk of TF abuse. - Ensure resources for competent authorities (supervisors, registry, LEAs) are proportional to size/complexity of TCSP sector. - Ensure FIs/DNFBPs, especially higher risk TCSP and investment businesses, implement adequate risk classification driving CDD/EDD; implement safeguards against risks from reliance on professional business introducers. - Supervisors to enforce fit and proper tests on beneficial owners and validate criminal history of relevant foreign persons at licensing/registration stage and ongoing. - Enhance FSC risk-based supervisory framework to adequately reflect BO vulnerabilities and prioritize AML/CFT engagements. - Increase onsite inspections prioritized by institutional ML/TF risks; apply full set of remedial actions including proportionate monetary sanctions. - Improve accessibility to basic company information held by VIRRGIN (example: online access); establish BO register of persons of significant control with designated public authority and sanctioning powers. - Actively seek AML international cooperation consistent with VI’s risk profile to support cross-border investigations and ensure AGC and RVIPF have resources to process requests. ### Effectiveness ratings (Immediate Outcomes — key entries) - IO.1 – Risk, policy, and coordination: Moderate - IO.2 – International cooperation: Moderate - IO.3 – Supervision: Low - IO.4 – Preventive measures: Low - IO.5 – Legal persons and arrangements: Moderate - IO.6 – Financial intelligence: Low - IO.7 – ML investigation and prosecution: Low - IO.8 – Confiscation: Low - IO.9 – TF investigation and prosecution: Moderate - IO.10 – TF preventive measures and financial sanctions: Low - IO.11 – PF financial sanctions: Low ### Selected Technical Compliance (Table highlights / key ratings preserved) - R.1 – LC - R.2 – C - R.3 – LC - R.4 – LC - R.5 – C - R.6 – LC - R.10 – NC - R.12 – LC - R.24 – LC - R.25 – C - R.29 – LC - R.36 – LC - R.37 – LC - R.39 – C - R.40 – LC ### Annex II — Summary of key technical deficiencies (selected) - Major/recurring themes: - Scope gaps: trading in foreign exchange excluded from FI definition (affects R.1, R.10, R.11, R.12, R.14, R.15, R.17, R.18, R.19). - Two parallel ML regimes with inconsistent penalties weaken sanction framework (R.3). - TFS: no domestic mechanisms/processes for identification of designation targets (UNSCR 1267/1373/1718/2231); some prohibitions conditioned on knowledge/recklessness (R.6/R.7). - NPOs: VI has not identified subset of NPOs at risk of TF; FIA supervision not sufficiently risk-based (R.8). - Beneficial ownership: BOI availability, timeliness, and accuracy dependent on TCSPs; BOSSS vs AML thresholds inconsistent (25% vs 10%); director info delays; registry public access constrained by fees and email-only search process (R.24/R.25). - Supervisory prioritization and inspection coverage insufficient for TCSP and investment business sectors; sanctioning not sufficiently dissuasive or proportionate (R.26/R.28/R.35). - LEA powers: lack of statutory provisions for controlled deliveries and certain investigative tools; limitations on taking witness statements outside international cooperation context (R.31). - Confiscation: limited use of criminal confiscation and absence of legal mechanism to void fraudulent transfers (R.4/R.38). - FIA outputs: strategic analysis limited (one completed), SARs misaligned with assessed threats, over-concentration of SAR filings in small number of entities (R.6/R.34). *Italic: Content derived from the source content unit 1vgbea2024001 as provided.* ### EXECUTIVE SUMMARY _________________________________________________________________________ 12 ### EXECUTIVE SUMMARY ### Scope and Purpose - This report summarizes the anti-money laundering/combating the financing of terrorism (AML/CFT) measures in place in the Virgin Islands (VI) as at the date of the onsite visit of March 15–30, 2023. - It analyses the level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of VI’s AML/CFT system and provides recommendations on how the system could be strengthened. ### Key Findings - 1. The overall understanding of money laundering (ML) and terrorist financing (TF) risks in the VI is fair and narrow, particularly with respect to the design of VI legal persons and legal arrangements, and their misuse abroad. - The relevant authorities and key reporting institutions broadly view the illicit activities of the foreign beneficial owners as having an insufficient nexus with the territory and do not consider that VI entities are directly involved in such activities. - This understanding of the risks that VI entities play in the layering and integrating phase of ML and TF activities abroad has cascading negative effects on the overall effectiveness of the AML/CFT system. - 2. Financial intelligence is used by several competent authorities and other public sector agencies in their operations. - However, regarding competent authorities such as the Financial Services Commission (FSC), Financial Investigation Agency (FIA)-Supervisory and Enforcement Unit (SEU), and other authorities such as the Ministry of Natural Resources, Labour and Immigration (MNRLI), this use is mainly for the purpose of conducting background checks, regulatory due diligence, and compliance instead of the investigation of ML/FT cases. - 3. There have been challenges regarding the quality of the FIA’s Analysis and Investigations Unit’s (FIA-AIU) intelligence, which impacted the Royal Virgin Island’s Police Force’s (RVIPF) Financial Crime Unit’s (FCU) use of the FIA-AIU’s disseminations to progress ML and TF investigations. - The FCU and FIA lately have sought to work collaboratively to address these issues, resulting in eight investigations which have recently commenced exploiting financial intelligence from the FIA. *Source: EXECUTIVE SUMMARY (onsite visit: March 15–30, 2023).* ### 4. Overall, the number of investigations, prosecutions, and convictions for ML is low for a ### 1vgbea2024001 - 4. Overall, the number of investigations, prosecutions, and convictions for ML is low for a ### Low investigative, prosecutorial, and conviction outcomes for ML - Overall number of investigations, prosecutions, and convictions for ML is low for a significant corporate and financial center such as the VI. - Most ML cases comprise simple cases of possession of cash proceeds derived for drug trafficking. - Limited outcomes are attributed to: - lack of comprehensive financial investigations aiming at identifying, locating, and seizing the proceeds of ML and predicate offences; - insufficient staff resources available to the FCU until recently; - perceived weaknesses in FIA disseminations; and - differences in views regarding the required legal nexus between illicit activities of British Virgin Island Business Companies (BVIBCs) allegedly committed abroad and maintaining related investigations and prosecutions within the VI. - Authorities have not initiated: - (i) large-scale ML investigations, - (ii) cross-border investigations, - (iii) investigations with respect to the potential criminal activities of BVIBCs reportedly involved in foreign predicates, or - (iv) investigations relating to third-party laundering. - Recent increase of investigative staff and consequences of the Commission of Inquiry (CoI) report on corruption have prompted a more forceful approach to ML. ### Seizures, forfeiture, and asset management - Significant amounts of cash were seized and forfeited during the period under review, mainly derived from drug trafficking. - Confiscation is not treated as a policy objective; there were no investigations aiming at identifying and locating criminal assets in the jurisdiction and abroad. - Forfeiture is largely limited to cash seized on arrested persons; criminal confiscation procedures have not been used so far. - The regime for asset management is only nascent. ### Terrorist financing (TF), targeted financial sanctions (TFS), and NPOs - The VI identified and investigated a small number of TF cases and did not prosecute or convict TF activities over the assessed period; this is broadly consistent with the low TF-risk profile of the territory. - The FCU demonstrated some preparedness to identify, prioritize, and investigate TF cases, but financial investigations capacity needs improvement. - UNSCRs have immediate legal effect in the VI; a framework is in place to implement TFS for TF and proliferation financing (PF) without delay. - Implementation weaknesses undermining effective TFS: - variances in the frequency of screening by reporting entities; - lack of sufficient mechanisms for identification of potential targets for designation and sanctioned assets; - inconsistent understanding among reporting entities of legal obligations; - supervisory activities not sufficiently rigorous to ensure effective implementation of TFS. - NPO sector: - TF risk recognized as low, but authorities have not identified the subset of NPOs vulnerable to TF abuse nor the specific TF threats facing the NPO sector in VI. - Resources are spread over a large number of NPOs, most unlikely to pose TF risk. - FIA’s supervisory approach is not sufficiently robust, risk-based, or aimed at mitigating TF risk in the NPO sector. ### Sectoral understanding of ML/TF risks and CDD/EDD implementation - All banks and some legal practitioners demonstrated a good understanding of their ML risks and AML/CFT obligations. - Understanding is heterogeneous in the TCSP sector and insufficient in certain segments of the investment business sector—these sectors are most material and most exposed to ML/TF risks. - Observed weaknesses: - ML risk understanding and mitigating controls in other FIs and DNFBPs; - measures employed remain rule-based and not sufficiently aligned with ML/TF risks. - Improvements in CDD by FSC-supervised entities noted, but obstacles remain undermining effective CDD and EDD in financial and non-financial sectors. - Beneficial ownership requirements: - recent amendments and broader application are an improvement, but remain too focused on determining ownership rather than control. - full understanding of the concept of control over a legal person and arrangement is yet to be demonstrated. - serious deficiencies in CDD, beneficial ownership requirements, and EDD by VI’s TCSP and investment business sectors negatively impact overall compliance. - SARs: important deficiencies continue to exist. ### Reliance on professional business introducers and virtual assets - Reliance on professional business introducers for CDD and record-keeping is widely used in the TCSP sector. - Sector insufficiently demonstrated that ML/TF risks from such reliance are adequately identified, understood, mitigated, and monitored. - Very recent introduction of a supervisory regime for VASPs is positive, but at the time of the assessment there was no evidence that preventive measures were already being implemented by VASPs operating in and from the VI. ### Supervision, inspections, and enforcement - Supervisory framework exists at both supervisory agencies; FSC’s framework is more developed. - Effective risk-based supervision demonstrated to a limited extent. - FSC collects broad data for risk identification, but its risk model does not effectively support assessment or prioritization of most important ML/TF risks. - Onsite inspections: - FSC carries out most onsite inspections in TCSP sector, but number of inspections is still very low for TCSPs, extremely low for investment businesses, and low for banks. - Inspections do not ensure (residual) risks from ownership and control structures of clients and active companies are effectively covered, nor business introductions. - FIA institutional risk assessments are developing but are not systematically and consistently conducted, leading to only a basic understanding of institutional ML/TF risk. - Remediation achieved effectively through remedial action plans (RAP) in TCSP sector but to a lesser extent in investment business sector; FIA increasingly applies RAP. - Penalties: - Where imposed by the FSC, they cannot be considered effective, proportionate, and dissuasive in most cases. - No monetary penalties have been imposed by the FIA. - Market entry controls do not effectively prevent criminals and associates from owning, controlling, and/or managing applicant licensees; potential criminal history of relevant foreign persons is not systematically verified. ### Beneficial ownership information, registry access, and nominee arrangements - System for adequate, accurate, and up-to-date basic and beneficial ownership information depends on information collected by TCSPs (registered agents). - Effectiveness impacted by shortcomings in CDD implementation by registered agents and supervisors’ ability to supervise TCSPs and other gatekeepers. - Basic information is held by the Registrar of Companies in the Virtual Integrated Registry and Regulatory General Information Network (VIRRGIN) platform, but: - information is only accessible to the public based on search requests submitted via email, at a fee; - VIRRGIN is not directly accessible to all competent authorities (domestic and international). - Information on directors may not be available to the registry for several months and was not publicly available until January 2023. - TCSPs can be licensed to provide nominee shareholder and director services, but authorities have not sufficiently implemented measures to mitigate possible misuse. - Bearer shares have been immobilized and most recently prohibited. - Recent legal framework amendments are commendable and can support availability of up-to-date beneficial ownership information going forward. ### International cooperation and MLA - VI generally provides mutual legal assistance (MLA) within a reasonable timeframe and its quality is generally good. - Scarce outgoing requests for MLA and other forms of international cooperation concerning ML are not consistent with the overall medium-high ML risk of the country, particularly risks posed by international activity of the corporate and financial sector. - Competent authorities seek and provide other forms of international cooperation promptly; some demonstrated good quality of information provided. - Staffing issues and case management capabilities may occasionally impact timeliness of cooperation provided by the Attorney General’s Chambers (AGC) and the RVIPF. - Limitations in effectiveness of the beneficial ownership regime may impact quality and usefulness of basic and beneficial ownership information available for exchange. ### Contextual factors, risks, and national risk assessment - Resources and capabilities of VI authorities in the fight against ML and TF were severely impacted over the past five years due to Hurricanes Irma and Maria (2017) and the COVID-19 pandemic. - VI characteristics and threats: - Very small jurisdiction with low level of domestic predicate crimes; - main domestic proceeds-generating crimes: drug trafficking, smuggling, and domestic corruption; - significant corporate and financial services sector faces high-threat from foreign proceed-generating crimes including corruption, fraud, tax evasion, and ML; - domestic TF and PF risks broadly low, but threats elevated internationally through misuse of VI entities. - Greatest ML/TF risks: - TCSP sector and services to establish legal persons and legal arrangements for foreign customers. - Limitations in transparency of beneficial ownership were a significant vulnerability during the period under review. - Large-scale reliance on professional business introducers without adequate safeguards is a vulnerability. - Virtual assets (VAs) and VASPs are identified as emerging and high risks, mostly relating to entities established in the VI conducting virtual activities outside the country. ### Assessment of risk understanding, coordination, and policy setting - Overall understanding of ML/TF risks among competent authorities is fair and narrow, notably with respect to mitigation. - Authorities conducted several written risk assessments; most recent was the 2022 ML Risk Assessment (MLRA). - Most significant threats identified: foreign criminal activities (tax evasion, corruption, fraud) through misuse of VI entities. - Authorities view that illicit activities committed abroad by foreign beneficial owners do not have a sufficient nexus with the country; VI entities are not viewed as directly involved in foreign predicate offenses. - Authorities have not sufficiently appreciated vulnerabilities of VI legal persons and legal arrangements for concealment of foreign criminal proceeds and ownership outside the country (e.g., as part of complex corporate structures). - FSC has an insufficient understanding of inherent vulnerabilities of licensed TCSPs regarding ownership and control of their clients and active VI entities. - Assessors were provided the 2022 MLRA during the onsite visit; authorities published results of the 2022 risk assessment in June 2023. - Activities of competent authorities are narrowly focused and do not fully respond to and mitigate identified risks, especially misuse of VI legal persons and arrangements. - Law enforcement efforts largely directed at investigating domestic drug trafficking threats; efforts to detect proceeds from foreign predicate offenses and misuse of VI entities are not reflective of the heightened threat level. - There have been no ML convictions arising from financial intelligence received from the FIA-AIU. - Supervisory authorities (FSC and FIA-SEU) were not able to demonstrate that activities are consistent with identified risks; FSC supervisory activities and resources viewed as insufficient to cover elevated risks from the TCSP sector. - The 2021 National AML/CFT Policy and Strategy responds broadly to ML/TF risks in the 2016 NRA but needs updating in light of the 2022 MLRA and should target mitigation of risks from misuse of legal persons and arrangements. - AML/CFT Implementation Unit (IU) monitors and reports progress on 2016 NRA action items; authorities are encouraged to update and align Policy and Strategy after dissemination of 2022 MLRA and continue monitoring progress. - Coordinating bodies provide a good basis for policymaking but operational coordination is limited; JALTFAC includes private sector representatives, facilitating awareness-raising. - Shortcomings in information/intelligence sharing among LEAs due to governance vulnerabilities. - Private sector engagement in the 2022 MLRA was more limited than in 2016 NRA; authorities continue awareness-raising through emails, seminars, outreach, and videos. - Shortcomings in integrating NRA risks into private sector institutional risk assessments, especially regarding reliance on professional business introducers and accuracy of foreign beneficial ownership information. ### Financial intelligence use, FIA-AIU, and SARs - Financial intelligence is being requested and used by some VI competent authorities. - FIA-AIU is well equipped with human resources, relevant equipment, and software to receive, request, analyze, store, and disseminate intelligence. - Primary user of FIA intelligence is the FSC, which uses intelligence mostly for regulatory compliance functions. - Financial intelligence is disseminated by the FIA to the FCU (police), but it is ultimately not being used to prosecute ML and TF. - Recent FCU effort to incorporate financial intelligence into investigations resulted in referral of four cases to the ODPP; if continued, this should have a long-term positive impact, but not yet. - Use of FIA financial intelligence by the FCU during the review period has been limited. - Challenges identified by the FCU regarding quality of FIA disseminations are being addressed through monthly meetings between FCU and FIA. - FIA is not receiving SARs consistent with the VI-assessed ML/TF risk. - While SARs have been received from some higher risk sectors such as VASPs, the majority of these SARs would have been reported by one entity. *Source: 1vgbea2024001 - 4. Overall, the number of investigations, prosecutions, and convictions for ML is low for a (PDF).* ### 24. ML investigations are limited to a few cases per year of possession of proceeds of ### 24. ML investigations are limited to a few cases per year of possession of proceeds of criminal conduct (PCC), mainly in the form of cash found during routine operations or when suspects were apprehended. ### Money laundering investigations, prosecutions, and confiscation - Findings on investigations: - ML investigations are limited to a few cases per year of possession of proceeds of criminal conduct (PCC), mainly in the form of cash found during routine operations or when suspects were apprehended. - Subsequent investigations were very limited in scope and did not seek to identify the source of the cash seized or the nature of the predicate offence. - The RVIPF is working to be more expansive in their investigations. - The RVIPF makes limited use of financial intelligence. - No investigation was carried out regarding the misuse of VI business companies involved in international ML schemes. - No complex, third-party, or cross-border ML case was investigated during the period under review. - Constraints affecting investigations: - Constrained resources. - Insufficient investigative powers. - Limitations in financial intelligence. - Conflicting domestic views as to the basis to prosecute BVIBCs, their beneficial owners and related registered agents with respect to overseas illicit activities. - Weak domestic co-ordination and intelligence gathering. - Prosecutions and court outcomes (2017–2022): - 24 cases were prosecuted, including 19 cases for PCC and 5 other cases labelled as ML because cash was seized and forfeited. - Cases were mainly related to drug trafficking, although the predicate offence investigations were very limited. - No prosecution involved legal persons, legal arrangements, financial institutions (FIs), or designated non-financial businesses and professions (DNFBPs). - There were convictions in all but one of the cases prosecuted. - The level of penalties proved to be very low, both in terms of imprisonment and fines. - PCC cases brought to court are not consistent with the risk profile of the jurisdiction, particularly regarding foreign offences and domestic corruption or the misuse of legal persons or arrangements, except with regard to drug trafficking. - Seizures and forfeitures: - Total amount seized: US$5.7 million. - Total amount forfeited: US$4.4 million. - Biggest seizures concerned the interception of speed boats between the United States Virgin Islands (USVI) and the VI coasts. - No other asset or instrumentality was forfeited during the period under review, except for two boats and one car. - No attempt to identify and locate the proceeds of predicate offences committed abroad until recently. - No MLA request was made to foreign authorities to locate proceeds abroad during the review period. - Mechanisms for confiscation of property of an equivalent value have not been used so far, but six recent case files for confiscation were filed with the ODPP recently. - No forfeiture was ordered for the proceeds of corruption or in ML cases involving VI legal persons. ### Terrorist financing (TF) and targeted financial sanctions (TFS) - Legal and operational findings: - The VI complies with the requirements of Recommendation (R.) 5. - LEAs responsible for TF investigations face challenges: resources, powers, capacity to conduct financial investigations, inter agency co-ordination issues, and differences in views with respect to the nexus between the activities of BVIBCs and domestic investigations and prosecutions. - Risk assessments and case activity: - The VI assessed exposure of several FI and DNFBP sectors to the risk of supporting foreign terrorist activity as medium-low; domestic TF risk for all sectors was considered low. - The VI identified and investigated a small number of TF cases between 2018 and 2022. - The FIA-AIU and the RVIPF-FCU regard TF cases as a high priority but require continued training and increased investigative capacity. - The country did not prosecute or convict TF cases over the period under review. - The ODPP and the Magistrate’s Courts are not specifically trained on TF. - The VI did not establish a counter-terrorism strategy between 2018 and 2022. - TFS implementation and freezing: - The VI is not effectively implementing TFS for TF or PF, despite an overall legal framework that meets many required elements. - No assets have been identified or frozen under UNSCRs 1267, 1988, 1713, or 2231 and relevant successor resolutions. - Until recently, no competent authority had any formal mechanism for identifying persons meeting designation criteria and some agencies lacked effective systems for detection of persons or assets subject to sanctions. - Law enforcement and other competent authorities do not proactively ascertain whether designated persons or sanctioned assets may be located in the territory, even where BVIBCs have been implicated in sanctions evasion schemes. - Almost all leads on sanctions are generated abroad and no domestic investigations have been opened despite: - 67 international SARs on TF, - 8 inquiries from the UN Panel of Experts on North Korea, - and several criminal proceedings in another jurisdiction involving foreign owners of BVIBCs. - These leads have not led to any designation or freezing activity. - Communications and timing: - UNSCRs legally take immediate effect in the VI, but in practice the VI relied on the U.K. system (Foreign Commonwealth Office) for communication of designations. - Notifications of new UN designations were received through the U.K. FCO, resulting in up to or more than 24 hours passing before competent authorities were made aware. - After the assessment, competent authorities have taken steps to rely directly on UNSC communications and less on the United Kingdom. - Supervision and detection: - Limited monitoring activities by supervisory authorities are not sufficient to ensure effective implementation of TFS by reporting entities. - FIs demonstrate a stronger appreciation of TFS than DNFBPs and generally have commercial screening systems in place. - Ambiguities and inconsistencies between the domestic and United Kingdom frameworks (e.g., reporting channels and the scope and timing of the freeze obligation) can create confusion. - Supervisors vary in the extent to which they monitor compliance with TFS obligations. - Non-profit organisations (NPOs) and TF vulnerability: - The VI has not identified the subset of NPOs vulnerable to TF abuse. - The FIA understands general TF threats through typologies but has not identified specific risks faced by VI’s NPO sector. - The primary characteristic identified as potentially risky is the collection and transmission of money outside of the territory. - The only NPO sector assessment conducted by the FIA is the institutional risk assessment intended to guide FIA supervision. - The FIA has not developed a risk-based inspection plan for NPOs as it is awaiting the results of a TF Risk Assessment scheduled to be issued later this year. - As such, the FIA is not currently applying risk-focused and proportionate oversight measures to the body of NPOs relevant for assessment of IO.10. - Authorities have carried out outreach and issued guidance and training to NPOs, but this support has not been focused on TF. - NPOs report good engagement with the FIA and appear cognizant of general TF risks; many have compliance systems in place to identify high-risk donors and measures to mitigate recipient-related risks. ### Preventive measures (FIs and DNFBPs) - Industry understanding and implementation: - All banks and some legal practitioners demonstrated a good understanding of their ML risks and AML/CFT obligations. - Understanding is very heterogenous in VI’s TCSP sector and insufficient for many investment businesses. - TF risk understanding across financial and DNFBP sectors was largely confined to low domestic TF threat with limited attention to foreign TF threat and misuse of BVIBCs for TFS evasion. - All FIs and DNFBPs interviewed conducted institutional risk assessments, but scope and depth varied significantly and results were insufficiently used to drive application of a risk-based approach (RBA). - Customer due diligence and beneficial ownership: - No difficulties observed in implementation of record-keeping requirements by FIs and DNFBPs. - Improvements in CDD and EDD by FSC-supervised entities are positive, but obstacles remain. - TCSPs frequently rely on professional business introducers for CDD and record-keeping without sufficient safeguards. - Some banks, a minority of investment businesses, some legal practitioners, and a few larger TCSPs tailor identification and verification to customer risk profile. - Other FIs and DNFBPs often implement CDD and EDD in a rule-based manner without adequately considering ML/TF risks. - Deficiencies remain in applying recently amended beneficial ownership requirements across all types of FIs and DNFBPs; focus is often on ownership thresholds with insufficient attention to persons who ultimately own or control the customer. - Wire transfers and TFS-related implementation: - All FIs and DNFBPs were familiar with FATF lists of jurisdictions subject to a call for action and jurisdictions with strategic deficiencies. - FIs have tools enabling them to ensure wire transfers are accompanied by required information on originator and beneficiary. - TF-related freezing and prohibition obligations are implemented to varying degrees by FIs and DNFBPs; implementation is not effective and timely in all cases. - Suspicious activity reporting: - Reporting is driven by a limited number of TCSPs and one bank who filed an overwhelming majority of reports. - Nearly 50 percent of licensed TCSPs and the entire investment business sector did not file reports, inconsistent with their risk profile. - SAR quality has been gradually improving but only partially corresponds to the main ML/TF threats to the VI. - All FIs have ML/TF programs and internal policies/procedures, but these are often not up to date nor implemented on a risk-sensitive basis. - No evidence that the recently regulated VASP sector implements preventive measures. ### Supervision and regulatory oversight - Fit and proper and registration: - Fit and proper requirements are in place for all sectors but are not effectively applied to beneficial owners of (applicant) licensees due to a limited concept of beneficial ownership applied by authorities. - Legislation was recently amended to reflect a broader concept in line with standards, but effective implementation needs to follow. - Supervisors did not demonstrate effective mechanisms to validate applicant criminal history information. - Identification of unauthorized financial services businesses focuses on reducing reputational damage from entities purporting to be FSC-licensed or BVIBCs for fraudulent purposes. - Limited measures taken to ensure unregulated VA-related services are identified by the FSC for proper registration and supervision. - Following the introduction of the DNFBP registration requirement in 2022, the FIA is in the process of registering DNFBPs. - Supervisors’ risk understanding and data use: - Supervisors demonstrated a limited understanding of ML/TF risk in their sectors and of individual regulated entities; the FIA’s risk understanding is more basic. - The FSC’s sectoral risk understanding reflects high threat of foreign proceeds of crime laundered through BVIBCs and vulnerabilities of TCSP and investment business sectors. - Limited appreciation that illicit activities and layering/integration of proceeds by foreign beneficial owners of VI-established legal persons and arrangements occur abroad, producing a nexus in the VI. - Understanding of TF risk lags behind ML risk understanding. - The FSC gathers wide-ranging data from TCSP and investment business sectors but lacks sufficient information on beneficial ownership and business introductions. - Information collected from the banking sector is less robust on ML/TF inherent vulnerabilities. - The FSC’s risk matrix includes inherent risks, vulnerabilities, and quality of internal controls but does not sufficiently support analysis of risks associated with beneficial ownership and business introduction. - The FSC’s risk matrix does not adequately mirror collected data. - The FIA’s risk matrix is limited in setup and does not reflect calibrated periodic data on inherent vulnerabilities and implemented controls. - Risk-based supervision and inspections: - Neither the FSC nor the FIA could adequately demonstrate effective risk-based supervision. - Supervisory engagements since 2018 are not prioritized or driven on the basis of ML/TF risk. - FSC’s onsite supervisory engagements are mostly directed at the high-risk TCSP sector but not necessarily at the highest-risk licensees within that sector. - Full and thematic onsite compliance inspections are not typically used to target highest risk licensees in TCSP and investment business sectors. - Supervisory coverage of inspections and desk-based reviews focuses on internal controls and preventive measures but does not target residual risks from ownership/control structures of clients and introduced business. - FSC’s offsite engagements provide licensees with feedback to address identified deficiencies. - Enforcement and remedial actions: - The FSC effectively uses RAPs to ensure compliance following inspections at TCSPs, to a lesser extent regarding investment business and banking sectors. - The FSC has a wide range of enforcement actions available but uses them to a limited extent; penalties imposed are not considered effective, proportionate, and dissuasive. - The FIA increasingly applies remedial actions, including in response to identified AML/CFT deficiencies. - Supervisory impact and guidance: - FSC supervisory actions have had some demonstrated effect on higher risk sectors’ compliance with AML/CFT requirements. - Increased compliance among TCSPs shows FSC engagement has improved licensees’ compliance with basic due diligence measures. - The extent to which FSC supervisory activities lead to improvements in internal controls’ risk-based character was not demonstrated. - The FIA demonstrated positive effect on DNFBPs seeking registration and approvals for directors and senior officers, but not on entities’ wider AML/CFT compliance. - Supervisory authorities provide general guidance on AML/CFT compliance but it is not particularly tailored to VI’s higher risk sectors, their products/services, or international vulnerabilities. - TCSP, VASP, and investment business sectors are not specifically targeted by the FSC for tailored support despite their ML/TF risks. - Publications of previous sectorial risk assessments (SRAs) of 2020/2021 supported sector understanding of outcomes. *Source: 1vgbea2024001 - 24. ML investigations are limited to a few cases per year of possession of proceeds of criminal conduct (PCC), PDF chapter/section.* ### 48. While the VI has taken steps towards assessing the risk of misuse of legal persons and ### 1vgbea2024001 - 48. While the VI has taken steps towards assessing the risk of misuse of legal persons and ### Risk assessment and understanding of VI-created legal entities - 48. While the VI has taken steps towards assessing the risk of misuse of legal persons and arrangements, including through the 2020 SRA and recently published 2022 MLRA, there is a narrower understanding of risks posed by VI-created legal entities. - Limitations identified: - Nexus between the VI-created legal entity and its foreign beneficial owners for enforcement is not well understood. - Limited understanding of complex legal structures and their impacts. - Inherent risks arise from frequent reliance on professional business introducers to collect and verify beneficial ownership information without proper mitigation measures. - Overall impact: these limitations "have an overall impact on the ability of competent authorities and the private sector to effectively mitigate against the misuse of these entities." ### Registry, basic information, and director data - 49. Basic information is held by the Registrar of Corporate Affairs through the VIRRGIN platform. - Accessibility and timeliness issues: - Information is available to some competent authorities but not easily accessible to the public, who can only access it through submission of a search request via email to the Registrar and payment of a fee. - Director information was only required to be publicly available at the beginning of 2023 and is not collected during incorporation and may not be available to the Registry for several months. ### Dependence on TCSPs and beneficial ownership information - 50. The VI’s system for holding adequate, accurate, and up-to-date basic and beneficial ownership information of legal persons and arrangements is primarily dependent on information collected and held by TCSPs, providing registered agent services. - Resulting effectiveness issues: - Overall effectiveness impacted by shortcomings in effective implementation of CDD and other measures by registered agents. - Reliance on thresholds and the risk-based nature of updating information reduces information currency. - Supervisory ability to effectively supervise TCSPs and other gatekeepers is critical. - Note: Recent amendments to the legal framework can support efforts to ensure availability of up-to-date beneficial ownership information in the VI. ### Legal arrangements, nominee services, and sanctions - 51. Legal arrangements (express trusts, trusts established under the VI Special Trusts Act (VISTA)) are not required to be registered; some information is collected from TCSPs offering professional trustee services through annual returns. - Challenges remain in ensuring adequate, accurate, and up-to-date information is held on trusts and their beneficial owners. - Unclear the extent to which information collected on trusts is factored into authorities’ risk-based supervision of TCSPs. - 52. TCSPs can be licensed to provide nominee shareholder services and director services; it is unclear to what extent authorities can effectively mitigate risks of such services being offered for illicit purposes. - Positive development: bearer shares were immobilized and have now been prohibited. - 53. While limited administrative fines have been issued, authorities have not imposed effective, proportionate, or dissuasive sanctions against registered agents to date. ### International cooperation and execution of requests - 54. Competent authorities demonstrated ability to furnish basic and beneficial ownership information in a timely manner in the context of international cooperation requests (subject to other limitations highlighted in relation to IOs.3 and 5), but: - They do not proactively seek international cooperation. - The VI has not investigated or prosecuted any cases of misuse of legal persons and arrangements. - 55–59. International cooperation overview: - Minor deficiencies in implementation of the TF and Merida Conventions need addressing. - Legislation to respond to MLA and extradition requests meets most requirements, but revisions are needed for timely asset freezing and sharing agreements. - The VI received a number of MLA requests over the period under review, most focused on ML. - Two outgoing MLA requests over the period and their nature were not consistent with the overall medium-high ML risk of the VI. - The VI did not submit MLA requests or engage in other forms of international cooperation in relation to TF over the period under review. - The VI received only one extradition request, did not request any, and did not engage in the sharing or repatriation of assets. - The VI generally provided MLA within a reasonable timeframe, but staffing issues and a predominantly manual system occasionally impact timeliness. - Assessment team could not confirm quality of MLA provided due to information gaps but assessed VI’s assistance contributed to exchanging useful information. - Some agencies have resource limitations (staff and technological tools) impacting management of requests. - 60. Several competent authorities engage in exchange of basic and beneficial ownership information; in some instances this is based on agreements or ad hoc. Technical and operational limitations in maintaining accurate and up-to-date beneficial ownership information impact the quality and usefulness of information exchanged. ### Priority actions (paragraphs 61–80) - 61. Deepen overall understanding of risks, particularly with respect to VI legal persons and legal arrangements, through comprehensive analysis of potential for misuse, especially abroad. - Include conducting typologies and country risk assessments of professional business introducers relied upon by TCSPs, and design mitigating measures appropriate to VI’s profile as a corporate and financial center. - 62. FCU and FIA should coordinate to improve use of FIA’s intelligence analysis to support FCU investigations of ML and TF and ensure intelligence disseminated aligns with VI’s assessed risks. - 63. Enhance operational cooperation and information sharing between all competent authorities to build trust; establish task forces and joint investigations. - 64. Provide necessary resources to investigative and prosecutorial authorities to deal with large-scale and cross-border ML and predicate offences related to serious crime (such as corruption) and those committed by BVIBCs and involving VAs. - 65. Amend law to provide full range of powers for financial and complex investigations (including powers to obtain information directly from public bodies and reporting entities) and to ensure effective, proportionate, and dissuasive sanctions for ML. - 66. Improve operational LEA coordination by enhancing intelligence collection and establishing task forces and joint investigatory teams. - 67. Make confiscation a fundamental objective of serious and organized crime policies; identify and locate criminal proceeds laundered in the jurisdiction (including non-cash assets) and assets abroad; grant legal powers to investigators and prosecutors for effective and speedy confiscation domestically or abroad. - 68. Promote collaboration between LEAs and the FIA to improve analytical processing of TF cases and increase chances dissemination to RVIPF-FCU results in TF criminal investigations. - 69. Improve effectiveness of TFS by increasing awareness and understanding among reporting entities of specific TFS obligations under various laws and overseas orders; expand coverage in supervisory programs; proactively follow up on lead information that may prompt domestic designations for TF and TF TFS. - 70. Conduct a risk assessment of the NPO sector to identify subset/types of NPOs at risk of TF abuse and identify specific TF threats to NPOs registered in the VI. - 71. Ensure resources of competent authorities dealing with the TCSP sector (e.g., supervisors) and related services (e.g., company registry), or with ML vulnerabilities (e.g., law enforcement), are proportional to the size and complexity of the sector. - 72. Ensure FIs and DNFBPs, especially higher risk TCSP and investment businesses, take targeted measures to strengthen ML/TF risk understanding and implement adequate risk classification of customers to drive CDD and EDD measures; implement safeguards against ML/TF risks arising from reliance on professional business introducers for CDD and record-keeping. - 73. Take relevant supervisory actions (guidance, training, inspections, and where necessary, proportionate and dissuasive sanctions) to ensure all FIs and DNFBPs, especially higher risk TCSP and investment business sectors, understand concept of control over a legal person or arrangement and implement beneficial ownership requirements per 2023 amendments to the AMLTFCOP. - 74. Take targeted supervisory action to ensure all categories of FIs and DNFBPs strengthen customer and transaction monitoring systems to allow proactive identification and timely submission of SARs commensurate with ML/TF threats to the VI. - 75. FSC should continue to raise awareness of VASPs operating in or from the VI about ML/TF risks and AML/CFT obligations and ensure VASPs implement preventive measures. - 76. Supervisors should enhance market entry controls ensuring beneficial owners of (applicant) licensees are subjected to fit and proper tests and adopt robust measures to verify directors, senior officers, and beneficial owners at licensing/registration stage and on an ongoing basis. - 77. FSC’s risk-based supervisory framework should be enhanced by ensuring: (i) it enables adequate understanding of licensees’ vulnerabilities from beneficial ownership issues, and (ii) institutional ML/TF risk profiles are developed sufficiently independently of prudential risks to allow prioritization of AML/CFT supervisory engagements. - 78. Supervisors should increase onsite inspections and better prioritize them based on institutional ML/TF risks, focusing on effectiveness of controls to obtain and hold accurate and up-to-date information on beneficial owners; apply full set of remedial actions including dissuasive and proportionate monetary sanctions where AML/CFT breaches are found. - 79. Ensure competent authorities can obtain adequate, accurate, and current basic and beneficial ownership information in a timely manner: - Improve accessibility to basic information held by VIRRGIN (for example, by making this information available online). - Put in place a beneficial ownership register of persons of significant control (as provided for in BVIBC Act (BVIBCA)), with a designated public authority responsible for receiving, holding, and verifying information and with appropriate sanctioning powers. - 80. Actively seek AML international cooperation from other jurisdictions consistent with VI’s risk profile to support investigations into cross-border ML and TF that may involve BVIBCs, and ensure relevant competent authorities, such as the AGC and the RVIPF, receive appropriate resources to process requests. ### Effectiveness & Technical Compliance Ratings (key points) - Effectiveness level ratings (IOs): - IO.1 – Risk, policy, and coordination: Moderate - IO.2 – International cooperation: Moderate - IO.3 – Supervision: Low - IO.4 – Preventive measures: Low - IO.5 – Legal persons and arrangements: Moderate - IO.6 – Financial intelligence: Low - IO.7 – ML investigation and prosecution: Low - IO.8 – Confiscation: Low - IO.9 – TF investigation and prosecution: Moderate - IO.10 – TF preventive measures and financial sanctions: Low - IO.11 – PF financial sanctions: Low - Level of Technical Compliance (selected entries from Table 2): - R.1 – Assessing risks and applying and risk-based approach: LC - R.2 – National cooperation and coordination: C - R.3 – Money laundering offense: LC - R.4 – Confiscation and provisional measures: LC - R.5 – Terrorist financing offense: C - R.6 – Targeted financial sanctions related to terrorism & terrorist financing: LC - R.10 – Customer due diligence: NC - R.12 – Politically exposed persons: LC - R.24 – Transparency and beneficial ownership of legal persons: LC - R.25 – Transparency and beneficial ownership of legal arrangements: C - R.29 – Financial intelligence units: LC - R.36 – International instruments: LC - R.37 – Mutual legal assistance: LC - R.39 – Extradition: C - R.40 – Other forms of international cooperation: LC _Italic: Content derived from the source content unit 1vgbea2024001 as provided._ ### 88. In its 2011 Third Follow-Up Report, the VI had achieved a rating of C or LC on all Core ### 1vgbea2024001 - 88. In its 2011 Third Follow-Up Report, the VI had achieved a rating of C or LC on all Core ### Overview and context - The Territory of the Virgin Islands (subsequently “Virgin Islands”) (VI) is one of the Overseas Territories (OT) of the United Kingdom. - Geography and demography: - Consists of approximately 60 islands, islets, and cays, 20 of which are inhabited. - Main islands: Tortola, Virgin Gorda, Anegada, and Jost Van Dyke. - Capital: Road Town (on Tortola). - Population: approximately 32,000. - VI is home to residents from over 110 different countries and territories who make up approximately 70 percent of the local labor force. - Virgin Islanders are British OT citizens and, since 2002, also British citizens. - Governance and legal framework: - Internally self-governing, Westminster system with a Cabinet-style government; the U.K. retains responsibility for external affairs and security. - House of Assembly consists of 13 elected members, the Attorney General, and a non-elected Speaker. - Common law jurisdiction; U.K. laws extended by Orders in Council; English law/procedure applies where relevant local provision is absent. - Judicial framework comprises Magistrate’s Court, High Court and Court of Appeal (Eastern Caribbean Supreme Court), and the Judicial Committee of the Privy Council in London. - Economy and sectors: - VI is one of the world’s leading corporate and financial centers; official currency is the U.S. dollar. - Primary sectors: tourism and corporate and financial services. - Corporate and financial services contributed approximately 32.6 percent of the VIs’ gross domestic product (GDP), as of 2022. - Classified by the World Bank as a high-income country. - GDP: US$1.30 billion in 2019 and US$1.39 billion in 2022. ### Impact of external shocks on AML/CFT implementation - Hurricanes and disaster impacts: - September 2017: Hurricanes Irma and Maria (both category 5) caused extreme flooding and extensive destruction. - Total damages assessed at US$2.3 billion, significantly exceeding the VI’s 2017 GDP of US$1.3 billion. - Tortola: 85 percent of buildings destroyed and infrastructure severely damaged. - Tourism sector land- and sea-based infrastructure damage estimated at US$1.1 billion. - Some financial service providers temporarily relocated; overall financial sector saw a six percent decrease in active companies registered at the end of 2017. - Government imposed a state of emergency and a three-month civilian curfew. - COVID-19 pandemic impacts: - Borders closed in March 2020; month-long 24-hour lockdown, domestic curfews, and business and tourism restrictions. - Airline passengers allowed entry in December 2020; seaport travel reopened in January 2021. - Tourism declined by 72 percent in December 2020 and has still not reached pre-pandemic levels. - Financial sector experienced an overall decrease in incorporations and revenue. - Contextual note: Authorities’ AML/CFT activities during this period should be viewed in the context of extreme challenges maintaining government services, severely competing financial priorities, and devastated infrastructure, affecting effectiveness under all 11 Immediate Outcomes. ### ML/TF threats (findings) - Domestic predicate crimes posing a higher ML threat: - Drug trafficking and associated cash smuggling. - Migrant smuggling. - Corruption. - Specific threat vectors: - Illicit trafficking in drugs in territorial waters between the VI and the USVI and associated illegal movement of cash. - Real estate agents, legal practitioners, and accountants can be used to conceal proceeds. - Human smuggling primarily from Haiti, Dominican Republic, Cuba, and Venezuela, mostly destined for the USVI. - Corruption: - Since the 2020 SRAs, domestic corruption threat intensified. - 2016 NRA and 2022 MLRA noted governance vulnerabilities among law enforcement institutions. - 2021 Commission of Inquiry (CoI) examined governance arrangements and corruption vulnerabilities in the public sector. - Examples: April 2022 arrest of the former Premier and the Managing Director of the VI Ports Authority on drug trafficking and ML charges. - International/foreign predicate crime threats: - High threat from proceeds-generating predicate offences committed overseas involving use of British Virgin Islands Business Companies (BVIBCs). - Potential abuse: foreign corruption, international fraud, tax evasion, and ML. - Emerging threats: - Illicit use of virtual assets (VAs) through unregulated BVIBCs operating as VA service providers (VASPs) and financial institutions (FIs) conducting VA-related business without VASP registration is an emerging but high ML/TF threat. - TF/PF threats: - Low domestic TF/PF threat; cross-border TF threat considered higher. - No known terrorist groups operating in or targeting the VI. - VI potentially exposed to a high foreign TF/PF threat through misuse of corporate vehicles for cross-border trading activities and transactions, including those involving VASPs or VA products. ### ML/TF vulnerabilities (findings) - Geographic vulnerabilities: - VI is a transit point for illicit drugs, human trafficking, and cash smuggling into the United States. - Porous borders, heavily trafficked waters, proximity to the USVI and Latin America increase exposure. - Intelligence, investigatory, and prosecutorial capacities are not matched to these threats. - Extent of organized crime gangs’ influence is currently unknown; investigations identified significant firearms trafficking and large drug seizures between the VI and the USVI. - Sectoral vulnerabilities: - Corporate services sector vulnerable, particularly involving trust and company service providers (TCSPs) and companies they administer. - Legal persons and arrangements, corporate vehicles, and professional facilitators can facilitate ML/TF and foreign illicit activities. - Supervision and resources: - Shortcomings in AML/CFT supervision and regulation of FIs and DNFBPs and lack of law enforcement resources represent significant vulnerabilities. - Authorities have initiated measures to improve data collection and analytical systems, but there have not been significant results reflecting these efforts. - Public sector corruption: - Acute vulnerability due to institutional shortcomings and ineffective prevention measures. - Investigations and prosecutions hindered by lack of resources and inefficient data collection. - 2021 CoI report points to possible corruption and abuse of office by elected public officials and law enforcement officers, lack of good governance standards, and insufficient capability to deter, investigate, and prosecute corruption offences. - Highly vulnerable institutions: His Majesty’s Customs (HMC), RVIPF, Department of Immigration (DOI), and the VI Ports Authority. - Specific reports of alleged corruption and bribery involve officials implicated in human and drug trafficking operations and awards of high-value public contracts. ### Country risk assessments and sectoral findings - NRA and follow-up assessments: - First NRA completed in 2016 (published 2017), covering 2011–2014. - Updated by separate 2020 ML and TF risk assessments for financial services, DNFBP, and NPO sectors and a 2022 PF risk assessment. - Authorities provided a copy of the 2022 MLRA covering 2020–2022; a sanitized version was published on the FSC’s and FIA’s websites on June 6, 2023 (outside scope of this assessment). - Methodologies rely on quantitative and qualitative inputs but could be further improved. - 2022 MLRA: - Completed just prior to the onsite visit; jointly carried out by the FSC and FIA with main competent authorities and LEAs. - Draws on quantitative and qualitative data from supervisors, competent authorities, LEAs, private sector surveys, and return filings. - Overall resulting ML threat to the VI assessed as medium-high, with higher ML threat emanating from foreign crimes. - Key sector risk ratings: - TCSP sector, legal persons and arrangements, VASPs, and emerging products (gaming and betting and domestic cannabis production for medicinal purposes) rated as high risk. - Banking sector identified as medium-low risk. - DNFBPs: legal practitioners rated medium-high risk for ML; all other DNFBP sub-sectors received a medium-low rating. - RVIPF Strategic Terrorism and Crime Assessment (STCA), November 2022: - First RVIPF strategic crime threat assessment; informed by operational experiences and data on organized crime, terrorism, firearms, ML, and cybercrime. - Reinforces 2022 MLRA findings: misuse of TCSP sector and VI’s geography as transit point. - Identifies limitations in data sources and significant shortcomings in law enforcement response, including lack of understanding of organized crime scale, insufficient investigative capacity, siloed agency culture impairing data exchange, internal corruption, and need for improved intelligence sharing with international counterparts. - TF risk assessments: - First sectoral TF Risk Assessment (TFRA) 2020 was jointly conducted by FSC and FIA, covering FIs, DNFBPs, and NPOs; based on data from 2015 to 2019. - TFRA findings: domestic TF threat low; overall TF threat to support foreign terrorist activity medium-low; TF risks from international trade and movement of funds medium-high. - Emerging products (VAs and VASPs) assessed as high TF risk; foreign TF threat for emerging products significantly higher than domestic; higher risk for TCSPs, money services business, and investment business. - Among DNFBPs, real estate sector faces the highest TF risk. - Separate PF Risk Assessment published in 2022 considering domestic and international risks. ### Scoping of higher-risk issues (assessment focus) - Pre-assessment scoping determined higher-risk topics for focused examination. - High-risk priorities identified: - Misuse of corporate vehicles and professional facilitators (TCSPs, lawyers, accountants, real estate agents). - Risks related to services offered to legal persons and arrangements owned or beneficially owned by international customers. - Investment businesses deemed high-risk (see “Weighting” section). - Emerging ML/TF risks from misuse of VAs through corporate vehicles and VASP operations in the VI. - Authorities’ understanding of beneficial ownership requirements and international cooperation for exchange of beneficial ownership information. - Areas examined by assessors: - Implementation and supervision of AML/CFT preventive measures by FIs, DNFBPs, and VASPs, including ML/TF risk understanding, application of CDD and EDD, identification of beneficial owners, implementation of financial sanctions, reporting obligations, and international information exchange. - Capacity of law enforcement and the FIU to identify and respond to complex financial crime, including efforts, resources, and capacity constraints for investigating and prosecuting complex ML offences and related predicate crimes involving international cooperation. - Public sector corruption and governance risks, including impact on effectiveness of AML/CFT agencies and measures to mitigate internal corruption weaknesses. *Source: 1vgbea2024001 - 88.* ### 114. Due to their relatively lower level of risks, the assessors devoted less attention to ### Materiality; Structural Elements; Legal and Institutional Framework — British Virgin Islands ### Materiality - The TCSP sector with 282 TCSPs is the most material sector and primary gateway to the VI’s financial services sector, accounting for approximately 67 percent of its economic activity in 2022. - The banking sector comprises 7 institutions and accounted for 25 percent of economic activity in 2022. - The banking sector held US$2.86 billion in assets at the end of 2022. - Two licensed money service businesses (MSBs) generated 4.5 percent of economic activity in 2022 with outward money transfers of approximately US$47 million and US$4.7 million in assets. - The banking sector comprises six commercial banks and one private wealth management institution serving predominantly local customers. - Total income within the banking sector was US$108.6 million or approximately 7.8 percent of GDP (end of 2022). - Banks held assets valued at US$2.86 billion with total deposits of US$2.15 billion (end of 2022). - The market share of deposits ranged from 2 percent to 23 percent of total deposits, with an average of 14 percent per bank. ### Structural Elements - The VI is an international business incorporation and financial center, well established in banking and legal services, trust and company management, captive insurance, company incorporations and re-registrations, and mutual funds administration. - The VI has a stable political and institutional system required for a functioning AML/CFT system and is internally self-governing. - Under the VI Constitution, the proper functioning of rule of law is a responsibility of the Governor and the United Kingdom; the Constitution is enacted by the United Kingdom through an Order in Council made by the U.K. Privy Council. - In June 2022, the United Kingdom passed the “Virgin Islands Constitution (Interim Amendment) Order 2022,” which allows for the imposition of direct rule and suspension of the VI’s House of Assembly and ministerial government; the Order has not been brought into force and the VI remains responsible for its own internal self-governance. ### Background and Other Contextual Factors - Since its last mutual evaluation (ME), the VI introduced new legislation and enacted several amendments to its AML/CFT institutional structures and regulatory and legislative framework, including amendments related to individual FI sectors, the Criminal Code, TFS, gaming, and betting. - Amendments to the Anti-Money Laundering Regulations (AMLR) and the AMLTFCOP in 2022 and the VASP Act, which came into force in February 2023, focused on adapting the AML/CFT regime to VA-related requirements. - The VI House of Assembly brought into law 16 pieces of legislation relevant to the AML/CFT framework shortly before and during the onsite visit, affecting assessors’ review of IOs.3 and 4 and several Recommendations, including those on ML and confiscation, preventive measures, transparency of beneficial ownership of legal persons and arrangements, and powers and responsibilities of competent authorities. - The size of the VI’s financial services sector exceeds the availability of resources to authorities (e.g., supervisory, law enforcement). - Public sector corruption and governance vulnerabilities among law enforcement institutions have affected the capacity of key AML/CFT agencies; an independent inquiry was established in January 2021 under the VI CoI Act to review governance. The CoI report points to possible corruption and abuse of office by elected public officials and law enforcement officers. - High-profile arrests of the former Premier and the Managing Director of the VI Ports Authority by U.S. authorities took place in April 2022 (see “Overview of ML/TF Risks”). - The VI’s porous borders and heavily trafficked waters create risks from illicit drug trafficking, human trafficking, and cash smuggling into the United States; long coastlines, high volume of commercial maritime and air traffic, and identified facilitation routes (e.g., from Venezuela to the USVI via the VI) complicate enforcement. - Understanding of facilitation networks and logistics is hampered by disconnects in domestic and international intelligence sharing. - Understaffing of LEAs such as the RVIPF, AGC, ODPP, and judiciary affects investigation and prosecution of ML and predicate crimes in the VI and those committed abroad. ### AML/CFT Strategy - The VI’s National AML/CFT Strategy 2021–2023 was approved by the National AML/CFT Coordinating Committee (NAMLCC) and the Cabinet in 2021 as a three-year roadmap linked to the VI’s National AML/CFT Policy. - The Strategy is intended for public and private sector stakeholders to implement effective measures to combat ML/TF/PF risks identified under the NRAs. - The AML/CFT Policy focuses on six key areas, reflected in the Strategy and divided into objectives and corresponding actions; focus areas include prevention, detection, investigation, and promotion of cooperation. - The NAMLCC is responsible for implementation and monitoring of the Strategy and Policy; monitoring is performed through the Ministry of Finance’s (MoF) AML/CFT Implementation Unit (IU) and ultimately reported to the Cabinet. ### Legal & Institutional Framework — Policy Coordination Bodies - The NAMLCC is the main national coordinating body on AML/CFT issues; established by the Cabinet in 2016 and enshrined into law in 2021 pursuant to section 26B of the Proceeds of Criminal Conduct Act (PCCA). It is chaired by the Premier and includes the Governor, Deputy Governor, the Attorney General, the Managing Director of the FSC, the Financial Secretary and representatives of JALTFAC, IGC, CCA, and CLEA. Its Secretariat, the AML/CFT IU, is situated within the MoF. - The Joint Anti-Money Laundering and Terrorist Financing Advisory Committee (JALTFAC) is statutorily established under the PCCA, advises the FSC on ML/TF prevention, encourages dialogue with the private sector, and is chaired by the FSC with a total of 15 members from the public and private sector. - The Inter-governmental Committee on AML/CFT Matters (IGC) promotes public awareness of AML/CFT issues and fosters cooperation between key public AML/CFT bodies; established pursuant to powers granted to the FSC and FIA under the AMLTFCOP (Section 50(1)). The IGC is chaired by the FSC. - The Council of Competent Authorities (CCA) was established by the Cabinet in 2017 and enshrined into law in 2021 under the Criminal Justice (International Cooperation) Act (C(JI)CA), section 10A; chaired by the FSC and includes the AGC, FIA, FSC, ITA, and GO. The CCA’s role was expanded in 2019 to assist ME preparation and make recommendations to the NAMLCC. - The Committee of Law Enforcement Agencies (CLEA), established by the Cabinet in 2017, is chaired by the ODPP and includes DOI, FIA, HMC, and the RVIPF; VI Airports Authority, VI Ports Authority, and Magistrate’s Court are invited as needed. - The AML/CFT Implementation Unit (IU) was established by the Cabinet as the Secretariat to the NAMLCC, tasked with implementing NRA recommendations and monitoring effectiveness; it assists with training needs and is currently staffed by two officers: an Implementation Coordinator (Head of the Unit) and one analyst. ### Legal & Institutional Framework — Ministries and Governmental Bodies - The Ministry of Finance (MoF) holds overall responsibility for financial management and control of government activities and national finances; administrative responsibility for HMC and the Department of Inland Revenue. - The Governor’s Office (GO) is the VI’s competent authority on extradition and international sanctions; a member of CCA and NAMLCC; standard operating procedures cover MLAs, Sanctions Reports, Extradition, Sanctions Licenses, and UN Panel of Expert requests; guided by U.K. and VI government sanctions policy and strategy. ### Legal & Institutional Framework — Criminal Justice and Operational Agencies - The Office of the Director of Public Prosecutions (ODPP) is the sole prosecutorial authority in the VI with a Senior Crown Counsel (Financial) tasked with ML/TF/PF prosecutions and a designated counsel for freezing, seizure, and forfeiture opportunities. - The Attorney General’s Chambers (AGC) receives MLA requests, leads on extradition requests, and exchanges information regularly with the GO, FIA, RVIPF, and FSC. - The Magistrate’s Court is supervised by the GO; most ML and predicate offences are adjudicated by the Magistrate’s Court; alongside RVIPF-FCU and ODPP it maintains statistics on ML/TF investigations, prosecutions, and convictions via case management systems. - The Supreme High Court and the Court of Appeal are part of the Eastern Caribbean Supreme Court (ECSC); the final court of appeal is the Judicial Committee of the Privy Council in London. - The Asset Seizure and Forfeiture Committee (ASFMC) manages property forfeited to the Crown; chaired by the Financial Secretary and composed of the Managing Director of the FSC, the Commissioner of Police, the Commissioner of Customs, the Director of the FIA, the Director of the ITA, and the Permanent Secretary in the Premier’s Office. - The Royal Virgin Islands Police Force (RVIPF) is the lead agency for criminal investigation of domestic and international ML offences; within the RVIPF the Financial Crimes Unit (FCU) is the main investigative body for ML and proceeds of crime. The RVIPF-FCU receives financial intelligence from the FIA and HMC and responds to MLA and police-to-police international cooperation requests. - His Majesty’s Customs (HMC) handles border protection, detaining, seizing, and forfeiting proceeds of criminal gains; utilizes the Ship Rider Agreement with the United States Coast Guard (USCG) to patrol common territorial waters and share resources; communicates with the USVI Fusion Center on enforcement matters. - The Department of Immigration (DOI) is responsible for immigration/emigration, detention of illegal immigrants, prevention of entry of unauthorized persons, and deportation; has minor investigative powers under the Immigration and Passport Ordinance. - The Registry of Corporate Affairs (ROCA) maintains registry of all legal persons formed or registered under the BVIBCA, 2004, Partnership Act, 1996, and the Limited Partnership Act, 2017; responsible for company winding-ups/strike-offs and collection of associated revenue. - The International Tax Authority (ITA) is the competent authority for tax information exchange, negotiating TIEAs and MLA requests; existed within the MoF since 2012 and established as a statutory body in 2018 pursuant to the ITA Act, 2018. - The Joint Task Force (JTF), created in 2020, coordinates joint law enforcement efforts including land and sea patrols to counter drug trafficking and cash and human smuggling; chaired by HMC and comprises the GO, DOI, and FIA. - The Non-Profit Organizations Board (NPOB) is charged with registration of NPOs, receiving and determining applications, facilitating sector development, and promoting understanding of NPO roles. ### Supervisory Authorities - The Financial Services Commission (FSC) regulates, supervises, and inspects banks, financing and MSBs, TCSPs (including registered agents), insolvency practitioners (IPs), insurance businesses, investment businesses, and VASPs; supervises compliance under the AMLR and the AMLTFCOP, as amended. The FSC’s Enforcement Division (ED) handles intelligence referrals from the FIA and engages in international cooperation for regulatory information. - The Financial Investigation Agency (FIA) serves as the VI’s FIU and supervises DNFBPs and identified high-risk NPOs; consists of two operational units: the Analysis and Investigations Unit (AIU) and the SEU. The FIA-AIU receives and analyses SARs and disseminates financial intelligence. The FIA-SEU supervises legal practitioners, accountants undertaking relevant business, real estate agents, high-value goods dealers (HVGD), dealers in precious metals and stones (DPMS), and NPOs. The FIA is a member of the Egmont Group of Financial Intelligence Units. - The Gaming and Betting Control Commission (GBCC) has not yet been established and would need to be established before any gaming licenses could be issued. ### Financial Sector, DNFBPs, NPOs and VASPs — Financial Institutions - The banking sector is comparatively small but integral due to domestic and international operations and substantial transaction volume. - Five banks operate as subsidiaries or branches of international banking groups; the sixth commercial bank is domestic and majority-owned by the Government of the VI. - The FSC has designated all banks as systemically important FIs. - No bank in the VI provides foreign correspondent banking services; each bank has relationships with overseas banks that provide correspondent banking services. - Cross-border transactions by banks (based on value of reported incoming and outgoing wire transfers) primarily involve transfers to and from North America, Asia, the United Kingdom, and the Caribbean. *BRITISH VIRGIN ISLANDS — INTERNATIONAL MONETARY FUND* ### 131. Banks’ exposure to high-risk customers and politically exposed persons (PEPs) is ### 1vgbea2024001 - 131. Banks’ exposure to high-risk customers and politically exposed persons (PEPs) is ### Banks’ exposure to high-risk customers and PEPs - Exposure is concentrated on customers resident in the VI, such as government officials and other high-ranking individuals along with their close associates and family members. - Foreign PEPs are predominantly connected to an account operated by a legal person for which the PEP may be the beneficial owner or director, even though legal persons without operations in the VI would generally not hold accounts in the VI. ### Investment business sector - Composition and scale (as of March 2023 unless noted): - 132 entities, 684 approved investment managers, and 53 authorized representatives. - Accounted for less than 5 percent of economic activity within the wider financial services sector. - Assets under management by approved managers amounted to US$33.7 billion at end of 2021. - Investment funds registered in the VI had a total net asset value of approximately US$298 billion (end of 2021). - Structure and risks: - Sector includes investment fund vehicles, asset administrators, broker/dealers, managers, and investment advisors. - Transaction numbers and volumes are large, serving an international customer base. - Products and services are varied and assets are dispersed globally, leaving this sector highly susceptible to ML risks. ### Financing businesses - As of the onsite assessment: - Three licensed financing businesses in the VI. - They serve approximately 800 local customers per year. - 420 transactions were conducted in 2022 with an average transaction value of US$1.8 million. - One financing business is responsible for approximately 91 percent of the value of these transactions; the other licensee is responsible for the remaining 9 percent. - Two licensees provide small short-term loans; the third had not commenced operations at the time of the onsite visit and has since surrendered its license. ### Money Service Businesses (MSBs) - Sector composition and activity: - Two providers. - Not highly integrated with sectors outside of banking. - Accounts for 4.5 percent of economic activity within the VI’s financial services sector. - Transaction profile and trends (2020–2022): - Outward money transfers account for 90.18 percent of all MSB transactions and were valued at US$47.1 million per annum. - A 78 percent decrease in the value of transactions compared to the 2015–2019 reporting period was attributed primarily to the onset of the COVID-19 pandemic and to a 7 percent government-issued levy in 2020. - Authorities observed the levy led to an increase in bank account use and also to hawala-style unregulated operators, increasing jurisdictional risk. - Regulatory note: - Trading in foreign exchange has been excluded from the AML/CFT framework, except for the obligation to file SARs. ### Insurance sector - Licensees and economic importance (March 2023; end-2021 financials): - 107 insurance business licensees operating in the VI. - Accounted for approximately 4.1 percent of economic activity within the wider financial services sector. - Composition: 38 domestic insurers, 46 captive insurers, 6 insurance managers, 14 insurance intermediaries (agents and brokers), and 3 loss adjusters. - Total value of premiums held by domestic insurers at the end of 2021: US$168.88 million. - Gross written premiums held by captives: US$383.96 million. - Captive insurance sector held US$1.22 billion in gross assets at the end of 2021. - Customer bases and business conduct: - Majority of customers for captive insurers and insurance managers are from the United States. - Domestic insurers’ customer base consists of insurance intermediaries representing foreign-based domestic insurers, as well as individual and corporate customers. - Customer base for insurance intermediaries is fully domestic. - Products relatively standard; most business conducted face-to-face; cash transactions limited to payment of premiums by some customers. ### Insolvency services sector - Size and activity (as of December 2022; 2020–2022): - 25 fully licensed IPs (mainly accountants and legal practitioners). - 248 insolvency appointments between 2020 and 2022, most related to liquidation of non-regulated BVIBCs. - Insolvency appointments geographically dispersed, including Asia, the EU, and the VI. - VI-licensed IPs carried out 305 joint appointments with overseas practitioners related to entities with centers of operation in Hong Kong, the Cayman Islands, and the United Kingdom. ### Industry associations - The VI’s financial services sector is organized in several industry associations that work with regulators and governments; associations include those for banks, compliance officers, insurance managers, insurance, registered agents, investment funds, and restructuring and insolvency specialists. ### TCSPs and DNFBPs - TCSP sector (as of March 2023): - Considered the most material sector in the VI and primary gateway to its financial services sector. - TSCPs accounted for 67 percent of all economic activity within the VI’s financial sector in 2022. - Annual fees from the TCSP sector amounted to US$195 million as of end-2021 (which comprises more than 55 percent of public revenues). - 282 TSCPs operating (53 Class I, 27 Class II, 33 Class III, 47 Restricted Class II, 105 Restricted Class III trusts, and 17 company management businesses). - Services include company administration, trustee and protector services, accounting services, ship registration, incorporations via registered agent services, and provision of directors and nominee shareholder services. - TCSP service capabilities (March 2023): - 103 (36.52 percent) of the 282 TCSPs could provide company management services (including registered agent services). - 127 (45 percent) licensed to provide trust-related services; 74 licensed exclusively to provide trust services (26 percent of all licensed TCSPs). - 73 percent of all licensed TCSPs can provide nominee shareholder services and have the ability to offer director services. - FSC classified the top 10 TCSPs that provide company incorporation services as systemically important FIs. - TCSP sector presents a high risk due to its large international customer base and non-face-to-face transactions. - Other DNFBP sub-sectors (March 2023 counts and characteristics): - Legal practitioners and notaries public: 40 registered; legal practitioner sector is the largest DNFBP sub-sector; majority serving customers of whom 60 percent are based outside of the VI; international customers include Belarus, Brazil, Mexico, Russia, Lebanon, and Pakistan. - Accountants: 15 registered; predominantly global customer base and virtual service delivery. - Real estate agents: 17 registered; 2020 reported 92 transactions valued at US$48.7 million; 2021 reported 90 transactions worth US$97.7 million (including a high-value commercial real estate transaction); noted increase in new market entrants; one to two PEP clients served by real estate agents per year. - Vehicle dealers: 7 dealers; two large dealers cover 70 percent of the market; sales between 550 to 750 imported vehicles per year to VI residents and businesses; cash transaction thresholds generally from US$5,000 to US$15,000 but some dealers have no maximum thresholds. - Yacht brokers: 7 brokers; average 6 to 15 sales over US$15,000 per year to mostly business customers; cash transactions are not undertaken. - Jewellers: 5 jewellers and 1 DPMS registered; four jewellers long-established and catering to cruise ship passengers and tourists; sector saw a 70 percent decline in sales in 2021 due to COVID-19 and sales increasing again since 2022. - DPMS: 1 registered. - HVGD: 2 entities; may undertake cash transactions over the US$15,000 threshold, though not the norm. - Gaming and betting: not currently permitted; GBCA entered into force July 2021 but Gaming Commission not established; betting and gaming illegal without appropriate license; authorities identified some prohibited related activities taking place. - DNFBP organization: - DNFBP sector organized in industry associations including professional accountants, bar association, association of registered agents, chartered secretaries, and trust and estate practitioners. ### Non-Profit Organizations (NPOs) - As of March 2023: - 110 NPOs registered in the VI, including religious, community, and sporting associations. - Under the NPO Act, supervision and monitoring of NPOs for AML/CFT purposes is the responsibility of the FIA-SEU. - Risk ratings: 9 rated as high risk, 52 as medium risk, remainder rated low risk or new NPOs. - Since 2009, no entity seeking to carry out non-profit activities outside of the VI may be incorporated as a BVIBC. ### VASPs - Regulatory framework and timeline: - As of December 2022, VASPs are subject to the VI’s AML/CFT regulations and AMLTFCOP. - VASP Act (VASPA) came into force in February 2023; VASPs are subject to supervision by the FSC. - Persons currently conducting VA service business required to be registered as a VASP by July 31, 2023; new businesses must register immediately. - FSC implementing regulatory and supervisory frameworks to monitor VASP compliance. - Sector size and risks: - Prior to VASPA, only one entity had obtained a SIBA license to operate as an investment exchange for derivatives related to VAs; evidence at onsite visit suggested VASP operations were taking place in or from the VI. - Actual size of VASP sector unclear; poses a high emerging ML/TF risk including due to unregulated BVIBCs operating as VASPs for international customers. - Upon collection of statistical information, the FSC learned about 195 entities which may have been carrying out VASP-related services without identifying individual providers as captured under the VASPA. ### Weighting of sectors in assessment - Highest importance: TCSPs (company management business, trust business, and other TCSPs) — most material economic sector with large international customer base and primary gateway to financial services sector. - Next highest: Investment businesses — highly susceptible to ML risks due to large transaction volumes for an international customer base and globally dispersed assets. - High importance: VASPs — recently come under supervision and pose a high emerging ML/TF risk. - Medium importance: Banks — provision of banking services to VI-created legal persons and arrangements not central to banks’ business; customer base and products largely domestically focused. - Medium importance also assigned to legal professionals, accountants, and real estate agents due to role as professional facilitators and potential misuse related to TCSP sector. - Less importance: MSB, financing, insurance, and DPMS given sector sizes, contribution to overall economic activity, and customer base composition. ### Preventive measures and supervisory responsibilities - Legal and regulatory framework: - Preventive measures set out in the AMLR and the AMLTFCOP (both revised in 2020 and amended in 2022 and 2023). - Section 4(1)(ca) of the Financial Services Commission Act (FSCA, revised in 2020) grants the FSC responsibility for supervising and monitoring compliance of FIs and TCSPs with AMLR and AMLTFCOP. - Section 5C of the Financial Investigation Agency Act (FIAA, revised in 2022) grants the FIA responsibility for monitoring DNFBPs' compliance with AMLR and AMLTFCOP. - Section 8 of the AMLTFCOP outlines responsibilities of the FSC and the FIA respectively in monitoring compliance of FIs and DNFBPs. - Additional applicable laws include the FSC and FIA Acts, PCCA, DTOA, Counter-Terrorism Act (CTA), PF (Prohibition) Act, the VASP Act of 2022, and the GBCA. - Coverage and gaps: - AMLR and AMLTFCOP cover most activities of FIs and DNFBPs required under the FATF standard and preventive measures such as CDD, record keeping, PEPs, correspondent banking relationships (CBR), and STR. - Trading in foreign exchange is out of scope of the AML/CFT regime except for the obligation to file SARs. - Guidance and supervision: - FSC and FIA provide guidance to supervised entities on AML/CFT preventive obligations, including FSC AML/CFT guidance for different FIs and FIA guidance notes on AML/CFT/CPF requirements for DNFBPs. *Source: 1vgbea2024001 - 131. Banks’ exposure to high-risk customers and politically exposed persons (PEPs) is (VI assessment text).* ### 153. Business companies: These can take the form of companies (i) limited by shares; (ii) limited ### 1vgbea2024001 - 153–170: Business companies, legal arrangements, supervisory arrangements, and national AML/CFT policies (British Virgin Islands) ### Forms of business companies and key metrics - Business company forms described: - (i) limited by shares - (ii) limited by guarantee but not authorized to issue shares - (iii) limited by guarantee and authorized to issue shares - (iv) unlimited and not authorized to issue shares - (v) unlimited and authorized to issue shares - Special designations and variants: - Companies limited by shares can be designated as segregated portfolio companies, restricted purpose companies. - Companies limited by shares or by guarantee can be designated as a private trust company. - Continuation and materiality: - A foreign company can be continued as a company incorporated under the BVIBCA and is then considered a BVIBC with all legal obligations and rights of a BVIBC. - Total BVIBCs registered with the Corporate Registry as of end-2022: 349,468. - Proportion of BVIBCs that are regulated FIs: 0.350 percent. - On average, less than 1 percent of BVIBCs incorporated annually operate physically in the VI (3,092 incorporated annually operate physically in the VI). - Over 99 percent of BVIBCs are used overseas. - In 2022, new BVIBCs incorporated: 28,077. - Selected counts from Table 6 (end-of-year register totals): - Company limited by shares: 2018: 379,744; 2019: 360,919; 2020: 342,718; 2021: 351,268; 2022: 348,915; 2023 (up to end of March): 341,258. - Unlimited Company—authorized to issue to shares: 2018: 261; 2019: 238; 2020: 227; 2021: 238; 2022: 244; 2023 (up to end of March): 239. - Unlimited Company—not authorized to issue shares: 2018: 8; 2019: 7; 2020: 8; 2021: 8; 2022: 7; 2023 (up to end of March): 8. - Company limited by guarantee—authorized to issue shares: 2018: 71; 2019: 70; 2020: 79; 2021: 76; 2022: 80; 2023 (up to end of March): 79. - Company limited by guarantee—not the authorized to issue shares: 2018: 182; 2019: 182; 2020: 189; 2021: 202; 2022: 222; 2023 (up to end of March): 213. - Total Number of BVIBCs: 2018: 380,266; 2019: 361,416; 2020: 343,221; 2021: 351,792; 2022: 349,468; 2023 (up to end of March): 341,797. - Segregated Portfolio Company: 2018: 97; 2019: 91; 2020: 102; 2021: 118; 2022: 142; 2023 (up to end of March): 120. - Restricted Purposes Company: 2018: 34; 2019: 35; 2020: 33; 2021: 33; 2022: 34; 2023 (up to end of March): 35. - Private Trust Company: 2018: 1,094; 2019: 1,080; 2020: 1,080; 2021: 1,141; 2022: 1,130; 2023 (up to end of March): 1,109. - Foreign companies continued as BVIBCs: 2018: 356; 2019: 369; 2020: 384; 2021: 569; 2022: 343; 2023 (up to end of March): 50. ### Foreign companies and limited partnerships - Foreign companies: - Foreign companies registered under the BVIBCA carry on business in the VI but maintain domicile in the jurisdiction of incorporation and are not considered BVIBCs. - Number of foreign companies registered in the VI: 55 (including 35 licensed entities under the FSC’s supervision). - Table 6 other legal persons — Foreign Companies registered in the VI: 2018: 60; 2019: 63; 2020: 66; 2021: 64; 2022: 55; 2023 (up to end of March): 51. - Limited Partnerships: - Created under the Limited Partnerships Act (LPA) 2017; prior to 2017 created under the Partnerships Act 1996. - Limited Partnerships can no longer be created under the Partnerships Act 1996; those created under that Act must re-register voluntarily under the LPA or will be automatically re-registered by the end of a 10-year transitional period. - Only 52 limited partnerships have voluntarily re-registered to date. - A foreign limited partnership can be continued as a limited partnership under the LPA and be considered formed in the VI; limited partnerships may merge or consolidate with a foreign limited partnership. - Limited partnerships under the LPA can elect to be registered with or without legal personality; assessment covers limited partnerships registered with legal personality. - Table 6 counts — Limited Partnerships (formed under LPA and Partnerships Act): 2018: 940; 2019: 978; 2020: 1,074; 2021: 2,066; 2022: 1,902; 2023 (up to end of March): 1,846. - Foreign limited partnerships continued as VI Limited Partnerships: 2018: 356; 2019: 369; 2020: 12; 2021: 1; 2022: 2; 2023 (up to end of March): 0. ### Micro-business companies, cooperatives, and friendly societies - Micro-Business companies: - Company limited by shares under the Micro-Business Companies Act 2017. - The Act is currently suspended but not repealed. - No micro-business companies have been created to date. - The suspended law can be lifted by notice of the relevant Minister. - Table 6 — Micro-business companies—suspended legislation: 2018: 0; 2019: 0; 2020: 0; 2021: 0; 2022: 0; 2023 (up to end of March): 0. - Cooperatives and Friendly Societies: - Established by Cooperatives Societies Act 1979 or the Friendly Societies Act 1928. - Friendly societies are deemed NPOs under the NPO Act 2012; the 1928 law still applies for creation processes. - Limited information available on existence of cooperatives and friendly societies; Table 6 entries: "No information available" for Cooperatives and Friendly Societies. ### Legal arrangements: express trusts and VISTA trusts - Express trusts: - Created under common law principles; no specific laws governing establishment beyond general trustee obligations in the Trustee Ordinance (Cap. 303). - Express trusts are not required to be registered in the VI. - Based on TCSP annual returns and 2022 MLRA reporting: around 6,277 express trusts set up in the VI, holding trust assets worth approximately US$183.66 billion (data available up to 2021 only). - Table 7 counts for express trusts: 2018: 7,148; 2019: 6,683; 2020: 6,628; 2021: 6,227; 2022: Data not yet available. - VISTA Trusts: - Special trusts under the VISTA set up only to hold shares in BVIBCs. - Based on annual returns: about 1,540 VISTA trusts set up in the VI (data available up to 2021). - Table 7 counts for VISTA trusts: 2018: 1,324; 2019: 1,530; 2020: 1,326; 2021: 1,540; 2022: Data not yet available. ### Supervisory arrangements and scope - Two competent AML/CFT supervisory authorities: - Financial Services Commission (FSC): - Established in 2002 pursuant to the FSCA. - Supervises: (i) banking, (ii) insurance, (iii) fiduciary services (TSCPs), (iv) investment business, (v) financing and MSBs, (vi) insolvency services, and (vii) VASPs. - Responsible for ensuring compliance with the AMLR and the AMLTFCOP (including identification and verification obligations, record-keeping, third-party relationships, suspicious activity reporting, internal controls, and PEP identification/handling). - Has signed MoUs and MMoUs for international exchange of information and assistance on AML/CFT matters. - Financial Investigation Agency (FIA): - Established in 2004 pursuant to the FIAA, 2003, as an autonomous LEA and the VI’s FIU. - In 2008 given responsibility for supervision of DNFBP sectors (via amendment to the AMLTFCOP). - Supervises DNFBPs: (i) legal practitioners, notaries public and accountants, (ii) real estate agents, (iii) DMPS, (iv) HVGD, (v) vehicle dealers, and (vi) persons engaged in the business of buying and selling boats. - Applies a risk-based approach to supervise NPOs at high risk of ML/TF/PF under FIAA provisions, but has not identified the subset of NPOs within the FATF’s definition and did not focus on NPOs at risk for TF specifically. - VASP supervision: - As of December 2022, VASPs subject to AMLR and AMLTFCOP requirements. - With entry into force of the VASP Act in February 2023, the FSC has responsibility to supervise all VASPs. ### International cooperation arrangements - Attorney General’s Chambers (AGC): - Central authority reviewing MLA requests for domestic legal requirements and transmitting to executing agencies (FIA, RVIPF, High Court, VI Shipping Registry, or dealing with requests itself). - Submits responses to foreign competent authorities. - FIA-AIU: - Plays a key role in the execution of MLA requests; investigating officers respond to MLA requests transmitted by the AGC, initiate investigations, request additional information (including from FIA-SEU), and send results to the AGC. - Other authorities engaged in extradition and international cooperation: - Governor, AGC, and ODPP are main authorities for execution of extradition requests. - FIA, RVIPF-FCU, HMC, ITA, and FSC engage in responding to and submitting requests for other forms of international cooperation. - Key international partners identified include the United States, the United Kingdom, and Puerto Rico. ### National AML/CFT policies and coordination — Key findings - Risk identification and assessments: - Authorities have undertaken positive steps, including the 2022 MLRA. - Risk assessments reasonably concluded that VI legal entities and legal arrangements have the highest risks in the country. - Overall risk understanding by competent authorities described as fair and narrow regarding the nexus of VI entities and illicit activities of their foreign beneficial owners. - Specific vulnerabilities: heavy reliance on professional business introducers, complexity of corporate formation practices, weaknesses in TCSPs and other gatekeepers. - Cascading negative impact on overall effectiveness of AML/CFT regime. - National policy and strategy: - National AML/CFT Policy and Strategy and operational policies broadly aimed at addressing identified risks. - National policy based on the 2016 NRA and not yet updated with the 2022 MLRA findings; does not fully target risk mitigation measures on misuse of VI legal persons and arrangements. - Supervision and law enforcement focus: - AML/CFT activities narrowly focused and do not fully mitigate identified risks of misuse of VI legal persons and arrangements. - Supervision over TCSPs and other gatekeepers not aligned with identified risks—especially regarding beneficial ownership information. - Law enforcement efforts and financial intelligence disseminations not effectively directed towards threats from foreign predicate crimes via misuse of VI legal persons and arrangements. - Coordination and information-sharing: - Multiple coordinating bodies exist with overlapping memberships and private sector participation. - Operational-level information-sharing and cooperation not fully leveraged due to domestic corruption risks (trust issues among LEAs, reluctance to share sensitive information, and culture of competition). - Dissemination of risk assessment results occurred (2022 MLRA disseminated in June 2023), but private sector awareness of risks is heterogeneous. ### National AML/CFT policies and coordination — Recommended actions - Deepen overall understanding of risks: - Conduct comprehensive analysis of potential misuse of VI entities, including assessment of country risks of professional business introducers and typologies of complex corporate formation practices and their misuse in the VI context; design mitigating measures appropriate to VI’s profile as a corporate and financial center. - Update policy and monitoring: - Update the National AML/CFT Policy and Strategy (including operational policies) to reflect findings of the 2022 MLRA, specifically targeting risks from misuse of VI legal persons and arrangements; continue monitoring and publishing progress on identified action items. - Enhance data collection and private sector engagement: - Enhance collection and analysis of quantitative data from supervisory activities (especially on beneficial ownership information). - Obtain adequate qualitative inputs from private sector stakeholders (specifically TCSP and other gatekeeper sectors) through periodic engagements; provide sufficient resources and seek additional expertise. - Improve coordination and joint operations: - Leverage multiple and overlapping coordinating bodies to improve consistency and overall understanding of ML/TF/PF risks (especially via JALTFAC) and update/monitor the National AML/CFT Policy and Strategy. - Build trust among agencies by maximizing existing legal foundations for coordination and collaboration at operational levels through joint operations. - Private sector dissemination and guidance: - Disseminate findings of the 2022 MLRA with the private sector and conduct awareness-raising activities (similar to those for the 2016 NRA and subsequent SRAs). - Issue typologies and guidance on key and emerging risks (e.g., misuse of VI legal persons and legal arrangements). ### Immediate Outcome 1 (Risk, Policy, and Coordination) — Country’s understanding of ML/TF risks - Risk assessment outputs and timelines: - NRA completed in 2016; full version distributed among relevant public authorities only; sanitized version publicly available July 2017. - NRA relied on data from 2011 to 2014 and analyzed vulnerabilities and consequences at sectoral level; discussions of factors contributing to threats sparse regarding nature, materiality, and relevance of predicate crimes. - FSC issued SRA on ML in 2020 covering FSC-supervised sectors; FIA issued SRA in 2020 covering NPOs and DNFBPs. - Separate TF RA (2020) and PF Risk Assessment (2022) were issued and published, taking into account domestic and international risks. - Authorities provided the 2022 MLRA and intend to publish a sanitized version; on June 9, 2023, FSC and FIA published the 2022 MLRA on their websites. - NAMLCC policy statement (February 8, 2023) committed to updating risk assessments and AML/CFT policies and strategies at least every two years. - Assessment of authorities’ understanding: - Overall understanding among public authorities described as fair and narrow despite written outputs. - Narrow understanding that VI legal persons and arrangements are not directly involved in predicate crimes; authorities fail to fully appreciate vulnerabilities specific to VI context and potential for concealing foreign criminal proceeds and ownership when part of complex corporate structures. - Consequences of narrow understanding: - Affects implementation of preventive measures by TCSPs that rely on professional business introducers. - Impacts quality of information on foreign beneficial owners of VI legal persons and arrangements. - Reduces prioritization of supervisory activities over highest-risk TCSPs. - Less proactive international cooperation and absence of domestic criminal enforcement concerning misuse of VI entities. - TCSP sector vulnerabilities and supervisory gaps: - Insufficient understanding by FSC of inherent vulnerabilities of licensed TCSPs regarding ownership and control of clients and active VI entities. - Contributing factors: heavy reliance on professional business introducers for CDD, high level of non-face-to-face interactions between TCSPs and customers, involvement of VI entities in complex corporate structures. - Risk that VI entities contribute to layering and integration phases of ML/TF activities abroad not adequately internalized by key stakeholders or majority of TCSPs. - Inadequate understanding of country risks from jurisdictions where professional business introducers operate (geographical elements and quality of supervisory regime). - Recommendation: deepen understanding of inherent risks of international business activities of VI legal persons and arrangements when part of complex corporate structures and develop understanding of country risks of professional business introducers. *Source: Excerpts from the British Virgin Islands assessment (1vgbea2024001), pages 153–170.* ### 171. LEAs also had a limited view of the ML/TF risks (focused mostly on domestic threats ### 171. LEAs also had a limited view of the ML/TF risks (focused mostly on domestic threats posed by drug trafficking and smuggling) ### LEA understanding of national ML/TF risks - LEAs were focused mostly on domestic threats posed by drug trafficking and smuggling and, outside of their agency’s own area of competence, were not able to demonstrate their overall understanding of risks at the national level, particularly with respect to VI entities, despite being identified as the most significant risk. - LEAs have conflicting views on whether the activities of VI entities (particularly, BVIBCs) should trigger domestic investigative and international cooperation requests (see Chapters 3 and 8). - The authorities do not generally consider that there is a sufficient nexus between the illicit activities of the beneficial owner undertaken abroad, and the BVIBC or the country, including in the context of domestic investigations and prosecutions. ### Foreign proceeds of crime and misuse of VI legal persons and arrangements - Authorities reasonably identified high susceptibility to criminal misuse of VI legal persons and legal arrangements given these entities’ global nature and engagement in trans-national business activities. - Aside from broad assertions, authorities were unable to articulate a detailed understanding of typologies used to launder foreign proceeds of crime and misuse of VI legal persons and arrangements (e.g., inherent vulnerabilities of VI entities as opposed to others, operating as part of complex legal structures, or country risk assessment where the VI entities operate or their beneficial owner is a national or residence). - Recommendation: A comprehensive analysis of the key features of VI legal persons and legal arrangements and potential for misuse abroad should deepen understanding and inform mitigating measures, improve accuracy and adequacy of basic and beneficial ownership information (see Chapter 7), better prioritize onsite supervision of the TCSP sector (see Chapter 6), and enhance information exchange with foreign authorities (see Chapter 8). ### Risk assessment methodology, frequency, and data - The 2016 NRA relied on pre-assessment questionnaires, statistics from agencies, qualitative in-person interviews, and a broad range of public agencies and private sector stakeholders. - Authorities are enhancing systems to collect and analyse statistical data, particularly on estimating proceeds of crimes by the LEAs (RVIPF, FIA-AIU, HMC) and through AML/CFT returns filed with the FSC and the FIA-SEU. - The 2022 MLRA was more streamlined and mostly relied on quantitative data; not all public agencies participating in the 2016 NRA were similarly involved in the 2022 MLRA. - Private sector input in 2022 came mainly through questionnaires and returns rather than in-person interviews and validation used in 2016. - Assessors view updating the NRA every two years as potentially onerous given the country’s risk context and capacity constraints and note alignment with FATF guidance (i.e., within the next three to five years) may alleviate resource constraints and allow deeper analysis; consideration should be given to seeking adequate resources and expertise (possibly through technical assistance). - Ongoing dialogue among public and private stakeholders should continue to keep the risk assessment timely and help identify emerging risks (including on VAs). ### Key findings from the 2020 SRA and 2022 MLRA (legal persons, predicate offenses, and sector risks) - The threat from predicate offenses committed overseas is viewed as high, particularly arising from the more than 300,000 BVIBCs on the register. - The 2020 SRA and 2022 MLRA assessed BVIBCs and emerging products (i.e., those offering VAs or VASPs) as having the highest risks among legal persons and legal arrangements. - Most relevant predicate offenses: international fraud, foreign corruption (e.g., foreign PEPs), and tax evasion as well as ML committed in other jurisdictions. - Example cited: In August 2020, a BVIBC pleaded guilty in a U.S. court for conspiring to commit ML to evade U.S. sanctions against North Korea and agreed to pay a fine of US$673,714. - PF and TF domestic threat levels: domestic TF and PF threats assessed as low domestically, but risks from misuse of VI entities are elevated (e.g., evasion of sanctions, corporate layering, non-verification of beneficial owners, use of cryptocurrencies to facilitate PF). - Shipping-related PF risks: misuse of VI-flagged vessels, or ownership of a foreign vessel through a BVIBC. ### Sectoral risk assessments and changes (selected) - TCSPs: assessed as having the highest ML risks; TCSP sector generates more than half of VI public revenues. - VASPs: assessed as having high risks; one BVIBC operating as a VASP has been generating significant “cryptocurrency” SARs filed with the FIA-AIU on clients mostly outside the VI. - 2022 MLRA changes vs 2020 SRA: risk ratings decreased for some reporting institutions; investment businesses remain at medium-high risk. - Banking: medium-low risk in both 2020 SRA and 2022 MLRA. - For DNBFPs (except TCSPs and legal practitioners), 2022 MLRA assessed accountants, real estate agents, vehicle dealers, yacht brokers and dealers, and jewellers/precious metals and stones dealers as medium-low risks (downgrades from prior assessments). - Financing business: lower risk assessment appears reasonable (1 of the 3 licensed entities captures 90 percent of the business and provides services exclusively to local clients). - Insurance sector noted factors: 107 licensed entities inclusive of 38 domestic insurers, 46 captives, 23 managers and other intermediaries, and captive insurance involving PEPs and US$1.2 billion gross asset value for captive insurance. ### Tabulated risk ratings (selected entries) - Table 8 highlights legal persons and legal arrangements risk ratings in 2020 SRA and 2022 MLRA with entries including: - BVIBCs: H → H - Emerging Products (VA/VASP): H → H - Trusts: MH → MH - Limited Partnerships: MH → MH - Private Trust Companies (PTCs): MH → N/A - VISTAs: MH → ML - Micro Business Companies: ML → L - Table 9 highlights sectoral ML risk ratings (concluded) with changes across 2016 NRA, 2020 SRA, and 2022 MLRA, e.g.: - TCSPs: M ↑ H → H - VASPs: N/A → H → H - Money Services: H ↓ MH ↓ ML - Banking: M → ML → ML - Insurance: M → ML ↓ L - Insolvency: L ↑ ML ↓ L - Financing: N/A → L → L - Legal Practitioners: L ↑ MH → MH - Accountants: L ↑ MH ↓ ML - Real Estate Agents: H → MH ↓ ML - Vehicle Dealers: N/A → MH ↓ ML - Yacht Brokers and Dealers: N/A → MH ↓ ML - Jewelers/Precious Metals and Stones Dealers: M → MH ↓ ML ### Domestic crime context and specific threats - VI has an overall low crime rate supported by a small population (around 30,000 inhabitants); domestic crime levels proportionally are also low, and crimes against property are usually of low financial value. - Drug trafficking vulnerability: VI identified as a transhipment point for narcotics from South America destined for the United States due to porous borders among isolated islands and proximity to the USVI and Puerto Rico and capacity constraints (including lack of modern equipment such as radars). - Organized criminal organizations use same drug routes to smuggle cash, migrants, and firearms; imbalance between incoming and outgoing cash smuggling suggests some illicit drug proceeds are repatriated into local economy and reinjected through small businesses (RVIPF 2022 STCA). - Authorities have limited understanding of laundering methods used by local criminals domestically through small businesses; no investigative actions targeting ML through small businesses noted. ### Governance, corruption, and impact on AML/CFT - 2016 NRA noted domestic corruption could have negative consequences if not investigated; 2021 VI CoI report identified governance vulnerabilities and abuse of discretionary powers by elected officials. - Governance vulnerabilities at senior level and in law enforcement institutions are viewed as negatively cascading to effective implementation of anti-corruption and AML/CFT measures (e.g., bribery and abuse of power in customs facilitating smuggling). - Lack of trust among LEAs and reluctance to share sensitive information, plus culture of competition, can impact reliability of investigations and law enforcement action. ### National policies, strategies, and implementation gaps - The 2021 National AML/CFT Policy and Strategy responds to key ML/TF risks in the 2016 NRA but has not been updated in light of the 2020 SRA, 2020 TF Risk Assessment, or 2022 MLRA. - The 2021 Policy and Strategy features six areas: (i) prevention, (ii) detection, (iii) investigation and sanctions, (iv) regulation, (v) articulation (public outreach and capacity building), and (vi) promotion of co-operation; the AML/CFT IU (secretariat of the NAMLCC) monitors progress. - The 2021 Final Progress Report on the Implementation of the 2016 NRA summarized 68 percent of recommendations being completed and largely completed, but noted they were broadly aimed and not specifically directed to significant risks. - Recommendation: Update the Policy and Strategy to reflect the 2022 MLRA, including changes in risk ratings (e.g., TCSP medium to high, legal practitioners low to medium-high, money services and real estate agents from high to medium-low) and focus mitigation measures on misuse of VI legal persons and legal arrangements. ### Operational policies and supervisory focus - FSC’s 2020 AML/CFT Policy and 2020–23 AML/CFT Strategy emphasize effective risk-based supervision of the TCSP sector. - RVIPF-FCU’s 2022 Financial Investigation Policy emphasizes parallel financial investigations and prioritization of resources against highest threats, considering national or SRAs. - ODPP’s 2023 Policy Guidelines require assessment of benefits (cash and properties) derived from investigated crimes and consideration for forfeiture and confiscation. - Despite policies, implementation has not delivered significant outcomes in mitigating significant risks. ### Exemptions, enhanced and simplified measures - Trading in foreign exchange is excluded from the AML/CFT framework for licensing and registration and preventive measures (except for reporting suspicions) without a demonstrated assessment of lower risks (see R.26.1). - The 2016 NRA, 2020 FSC SRA, and 2022 MLRA make no assessment justifying this exclusion; authorities could not demonstrate justification or underlying risk assessment. - Assessment team notes trading in foreign exchange is offered by banks and investment businesses (subject to licensing and preventive measures) and limited overall impact of this scope limitation. - No enhanced measures are required or applied in cases of higher risk scenarios identified in the risk assessments (except EDD requirements for higher-risk customers as in Chapter 5). - No simplified measures are applied to low-risk scenarios identified in the risk assessment (except provision of simplified measures for low-risk customers). ### Objectives and activities of competent authorities — gaps relative to identified risks - Activities of competent authorities do not fully respond to the identified risks and are not commensurate with risks associated with misuse of VI legal persons and legal arrangements in context of VI’s status as a corporate and financial center. - Law enforcement focus: mostly directed at domestic drug trafficking and associated crimes; threats from foreign crimes via misuse of legal persons and arrangements are not effectively addressed. - Criminal investigations during the review period focused on domestic predicate offenses without sufficient parallel financial investigations; cash seizures were not supplemented with financial investigations into origins or underlying schemes, nor effective seizure and confiscation of instrumentalities (e.g., vessels or vehicles). - Recent policy developments: RVIPF-FCU Financial Investigation Policy updated in August 2022 to intensify follow-the-money efforts and financial investigations. - Efforts to investigate and detect proceeds from foreign predicate offenses and those facilitated by legal persons and legal arrangements created in the VI (including TCSPs) are few relative to heightened threat level. - Most criminal cases during the review period with respect to BVIBCs relate to failure to disclose tax information upon request of the ITA for purposes of international tax information exchange. *Source: Extracted content from the provided IMF assessment chapter.* ### 190. Analysis of SARs and financial intelligence dissemination are not fully aligned with VI’s ### Analysis of SARs and financial intelligence dissemination are not fully aligned with VI’s risk profile ### Misalignment between SAR filings and assessed risks - TCSPs (the sector with the highest ML/TF risk) filed most of the SARs during the review period, but reporting levels within the TCSP sector vary considerably. - The top 10 TCSPs responsible for providing services to the majority of BVIBCs are filing most of the SARs, while more than half of TCSPs have made no SARs filings at all. - SARs from the banking sector were next in number filed with the FIA-AIU, despite the sector being rated as medium-low in the 2020 SRA and 2022 MLRA. - Reporting in the banking sector is mainly concentrated in one bank that: - accounts for 23.11 percent of market share, - is responsible for 69.7 percent of SARs filed in the sector. - A significant portion of SARs involved persons not domiciled or a resident of the VI (“international SARs”) and related to suspected stand-alone ML, reflecting the country’s status as a corporate and financial center. - Domestic SARs (persons domiciled or residents of the VI) are focused on fraud and stand-alone ML, despite drug trafficking, cash and migrant smuggling, and corruption being identified as the key domestic threats. - There was a significantly disproportionate number of SARs related to VAs, owing to one BVIBC which submitted SARs to the FIA-AIU concerning suspicious activities related to its European clients conducted outside of the VI. - Financial disseminations have been made by the FIA-AIU to the RVIPF-FCU, but there has been no ML convictions arising from financial intelligence received from the FIA-AIU. ### Supervisory shortcomings and resource allocation - The FSC and FIA-SEU could not demonstrate that their supervisory activities are consistent with identified risks. - The FSC: - recognized inherent risks from the company formation business and the need for supervising the TCSP sector, - performed supervisory activities (particularly onsite inspections) that were assessed as inadequate given the elevated risks from the TCSP sector, - faced capacity challenges given 105 registered agents and more than 300,000 BVIBCs, - conducted 36 onsite examinations of TCSPs over a period of 5 years (insufficient to demonstrate risk-driven allocations). - The FSC does not adequately supervise on a risk-based approach the quality of AML/CFT controls of TCSPs to verify the accuracy, adequacy, and up-to-date beneficial ownership information, including in light of reliance on professional business introducers. - The FIA-SEU’s constrained understanding of potential involvement of legal professions in providing legal advice to BVIBCs is not consistent with its assessment of medium-high risks among DNFBPs it supervises. ### National coordination and operational cooperation - Existing coordinating bodies provide a good basis for domestic AML/CFT policymaking and enhancing risk understanding: - The NAMLCC is the highest AML/CFT/CPF decision-making body and includes senior officials such as the Premier/Minister of Finance, Governor, the head of the FSC, and Attorney General. - Overlapping membership of FSC, FIA, RVIPF in bodies such as the IGC, CCA, and CLEA supports consistency in approaches. - Monthly meetings inform and decide on national action plans, assessment of risks, and legislative reforms. - The JALTFAC involves private sector participation for discussion and dissemination of AML/CFT policies. - Coordination on PF has been limited to the conduct of the 2022 PF Risk Assessment. - The authorities should strengthen cooperation with the Information Commission on data privacy issues, noting the DPA provides exemptions with respect to other laws (including on AML/CFT). - Operational inter-agency coordination is underutilized due to governance vulnerabilities (reluctance to share sensitive information and a culture of competition among agencies), despite good legal foundations: - The IGC’s MMoU provides a mechanism for exchanging information (spontaneously or upon written request) and requires confidentiality of obtained information. - Separate bilateral MoUs for information exchange and cooperation are in place (examples cited in original material). - An MoU between RVIPF, DOI, HMC, VI Ports Authority, and VI Airports Authority became effective in October 2022 to mitigate heightened threats from smuggling and designate RVIPF as lead agency for port security. - Regular monthly meetings between the FIA (AIU) and RVIPF-FCU help facilitate financial intelligence disseminations (prioritization under the traffic light matrix, completeness of information submitted, and protecting confidentiality through a chain of custody). ### Private sector awareness and engagement - Authorities distributed risk assessment results and emerging risk information to reporting institutions, with exceptions: - The 2016 NRA and various SRAs (2020 FSC SRA, 2020 FIA SRA, 2020 TF RA, 2022 PF RA) are published and accessible, and reporting institutions participated in the 2016 NRA. - The 2022 MLRA was provided to the assessment team at the onsite visit and subsequently published on June 9, 2023; private sector engagement in the 2022 MLRA was more limited than in 2016 (no interviews or focus groups). - Authorities intend to conduct awareness raising activities with the private sector similar to previous exercises. - Overall understanding of risks among the private sector is heterogenous and should be improved, especially regarding misuse of VI legal persons and legal arrangements: - Many reporting institutions were unable to demonstrate how national risks were integrated into their institutional risk assessments. - Some registered agents frequently rely on professional business introducers to conduct CDD (including collection of basic and beneficial ownership information) without adequate assessment of the risks of the ultimate customer or beneficial owner. - Risks are aggravated by lack of face-to-face interaction between TCSPs and beneficial owners. - The JALTFAC should be leveraged further for awareness-raising; typologies on misuse of VI entities for foreign illicit proceeds and assessments of country risks where professional introducers operate could sensitize TCSPs. ### Conclusions on IO.1 (summarized findings) - Despite efforts to identify and assess risks (including the 2022 MLRA), overall understanding of risks in the VI is fair and narrow, particularly concerning: - elevated risks of misuse of VI entities abroad, - the complexity of the VI’s corporate formation practices, - vulnerabilities of TCSPs and other gatekeepers. - Narrow risk understanding negatively impacts authorities’ ability to mitigate ML/TF risks and undermines policies and application of mitigating measures, including a perception that VI legal persons and legal arrangements are not directly involved in foreign predicate crimes and have insufficient nexus to the country. - National AML/CFT policy and strategy, coordinating bodies, and proactive private sector outreach provide foundations for deepening overall risk understanding moving forward. *Excerpt from IMF assessment (Content unit: 1vgbea2024001 - 190).* ### 198. The VI is rated as having a moderate level of effectiveness for IO.1. ### 1vgbea2024001 - 198. The VI is rated as having a moderate level of effectiveness for IO.1. ### LEGAL SYSTEM AND OPERATIONAL ISSUES — Key Findings - Immediate Outcome 6 - Financial intelligence is used by several competent authorities in their operations to varying degrees. For entities such as the FSC, FIA-SEU, and the MNRLI this is mainly with an emphasis on the conduct of background checks, regulatory due diligence, and compliance. - The FCU has recently increased its use of financial intelligence produced by and disseminated to it by the FIA–AIU. The FCU also relies on financial intelligence generated from its own sources. - Other agencies such as the ITA and Customs do not use financial intelligence to a substantial extent. - The FIA has demonstrated that it is providing intelligence to competent authorities. There have been no prosecutions or convictions arising from its disseminations. Intelligence disseminated to the FCU by the FIA-AIU during the previous year resulted in eight ML investigations, four of which were sent to the ODPP (in December 2022) for a decision regarding prosecution. - There have been challenges regarding the quality of the FIA’s intelligence (including the age of the information provided) which impacted the FCU’s ability to progress ML and TF investigations. - The FCU and FIA have sought to work collaboratively to address these issues, resulting in increased requests in 2022 from the FCU, a significant improvement over the previous four years where requests ranged from zero to three. - The VI has several committees for cooperation and coordination on the exchange and use of information/financial intelligence among competent authorities. However, there have been no demonstrated operational outcomes regarding ML and TF arising from those bodies. - Limited reporting of suspicious activities from some higher risk entities and weak or uneven levels of reporting in other sectors impacts the FIA’s analysis. As a result, the financial intelligence generated is not representative of the VI’s risk profile. - Limited strategic analysis has been conducted by the FIA; during the period under review there was one completed strategic analysis product based on BVIBCs involved in cryptocurrency-related business. - Immediate Outcome 7 - Few significant ML cases have been prosecuted in the period under review. Most relate to the arrest of offenders in possession of cash. No in-depth investigations were made to trace and identify the origin of the assets and of the predicate offence, for predicate offences committed abroad or for identification of assets located abroad. - Investigators lack adequate legal powers and resources to conduct complex investigations (e.g., tracing assets abroad, controlled deliveries, undercover operations, requesting witness statements or financial information directly from regulated entities and other holders of financial information). - No complex ML investigations were carried out with regard to the misuse of VI-registered corporate vehicles in international ML schemes. No third-party ML cases were investigated or prosecuted, domestic or foreign. - Lack of operational information-sharing and trust between agencies is likely to be a contributory factor. - The territory faced severe disruptions following the 2017 hurricanes and the 2020 pandemic; this context affects performance. - The Governor may order interception of telecommunication or electronic data surveillance for criminal investigations, but investigators lack a comprehensive legal framework for controlled deliveries, undercover operations, or direct requests to regulated entities. - Investigations and prosecutions are consistent with risks in relation to drug-trafficking or cash-smuggling predicate offences, but other high-risk areas (corruption, tax evasion, corporate vehicles involved in cross-border ML) have not been subject to investigations or prosecutions except for 3 corruption prosecutions in 2021, and 12 investigations in 2022 (under the likely impetus of the CoI). - Sanctions cannot be considered proportionate, effective, or dissuasive partly due to thresholds for penalties before the lower court and ODPP prosecutorial choices. - Positive recent developments: investigators making better use of FIA dissemination reports due to improved FCU–FIA coordination; production orders are being utilized; stand-alone corruption investigations are now carried out; some MLA requests were made. A policy shift to improve ML fight is evident though statistics do not yet reflect it. - Immediate Outcome 8 - Two procedures for confiscation: the forfeiture procedure and the confiscation procedure. Most reported cases relate to forfeiture of cash uncovered during arrests or interception of boats in drug trafficking enforcement. - The criminal confiscation procedure (confiscation in equivalent value) was used only very recently; cases were still under review by the ODPP during the onsite visit. Few non-cash assets have been forfeited so far. - Confiscation has not been set as a national policy objective by VI authorities, although RVIPF prioritizes it operationally to some extent. - The Commissioner of Police issued guidelines on cash seizure and asset seizure in 2022; the ODPP issued a policy guideline in January 2023 for prosecutors on seeking forfeiture and confiscation. No overarching policy to make confiscation a government priority was set to date. - Deficiencies in IOs.1, 2, 4, 5, and 7 cascade and hinder the ability to adequately seize and confiscate criminal assets. Consequently, no investigations were carried out to identify proceeds located abroad (particularly relating to BVIBCs), and forfeiture cases are not fully consistent with the VI’s risk profile. - An ASFMC was created but is not fully operational yet. - Positive outcomes: successes in seizure and forfeiture of significant amounts of cash from arrest of cash couriers by sea. Efforts underway to extend forfeiture/confiscation beyond cash to predicate offences like corruption. Requests under the confiscation procedure to allow for extended confiscation were recently filed with the ODPP. ### LEGAL SYSTEM AND OPERATIONAL ISSUES — Recommended Actions - Immediate Outcome 6 - Further efforts to improve FIA–FCU cooperation and quality of FIA reports should be pursued. The FCU should make greater use of FIA intelligence by systematically incorporating it in investigations of suspected ML/TF and predicate offences. - The FIA should improve timeliness of disseminations to the FCU and provide supporting documents and information to assist development of ML investigations. - The FIA, with relevant competent authorities and based on recent sectoral risk ratings, should conduct targeted ML/TF outreach and awareness raising, particularly to sectors rated High and Medium-High Risk for ML and TF where SAR reporting is negligible or non-existent, to improve quantity and quality of SARs. - The VI should build upon existing cooperation structures (such as the CLEA) to ensure timely sharing of information critical to ML/TF investigations. LEAs should provide feedback to each other on status of intelligence and information exchanged. - The FIA should more consistently develop and publish strategic analysis products aligning with the VI’s ML/TF risks to help the financial services sector, DNFBPs, NPOs, and policy makers. - The FIA should increase requests for international assistance to enhance analysis of international cases in keeping with the VI’s assessed risk and the prevalence of international SARs; FIA should increase disseminations to the FCU on possible cross-border illicit activities conducted by BVIBCs. - Immediate Outcome 7 - Amend law to grant LEAs power to request relevant information relating to ML investigations directly from regulated entities and other holders of financial information, as FIA can; consider special mechanisms to investigate unexplained wealth given corruption concerns. - Amend law to provide express legislative provisions to regulate use of controlled deliveries, undercover operations, and electronic surveillance techniques, such as electronic mailboxes, in accordance with international treaty requirements. - ML provisions under DTOA and PCCA should provide for the same level of penalties for drug trafficking and other predicate offences proceeds, and for a single application of ML provisions for all types of ML. Proportionate and dissuasive sanctions should be provided for ML offences on summary conviction, and/or specific procedural rules should be set for placing organized crime/serious ML offences before the High Court to ensure proportionality of penalties. - Grant adequate resources to the ODPP and judicial authorities to effectively deal with complex ML cases. - Set policies to investigate more systematically international ML schemes involving BVIBCs, including joint investigations and task forces to improve coordination and information sharing among LEAs and reduce trust deficits. - Establish policies to systematically investigate, in cases of possession of proceeds of crime, the origin of assets to determine whether the arrested person is part of broader schemes involving criminal organizations, professionals, facilitators, or gatekeepers. - Increase focus on ML related to other identified predicate risks, notably domestic corruption and potential laundering through cash intensive business laundering; extend pursuit of corruption-related ML to domestic and cross-border investigations and prosecutions and use international cooperation to identify and locate proceeds. - Increase staff levels in the FCU with officers trained in financial, ML, and terrorist investigations to effectively pursue ML, TF, and conduct parallel financial investigations. - Consider reforming the jury designation process to widen the pool of jurors. - Immediate Outcome 8 - Set confiscation as a key objective for implementation across AML/CFT strategies and policies through overarching guidance and instructions to steer government agencies and ensure coordination. - Provide appropriate legal means to LEAs and prosecutorial authorities to identify, locate, seize, and confiscate all proceeds of crime domestically or internationally, including advanced financial investigative and extended confiscation techniques. - Pursue more cases for criminal confiscation and cross-border confiscation. - Grant appropriate staff resources to investigative and prosecutorial authorities and provide training to enhance professional skills in seizure and confiscation. - Make the ASFMC fully operational to manage and dispose of seized and confiscated assets as a priority to relieve LEAs from management and storage burdens. - Make greater use of formal and informal international cooperation to identify, locate and seize illicit proceeds abroad. ### Immediate Outcome 6 — FIA Overview and Operational Details - FIA governance and AIU - The FIA is the FIU of the VI and is governed by a Board of Directors not involved in daily operations. The operational head of the FIA is also a member of the Board. - The AIU of the FIA is responsible for analysing SARs (tactical analysis) and conducting strategic analysis. It consists of 15 employees. - FIA staffing and capacity (review period) - FIA-AIU staff increased from 6 in 2018 (2 investigating officers, 3 analysts, 1 administrative/support staff) to 15 in 2022 (3 investigating officers, 7 analysts, 3 administrative/support staff). - Added posts during the period: International Support Assistant and Senior Intelligence Officer. - Of the 15 employees, 8 are International Compliance Association (ICA)-certified and 1 is Association of Certified Anti-Money Laundering Specialists-certified. - FIA-AIU facilitates continuous training: participation in Egmont Centre of FIU Excellence and Leadership (ECOFEL) courses, CFATF, UNODC courses and others; weekly in-house training sessions with external presenters. - Information access and systems - The FIA has direct and indirect access to open source and closed source information. The FIA has direct access to VIRRGIN, the companies register for the VI. - Deputy Director and Senior Officer of each AIU team have access to and can search OTRCIS (Overseas Territories Regional Criminal Intelligence System); OTRCIS stores information from all competent authorities subscribing to it. The VI was the first overseas territory to be granted access to OTRCIS. - Two FIA staff have direct access to the BOSSS portal through designation under s.13 of the Beneficial Ownership Secure Search System Act (BOSSSA). - FIA uses commercial sources such as World Check. - Legal powers and mechanisms - The FIA is empowered under relevant Acts and the IGC MoU (as described under R.29) to receive, request, gather, and store information necessary for its functions. - Section 4 Notices enable the FIA to access information directly from the financial sector; FIs and DNFBPs are generally responsive. RVIPF frequently requests assistance from the FIA using this power. - Analytical tools and processes - The FIA uses commercial analytical tools and iBase for capturing, configuring, and displaying complex information; data produced helps generate trends and patterns. - SOPs: upon receipt of a SAR the Deputy Director of the FIA-AIU (or Director in absence) assesses quality and assigns a risk rating: high, medium, or low. Senior Analyst assigns to an analyst who considers SAR quality and commences analysis (reviews of financial activity patterns, links to associates, prior criminal history, identification of property/assets, adverse OSINT findings). - Upon completion, the analyst recommends disposal: dissemination to a competent authority or LEA among options. - There have been issues regarding the quality of FIA disseminations. - SAR processing times (preserved exact table data) - Table 10. British Virgin Islands: Average Processing Time for Ordinary SARs (2018 to 2022) - 2018: 1–5 Days: 107; 16–24 Days: 0; 25–49 Days: 1; 50–99 Days: 5; 100–199 Days: 22; 200–299 Days: 1; 300+ Days: 139; Unassigned: 168; Total number of SRTs received: 443 - 2019: 1–5 Days: 234; 16–24 Days: 0; 25–49 Days: 5; 50–99 Days: 5; 100–199 Days: 20; 200–299 Days: 12; 300+ Days: 104; Unassigned: 67; Total number of SRTs received: 447 - 2020: 1–5 Days: 407; 16–24 Days: 26; 25–49 Days: 35; 50–99 Days: 50; 100–199 Days: 44; 200–299 Days: 26; 300+ Days: 31; Unassigned: 185; Total number of SRTs received: 804 - 2021: 1–5 Days: 224; 16–24 Days: 69; 25–49 Days: 29; 50–99 Days: 56; 100–199 Days: 15; 200–299 Days: 5; 300+ Days: 3; Unassigned: 22; Total number of SRTs received: 423 - 2022: 1–5 Days: 274; 16–24 Days: 16; 25–49 Days: 47; 50–99 Days: 39; 100–199 Days: 43; 200–299 Days: 0; 300+ Days: 0; Unassigned: 78; Total number of SRTs received: 497 - Observed trend: steady reduction in time required to process a SAR from majority taking 300 plus days in 2018 to majority taking 1 to 5 days in 2022, attributed to increased AIU staff, training, and analytical tools. *Source: 1vgbea2024001 - 198. The VI is rated as having a moderate level of effectiveness for IO.1.* ### 209. The FIU is well resourced and has modern and secure facilities and the necessary ### 1vgbea2024001 - 209. The FIU is well resourced and has modern and secure facilities and the necessary ### FIU resources, facilities, and technical capabilities - "The FIU is well resourced and has modern and secure facilities and the necessary technical resources to carry out its work." - FIA-AIU staff training and capability development for Virtual Assets (VAs): - Deputy Director of the AIU and four analysts certified by CipherTrace as cryptocurrency tracing examiners. - Analyst team undertook ECOFEL courses and a week-long external seminar. - FIA acquired blockchain analytics software. ### Use of financial intelligence by the FCU and inter-agency collaboration - FCU access and legal limitations: - The FCU receives all FIA ML and TF disseminations and primarily utilizes OTRCIS. - FCU has access to Interpol, various key stakeholders, and OSINT. - FCU "does not have the legal power to request financial information from FIs or TCSPs directly" and "must make such requests through the FIA." - Intelligence management and prioritization: - FCU applies a grading and risk rating system; ML and TF matters prioritized when they can impact national security or have international ramifications. - Investigations prioritized using a Threat-Based Assessment that considers FCU capacity, capabilities, and resources. - Requests from FCU to FIA (Table 11): - 2018: Received 3 | Pending 0 | Completed 3 - 2019: Received 0 | Pending 0 | Completed 0 - 2020: Received 1 | Pending 0 | Completed 1 - 2021: Received 0 | Pending 0 | Completed 0 - 2022: Received 24 | Pending 0 | Completed 24 - Drivers and effects of collaboration: - FCU largely relied on its own direct access to intelligence during 2018–2021 and viewed much FIA intelligence as dated or lacking supporting material (e.g., location of financial assets). - Collaboration improved in 2021 with monthly FIA-AIU and FCU meetings (eight meetings in 2022) and since January 2022 disseminations to FCU are "accompanied by supporting documentation" (e.g., subject identification, financial activities, financial statements analysis, link charts, association matrices, investigative leads). - FCU submitted 24 requests to FIA in 2022 (significant increase over average of one per year during 2018–2021), attributed in part to increased FCU staffing. - In 2022, FCU sent four ML investigations to the ODPP for advice and further direction stemming from FIA disseminations. - FCU used FIA financial intelligence in cash seizure cases and other predicate-offence investigations; some investigations using FIA information did not reach prosecution threshold. - Overall use by LEAs: - "Over the entirety of the review period, the FCU made limited use of the FIA’s intelligence products." - Other LEAs such as HMC and Immigration "do not conduct ML or TF investigations, and do not utilize the FIA’s financial intelligence for ML/TF investigatory purposes." - The FSC uses FIA products more regularly for supervisory due diligence and background checks. ### Case study illustrating FIU–FCU interaction - Case Study 6.2 (summary of flow and outcomes): - FIA received a SAR reporting unusual cash deposits into a government employee’s bank account. - Analysis used open and closed sources, Section 4 notices to multiple FIs, public entities (HMC, Department of Motor Vehicles, Department of Trade, Consumer Affairs and Investment Promotion, Social Security Board), and OSINT. - No legitimate income source identified for the subject. - An Information/Disclosure form disseminated to FCU on October 11, 2021. - FCU commenced an ML investigation; used IGC MMoU, search warrants, and production orders. - Examination revealed significant deposits exceeding subject’s monthly income, suspected co-mingling with partner’s accounts, two importations of high-powered boats, and partner had no declared VI income. - August 2022: file prepared to be submitted to ODPP for advice in respect of contemplated prosecution (consistent with RVIPF/ODPP Case File Submission and File Reviews Policy). - An MLA application is being considered relating to foreign transactions and potential restraint/confiscation proceedings. ### SAR reporting patterns, categories, and alignment with assessed risks - SAR submission channels: - FIA receives SARs via AMLive and via downloadable form submitted by email or hand-delivery. - SAR volumes by supervised sector (Table 12; 2018–2022 totals and yearly breakdowns): - Banks: 77, 120, 106, 200, 143 | Total 646 - Financing Business: 0, 0, 0, 0, 0 | Total 0 - Insolvency Practitioners: 1, 14, 10, 7, 6 | Total 38 - Insurance Business: 4, 4, 6, 7, 10 | Total 31 - Investments Business: 0, 0, 0, 1, 1 | Total 2 - Money Services: 22, 1, 1, 0, 3 | Total 27 - Total (Financial Institutions): 104, 139, 123, 215, 162 | Total 744 - DNFBPs — Accountants: 2, 9, 0, 0, 0 | Total 11 - Dealers in Precious metals and stones: 0, 2, 0, 0, 0 | Total 2 - Lawyers: 7, 14, 11, 13, 13 | Total 58 - Other (HVGD): 0, 0, 0, 0, 0 | Total 0 - Real Estate Agents: 0, 0, 0, 0, 0 | Total 0 - TCSPs: 324, 269, 656, 190, 279 | Total 1,718 - Total (DNFBPs): 333, 294, 667, 203, 292 | Total 1,789 - Grand Totals: 437, 433, 790, 418, 455 | Total 2,533 - Aggregate reporting patterns and concentrations: - During 2018–2022, TCSPs filed 67.8 percent of SARs; banks 25.5 percent; lawyers 2.3 percent; insurance business 1.2 percent; money services 1.1 percent; all other categories below 1 percent. - "77.3 percent of SARS filed by TCSPs were filed by just 10 entities, and 66.2 percent of TCSPs have never filed a SAR." - Investment business (rated medium-high risk in 2022 MLRA) filed only two SARs during the review period. - Domestic vs international SARs (Figure 1 totals by year): - 2018: Domestic 1,06 | International 504 | Total 610 - 2019: Domestic 134 | International 1,156 | Total 1,291 - 2020: Domestic 120 | International 1,134 | Total 1,254 - 2021: Domestic 207 | International 972 | Total 1,179 - 2022: Domestic 142 | International 4,637 | Total 4,779 - Observation: Large international component consistent with 2022 MLRA noting international nature of corporate vehicles incorporated in the VI. - Virtual asset (cryptocurrency) SARs: - Cryptocurrency SARs received: 2018=167; 2019=844; 2020=450; 2021=756; 2022=4,282. - Total cryptocurrency SARs during review period: 6,499. - FIA risk-rates cryptocurrency SARs and prioritizes urgent ones (TF or sanction-related). - Authorities indicated no cryptocurrency SAR to date contained information relating to activities or transactions taking place within the VI. - "There were no cryptocurrency investigations conducted by the RVIPF incorporating the use of financial intelligence and financial intelligence analysis." - SARs by primary reason for suspicion (Table 13 totals 2018–2022): - Stand-alone Money Laundering: Domestic totals by year 52, 69, 62, 58, 15; International totals 178, 811, 439, 88, 1,102; Combined totals 230, 880, 501, 146, 1,117. - Fraud: Domestic totals by year 9, 30, 10, 65, 20; International totals 144, 63, 165, 57, 1,591; Combined totals 153, 93, 175, 122, 1,611. - Suspicious Activity: Domestic totals 16, 18, 37, 65, 101; International totals 1, 1, 63, 721, 716; Combined totals 17, 20, 100, 786, 817. - Corruption/Bribery (international prominent): International totals 26, 28, 54, 16, 5; Combined totals 26, 28, 5, 17, 5 (note: table structure preserved as in source). - Totals (by year): 2018 610 | 2019 1,291 | 2020 1,254 | 2021 1,179 | 2022 4,779. - Misalignment with MLRA: - At the domestic level, reported underlying offences (e.g., stand-alone ML, suspicious activity, fraud) are "inconsistent with the drug trafficking, cash smuggling, human trafficking, and corruption" cited as the most significant domestic predicate crimes in the 2022 MLRA. - "The misalignment ... suggests a need for a revision and strengthening of the outreach and awareness-raising ... to reporting entities." ### FIA information requests, compliance, and public-body engagement - Section 4 requests to FIs and DNFBPs (Table 14): - 2018: Requests Issued 732 | Responses Received 628 | Requests Not Responded To 104 - 2019: 475 | 419 | 56 - 2020: 481 | 380 | 101 - 2021: 682 | 564 | 118 - 2022: 561 | 557 | 4 - Totals: Requests Issued 2,931 | Responses Received 2,548 | Requests Not Responded To 383 - Compliance improvement: - Compliance rate improved from an average of 84 percent during 2018–2021 to 99 percent in 2022. - FIA initiated administrative fines for failure to respond within deadline on nine occasions as of October 2022; fines were imposed in five cases and were paid. - "Given the recent nature of this enforcement action, the impact on overall compliance or reporting quality was not discerned." - FIA requests to public entities (Table 15 totals and key recipients): - Total FIA AIU requests to public bodies 2018–2022: 692 (annual breakdown 75, 36, 73, 296, 212). - Top five recipient agencies: Department of Trade and Consumer Affairs (148 total), VI Social Security Board (BVI SSB) (115 total), Department of Immigration (98 total), Department of Labor (63 total), DOI (Department of Information?) — note: DOI appeared as recipient in narrative; table shows Department of Inland Revenue 1 and other agencies by counts. - Specific entries (selected): - BVI SSB: 1, 0, 0, 69, 45 | Total 115 - Department of Immigration: 2, 5, 8, 49, 34 | Total 98 - Department of Trade and Consumer Affairs: 5, 8, 30, 66, 39 | Total 148 - His Majesty's Customs Dept: 0, 2, 4, 18, 8 | Total 32 - Royal Virgin Islands Police Force: 54, 9, 5, 10, 8 | Total 86 - Total requests per year: 2018 75 | 2019 36 | 2020 73 | 2021 296 | 2022 212. - FIA powers and utility: - FIA can request information from reporting institutions and private persons, and from cross-border reports on currency and BNIs, law enforcement intelligence, criminal records, supervisory information, and companies’ registry. - "To a large extent, however, the use of this power to request information seems to be the most valuable form of assistance that the FIA renders to law enforcement authorities." ### Key issues identified and policy implications - Limited demonstrable operational impact of FIA intelligence across the review period: - Despite improved collaboration in 2021–2022, "there is limited evidence to support a finding that the work of the FIA generally supports the operational needs of LEAs." - FCU's reliance on its own intelligence did not result in major ML investigations developed independent of FIA intelligence during the review period. - Reporting gaps and misalignment with assessed risks: - Reporting dominated by TCSPs and banks, with significant concentration among a few TCSPs; many TCSPs and other entities have never filed SARs. - Significant misalignment between types of SARs reported and the 2022 MLRA assessed highest domestic predicate offences. - Recommendations and actions signaled by the authorities (from source text): - Authorities "must consider the reasons why ... the SARs being reported are not consistent with the findings of the 2022 MLRA" and whether this suggests flaws in the MLRA or gaps in reporting entities’ understanding. - Need for revision and strengthening of outreach and awareness-raising by competent authorities to reporting entities regarding indicators of higher-risk predicate offences. - Continue and maintain regular FIA-AIU and FCU meetings to track disseminations and requests, and to provide platforms to resolve intelligence content issues. - Sustain provision of supporting documentation with disseminations to improve investigative utility. - Consider deeper pursuit of cross-border criminal activities linked to transactions and vehicles given large international SAR component. *Source: Extract from 1vgbea2024001 (sections 209–230) — IMF PDF chapter content provided.* ### 232. The FIA makes disseminations to several competent authorities. As shown in Table 16, ### 1vgbea2024001 - 232. The FIA makes disseminations to several competent authorities. As shown in Table 16, ### Domestic disseminations (volume and recipients) - Table 16: FIU’s Domestic Disseminations by year and recipient (2018, 2019, 2020, 2021, 2022, Total) - RVIPF (FCU): 1, 0, 11, 44, 12, 68 - FSC: 7, 1, 128, 73, 6, 215 - Governor's Office: 0, 1, 2, 2, 7, 12 - Department of Labor: 0, 0, 0, 1, 3, 4 - Department of Immigration: 0, 0, 0, 1, 3, 4 - Department of Trade: 0, 0, 2, 0, 0, 2 - Department of Health: 0, 0, 1, 0, 0, 1 - Social Security Board: 0, 0, 0, 0, 1, 1 - Total: 8, 2, 144, 121, 32, 307 - Observations and implications: - Very few disseminations in 2018 and 2019; the highest number of disseminations occurred in 2020. - Domestic disseminations declined somewhat after 2020. - The largest number of disseminations over the review period were to the FSC, the FCU, and the Governor’s Office respectively. - The FIA made more than three times the number of disseminations to the FSC than to the FCU—indicating a stronger support orientation toward regulatory and supervisory purposes than toward ML/TF investigations. - The nature of disseminations is not aligned with the main jurisdictional risks: the FIA only disseminated seven disclosures in relation to international SARs to the FCU despite international SARs constituting the vast majority of SARs during the period under review; these seven disseminations all occurred in 2022. ### Use of FIA intelligence by domestic competent authorities - FCU (RVIPF) - The FCU made limited use of FIA intelligence over the review period; disseminations to the FCU totaled 68 over the review period. - FCU feedback indicated intelligence quality issues: insufficient information provided, not accompanied by supporting documentation, “lack of up-to-date financial information,” and “insufficient information to commence investigation.” - The FIA indicated SAR content limitations hindered further research and analysis, suggesting SAR quality issues from reporting entities. - FIA efforts to improve SAR quality included feedback forms and outreach to FIs and DNFBPs, but low reporting levels persist in some sectors. - In 2022, four investigations originating from SAR intelligence were submitted to the ODPP for review. - Based on FIA financial intelligence, the FCU sought 29 production orders, of which 14 were issued in 2022. - The FCU advised that current disseminations from the FIA are more useful, resulting in additional investigations in progress. - FSC - The FSC recorded a total of 262 intelligence disseminations from the FIA between 2018 and 2022. - Disseminations mainly involved allegations of ML, fraud, AML breaches, and sanctions violations related to VI companies operating abroad; all intelligence pointed to possible breaches in foreign jurisdictions. - During the review period: - Five disseminations to the FSC’s Enforcement Division (ED) resulted in notification to the Supervisory Unit. - Eight disseminations resulted in notification to the Compliance Inspection Unit. - One dissemination led to enforcement action in the form of an administrative penalty for conducting unauthorized financial services business. - The FSC routinely requests information from the FIA to support operational needs. - Governor’s Office (GO) and other authorities - The GO is notified of potential breach/evasion of sanctions and uses the FIA’s Domestic Feedback form; disseminations to the GO have been useful but resulted in limited action. - SARs relating to international tax matters are disclosed to the ITA. - Apart from the RVIPF and the GO, other agencies request relatively few SAR-related RFIs from the FIA (see Table 17). - Table 17: Requests Received by FIA from Domestic Competent Authorities (2018, 2019, 2020, 2021, 2022, Total) - Attorney General's Chambers: 3, 0, 0, 1, 0, 4 - RVIPF: 22, 8, 3, 0, 24, 57 - Financial Services Commission (FSC): 1, 1, 1, 2, 0, 5 - Governor's Office: 1, 5, 5, 3, 4, 18 - His Majesty's Customs: 0, 1, 1, 2, 0, 4 - ITA: 0, 1, 1, 0, 0, 2 - Total: 27, 16, 11, 8, 28, 90 - Note: Many domestic agencies do not have legislative authority to conduct ML and TF investigations and refer such cases to the RVIPF. ### Strategic analysis conducted by the FIA - Legal and procedural basis: - The requirement for the FIA to conduct strategic analysis is founded in legislation (FIAA) and detailed in the FIA’s SOPs, including structure, work plans, composition of project teams, information gathering, resources, and analysis process. - Actual output and alignment with risk: - The FIA produced limited strategic analysis products during the review period. - Strategic analysis undertaken included review of SAR filings after an unusual pattern of reporting; captured in the FIA’s 2019 and 2020 annual reports. - The analysis detected a connection between increased reporting and BVIBCs involved in cryptocurrency-related business which lacked a regulatory framework at the time. - The strategic analysis on virtual assets (VA) aligned with the high-risk rating in the 2020 SRA. - Findings informed internal recommendations: training, acquisition of blockchain analysis software, and formation of a regulatory framework for cryptocurrencies and providers of such services. - The analysis supported requests for increased budgetary allocations; resulting funding permitted staff training in cryptocurrencies and TA in the development of the VASP Act. - During the onsite visit, a significant strategic analysis product in progress was discussed concerning emerging risks in a sector not covered under the AML/CFT framework and rated medium-high risk in the 2020 SRA; FIA-AIU demonstrated technical expertise and resources to conduct such analysis. - FIA SOPs state that at least one strategic analysis product should be produced annually, but consistency needs improvement to meet the requirement to identify ML, TF, and related trends and patterns. - The FIA has only carried out one strategic analysis (conclusion summary). ### International cooperation and requests - Use of Egmont Secure Web (ESW) for international assistance: - The FIA makes international requests via the ESW when it requires assistance to gather information on behalf of local LEAs. - Limited number of international requests does not correlate with the higher international SAR risk profile. - Table 18: FIA Requests to Foreign FIUs by country (2018, 2019, 2020, 2021, 2022, Total) - United States: 0, 0, 2, 2, 10, 14 - Brazil: 4, 4, 2, 0, 0, 10 - United Kingdom: 1, 1, 0, 0, 4, 6 - Cyprus: 0, 0, 0, 0, 4, 4 - Singapore: 3, 0, 0, 0, 0, 3 - Switzerland: 2, 1, 0, 0, 0, 3 - Barbados: 1, 2, 0, 0, 0, 3 - Dominica: 1, 0, 1, 0, 0, 2 - France: 1, 0, 1, 0, 0, 2 - Cayman Islands: 0, 1, 1, 0, 0, 2 - Jersey: 0, 1, 0, 0, 1, 2 - Other (countries with only one request over the five-year period): 6, 5, 7, 2, 2, 22 - Total: 19, 15, 14, 4, 21, 73 - Example of international sharing: - July 22, 2022: FIA disclosed a trends and typologies report on increased cryptocurrency SARs to a foreign FIU via ESW; that FIU subsequently sought permission to share intelligence with its police force (August 9, 2022) and tax authority (August 11, 2022); permission was granted. It is unknown if further results were achieved. - MoUs and information-sharing arrangements: - FIA does not require MoUs to share or exchange information with other FIUs but has signed international MoUs with multiple countries (Israel (2009); Australia, Canada, Russian Federation, Republic of Moldova, Republic of North Macedonia, Romania, Montenegro (2011); Taiwan, Province of China (2014); Guyana (2022)). - Domestically, the FIA has MoUs with the FSC (2007); the RVIPF (2009); IGC (2014); the AGC (2015); and HMC (2020). - The RVIPF, HMC, and FIA subscribe to OTRCIS. ### Overall effectiveness and conclusions on IO.6 - Key conclusions: - The FIA gathers, analyses, and disseminates financial intelligence and other information to support LEAs, but sporadic reporting by a small number of reporting entities limits the effectiveness of FIA analysis. - Predicate offences underlying SARs received are not sufficiently aligned with the VI’s risk profile. - The FIA showed recent improvements in producing quality intelligence reports; however, this has not demonstrably translated into effective use by LEAs in ML/TF cases during the review period. - Financial intelligence was not (until very recently) demonstrably used in an ML/TF investigation or prosecution, indicating FIA analysis and dissemination have not been supporting operational needs of competent authorities. - Most disseminations are to regulatory agencies for operational needs and have not resulted in enforcement actions. - The FIA has only carried out one strategic analysis. - Limited requests for financial intelligence to international counterparts are inconsistent with the VI’s assessed risk given a high number of international SARs. - Effectiveness rating: - The VI is rated as having a low level of effectiveness for IO.6. ### Immediate Outcome 7: ML investigation and prosecution (overview) - Institutional responsibilities and capacities: - Two LEAs have powers to investigate ML offences: the RVIPF and the FIA; HMC and DOI investigate predicate offences related to their activities and provide police with newly identified cases for further action. - The FIA has powers to conduct criminal investigations but in practice does not; criminal investigations are carried out by the RVIPF only. - Prosecutions are initiated and conducted solely by the ODPP. - Criminal cases are adjudicated in the Magistrate’s Court or the High Court of the ECSC. - Judicial and prosecutorial context: - Most ML and predicate offence cases have been adjudicated in the Magistrate’s Court. - The Magistrate’s Court hears summary proceedings which limit penalties and confiscation amounts. - The ECSC High Court hears criminal cases on indictment; the Court of Appeal and the Judicial Committee of the Privy Council serve appellate roles. - The ODPP should include 13 counsels and 10 administrative staff when fully staffed; actual staffing during the review period was 16 staff (Director, Principal Crown Counsel, 2 Senior Crown Counsels, 5 Crown Counsels, and 7 paralegal and administrative personnel). - The ODPP engages early with RVIPF on significant cases and may require further investigation when a file is submitted; budgetary constraints and limited resources are principal obstacles. - ODPP counsels received training during the review period on AML/CFT strategies (10 participants), foundations of PCC (7), investigations/prosecutions/extradition/confiscation/asset management (19), PF (2), and cryptocurrencies (3). - RVIPF (lead LEA) - The FCU is the primary police unit for ML/TF investigations; comprised of six officers led by a Detective Inspector. - The FCU suffers relatively high staff turnover; police leadership acknowledges the unit requires strengthening and increased resources. - Historical low public trust in the police hindered public cooperation; issues attributed to political interference and internal corruption per referenced reports. - Since 2021, the new Commissioner of Police prioritized reducing the trust gap and established community policing teams. *Source: 1vgbea2024001 - 232. The FIA makes disseminations to several competent authorities. As shown in Table 16,* ### 260. FCU officers receive regular substantive training on all issues related to their area of ### 260. FCU officers receive regular substantive training on all issues related to their area of ### Training and roles of FCU and other agencies - FCU officers receive regular substantive training on issues related to their area of work, including financial investigations, PF, integrity, ethics and accountability, trade-based ML, and crypto investigations. - FIA main involvement: capacity as the FIU and forwarding intelligence to other competent authorities whether upon request or spontaneously. - FIA powers and practice: - Has more extensive powers than the police to access financial information but does not conduct criminal investigations on its own initiative. - May exercise powers based on police request and may spontaneously disseminate financial information. - Has never submitted a case based on its investigations to the ODPP. - HMC considers its role mainly to prevent cross-border contraband and smuggling, and hands over all cases of proceeds of crime or suspicion of ML/FT to the RVIPF. The DOI also passes such cases to the RVIPF. ### Interagency cooperation and coordination mechanisms - Domestic cooperation facilitated through coordination mechanisms: - Quarterly CLEA meetings. - Weekly JTF meetings (chaired by Customs). - An MoU signed in 2014 under the IGC to facilitate exchange of information among LEAs and competent authorities. - Identified cooperation challenges: - Exchange of information limited due to lack of trust among agencies and the risk of investigation leaks. - Other agencies complained they do not receive investigative updates on matters they referred to other bodies. - Performance and guidance instruments issued by the Commissioner of Police: - Investigator’s Manual (2018). - Financial Investigation Reference Manual (rev. 2022). - Financial Investigation Policy (rev. 2022). - Cash Seizure Policy (2022). - Asset (Property) Seizure Policy (2022). - A Headquarters Investigation Unit (13 to 15 investigators, including investigators seconded by the U.K. government) created after the CoI report to investigate potential corruption cases; currently 12 corruption cases being investigated. ### ML identification, investigations, prosecutions, and outcomes - Typical investigation pathway: - Most ML cases identified through an investigation initially opened on the predicate offence (often drug charges and/or seizure of cash or drugs). - FCU opens a parallel financial investigation in coordination with the Investigative Unit when proceeds are suspected. - If cash seized, ODPP initiates forfeiture proceedings leading to a forfeiture order by the Magistrate. - Shift in practice in 2022: - Several ML investigations were initiated because of FIA dissemination reports or other intelligence through stand-alone investigations. - At end of 2022, the ODPP had received four case files of ML investigations initiated by FIA dissemination reports (under review). - In 2022, eight criminal investigations were opened on the basis of FIA reports, four of which were referred to the ODPP in 2022. - FCU access to financial information: - FCU does not have direct legal power to request production of financial information by FIs or TCSPs; it issues requests to the FIA which is empowered to obtain such information. - FCU then applies to the High Court Judge for production orders to make intelligence acceptable as evidence. - Improvement: FCU successfully applied for 14 production orders during 2022. - A mechanism allows FCU to access the VIRRGIN database, but not the BOSSS database. - Investigative methods and legal powers: - Police lack adequate legal framework to regulate use of advanced investigation techniques; only the Governor has general power to order interception of telecommunications, electronic data surveillance, and approve undercover activities. - Legislation does not allow controlled deliveries, though undercover operations occur in practice. - Traditional methods used: search warrants, witness statements, surveillance, informants, OSINT. - Police did not have power to identify whether defendants have accounts with FIs; the PCCA was amended during the onsite visit to provide for account monitoring orders. - Relationship between FIA and FCU: - Until recently, FIA disseminations were often non-actionable due to lack of substantive information and supporting documentation. In 2020, only 1 of the 11 dissemination reports resulted in an investigation. - Subsequent coordination and improved quality of intelligence forwarded by FIA led to increased successful production orders and investigations. ### Case studies and key statistics - Box 4: 2020 drug trafficking operation (RVIPF): - Seized 2.353 tons of cocaine valued at US$235,300,000. - Two firearms recovered. - Three persons arrested (two serving police officers and one former police officer) and charged with drugs, firearms trafficking, and PCC pending trial. - One additional person fled; later arrested transporting about 300 kilograms of cocaine to Puerto Rico; held in the USVI. - Box 5: March 2021 case: - Seized 535.5 kilograms of cocaine valued at US$53,530,000. - Parallel ML investigation instigated following FIA information in August 2021. - Gross earnings for subject during 1997 to 2007 averaged under US$5,000 per year. - Subject had imported 29 vehicles from December 2019 to March 2021 with total value over US$130,000 (plus customs costs of nearly US$36,000 and agents' fees (to be determined)). - Eight vehicles potentially subject to further investigations and potential seizure. - Accused pleaded guilty to possession of a controlled drug (predicate offense); plea triggers confiscation; matter listed to continue with trial in late March 2023. - Table 19. British Virgin Islands: Statistics on ML (Proceeds of Crime) Investigations by the FCU - Year: 2018 2019 2020 2021 2022 - Number of PCC cases opened: 10 18 18 18 36 - No. of persons charged with PCC: 11 11 11 8 8 - No. of Cases referred to ODPP: 8 9 6 3 12 - Table 20. British Virgin Islands: Investigations, Prosecutions, and Convictions of Proceeds of Crime Conduct - Year: 2018 2019 2020 2021 2022 Total - Investigation cases: 10 18 18 18 36 100 - Cases referred to the ODPP: 8 9 6 3 12 38 - Prosecution cases concluded: 8 4 2 2 3 19 - Convictions (number of cases per year): 6 4 6 6 1 23 - Convictions (number of persons): 9 7 3 6 9 34 ### Consistency of ML investigations and prosecutions with threats, risks, and national AML policies - Two main ML dimensions in the VI: - Domestic: small island jurisdiction (~30,000 citizens) and transit point for drug trafficking and smuggling. - International: prominent corporate and financial center with BVIBCs associated with international investigations/prosecutions for ML-related cases. - Scope of investigations: - Investigations mainly relate to domestic predicate crimes. - None of the approximately 349,000 business companies registered in the jurisdiction have been subject to a PCC investigation. - 2022 MLRA risk findings: - Domestic significant predicate crimes: drug trafficking, cash smuggling, human trafficking, and corruption. - Non-domestic main threats: international fraud, foreign corruption, and tax evasion. - Major vulnerabilities: legal persons and arrangements, and emerging products and technologies, including VAs. - Drug trafficking and cash smuggling: - VI highly vulnerable to drug trafficking due to isolated islands, lack of modern equipment, and potential for corruption within controlling agencies. - Drug trafficking proceeds constitute main target of parallel investigations and principal source of cash seizures. - Many case studies relate to cash smuggled into the jurisdiction rather than out of it; imbalance suggests some illicit proceeds are repatriated and retained locally. - Corruption: - 2022 MLRA considers corruption both a significant threat and a major vulnerability. - Integrity of judiciary (including ODPP) considered very high; some LEAs viewed as having integrity issues per CoI report. - Reluctance among law enforcement to exchange sensitive information due to risk of leaks and culture of competition rather than collaboration. - In 2021, 3 prosecutions for “breach of trust” were undertaken; 12 investigations in 2022. - FCU does not have ongoing corruption-related investigations; such cases are referred to the RVIPF Headquarters Investigation Unit. *Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf* ### 280. The RVIPF Strategic Assessment Report suggests that an important portion of illicit ### 1vgbea2024001 - 280. The RVIPF Strategic Assessment Report suggests that an important portion of illicit ### Illicit cash reinjection and cash-based businesses - The RVIPF Strategic Assessment Report indicates an important portion of illicit cash proceeds flowing into the jurisdiction is reinjected into the local economy, either directly or through small businesses, in particular through the tourism sector, or in cash-based businesses. - No criminal investigations have been carried out into these types of entities to determine sources of funding or whether beneficial owners may have a link to drug trafficking. - The assessment team did not find evidence that the RVIPF Strategic Assessment triggered operational intelligence or policy action to address money laundering (ML) through cash-based small businesses. ### Risks from BVIBCs, TCSPs, and legal persons - VI MLRA 2022: “exposure to transactions involving VI companies presumably poses a higher ML/TF threat than domestically generated proceeds of crime.” - RVIPF STCA 2022 assessment (quoted): the TCSP sector is attractive to international criminals to obscure ownership, evade foreign taxes, or conceal criminal origins due to the nature of products offered; inherent vulnerability arises from complex legal persons/arrangements, non-face-to-face transactions, and significant volumes of high-risk customers, including foreign PEPs. - No investigation was carried out within the territory in relation to BVIBCs or other legal arrangements for ML crimes during the period under review. - VI authorities receive intelligence from international investigations involving BVIBCs but do not use this information to initiate domestic investigations. - RVIPF suggests lack of successful cases against VI business companies is explained by the ODPP position that VI lacks jurisdiction to prosecute ML crimes committed abroad by business companies owned by non-residents, though the DPP stated readiness to prosecute if investigators present sufficient evidence that an ML offence had been committed. ### Types and characteristics of ML cases pursued (findings and statistics) - Twenty-four cases of ML were reported to be prosecuted during the period under review, including 19 cases with proceeds of criminal conduct charges. - All but one of the 24 cases resulted in a conviction. - Case contexts: - Discovery of cash was the primary driver: arrests at the airport (six cases), interception of a vehicle (three cases), interception of a boat (seven cases). - Other contexts: suspected trafficking in migrants (one case), contraband (one case), forged cheques (one case), as part of a drug trafficking investigation (three cases). - Except in one case (forged cheques), ML charges were retained in relation to discovery of cash. - Charges composition: - “Possession of Proceeds of criminal conduct” laid in 18 of the 24 cases. - “Failing to declare monies to Customs” in 11 instances. - One charge for concealment of PCC. - Five cases had no PCCA-related offences charged. - Character of investigations: - Most cases were limited to possession of illicit property (simple, stand-alone ML incidents). - Predicate offence generating the profits was generally not ascertained and no in-depth investigation was undertaken to identify conversion, transfer, or concealment schemes. - No ML cases involving professionals, facilitators, gatekeepers, or third-party ML have been investigated; couriers in cash smuggling cases were not probed to identify parties behind transactions. - No ML investigation sought to identify foreign connections or to trace assets located abroad in the cases brought to court; lack of MLA requests from the VI supports this conclusion. - During months preceding the onsite visit, a number of more proactive ML investigations had been initiated and were ongoing, aiming to seek confiscation and trace assets abroad. ### Case examples (operational detail) - October 19, 2019 case: two individuals arrived from the USVI; US$845,550 found on vessel; one suspect convicted in Magistrate’s Court for engaging in smuggling; US$845,550 forfeited to the Crown in 2020; joint financial investigation with USVI did not identify sufficient assets to merit further international cooperation. - February 4, 2021 case: money found in a barrel at Deep Water Harbour from Anguilla; monies counted at US$300,060; captain arrested then discharged; monies forfeited to the Crown in July 2022; no charges owing to lack of evidence linking captain to the barrel or cargo. ### Effectiveness, proportionality, and dissuasiveness of sanctions - The DPP brings most ML-related offences before the Magistrate’s Court; penalties available there are significantly lower than those for convictions on indictment. - Magistracy acknowledged limited penalty thresholds as an issue; difficulties gathering an independent jury were cited as an impediment to High Court prosecutions. - Inconsistencies exist between penalties in DTOA and PCCA and legal issues arise from two different legal bases for ML prosecution depending on whether the predicate is drug trafficking or another offence. - Penalty outcomes: - Apart from four cases where perpetrators received more than three years imprisonment, sanctions are in most cases lower than one year, and in some cases limited to fines. - One instance involved a fine or penalty amounting to US$170,000. - Investigations generally did not seek to identify origin/destination of assets, roles in laundered funds, or criminal organization structures; sanctions therefore are commensurate to simple possession cases but are not dissuasive, proportionate, or effective against threats such as drug trafficking or dismantling criminal organizations. - No sanctions were ordered against legal persons because no investigations or prosecutions were carried out against them, despite legal framework permitting prosecution of legal entities even for conduct occurring abroad. ### Use of alternative measures (forfeiture and administrative measures) - Forfeiture of cash seized is the main alternative measure; forfeiture proceedings are civil in nature (balance of probabilities) but heard by Magistrate in charge of criminal matters; forfeiture can be ordered in parallel to prosecution or on conviction; civil forfeiture does not require conviction. - In cash seizure cases where ML conviction was not secured, prosecutions sometimes pursued failing to declare to Customs; Commissioner of Customs can levy administrative penalties for failure to declare and has done so. - No other alternative measures have been applied where ML prosecution was not feasible. ### Confiscation framework, policy, and practice - Two main procedures for confiscation: forfeiture procedure and confiscation procedure (both covered by the general term “confiscation” in the DAR). - Forfeiture procedure: civil “balance of probabilities” standard; may be ordered by Magistrate or High Court Judge; applies to cash proceeds and, under DTOA, instrumentalities; does not apply to property of corresponding value. - Confiscation procedure: part of criminal prosecution; ODPP must notify defendants that confiscation will be sought; requires assessment of amount of criminal proceeds generated by predicate offence; prosecution may request restraint orders against assets associated with criminal activity, including assets in hands of third parties (though latter has never occurred). - In theory confiscation may be undertaken against any assets of the offender, including those of legitimate origin (confiscation in equivalent value), but prosecutors have not sought such applications. - RVIPF recently submitted to the ODPP six applications for confiscation; ODPP filed three applications with the court and returned three to the FCU for further investigation to seek MLA for assets abroad. - If application for confiscation is made before the Magistrate’s Court, a US$150,000 threshold applies and Magistrate must refer case to the High Court for confiscation over the threshold. - Ability of LEAs to investigate illicit proceeds is hampered by deficiencies in investigation processes, staff resource limitations, and inadequate recourse to international cooperation. ### Confiscation as policy objective and coordination - 2021 AML/CFT National Policy and 2021–2023 National Strategy define main policy objectives (prevention, detection, investigation and sanction, articulation, and promotion of cooperation) but do not set confiscation as a policy objective. - 2022 MLRA states forfeiture and confiscation are “an important part of any jurisdiction’s AML/CFT regime” and that “in the VI, funds found during the commission of a crime are seized as a matter of policy,” but it does not set a policy objective to search, trace, and seize property not found during commission of an offence. - ODPP issued financial policy guidance and procedures at the beginning of 2023 for prosecutors pursuing ML offences and seeking forfeiture or confiscation; RVIPF issued operational policy documents including policy on asset seizure and on cash seizure. - Despite operational documents, authorities did not demonstrate overarching policies steering agencies toward confiscation as a main objective; agencies define priorities independently and coordination committees have not issued policy guidance on forfeiture/confiscation; asset management framework not fully operational. ### Forfeiture statistics (police statistics for reporting period) - Total forfeiture cases in VI during the period under review: 43. - All PCC cases prosecuted before the Magistrate’s Court resulted in forfeitures based on discovery of cash during arrest rather than from in-depth financial investigations. - Table (year-by-year): - 2018: Total Instances of Forfeiture 10; Amount Seized & Detained ($) 886,104.74; Value of Forfeited Assets 730,122.75; Description of Forfeited Items Cash - 2019: Total Instances of Forfeiture 6; Amount Seized & Detained ($) 1,705,492; Value of Forfeited Assets 277,502; Description of Forfeited Items Cash - 2020: Total Instances of Forfeiture 12; Amount Seized & Detained ($) 1,568,531; Value of Forfeited Assets 1,089,370; Description of Forfeited Items Cash - 2021: Total Instances of Forfeiture 7; Amount Seized & Detained ($) 927,975.47; Value of Forfeited Assets 635,00; Description of Forfeited Items Cash - 2022: Total Instances of Forfeiture 8; Amount Seized & Detained ($) 652,886; Value of Forfeited Assets 1,672,581; Description of Forfeited Items Cash - Total: 43; Amount Seized & Detained ($) 5,740,989.21; Value of Forfeited Assets 4,404,575.75 - Note from source: The amounts seized and the amount forfeited do not match because forfeiture decisions do not always occur in the year during which they were seized. ### Assessment conclusions and rating - The VI has legal frameworks allowing investigation and prosecution of ML crimes, but effectiveness is impacted by lack of resources, limited information-sharing, lack of express legal investigative powers, low summary penalties, and lack of focus on key jurisdictional risks. - Despite constraints, law enforcement is generally committed and the Prosecution and Judiciary have dedicated, highly professional personnel. - ML investigations to date have resulted in a few cases per year of simple possession of PCC in cash; no domestic investigation of complex ML schemes has been carried out; no investigations of VI business companies have been conducted despite international evidence. - Police and ODPP have not reached a common understanding/approach on investigating BVIBCs/TCSPs; investigations typically focus on drug trafficking-related proceeds without broader financial analysis; associated cash smuggling risks have not been coordinated; corruption has not been addressed in financial investigations until recently. - Sanctions are not effective, dissuasive, or proportionate to threats; investigatory and prosecutorial authorities lack resources and capacity to handle complex ML cases. - The assessment team noted recent strong awareness by authorities of the need to address ML crime. - The VI is rated as having a low level of effectiveness for IO.7. *Source: 1vgbea2024001 - 280. The RVIPF Strategic Assessment Report suggests that an important portion of illicit cash proceeds flowing into the jurisdiction is reinjected into the local economy (IMF).* ### 304. In all the cases prosecuted so far, assets other than cash were only seized and forfeited ### 304. In all the cases prosecuted so far, assets other than cash were only seized and forfeited ### Seizure and forfeiture practice - Assets other than cash were seized and forfeited in three cases. - Assets forfeited included two boats (one of which contained US$805,370) and one car in which some drugs were found. - Drugs are destroyed by order of the Magistrate without the need to go through a confiscation or forfeiture procedure. - Firearms are automatically confiscated by law and destroyed by LEAs without undergoing any confiscation process. - In many intercepted cases at sea, no means of conveyance, instrumentalities, or other proceeds were forfeited because: - the conveyance was found to be rented or reported stolen, and confiscation was not pursued; or - authorities were awaiting investigation outcomes before filing for forfeiture/confiscation. ### Assets under custody and inventories - An inventory prepared during the onsite visit shows 30 vessels currently seized or detained by LEAs, but applications for forfeiture/confiscation were filed only in the three cases noted above. - Some seized vessels were abandoned (five), sunk (two), or a recovered wreck (one). - An inventory later provided lists: - 30 boats: 1 related to a PCC case, 1 to a firearms offence, 5 to drug trafficking cases, and 6 in relation to possible migrant smuggling (most not functioning). - Another inventory lists nine vehicles, two scooters, four cases of electronic devices (phones, laptops, tablets), one case of cash, and four cases of pieces of jewelry (no values indicated except for two cars). - ASFMC has not yet commenced management of seized or forfeited non-cash assets; such assets remain in LEA custody. ### Forfeiture and confiscation legal framework and practice - Forfeiture: Magistrate considers origin of assets on the balance of probabilities; acts as a mechanism to alleviate burden of proof of illicit origin. - Confiscation: mechanism of confiscation in equivalent value; assessed on the balance of probabilities but ordered upon conviction only. - Criminal Code, section 94: offence of illicit enrichment exists in current legislation (noted as effective for corruption matters, though not required under the standard and not taken into account for the rating). - Confiscation of assets from foreign predicate offences has been limited to seizure of cash from drug trafficking. - No substantial investigations aimed at confiscating assets from foreign predicate offences were conducted until recently. - No investigations had been carried out to identify, locate, or seize assets abroad until recent times; two MLA requests were issued by the VI in the entire period under review, but none related to confiscation of foreign-based assets. ### Case study: Forfeiture of cash found at sea - On June 16, 2020, two males on a twin-engine speed boat fleeing into VI waters were intercepted; two black duffle bags were found containing a total of US$805,370. - Suspects charged with illegal entry, possession of PCC, failing to declare monies, and engagement in smuggling; PCC charges were not instigated by the ODPP. - In 2021, they pleaded guilty to three offences (illegal entry, failing to declare monies, engagement in smuggling), were found guilty and sentenced, and the US$805,370 was forfeited under the Customs Management and Duties Act. ### Cross-border currency/BNI declarations and seizures - Travelers must declare all cross-border movements of cash over US$10,000. - Significant decrease in cash movement declarations during the period under review, correlated with decreased cash seizures at the airport; trend possibly due in part to the pandemic. - Table 22: Number of Cross-Border Currency and BNI Declarations to Customs - 2018: Incoming Under $10K 0, Incoming Over $10K 0, Outgoing Under $10K 231, Outgoing Over $10K 86 - 2019: Incoming Under $10K 0, Incoming Over $10K 8, Outgoing Under $10K 255, Outgoing Over $10K 73 - 2020: Incoming Under $10K 0, Incoming Over $10K 1, Outgoing Under $10K 61, Outgoing Over $10K 19 - 2021: Incoming Under $10K 0, Incoming Over $10K 0, Outgoing Under $10K 78, Outgoing Over $10K 27 - 2022 (as of September 30): Incoming Under $10K 0, Incoming Over $10K 0, Outgoing Under $10K 10, Outgoing Over $10K 18 - Table 23: Seizure of Non-Declared/Falsely Declared Outgoing Cash and BNIs by HMC - 2018: Number of Seizures 9, Value of Seizures $809,707.50 - 2019: Number of Seizures 1, Value of Seizures $10,300 - 2020: Number of Seizures 3, Value of Seizures $52,561 - 2021: Number of Seizures 1, Value of Seizures $12,604.50 - 2022 (as of September 30): Number of Seizures 0, Value of Seizures $0 - Seizures at airport and sea are largely linked to incoming cash, likely proceeds of drug trafficking through the VI and USVI destined for the U.S. market. - Systematic forfeiture of currencies under these circumstances is described as effective, proportionate, and dissuasive for cash smuggling. ### Institutional developments and resources - ASFMC created by Law 20 of 2020 and operational since October 2021; responsible for custody/management of seized and forfeited assets and sharing proceeds deposited in the Asset Seizure and Forfeiture Fund. - Asset Seizure and Forfeiture Fund amount to date: US$4,418,831. - The Act provides a schedule on the share of assets for each authority but does not provide for restitution to victims. - ASFMC has met three times since creation and established an ad hoc committee to revise the schedule, set up management and distribution guidelines, and propose amendments to the Act; works expected to be completed by the end of the first half of 2023. - ASFMC interviewees initially could not indicate volumes of assets held because no inventory had been submitted; inventory provided later at request of assessment team. ### Limitations, gaps, and trends - Limited forfeiture/confiscation results reflect cascading deficiencies across the AML/CFT framework: - Low understanding of risks and supervision deficiencies lead to inadequate reporting and financial intelligence. - Deficiencies in international cooperation impair ability to identify and locate assets abroad. - No forfeiture/confiscation pursued against BVIBCs or TCSPs to date; no investigations into domestic elements of ML tied to misuse of VI corporate vehicles or into persons associated with such companies and beneficial owners. - No investigations to identify illicit proceeds located abroad; no informal cooperation except one case; FIA has not made enquiries to a foreign counterpart based on RVIPF requests regarding potential property held abroad. - Five investigations related to arms smuggling reported; as of the onsite visit no decision made regarding seized cash (monies detained pending forfeiture/confiscation). - No forfeiture or confiscation pursued in any case of corruption to date, though CoI identified “gross failures in governance” across recent Government ministries and several corruption-related investigations have been initiated since CoI work began. - Authorities recognize growing concerns regarding virtual assets (VAs); LEA capacity to trace, locate, and seize VAs is limited due to resources and skills constraints. Training, including cryptocurrency-related certification, was undertaken by LEAs, but no investigation relating to crypto assets had been carried out to date. ### Conclusions on IO.8 and final observations - Confiscation of criminal proceeds, instrumentalities, and property of equivalent value has not been implemented as a policy objective in the VI, though ODPP and RVIPF have operational focus. - Efforts have centered on seizure and forfeiture of cash; investigations at arrest often did not seek to identify, trace, and locate illicit proceeds due to limited police powers and resources (e.g., absence of requests for production orders until 2022). - No steps had been taken to identify illicit proceeds located abroad via FIA, informal police cooperation, or formal MLA requests until 2022; no confiscation procedure applied until 2022 to extend confiscation beyond assets seized on arrest or to seek value-based confiscation. - Confiscation practice has been consistent with the VI’s risk profile regarding drug trafficking and arms smuggling, but has not addressed other high risks: domestic corruption, international threats posed by BVIBCs and VI-registered legal persons and arrangements, tax evasion, and vulnerabilities of cash-based businesses. - Positive notes: - Successes in seizure and forfeiture of cash derived from drug trafficking. - A recent trend toward more in-depth investigations to trace assets and an expanding scope of forfeiture/confiscation beyond cash proceeds to other predicate offences such as firearms or corruption. - It is too early to assess whether new efforts will align confiscation policies more clearly with the current national risk profile, particularly regarding BVIBCs and non-cash assets. *BRITISH VIRGIN ISLANDS — INTERNATIONAL MONETARY FUND* ### 325. The VI is rated as having a low level of effectiveness for IO.8. ### 325. The VI is rated as having a low level of effectiveness for IO.8. ### Key Findings — Terrorist Financing and Financing of Proliferation (Immediate Outcomes 9–11) - Immediate Outcome 9 - The technical limitations and effectiveness shortcomings described in IOs.1, 4, 5, 6, and 7 negatively impact the country’s capacity to identify or investigate TF cases. - The FIU-AIU produced a small number of TF-related intelligence reports over the period under review that prompted TF investigations by the RVIPF-FCU that are in an early stage, waiting on additional intelligence, including from the FIA. - The small number of TF cases identified and the absence of cases prosecuted and convicted broadly aligns with the country’s low domestic and foreign medium-low TF risks. - The ODPP did not prosecute TF cases during the period under review and, consequently, the Magistrate's Court did not impose penalties in this regard. - The VI has a set of alternative measures in law to disrupt TF activities where it is not practicable to secure a TF conviction, although these were not needed to be used over the period under review. - Immediate Outcome 10 - A legal framework is in place in the VI for implementation of TFS for TF without delay and UNSCRs have immediate effect in the VI by law. Competent authorities also expeditiously notify reporting entities of new listings and de-listings. - Practical impediments (e.g., relating to screening practices by reporting entities, communication of designations) impact timely and effective implementation. - No assets have been identified or frozen under UNSCRs 1267, 1988 (and successor resolutions), or 1373. - While national coordination mechanisms exist, competent authorities have never considered any person or entity for designation or proposal for designation (to another jurisdiction under 1373 or to the UN under 1267). Until recently, no competent authority had any formal mechanism for identifying persons meeting designation criteria. - Varying obligations under different legal provisions have the potential to cause confusion among reporting entities as to their TFS obligations. However, to date, no legal challenges have arisen. - Limited supervisory oversight has not been sufficient to provide assurance that reporting entities are effectively implementing TFS for TF. - The VI have not identified the subset of NPOs that are vulnerable to TF abuse. The FIA does not appear to have definitively identified the specific TF risks faced by VI’s NPO sector. - The FIA’s oversight of the NPO sector is not effectively applying a risk-based approach, nor is it targeting NPOs vulnerable to TF. - Immediate Outcome 11 - A legal framework is in place to implement TFS for PF without delay in the VI. UNSCRs have immediate effect in the VI by law. Competent authorities expeditiously notify reporting entities of new listings and de-listings. - Practical impediments (e.g., relating to screening practices by reporting entities, communication of designations) impact timely and effective implementation. - No assets have been identified or frozen under UNSCRs 1713 or 2231. - National coordination on PF is nascent, and some agencies lack effective systems for detection of persons or assets subject to sanctions. - Understanding of PF TFS obligations varies among competent authorities; most exhibit an overall understanding but lack in-depth understanding of specifics. - Competent authorities and law enforcement do not appear to be sufficiently proactive in ascertaining whether designated persons or sanctioned assets may be in the territory in instances in which a BVIBC has been implicated in a sanction evasion scheme. No domestic inquiries or investigations have been opened despite, for example, eight inquiries from the UN Panel of Experts on North Korea and several criminal proceedings in another jurisdiction involving foreign owners of BVIBCs. - The level of supervisory oversight does not provide sufficient assurance that reporting entities are effectively implementing TFS for PF. The FIA has not commenced its supervisory oversight of sanctions compliance by DNFBPs, whilst the FSC has only begun integrating examination of sanctions handling in its supervision of FIs. ### Recommended Actions — Immediate Outcome 9 (TF investigation and prosecution) - Establish a CFT strategy that includes the investigation and prosecutions of TF cases and the confiscation of TF-related assets as outcomes that support national counter-terrorism strategies. - The ODPP, RVIPF-FCU, and FIA-AIU should work together to improve the analytical process of TF cases conducted by the FIA-AIU to increase the chances that the dissemination of cases to the RVIPF-FCU result in TF criminal investigations. - TF trends and techniques should be monitored by the FIU-AIU and the RVIPF-FCU. - Increase the FIA-AIU's specialized training concerning the identification and analysis of TF cases to enhance the benefits of the analytical tools at its disposal. - Ensure that the ODPP and Magistrate's Court receive specialized training on the prosecution and adjudication of TF matters. ### Recommended Actions — Immediate Outcome 10 (TFS for TF) - Address the shortcomings identified in R.6 in the domestic legislative framework to ensure alignment with the standard. - Improve national coordination, including by establishing formal delegations of statutory functions, where needed; developing formal mechanisms; and leveraging existing inter-agency working groups to identify potential targets for designation. - Provide training based on the recently updated Sanctions Guidelines detailing the specific obligations outlined in the various pieces of legislation that comprise the TFS framework. - Improve oversight of implementation of TFS obligations by reporting entities, including by providing detailed feedback on sanctions handling and testing the effectiveness of screening systems. - Conduct a risk assessment of the NPO sector specifically aimed at identifying the subset or types of NPOs within its broader NPO sector that are at risk of TF abuse and identify the specific TF threats faced by the NPOs registered in the VI. - Develop and execute a risk-based supervision and inspection plan with supporting inspection manuals and procedures for the NPO sector and, in particular, the subset of NPOs that are at risk for TF abuse. ### Recommended Actions — Immediate Outcome 11 (TFS for PF) - Improve coordination among authorities on PF to better and more proactively investigate the involvement of VI structures, persons, or service providers in the evasion of sanctions related to PF and identify assets and funds held by designated persons/entities. - More rigorously monitor the implementation of TFS for PF by FIs and DNFBPs, including by integrating examination of sanctions handling regularly in inspections and testing the effectiveness of screening systems. - Undertake outreach and provide guidance to FIs and DNFBPs on sanctions evasion typologies related to PF and explain statutory requirements where assets are identified. ### Immediate Outcome 9 — Detailed Findings (TF investigation and prosecution) - Risk profile and prosecutions - In the VI’s Financial Services Sector TF RA 2020, the FSC and the FIA regarded exposure of several FI and DNFBP sectors to the risk of supporting foreign terrorist activity was medium-low, while the domestic TF risk for all sectors was considered low. - Between 2015 and 2019, there were no known terrorist groups, organizations, foreign terrorist fighters, or self-radicalized terrorists operating in or targeting the VI. - The ODPP did not prosecute TF cases between 2018 and 2022. - The ODPP’s staff received at least two AML/CFT trainings between 2018 and 2021 that covered the prosecution of TF. - Magistrate’s Courts did not process TF cases during the period under review; the Magistrate’s Court can resort to the United Kingdom to commission more experienced, skilled judges for TF cases. - TF identification, investigation and prioritization - FIA-AIU and RVIPF-FCU regard TF cases as a high priority and have policies to prioritize TF investigations (FIA SOP approved in 2019 and revised in July 2022; RVIPF Financial Investigation Policy approved in 2011 and last revised in February 2023). - Between 2018 and 2022, the FIA received 67 SARs related to TF from TCSPs, from which 17 were classified as “TF Ordinary SARs” and 50 as “TF Crypto SARs.” - The only category of VAs identified in such SARs was cryptocurrency. - The FIA did not find indications of TF activities happening in the VI or being committed by means of a BVIBC. - The FIA-AIU disseminated a total of three TF financial intelligence reports in 2022 to the RVIPF-FCU based on the TF SARs; the FCU sought additional information from the FIA and these investigations remained in an early stage. - The RVIPF-FCU did not start any evidence-focused TF investigations over the period under review but started intelligence-focused TF investigations. - The RVIPF uses a “necessary and proportionate test” to determine appropriate sources for additional intelligence or evidence; the FIA is a preferred route for new investigations due to the intelligence-focused initial stage. - The RVIPF commissioned an independent review of its intelligence capability highlighting analysis, intelligence collection, policy, and processes development as areas to be strengthened. - Training and trends - The 2016 NRA and the 2020 Financial Services TF Report highlighted training of LEAs and competent authorities to detect, investigate, and prosecute TF as an area for improvement. - FIA staff received four training courses regarding TF during the period under review: two in 2018, one in 2019, and one in 2020 provided by the FSC, CFATF, the World Bank, and one private vendor. - RVIPF-FCU officers received TF-related training: one officer in 2019 (Countering Proliferation Financing and Terrorist Financing Course in the Cayman Islands); six officers in 2020 and 2021 (online Financial Investigation and Terrorist Financing Course Parts I and II); six officers in 2022 (Financial Investigation and Terrorist Financing Mentorship); three officers in 2022 (Crypto Investigation Training including TF contents). - During the period under review, the FIA and the RVIPF did not actively monitor trends and techniques related to TF, nor did they gather any intelligence indicating use of the territory for TF activities. - Strategy and integration with national efforts - The VI did not establish counter-terrorism strategies between 2018 and 2022. - The National AML/CFT Strategy 2021–2023 highlighted objectives relevant to TF, including developing legislation to meet international standards, strengthening FIA’s and LEAs' training, structure, and resources, regulating and applying civil forfeiture, and improving inter-institutional collaboration. - The RVIPF approved Standard Operation Procedures for Identification of Targets for Designation in late March 2023, but had not started using them at time of writing. - In November 2022, the RVIPF issued a Terrorism Threat Assessment stating it is unlikely to have a terrorist attack mounted by an international terrorist group in the VI and that the territory is more likely to face a lone wolf, espionage, cyber-attacks, or be used for TF purposes. No terrorism investigations or TF investigations had been initiated to support this assessment. *Source: 1vgbea2024001 - 325.* ### 348. As noted in the analysis of technical compliance of R.5, the penalties available for ### 1vgbea2024001 - 348. As noted in the analysis of technical compliance of R.5, the penalties available for ### Alternative Measures Used Where TF Conviction is not Possible (e.g., Disruption) - Section 81 of the CTA provides measures such as the forfeiture of terrorist cash in civil proceedings; over the period under review, there was no need to apply any of these measures. - Section 40 of the British Nationality Act 1981 allows the Secretary of State of the United Kingdom to deprive a person of British citizenship if deprivation is found to be conducive to the public good and the person has conducted himself in a manner seriously prejudicial to the vital interests of the United Kingdom or any OTs. - The citizenship-deprivation measure under section 40 is limited to: - those that obtained British citizenship by virtue of the provisions of the Act or by certificate of naturalization only, and - those that are citizens of the Republic of Ireland who obtained British citizenship by means of a certificate of naturalization only. ### Conclusions on IO.9 (TF investigations, prosecutions, and institutional capacity) - The VI identified and investigated a small number of TF cases and did not prosecute or sanction TF cases over the period under review, consistent with the low-risk TF profile of the country. - Authorities are not actively monitoring TF trends and typologies. - Operational limitations: - The FIA-AIU and the RVIPF-FCU have significant limitations affecting their capacity to identify and investigate TF cases, although measures exist to prioritize such cases. - The ODPP has trained staff capable of dealing with TF cases. - Magistrates lack similar preparation, but this is regarded as a minor deficiency given the VI can seek assistance from the United Kingdom to appoint experienced judges. - Current legal guidance refers to TF as an aggravating factor only, especially for "dishonesty offences" (the offences of theft, robbery, burglary, and aggravated burglary committed with the purpose of funding terrorism).31 - The VI is rated as having a moderate level of effectiveness for IO.9. ### Immediate Outcome 10 (TF preventive measures and financial sanctions) — Legal framework and implementation - International sanctions obligations are extended to the VI by a combination of U.K. law (through Orders-in-Council (OICs)) and domestic legislation; the Governor of the VI is the responsible competent authority for enforcing OICs relative to all international sanctions under both domestic and U.K. frameworks. - A legal framework allows for timely implementation of TFS for TF, although some impediments may exist in practice. - Pursuant to domestic legislation, UNSCRs have immediate effect in the VI. - Notification of reporting entities of new listings and de-listings has been highly efficient in practice; over the period under review notification generally occurred within 24 hours of a U.N. update, with the system previously hinging on updates from the U.K.’s Office of Financial Sanctions Implementation (OFSI). - As of April 23, 2023, all competent authorities receive updates directly from the U.N. ### Designations, freezing actions, and identification of targets - Over the period under review: - The VI has not proposed a designation, either alone or jointly. - The VI has not frozen any assets under UNSCRs 1267, 1988, or 1373 to other jurisdictions, either directly or through the United Kingdom. - No competent authorities reported identifying or considering any potential targets for designation. - No assets belonging to designated persons were located in the VI; therefore no freezing actions have been taken. ### Legal and institutional impediments; delegation and understanding of responsibilities - Varying obligations in different legal provisions can cause confusion for reporting entities, particularly regarding reporting channels and obligations; to date no legal challenges have arisen. - The Governor’s Office (GO) was initially unable to clearly outline key legal requirements or how domestic and U.K. frameworks interrelate; the GO does not carry out all statutorily mandated tasks and reported informal delegation of such tasks to the FIA and FSC without formal documentation.33 - The FIA and FSC exhibited a stronger understanding of legislative requirements, although neither agency appeared to focus on framework specificities when monitoring compliance of reporting entities. ### Inter-agency cooperation, identification of designation targets, and use of intelligence - Insufficient inter-agency cooperation may impede identification of persons meeting designation criteria under UNSCRs 1267, 1988, or 1373 and weaken the preventive effect of TFS. - Roles and practices: - The GO is responsible for identifying possible targets but does not take an active or leading role; the GO reports reliance on RVIPF to identify potential targets, though RVIPF reported it had never opened any investigation into sanctions evasion or considered any person/entity as a potential target for designation. - As of March 24, 2023, the RVIPF issued an SOP on identification of possible targets for designation; prior to this, no formal policy or procedure existed. - The FIA contributes through analytical work but there is no formal mechanism to ensure effective action is taken on intelligence. - Since 2022, four formal analysis reports were forwarded by the FIA to the GO (none related to TF). The GO instructed the FIA or RVIPF to investigate potential sanctions evasions in seven instances (none related to TF-TFS); in six instances the FIA did not find sufficient information; one resulted in dissemination to the FCU and the FSC but no apparent additional action. - The CCA and its sanctions sub-committee provide a forum for sanctions discussion but are not leveraged to consider possible designation targets. ### Focus on assisting foreign counterparts and international leads - The authorities focus on assisting foreign law enforcement rather than investigating the role of VI entities, individuals, and service providers in alleged sanctions evasion schemes. - Almost all leads on TF-related sanctions breaches originated from sources abroad. - The VI has received 76 international SARs on TF and several requests for information from foreign counterparts. - Authorities contend that many leads relate to foreign beneficial owners of BVIBCs, and therefore no individuals or assets involved in alleged sanctions evasion are located in the VI. ### Screening, beneficial ownership limitations, and detection gaps - The FSC automatically screens each sanctions list against its VIRRGIN database of director information at each designation; the VIRRGIN database contains only information on directors and not beneficial owners, so it would not be expected to detect instances where BVIBCs are owned or affiliated with designated individuals. - Limitations in CDD and the availability of accurate and up-to-date beneficial ownership information, and potential inaccuracies in basic company information during the review period, likely hinder identification of designated persons involved in BVIBCs (see IOs.4 and 5). ### Reporting entities’ compliance, understanding, and supervision - Compliance with and understanding of TF/TFS obligations varies among reporting entities: - DNFBPs showed broad appreciation of sanctions but limited understanding of specific legal obligations under various sanctions regimes, including filing a compliance reporting form (CRF) with the Governor and immediate actions following a positive hit. - FIs were generally more knowledgeable about TFS but none could distinguish between obligations imposed under different pieces of legislation. - Reporting entities’ screening frequency varied widely: - From a 2021 desk-based sanctions-themed survey of 18 TCSPs, 42 percent of sampled licensees performed ongoing screening on a daily basis, or upon receiving the updated designated persons listing from the FSC. - The remaining 58 percent screened client lists quarterly, annually, at intervals associated with client risk rating, or at no specifically defined interval. - Screening systems varied from commercial software and multiple-list screening to manual screening or outsourcing. - There is limited supervision of TFS compliance: - The FSC conducted a desk-based sanctions-themed survey of the TCSP sector in 2021 and has only begun examining sanctions handling in other sectors. - The FIA has not carried out supervisory testing of DNFBPs’ compliance with TFS obligations. - Competent authorities updated the Sanctions Guidelines in March 2023 to include detailed explanations of the competing legal provisions comprising the VI’s TFS framework. ### Targeted approach, outreach, and oversight of at-risk NPOs - Legal and supervisory framework: - NPO registration is governed by the Non-Profit Organizations Act 2012 (NPO Act). - The NPO Registration Board (NPO Board) is the competent authority for registration; functions include receiving/determining registration applications, facilitating sector development, and promoting understanding of NPO roles. - Supervision of NPOs is the responsibility of the FIA in accordance with the FIAA and the NPO Act; NPOs must adhere to provisions of the AMLTFCOP insofar as they relate to NPOs. - Registration and sector profile: - Since the NPO Act came into force in 2012, 368 NPOs have been registered. - As of March 23, 2022, there were 110 NPOs listed on the NPO Register. - Table 24 (as of March 20, 2022) shows the number in each sector: Churches or Religious Organizations 44; Community Organizations 9; Sporting Associations 19; Youth Organizations 6; Service Clubs or Associations 25; Performing Arts Companies/Groups 1; Foundations 3; National or Country Associations 3; Total 110. - The VI NPO sector is primarily small, mainly domestic; 50 percent of active NPOs categorized as religious organizations; approximately 40 percent of the 110 active NPOs either receive funds from abroad or send them abroad. - The majority of NPOs have been long established, with an average of about 20–30 new NPOs being formed annually. - A considerable number are small and do not receive large donations (above US$10,000); in 2022 only 29 registered NPOs solicited donations exceeding US$10,000 (largely due to grants received during COVID-19). - Risk assessment and supervision gaps: - The VI has not identified the subset of NPOs vulnerable to TF based on characteristics or activities. - The 2020 TF sectoral risk assessment found the NPO sector at relatively low risk of abuse for TF (low for domestic TF and medium-low for foreign TF) and did not identify NPO characteristics as creating TF vulnerability; the TF RA contains little analysis of VI NPO-sector data in relation to TF. - The FIA undertakes sustained outreach with the NPO sector, but until recently training focused on AML/CFT generally and did not sufficiently target TF-specific issues. - In 2022, the FIA issued Guidance Notes on AML/CFT for NPOs focusing primarily on preventive measures (e.g., CDD) and not distinguishing TF-specific from ML-specific measures. - Towards the end of 2022 and early 2023, authorities issued guidance notes and webinars specifically on TF and PF. - NPOs interviewed were broadly aware of TF threats and had extensive internal controls, but controls appeared aimed more at ML risk than TF risk; main due diligence measures (identifying donors where donations exceeded US$10,000) are more relevant to ML than TF. - Effectiveness of supervision: - The FIA-SEU is responsible for supervision and monitoring of registered NPOs for AML/CFT generally; the FIA may supervise any NPO where it is satisfied the NPO presents a ML, TF, or PF risk. - The FIA risk-profiles every registered NPO for inspection selection, but this risk classification does not target those most at risk of TF abuse and takes into account factors not all relevant to TF. - Of 110 registered NPOs over the review period: 12 were categorized as high-risk, 52 as medium-risk, and 49 as low-risk. - The FIA does not have an inspection plan for the NPO sector; the majority of supervisory work is desk-based, and not all high-risk NPOs were subject to full inspection due to resource constraints. - The FIA’s supervisory approach focuses on broader misuse (e.g., ML) rather than TF, so effectiveness in mitigating TF risks is uncertain. ### Deprivation of TF assets and consistency with TF risk profile - To date, there have been three TF investigations but no TF prosecutions; therefore no restraints, confiscations, or deprivations of assets related to TF during the review period. - The absence of freezing actions and designations is consistent with the VI’s TF risk profile for domestic TF but may not reflect foreign TF threats faced by the VI as a corporate and financial center. - The lack of leads or suspicions relating to TF with a nexus to the VI may result from inadequate implementation of TFS, limited proactivity in gathering TF-related intelligence involving BVIBCs, and limitations in accurate and up-to-date beneficial ownership information. *Source: 1vgbea2024001 - Extracted content unit.* ### 373. With respect to NPOs, as the VI has not yet identified the subset of NPOs at risk of ### 1vgbea2024001 - 373. ### NPO sector and Immediate Outcome 10 (IO.10) — Findings - The VI has not identified the subset of NPOs at risk of being abused for TF, nor has it assessed the specific TF threats faced by the NPO sector drawing from all available information specific to the risks within the VI and on an ongoing basis (para. 373). - Without identification and ongoing assessment, authorities are not taking targeted, risk-based measures commensurate with the VI’s overall TF risk profile (para. 373). - Limited supervisory staff are available to focus on NPO TF risks; the supervisory framework has a low impact on mitigating TF risks in the NPO sector (para. 373). - The FIA understands general TF typologies but has not identified the specific TF risks faced by the VI’s NPO sector; the only assessment conducted is an institutional risk assessment exercise (para. 375). - The FIA is awaiting a TF Risk Assessment scheduled to be issued later this year and has not yet developed a risk-based inspection plan for NPOs; consequently, the FIA is not currently applying risk-focused and proportionate oversight measures to NPOs (para. 375). - The FIA has undertaken supervisory activities and outreach to strengthen the sector’s capacity; NPOs appear generally aware of TF risks and are applying some TF-specific mitigation measures (para. 375). - The VI is rated as having a low level of effectiveness for IO.10 (para. 376). ### Immediate Outcome 11 (PF financial sanctions) — Framework and general implementation - The VI uses a combination of supranational and national mechanisms to implement PF-related TFS; international sanctions obligations are extended to the VI by way of OICs and domestic legislation giving immediate effect to relevant UNSCRs (para. 377). - The Governor is the competent authority responsible for ensuring implementation of provisions arising under the VI’s sanctions regime for PF (para. 377). - A framework exists to allow for timely implementation of TFS for PF, although impediments exist in practice; the system is largely identical to that for TF (para. 378). - UNSCRs have immediate effect in the VI and are expeditiously communicated to reporting entities (para. 378). ### Exposure, typologies, and risks related to BVIBCs - The VI is a corporate and financial center and hub for company formation; exposure to illicit activities linked to sanctions evasion by foreign actors is elevated, primarily due to prevalence and misuse risk of BVIBCs (para. 379). - No manufacturing sites or research centers producing dual use and proliferation-sensitive goods are located in the territory; domestic exposure to PF sanctions evasion via physical production is considered low (para. 379). - The 2022 PF RA found the risk of misuse of BVIBCs to facilitate financing of WMD to be high (para. 379). - Common typologies include a BVIBC as the registered owner of a vessel flying a flag of convenience used to facilitate illicit trade with a North Korean entity; typologies often rely on vulnerabilities in beneficial ownership information and poor detection of deceptive shipping practices (para. 379). ### Detection, screening, and information systems - The FSC automatically screens each sanctions list against its VIRRGIN database of director information when a new designation is made and when transactions are filed; shortcomings in VIRRGIN (e.g., missing or out-of-date director information) could impact effectiveness (para. 380). - The FIA screens sanctions lists against the BOSSS database for possible matches in relation to beneficial owners; BOSSS reflects only beneficial owners with a 25 percent or higher ownership stake and contains information that is not verified by any public entity (para. 381). - Not all relevant agencies are playing a role in PF sanctions implementation; awareness of sanctions obligations is broad but uneven, and some agencies have nascent screening systems (para. 382). - Examples: HMC is not yet conducting any screening against the lists it receives from the GO; the DOI has a significant backlog of names to screen (paras. 340–341 referenced in source; para. 382). - The Shipping Registry screens against its register but does not collect beneficial ownership information on corporate entities registering as vessel owners (para. 382). - The VI cannot yet be considered to be effectively implementing TFS for PF without delay (para. 382). ### Identification of assets, domestic actions, and cooperation - To date, the VI has not identified any funds or other assets belonging to a person or entity designated for PF-related activities associated with DPRK or Iran; BVIBCs not domiciled in the VI generally do not maintain assets in the VI (para. 383). - VI authorities often view illicit acts linked to BVIBCs as not concerning the VI because beneficial owners are usually foreign; this view reduces domestic investigations and prosecutions (para. 384). - Authorities did not take actions such as designating implicated BVIBCs or beneficial owners, consulting with the Foreign, Commonwealth, and Development Office to propose designations, adding company information to existing designations, initiating criminal investigations of owners/nominee owners/shareholders or TCSPs, or conducting supervisory actions to determine compliance breaches in several implicated cases (para. 384). - The reactive approach to sanctions implementation is likely contributing to lack of detection (para. 384). ### Casework, requests, and investigative follow-up - VI law requires reporting of suspicious transactions related to PF; over the review period, the FIA received three SARs related to potential instances of PF (one alleged crypto-related sanctions breach and two alleging PF-related activity by BVIBCs) (para. 385). - The FIA issued two disseminations but deemed no further investigatory action warranted in those matters (para. 385). - Requests for information from foreign authorities have been received; one MLA request related to U.S. criminal proceedings where a BVIBC pled guilty to ML charges related to DPRK sanctions evasion is ongoing (para. 385). - The FIA provided information in response to U.S. FIU cooperation requests and received 8 requests concerning 60 BVIBCs from the UN Panel of Experts on North Korea; no inquiries or investigations were initiated with respect to any of the 60 BVIBCs (para. 385). ### Border controls and screening integration - Efforts to integrate sanctions screening into border controls by DOI and HMC have been made but are incomplete (para. 386). - In 2020, the Immigration Border Management System and e-Visa system were integrated with a Watch List Management (WMS) system to flag individuals on the U.K. sanctions list; the WMS currently relies on manual population of the U.K. sanctions list by immigration officers, an ongoing process since early 2022 and not yet complete (para. 386). - DOI receives notifications of new designations from the GO and adds new designations to the system as it works through the backlog; discussions are underway to extend WMS to the HMC (para. 386). - The GO provides HMC with updated U.K. sanctions lists twice a week, but HMC does not yet use the U.K. sanctions list in any activities nor flag goods destined for or originating from Iran or North Korea (para. 386). - As of March 2023, the RVIPF has a standard operating procedure on detection of sanctioned assets but has not encountered leads related to sanctions evasion (para. 386). ### Reporting entities (FIs and DNFBPs) — Awareness and compliance - Understanding of obligations arising from UN sanctions regimes relating to proliferation of WMDs varies widely among reporting entities; inconsistencies in the underlying framework result in lack of clarity (para. 387). - Both the CTA and the PF Prohibition Act (PFPA) address PF of WMD but contain different obligations, creating legal uncertainty (para. 387). - Most DNFBPs were generally aware of the obligation to report to the FIA but were not familiar with specific reporting requirements or legal provisions (para. 387). - Most FIs were aware of the reporting channel to the GO, with a few recognizing the need to report to the FIA (primarily in the context of SARs); no reporting entities onsite could articulate all relevant reporting channels (para. 387). - Some reporting entities mistakenly believed their legal obligations were linked to the U.K. sanctions regime (para. 387). - Compliance with TFS obligations varies among reporting entities; frequency of ongoing screening varies (some frequent, others monthly or less) with firm size a determinant of screening timing (para. 388). - Most FIs rely on commercial databases and automated screening; no DNFBPs interviewed reported positive hits against any sanctions lists, but several FIs reported positive hits; only one reporting entity reported a PF-related hit (para. 388). - Two FIs reported false positives against sanctions lists (para. 388). - No CRFs have been filed with the GO under the PF sanctions regime (para. 388). - Between 2018–2022, the FIA received three SARs pertaining to PF, indicating some reporting entities are broadly aware of compliance obligations; however, no commensurate CRF under the PFPA has been filed (para. 389). ### Competent authorities’ monitoring and supervision - Monitoring of compliance with TFS for PF has been limited in scope (para. 390). - Over the review period, the FSC mainly monitored TCSP compliance through desk-based reviews of sanctions policies and procedures as part of pre-inspection processes, using a sanctions checklist (para. 390). - The FSC has only begun integrating examination of sanctions handling into oversight of other FIs and has not tested the screening systems of FIs onsite (para. 390). - The FIA has never conducted a thematic inspection relating to sanctions compliance and has only considered a supervised entity’s sanctions policies as part of pre-inspection desk-based reviews (para. 390). - The FSC’s review revealed significant shortcomings: untimely screening intervals, inadequate procedures for handling hits, failure to identify reporting obligations to competent authorities, and insufficient training (para. 391). - Supervisory actions have not been sufficiently rigorous to improve compliance: in sampled inspection reports that examined sanctions handling, the FSC did not rate any TCSP on sanctions handling, did not provide specific guidance, and imposed no penalties beyond corrective actions to align policies with Sanctions Guidelines (para. 392). ### Conclusions on Immediate Outcome 11 (IO.11) - The VI is not effectively implementing TFS for PF (para. 393). - The VI is exposed to potential illicit activities linked to sanctions evasion by foreign actors; however, no assets potentially subject to sanctions have been identified in the VI and no domestic investigations into potential sanctions evasions have been initiated despite implication of multiple BVIBCs in alleged sanctions evasion schemes (para. 393). - Understanding of TFS obligations varies among competent authorities; most exhibit general understanding but lack in-depth appreciation of the underlying legal framework (para. 393). - Identification of BVIBCs that may have a designated person or entity in ownership structures is difficult due to issues in the regime for identifying beneficial owners in the VI (para. 393). - Deficiencies in frequency of screening and in actions following a positive hit by reporting entities are likely to undermine the effectiveness and timeliness of TFS implementation (para. 393). - Oversight of compliance with TFS obligations is limited to review of procedures and policies and does not include inspection plans relating to PF compliance or testing of screening systems onsite (para. 393). *Source: 1vgbea2024001 - 373. (PDF chapter/section).* ### 394. The VI is rated as having a low level of effectiveness for IO.11. ### 394. The VI is rated as having a low level of effectiveness for IO.11. ### PREVENTIVE MEASURES — A. Key Findings - All banks and some legal practitioners have a good understanding of their ML risks and AML/CFT obligations. Such understanding is however very heterogenous in the TCSP sector and insufficient in certain segments of the investment business sector, which constitute the most important sectors in terms of materiality and are most exposed to ML/TF risks. A majority of DNFBPs (other than TCSPs) only have a basic understanding of their ML risks and AML/CFT obligations. - A minority of investment businesses and some legal practitioners, a few of the larger TCSPs, and all banks have developed adequate risk classification practices driving their CDD and EDD measures. Mitigation measures applied by other FIs and a majority of DNFBPs remain rather rule-based and are not yet sufficiently aligned with their exposure to ML/TF risks. - While improvements in the implementation of CDD measures and record-keeping requirements by FSC supervised entities are positive, there are several remaining obstacles to effective implementation by all categories of FIs and DNFBPs, except banks. One of them finds its origin in TCSP’s quite heavy reliance on professional business introducers for CDD and record-keeping purposes. While such reliance is permitted under the FATF Standards, there is insufficient evidence that there are adequate safeguards in place to mitigate associated ML/TF risks, fully in line with the requirements of R.17. In addition, the implementation of CDD measures by a majority of FIs and DNFBPs is not yet entirely adequate because these measures are insufficiently tailored to the customer’s risk profile. Moreover, the application of the recently updated beneficial ownership requirements by all FIs and DNFBPs, including banks, is too focused on determining ownership thresholds, with insufficient attention being given to the concept of control through other means. - A minority of investment businesses and some legal practitioners, a few of the larger TCSPs, and all banks demonstrated a good implementation of EDD measures arising from specific higher risk scenarios identified through their institutional risk assessments. The application of EDD measures by all other FIs and DNFBPs is however insufficiently driven by an adequate consideration of ML/TF risks. As a result of information sharing by the FSC and the FIA, all FIs and DNFBPs were familiar with the FATF’s lists of jurisdictions subject to a call for action and jurisdictions with strategic deficiencies in their AML/CFT regimes, and of the requirement to apply EDD measures when called upon by the FATF. However, implementation of TF-related freezing and prohibition obligations varies and is not effective and timely in all cases. - The level of SARs in the VI is largely driven by a limited number of TCSPs and one international bank who filed an overwhelming majority of reports. There is no reasonable explanation for the absence of reporting by nearly 50 percent of TCSPs and the entire investment business sector, despite these sectors’ ML/TF risks. While the quality of SARs has been gradually improving, they only partially correspond to the main ML/TF threats to the VI. A relatively large number of SARs are filed because of adverse media screening, attempts of fraud, and failure to complete CDD rather than spontaneous detection of suspicious activity. While all FIs and DNFBPs interviewed introduced programs against ML/TF and established relevant internal policies and procedures, these were often not up to date and not fully implemented on a risk-sensitive basis. - While there is evidence that VASPs are operating in or from the VI and the provisions of the AMLTFCOP apply to VASPs since December 1, 2022, there is no evidence that, at the time of the onsite visit a few months later, they already implemented the preventive measures. ### PREVENTIVE MEASURES — B. Recommended Actions - Continue to promote awareness among the high(er)-risk FIs and DNFBPs of their sector-specific ML/TF risks and their AML/CFT obligations and ensure that they have sufficiently documented and nuanced institutional risk assessments tailored to their own business and activities, and implement risk-sensitive internal controls, policies, and procedures in line with the AMLTFCOP. - Ensure that FIs and DNFBPs, especially higher risk sectors such as TCSPs and investment businesses, adopt sufficiently detailed risk classification practices, to drive the risk-based application of CDD and EDD measures. - Take targeted supervisory actions (issuing guidance, delivering training, conducting inspections and, where necessary, imposing proportionate and dissuasive sanctions) to ensure that TCSPs who rely on professional business introducers for CDD and record-keeping purposes adequately identify, understand, mitigate, and monitor the ML/TF risks associated with such reliance. - Conduct outreach, provide additional guidance, and strengthen supervisory engagement and, where applicable, remedial actions to ensure that FIs and DNFBPs, especially entities in the high(er)-risk TCSP and investment businesses sectors, properly understand the concept of control over a legal person and arrangement, and adequately implement beneficial ownership requirements in line with the 2022 and 2023 amendments to the AMLTFCOP. - Continue ongoing supervisory engagement and outreach to ensure that FIs and DNFBPs adequately understand their freezing and prohibition obligations, have relevant TFS procedures in place and implement TFS without delay. - Take targeted actions (i.e., continue to conduct education, and outreach, issue sector-specific typologies, and apply remedial actions and/or sanctions for failure to comply with the reporting obligation) to ensure that FIs and DNFBPs, especially entities in the high(er)-risk TCSP and investment business sectors, and in other sectors where SAR reporting is negligible or non-existent, improve the quantity and quality of SAR reports, in line with the ML/TF threats to the VI. - Continue to raise awareness of VASPs operating in or from the VI about their ML/TF risks and AML/CFT obligations and ensure that VASPs implement all relevant legal requirements, including the travel rule requirements. ### Immediate Outcome 4 (Preventive Measures) — Context and Assessment Approach - The relevant Immediate Outcome considered and assessed in this chapter is IO.4. The Recommendations relevant for the assessment of effectiveness under this section are Rs.9–23, and elements of Rs.1, 6, 15 and 29. - The assessment team weighted the implementation of preventive measures based on the respective importance of regulated sectors in VI’s context. The assessment team assigned the highest importance to TCSPs, followed by investment businesses and VASPs. A medium level of importance was assigned to banks, legal practitioners, accountants, and real estate agents, while less importance was given to MSBs, financing businesses, and DPMS. Due to their relatively lower level of risks, the assessors also devoted lesser attention to the insurance sector and the referrals to Fis in the analysis of preventive measures therefore do not extend to insurance businesses. The details of the weighting of each sector are found in paras. 85 to 105 of Chapter 1. - The VI significantly strengthened its AML/CFT legislation (AMLTFCOP) in 2022 to improve its compliance with the 2012 FATF Standards and introduced new obligations for all FIs and DNFBPs, which came into force on August 1, 2022. At the time of the onsite visit with private sector entities (i.e., nearly eight months later), all categories of relevant businesses interviewed were still adapting to the new requirements, and many of them were in the process of updating their AML/CFT policies and procedures accordingly. During the onsite visit, the AMLTFCOP was further updated to address some of the remaining technical deficiencies, including an important deficiency in VI’s beneficial ownership requirements. A minority of investment businesses and some legal practitioners, a few of the larger TCSPs, and international banks knew about the content of the March 2023 amendments and indicated that these changes would be integrated in their AML/CFT policies and procedures. However, a large majority of FIs and DNFBPs were not aware that further amendments to the AMLTFCOP were made in March 2023 to strengthen preventive measures for all categories of relevant businesses. - The conclusions under IO.4 are based on written documentation (including processes and procedures, case examples, and statistics) provided by the VI’s authorities and private sector entities, meetings with the FSC, the FIA, and other relevant authorities. The assessment team also met face-to-face with a representative sample of private sector entities and a few industry groups. These meetings included TCSPs which in total represent a significant share of the market, investment businesses, banks, MSBs, financing businesses, legal practitioners, real estate agents, accountants, and jewelers. Significant differences were observed in ML/TF risk understanding, the application of corresponding mitigation measures and the implementation of preventive measures more generally, both between and within the various categories of FIs and DNFBPs interviewed. There is evidence that VASPs are operating in or from the VI. These VASPs qualify as a relevant business in the VI, and the requirements of the AMLTFCOP are applicable to them as of December 1, 2022. However, at the time of the onsite visit (just a few months later), it did not appear that these VASPs were implementing preventive measures which negatively impacts the assessment of effectiveness for each of the core issues in this chapter. The authorities indicated that just one entity had obtained a license under the SIBA to operate as an Investment Exchange for buying and selling of derivatives related to VA but clarified that this entity had not yet started its activities. On February 1, 2023, the FSC issued guidance to sensitize VASPs on regulatory issues, reporting obligations and, to some extent, ML/TF threats and vulnerabilities to the sector (see Chapters 1, 2, and 6). - The activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures (except reporting of suspicious transactions—R.20). This exclusion is not based on an assessment of risks (see Chapter 2). However, since this activity is exclusively conducted through banks and investment businesses, which for their other activities are subject to AML/CFT preventive measures, the overall impact of this scope limitation on the effective implementation of preventive measures is limited. ### Understanding of ML/TF Risks and AML/CFT Obligations — Findings in Detail - All FIs and DNFBPs interviewed were familiar with the 2016 NRA and the 2020 ML and TF SRAs through their engagement with the FSC and the FIA, in particular, recent AML/CFT awareness raising initiatives. None of the FIs and DNFBPs interviewed had been closely involved in the 2022 MLRA work, which could have strengthened their ML/TF risk understanding (see Chapter 2). Some of them said to have contributed via the completion of a questionnaire while others had no recollection of being associated whatsoever to the process. - Despite relevant supervisory efforts, ML risk understanding in VI’s financial sector is quite diverse and insufficient in certain segments of the investment business sector considering this sector’s overall ML risk profile, as set out in the 2020 ML SRA and 2022 MLRA. All banks demonstrated an adequate understanding of their ML risks and were able to offer details on how ML risks derive from their own specific mix of business and customers. Similarly, a minority of investment businesses that are part of an international group exhibited a very good ML/TF risk understanding. These investment businesses and all banks differentiated between the risks related to customers, geographic factors, products, services, transactions, and delivery channels and were nuanced in referring to the ML threats to their business and the VI more generally. They were also able to elaborate on their institution’s inherent ML/TF risks, the mitigation measures applied, and the existing residual risks. Risk understanding by other categories of FIs is clearly less developed but overall acceptable and in line with the results of the 2020 ML SRA and the 2022 MLRA for these sectors. These sectors explained the ML risks they see associated with customers and products, and, where relevant, also geographic risks. - However, ML risk understanding by other investment businesses interviewed did not appear to be sufficiently developed and only partially corresponds to the findings of the 2020 ML SRA and 2022 MLRA. These businesses cited proceeds of drug and human trafficking as the most important ML threats and referred to ML/TF risks associated with the use of cash, in line with the risk assessment’s findings. However, they did not refer to corruption as another important domestic ML threat nor to any of the foreign ML threats to which they are potentially exposed considering the nature of their business and clientele. They could not clearly explain their own institution’s inherent and residual ML/TF risks nor, more generally, how legal persons and arrangements can be misused for laundering the proceeds of crime, including through the investment business sector. In their responses, they exclusively focused on customer risks and remained silent about the inherent vulnerabilities of the products and services they offer. While examples of institutional risk assessments reviewed show that there is nevertheless a focus on products and services in determining inherent and residual ML risks, they had difficulties in explaining how these risks could materialize in practice. These businesses further explained that their exposure to ML and proceeds of crime is limited because they do not accept cash, and assets under their management are always transferred through other domestic or foreign regulated Fis. While they would verify that the FI of the originator is regulated for AML/CFT purposes, they would generally not undertake an independent verification of the source of funds. They expect that the FI of the originator has already adequately verified the source of funds in line with international standards. However, they did not clearly demonstrate to have given sufficient thought to significant differences in the implementation of preventive measures by private sector entities around the globe, as identified by AML/CFT assessment reports adopted by the FATF’s Global Network. - ML risk understanding by TCSPs is quite diverse, and only a few of the TCSPs interviewed demonstrated an adequate risk understanding, at their own institutional level and at sectoral level, consistent with the findings of the 2020 ML SRA and 2022 MLRA. - All other TCSPs interviewed acknowledged the inherent vulnerabilities of legal persons and legal arrangements and their potential misuse for ML, and they indicated that the main ML threats are foreign corruption and fraud, a statement that is only partially in line with the 2020 ML SRA and 2022 MLRA. They also referred to ML vulnerabilities of certain trade-based activities that can be performed by legal persons they set up and manage. These TCSPs specified that, in the past, the TCSP sector in the VI was clearly vulnerable to ML because of a lack of transparency associated with the use of bearer shares and nominee services, and less stringent CDD measures, including beneficial ownership requirements. They referred to various improvements in the VI’s AML/CFT regime which they believe led to a strong legal and regulatory framework for the sector. They consider that it is therefore now very difficult to launder money through the TCSP sector and the VI more generally. While they recognized that BVIBCs are still being used in ML schemes, they believe that this is not due to a lack of transparency of the corporate vehicles they create and manage in the VI but rather to remaining weaknesses in foreign jurisdictions’ AML/CFT regimes (see Chapter 2). Although the VI’s strengthened legal framework should be acknowledged, several of the important amendments are recent (August 2022 and March 2023—i.e., during the onsite visit) and effective implementation of relevant controls by a majority of TCSPs could not yet be established. - Reliance on professional business introducers, including for CDD and record-keeping purposes, as permitted by the FATF Standards, remains a widely used practice in the sector, but a majority of TCSPs interviewed did not demonstrate that they adequately identify, fully understand, mitigate, and monitor associated ML/TF risks. Moreover, according to their AML/CFT returns filed with the FSC, only 2 percent of TCSPs believe their business presents a high ML/TF risk, while 49 percent consider their ML/TF business risks to be low. This risk perception does not correspond to the results of the 2020 ML SRA and 2022 MLRA, which identify the ML/TF risks at sectoral level as high. - Some legal practitioners showed a well-developed ML risk understanding. Even though the FIA organized training sessions to enhance risk understanding, other DNFBPs had difficulties in citing any ML threats beyond drug and human trafficking. These businesses and professions considered VI’s cash-based society to present a significant vulnerability for ML but were unable to explain how cash could potentially enter the VI’s financial and DNFBP sectors, which is illustrative of their basic ML risk understanding. - TF risk understanding within both the financial and DNFBP sectors was largely confined to the low domestic TF threat with very little attention given to the foreign TF threat and the potential for misuse of BVIBCs for TF sanctions evasion. A few Fis referred to the vulnerabilities associated with the physical cross-border transportation of cash and donations to NPOs, but none of them elaborated on the TF vulnerabilities associated with BVIBCs. - Overall, a minority of investment businesses and some legal practitioners, a few of the larger TCSPs, and all banks have a good understanding of their AML/CFT obligations although there is room for further improvement of their understanding of the beneficial ownership requirements, especially the concept of control over a legal person and arrangement needs further strengthening. - The level of understanding of the CDD requirements by other TCSPs and investment businesses interviewed varied significantly, as illustrated below. While TCSPs quite heavily rely on professional business introducers for CDD and record-keeping purposes, a majority of TCSPs did not demonstrate that they apply adequate controls to mitigate ML/TF risks associated with this reliance, as required by R.17. While they verify whether the introducer is subject to CDD and record-keeping requirements, they did not show that they fully satisfy themselves that the introducer effectively implements these requirements in line with Rs.10 and 11. Moreover, the understanding of the beneficial ownership requirements by TCSPs and investment businesses is generally too narrowly focused on the 10 percent ownership threshold in the AMLTFPOC rather than on the natural person who ultimately owns or controls the legal person. In addition, these TCSPs and investment businesses appeared to heavily rely on statements from other domestic and foreign regulated entities setting out what the source of funds is without considering the pertinence of undertaking an independent verification. The FSC disagrees with this finding and indicates that based on a review of past and current reliance practices by TCSPs, it has observed significant improvements over the past few years. While a few of the TCSPs demonstrated recent improvements in the application of adequate controls, the assessment team cannot discount the information obtained from a majority of TCSPs interviewed that points to significant remaining weaknesses in the implementation of the reliance provisions. *Source: 1vgbea2024001 - 394. The VI is rated as having a low level of effectiveness for IO.11.* ### 410. All other types of FIs and DNFBPs showed a rather basic understanding of their ### 1vgbea2024001 - 410. ### Understanding of AML/CFT obligations - All other types of FIs and DNFBPs showed a rather basic understanding of their AML/CFT obligations. - Many could not clearly define the measurable difference between normal CDD and EDD measures and how this would translate into applying increased controls. - FIA’s thematic inspections identified weaknesses across the range of preventive measures; authorities indicate some improvements following FIA’s outreach to the DNFBP sector. ### Application of Risk Mitigating Measures - All FIs and DNFBPs interviewed were familiar with the legal obligation to conduct an institutional risk assessment to drive the application of an RBA, but scope and depth varied significantly. - Some smaller FIs and a larger number of DNFBPs (except TCSPs and legal practitioners) rely on external AML/CFT consultants for institutional risk assessments and AML/CFT controls due to lack of inhouse expertise and resources. - A minority of investment businesses, some legal practitioners, a few larger TCSPs, and all banks: - Have developed an adequate risk classification system that drives CDD and EDD measures. - Have tools to detect atypical behavior and activities and comprehensively explain construction of institutional risk assessments and tailored mitigation measures. - Banks consistently referred to VI’s TCSP sector as high-risk, often presenting an unacceptable ML risk; some TCSPs reported banks terminating or declining accounts, and some TCSPs no longer hold any accounts in the VI. - Some banks do not establish new relationships with DNFBPs and VASPs because of perceived gatekeeper roles, cash-intensive activities, and lack of adequate regulation and supervision of VASPs — an approach not always supported by risk assessments and not necessarily corresponding to the concept of an RBA. - Risk classification across the financial sector (except banks and a minority of investment businesses) primarily based on checks against private commercial databases (e.g., World Check, LexisNexis, SafetyNet), FATF public lists, and Google searches; these checks are insufficiently supplemented by measures tied to institutional risk assessments. - Many FIs classified a relatively large proportion of customers as low risk without convincing underlying factors. - Investment businesses often focused on product and transactional risks in isolation without adequate consideration of interaction with customer risks. - Some FIs rely on statements (e.g., certificates of good standing) issued by other domestic or foreign-regulated entities as risk mitigation without sufficiently considering effective implementation of preventive measures by those entities. - Majority of TCSPs: - Mitigation measures insufficiently tailored to business-specific ML/TF risks and not aligned with sector ML risks from the 2020 ML SRA and 2022 MLRA. - Many classified a large proportion of customers as low risk; some larger TCSPs indicated up to 75 percent of customers qualify as low risk. - Reliance on professional business introducers is common in the TCSP sector: - Larger TCSPs indicated working with up to 100 introducers. - Introducers mainly based in Asia, the Caribbean, the European continent (in particular, Cyprus, Liechtenstein, Monaco, and Switzerland), North America, including Delaware, and South America. - Degrees of reliance vary between 28 percent (lowest reported) and 75 percent (highest reported) of clientele. - A few TCSPs reduced introducer networks due to observed deficiencies and request CDD documents for independent verification; others with highest reliance levels indicated no independent verification would be needed, citing introducers from “FATF compliant jurisdictions” or “white-list countries” or absence from FATF public statements as mitigating factors — an interpretation of equivalence that is of concern. - Significant deficiencies in DNFBPs’ (other than TCSPs) understanding of risk: - Risk classification centered on customer-related factors such as country of residence and economic/personal activity without sufficient account of type, scope, and frequency of services. - Adverse media screening is often the main basis for risk classification. - Personal knowledge of a customer leads some DNFBPs to always classify locals, including domestic PEPs, as low-risk. - Some legal practitioners and a few accountants showed better understanding but implementation across DNFBPs remains quasi exclusively rule-based. - Authorities note FIA outreach on institutional risk assessments for DNFBPs and are confident this will translate into improved implementation. ### Application of CDD and Record-Keeping Requirements - No difficulties noted regarding retention of documents relating to transactions and information obtained as part of due diligence measures; AML/CFT manuals reviewed explain legal record-keeping requirements. - FSC-supervised entities showed improvements in CDD implementation, but onsite interviews identified remaining obstacles: - TCSPs heavily rely on professional business introducers for onboarding and keeping CDD information up to date. - All TCSPs interviewed indicated that for an overwhelming majority of customers (more than 90 percent), onboarding is non-face-to-face and often through professional business introducers. - In many instances, TCSPs meet the introducer in person but usually do not meet the customer. - Majority of TCSPs did not demonstrate that ML/TF risks via business introducers are adequately identified, understood, mitigated, and monitored in line with R.17. - Imperfect understanding of beneficial ownership requirements by TCSPs: - Focus often on the 10 percent threshold for ownership rather than on persons who may ultimately own or control the customer. - AML/CFT policies often silent on what “exercising control” means and how to determine it. - Important deficiencies in VI’s beneficial ownership requirements, including the concept of control over a legal person, were addressed through the August 2022 and March 2023 amendments to the AMLTFCOP. - Except for a minority of investment businesses, some legal practitioners, and all banks, FIs and DNFBPs (other than TCSPs) did not demonstrate that CDD is a dynamic, risk-driven process; implementation is rather static and rule-based, relying on collected datasets, supporting documentation, self-declarations on beneficial ownership and PEP status, and checks against private databases/FATF lists/Google searches. - Many entities generally do not conduct independent verification of source of funds when funds are received via a domestic or foreign regulated entity, assuming the originating FI conducted required CDD. - In-depth understanding of “source of wealth” was not uniformly demonstrated, especially by DNFBPs. - Some AML/CFT manuals refer to a 20/25 percent ownership threshold, possibly incorrect referral to the 25 percent threshold set by BOSSS requirements. - Real estate agents generally do not consider themselves responsible for identifying/verifying the beneficial owner of a legal person acquiring real estate in the name of a legal person; they limit their role to copies of identification documents and proof of residence of natural persons involved. - All FIs and DNFBPs demonstrated a good understanding of identification and verification requirements for trusts and other legal arrangements and of parties to be identified (settlor, trustee, protector, beneficiaries). - Application of CDD to existing customers: - Customer’s risk profile determines frequency of updating KYC and beneficial ownership information. - General practice: review KYC and beneficial ownership information every year for high-risk customers and at least every four years for all other customers, consistent with legal requirements. - For clientele onboarded through reliance on introducers, majority of TCSPs rely on introducers to keep CDD updated and would not systematically check whether updates take place. - Ongoing monitoring is rule-based and automated, but weaknesses in risk understanding, beneficial ownership identification, and reliance on external statements cast doubt on adequacy of detecting inconsistencies. - Some TCSPs and investment businesses classify a relatively large proportion of customers as low risk, meaning updates occur once every four years and raising questions on adequacy and accuracy of information to be provided to competent authorities upon request. - All FIs and DNFBPs confirmed inability to comply with CDD would result in not establishing the business relationship, not carrying out an occasional transaction, or terminating an existing relationship, and that they would consider filing an SAR with the FIA. - Over the period 2018–2022, 223 SARs were filed because of failure to complete CDD; an overwhelming majority of them were filed by one TCSP who filed in 2020, 194 such SARs. ### Application of EDD Measures - Except for a minority of investment businesses and some legal practitioners, a few larger TCSPs, and all banks, most FIs and DNFBPs did not demonstrate an adequate understanding of EDD measures arising from higher-risk scenarios identified through institutional risk assessments. - Cited exceptions apply EDD measures corresponding to risks related to individual customers, geographic location, use of specific products/services and distribution channels, and transaction patterns. ### Politically Exposed Persons - A minority of investment businesses and some legal practitioners, a few larger TCSPs, and all banks: - Screen customers at onboarding and subsequently, daily to determine PEP status. - Do not differentiate EDD measures between domestic and foreign PEPs and apply EDD to family members and close associates of PEPs, consistent with national legislation. - Continue to consider the customer a PEP for a minimum period of 12 months after cessation from a prominent public function, at which time risk classification is updated depending on outcomes of a customer risk assessment. - Legal practitioners indicated applying the rule “once a PEP, always a PEP” and would treat the customer as high risk during the entire business relationship. *Source: 1vgbea2024001 - 410.* ### 428. To determine whether a potential customer is a PEP, other types of FIs and a majority ### 1vgbea2024001 - 428. To determine whether a potential customer is a PEP, other types of FIs and a majority ### PEP identification and enhanced due diligence (EDD) - FIs, a majority of TCSPs, and legal practitioners predominantly rely on: - the customer’s self-declaration, and - screening against commercial databases at onboarding. - EDD measures commonly described: - requirement to obtain senior management approval to establish the relationship, and - requirement to obtain further information, extending to source of funds. - Deficiencies and inconsistencies: - Not all entities can clearly define the measurable difference between normal CDD and EDD in terms of additional information obtained and increased controls, despite some AML/CFT manuals providing clarification. - Additional PEP information collected can include certificates of good standing and information on the source of funds issued by regulated third parties in the VI and abroad. - Understanding of the concept of source of wealth is not uniformly demonstrated. - Becoming a PEP during an existing business relationship is not consistently treated as a trigger for enhanced ongoing monitoring. - Customers who become a PEP during the relationship could remain without EDD measures for several years if initially classified as low-risk; PEP status may only be identified at periodic CDD updates or through adequately implemented third-party reliance. ### DNFBPs (excluding TCSPs and legal practitioners): EDD awareness and implementation - Awareness: - DNFBPs are aware of EDD requirements for PEPs, their family members, and close associates. - Implementation gaps: - Reliance on self-declarations without verification (e.g., screening against commercial databases) allows potential onboarding of foreign PEPs without identification. - Some DNFBPs apply EDD to domestic PEPs at onboarding but still classify them as low risk and update CDD every four years per legal requirements. - Verification of source of funds for domestic PEPs is not consistently carried out; some rely on personal knowledge of the PEP. - FIA identified deficiencies in EDD implementation across DNFBPs under its supervision. ### Correspondent banking - Banks in the VI do not provide correspondent banking services and operate exclusively as respondent banks to banks abroad. ### New technologies and supervisory oversight - FSC supervisory program includes verification of pre-introduction risk assessments for new technologies for supervised entities. - Recent findings: - FSC has not recently observed introduction of new technologies related to products, services, or new delivery mechanisms, except for the VASP sector (not supervised at the time of the onsite visit). - Understanding of the legal requirement for pre-introduction risk assessments is not uniformly demonstrated and is not consistently addressed in AML/CFT manuals. - Some manuals provide clear direction; others only cite the AMLTFCOP provision or omit the requirement. ### FATF list awareness and use - Information sharing by the FSC and the FIA ensures familiarity among FIs and DNFBPs with FATF “blacklist” and “grey list”. - Communication methods: - FIs and DNFBPs receive e-mails from FSC or FIA when supervisors update their websites to reflect FATF list amendments. - A minority of investment businesses, some legal practitioners, a few larger TCSPs, and international banks proactively consult the FATF website after each plenary. - Usage in risk classification and monitoring: - FIs dealing with non-residents, other TCSPs and legal practitioners, and accountants include FATF-list information in customer risk-classification and acceptance procedures; some use it to trigger ongoing monitoring and apply EDD. - A limited number of TCSPs have begun terminating reliance agreements with third parties in some listed countries; a few others plan to do so. - Communication overload: - Some DNFBPs reported being overwhelmed by volume of e-mails from the FIA (including on sanctions screening), making it challenging to keep abreast and implement EDD requirements. ### Rules relating to wire transfers - FIs generally have tools to ensure wire transfers include accurate and required originator and beneficiary information. - All FIs indicated they reject incoming transfers with incomplete originator and beneficiary information. ### Targeted financial sanctions (TFS) implementation - Effectiveness and timeliness: - Implementation of TF-related freezing and prohibition obligations by FIs and DNFBPs is not consistently effective and timely. - Practices observed: - Some larger investment businesses, legal practitioners, a few larger TCSPs, and banks implement daily filtering and automatic cross-checks against commercial databases. - Commercial databases are said to be updated one day after UN designation amendments; FIs/DNFBPs do not verify this themselves. - Majority of other FIs and some DNFBPs screen upon receipt of updated sanctions lists from FSC and FIA, but not necessarily immediately. - Frequency of periodic cross-checks varies significantly: between weekly and annually. - Evidence from supervisory reviews: - A 2021 desk-based sanctions-themed review of 18 TCSPs found less than half undertook sanctions screening daily or upon notification by a competent authority. - Cooperation: - All FIs and DNFBPs referred to good cooperation with FSC and FIA on TFS topics, stemming from awareness-raising initiatives and engagement. ### Reporting obligations, SARs, and tipping-off - Legal reporting framework: - In line with Rs.20 and 23, FIA receives SARs from all categories of FIs and DNFBPs defined by the FATF; any person with knowledge/suspicion from professional activity must report to FIA. - The broad reporting obligation adequately covered VASPs even prior to December 1, 2022. - Cryptocurrency-related reporting: - During 2018–2022, FIA received many SARs from BVIBCs incorporated in the VI but regulated and operating as VASPs exclusively outside the VI; these are termed “cryptocurrency SARs.” - These BVIBCs do not qualify as FIs or DNFBPs in the VI as they are not regulated or supervised in the VI. - FIA did not receive any SARs from VASPs operating in or from the VI during the period under review. - Cryptocurrency SARs from BVIBCs operating outside the VI are not considered when assessing effective implementation of preventive measures in the VI; statistics below are therefore not fully comparable with IO.6 analysis. - SARs by reporting entity (Table 25 totals): - Banks: 77, 120, 106, 200, 143 — TOTAL 646 - Investments Business: 0, 0, 0, 1, 1 — TOTAL 2 - Insurance Business: 4, 4, 6, 7, 10 — TOTAL 31 - Insolvency Practitioners: 1, 14, 10, 7, 6 — TOTAL 38 - Money Services: 22, 1, 1, 0, 3 — TOTAL 27 - Financing Business: 0, 0, 0, 0, 0 — TOTAL 0 - TCSPs: 324, 269, 656, 190, 279 — TOTAL 1,718 - Real Estate Agents: 0, 0, 0, 0, 0 — TOTAL 0 - Legal Practitioners: 7, 14, 11, 13, 13 — TOTAL 58 - Accountants: 2, 9, 0, 0, 0 — TOTAL 11 - Jewelers: 0, 2, 0, 0, 0 — TOTAL 2 - Other HVG Dealers: 0, 0, 0, 0, 0 — TOTAL 0 - TOTAL SARs (2018–2022): 437, 433, 790, 418, 455 — GRAND TOTAL 2,533 - Distribution and concentration: - TCSPs filed 67.8 percent of SARs and banks filed 25.5 percent; together they account for 93.3 percent of SARs. - Within TCSPs: - 77.3 percent of the 1,718 SARs were filed by 10 TCSPs that provide services to 71 percent of active registered BVIBCs. - Seven of these 10 are under specialized FSC supervision due to higher risk/systemic importance. - 44.8 percent of the 1,718 TCSP SARs were submitted by one single business that represents 6.6 percent market share. - In 2020 that single business accounted for 76.2 percent of the sector’s SARs; 38.8 percent of its 2020 SARs were filed due to failure to complete CDD. - That business later refined monitoring parameters, reducing SARs; still accounted for 67 percent and 36.6 percent of TCSP SARs in 2021 and 2022 respectively. - Almost 50 percent of TCSPs have never submitted a SAR. - Banking sector: - All banks filed SARs but reporting concentrated in one international bank with a 23.11 percent market share which submitted on average 69.7 percent of all SARs filed by the sector. - Sectoral under-reporting and causes: - Investment businesses: reporting almost nonexistent and inconsistent with sector ML risks. - Real estate agents: complete absence of reporting not justifiable given transaction volume. - Reported cause: significant deficiencies in ML/TF risk understanding; belief that ML risks are limited because funds pass through other regulated FIs. - MSBs: number of SARs declined after FIA outreach and after the 2017 hurricanes reduced economic activity and migrant workforce; outreach targeted defensive filings and the sector reduced similar filings as a result. - Since end-2019, many DNFBPs (except legal practitioners) have not reported — no reasonable explanation provided. - Nature and quality of SARs: - Many SARs filed due to adverse media screening, fraud attempts, and failure to complete CDD rather than spontaneous detection. - FIA assessment: most SARs received were reactive. - No evidence that requirement to report attempted transactions is adequately implemented. - Out of 2,533 SARs, only 17 related to TF; limited domestic TF risk partly explains low number but also reflects incomplete TF risk understanding by FIs and DNFBPs. - Tipping-off: - All categories generally understand tipping-off risks. - All FIs, TCSPs, accountants, and legal practitioners demonstrated practical measures to prevent tipping-off. - Other DNFBP categories did not show effective implementation elements. ### Internal controls, regulatory updates, and staff training - Internal programs and policy status: - All interviewed FIs and DNFBPs introduced ML/TF programs and internal policies/procedures. - Many policies/procedures did not reflect 2022 amendments to the AMLTFCOP even though those amendments were more than seven months in force at the time of the onsite visit. - A minority of investment businesses, some legal practitioners, a few larger TCSPs, and all banks demonstrated adequate risk-sensitive internal controls. - Risk-based implementation deficiencies stem from limited understanding of ML/TF risks and AML/CFT obligations. - Quality and comprehensiveness of policies/procedures vary across sectors; examples from larger TCSPs and legal practitioners are often high-level and lack detailed practical guidance. - FIs and DNFBPs in international groups coordinate with group compliance for institutional risk assessments, AML/CFT policies, and AML/CFT information sharing in accordance with R.18; some indicated sharing relevant SAR information, notwithstanding a legal limitation only addressed in March 2023. - Training: - All interviewed FIs and DNFBPs indicated they organize AML/CFT staff training; scope and frequency depend on entity size. - Larger entities provide mandatory in-house training (in person and/or online) for all employees and targeted training for front-line staff. - Staff training occurs at onboarding and thereafter at regular intervals; smaller entities find ongoing training more challenging and sometimes use external consultants. - FSC compliance reports indicate majority of FIs and TCSPs provide AML/CFT training; FIA states supervised entities’ commitment to staff training is improving. *BRITISH VIRGIN ISLANDS INTERNATIONAL MONETARY FUND* ### 443. Except for the banking sector, strategic deficiencies in ML/TF risk understanding by a ### Except for the banking sector, strategic deficiencies in ML/TF risk understanding by a wide range of entities within all categories of FIs and DNFBPs hinder the effective application of risk mitigation measures. ### Overview - Except for the banking sector, strategic deficiencies in ML/TF risk understanding by a wide range of entities within all categories of FIs and DNFBPs hinder the effective application of risk mitigation measures. - Important deficiencies observed in the implementation of CDD and EDD measures in all sectors, except the banking sector. - Reliance on professional business introducers with insufficient mitigating controls by TCSPs further affects adequacy of CDD and EDD measures. - Understanding of the concept of control over a legal person and arrangement was insufficiently demonstrated, including in the TCSP sector. - SAR filing is mainly reactive, only partially in line with ML/TF threats and concentrated within a limited number of entities. - The regime for VASPs is a recent positive step, but there was no evidence that, at the time of the onsite visit, preventive measures were being implemented by VASPs operating in the VI. - The VI is rated as having a low level of effectiveness for IO.4. ### Supervisory — Key Findings - Directors and senior officers of (applicant) licensees are within the scope of supervisors’ controls to prevent criminals and associates from entering the financial and DNFBP sectors, but beneficial owners to a limited extent. - The concept of beneficial owner applied by the FSC is limited; relevant sectoral legislation was recently amended to include a sufficiently broad concept of beneficial owner. - Market entry controls are not consistently implemented across sectors. - Supervisors could not adequately demonstrate adequate measures to fully establish criminal background and to verify self-declarations of any type of applicant for fit and proper testing. - VASPs are currently, to a very limited extent, systematically identified, registered, and brought under the FSC’s supervision. - The FIA is in the process of finalizing the registration of DNFBPs following the introduction of the registration requirement in the first half of 2022. - The FSC’s sectoral ML/TF risk understanding is developing but lacks substantiation regarding TCSPs’ and investment businesses' vulnerabilities with respect to ownership and control, including business introduction. - The domestic risk exposure of the banking sector is not adequately analyzed and understood. - The FIA’s understanding of risks is developing but more limited than FSC’s and needs enhancement of domestic ML/TF risk understanding. - A supervisory framework is in place for both supervisors, but: - FSC’s returns provide a broad range of relevant data supporting identification of institutional risks in TCSP and investment business sectors, but not in the banking sector. - Data on vulnerabilities and effective implementation of controls concerning beneficial ownership and reliance on business introducers is not sufficiently nor systematically collected. - The Risk Assessment Model (RAM) is well-developed from a broader risk perspective but limited in providing an adequately supported and weighted ML/TF risk rating; RAM is not consistently aligned with data collected and its overall risk rating includes a broad range of prudential risks with limited weight attributed to ML/TF risks. - Isolated use of the AML/CFT & Financial Crime segment of the RAM does not adequately reflect all relevant (A)ML/(C)FT risk factors. - FIA’s institutional risk assessments are developing but not systematically and consistently conducted and lead to a basic understanding of institutional ML/TF risks. - FSC could demonstrate effective risk-based supervision to a limited extent; prioritization and selection of individual entities for onsite engagements commensurate with risk profiles was not effectively demonstrated. - Risk-based supervision by the FIA is basic and supervisory actions not demonstrated to be effectively risk-based. - Number of inspections: - Very low at TCSPs. - Extremely low for investment businesses. - Low for the banking sector. - Onsite inspections in investment business sector are somewhat more focused at higher-risk licensees when compared to other sectors. - Although all banks are considered high or extreme high risk under the RAM since 2019, this has not led to any on-site supervisory engagement. - Onsite inspections by the FSC seem thorough in some aspects but do not adequately consider ML/TF risk profile of licensees; inadequate coverage of (residual) risks from ownership and control structures and frequent reliance on business introducers. - Offsite engagements are used to collect data for FSC’s risk identification and to provide targeted feedback on compliance manuals. - FSC effectively uses remedial action plans (RAPs) to ensure compliance following inspections at TCSPs, but to a lesser extent regarding investment business. - Enforcement action is used to a modest extent; penalties are increasing but cannot be considered proportionate and dissuasive in most cases. - FIA increasingly applies remedial action but uses a small range of tools to a limited extent; no monetary penalties imposed on the DNFBP sector for non-compliance. - FSC’s supervisory actions have had some positive effect on sectors’ AML/CFT compliance; FIA actions influence DNFBPs seeking to register and apply for approval for directors and senior officers, but effect on DNFBP compliance only demonstrated to a limited extent. - General guidance is provided by supervisors on AML/CFT obligations and the outcomes of the SRAs (2020), but issued guidance is not targeted at VI’s higher risk sectors or their specific product and service vulnerabilities in an international context. ### Recommended Actions (selected) - FSC should subject the complete relevant range of beneficial owners of licensees—in line with amended regulatory legislation—to propriety tests and adopt more robust and comprehensive measures including updated application forms, self-declarations and targeted procedures and guidance. - FSC and FIA should implement measures to adequately identify and verify potential foreign criminal background of directors, senior officers, and beneficial owners at licensing/registration stage and on an ongoing basis. - FSC should set up and implement an adequate mechanism to proactively identify unregistered VASPs and ensure and enforce registration requirements and subsequent supervision. - FSC should develop and strengthen understanding of ML/TF risks by ensuring adequate understanding of TCSP vulnerabilities from beneficial ownership and introduced business reliance; expand returns to include relevant data points and ensure RAM adequately reflects and weights those factors calibrating residual ML/TF risk. - FSC’s risk-based supervisory framework should allow for institutional ML/TF risk categorization considering an adequate range of ML/TF-related risk factors—both inherent vulnerabilities and AML/CFT controls—allowing prioritization of supervisory engagements based on residual ML/TF risk understanding. - FIA should implement a mechanism to conduct institutional risk assessments systematically and periodically, including a broad set of data points, to apply risk-sensitive supervisory programs and intervention strategies; consider additional resources to support risk-based supervision. - Supervisors should increase use of, better prioritize and scope onsite inspections on the basis of sectoral and institutional ML/TF risks, and periodically develop and implement explicit sector-wide AML/CFT-targeted supervisory plans. - In on-site inspections, supervisors should focus more on effectiveness of controls to establish and understand ownership and control structure of clients and active companies, mitigate risks of TCSPs’ reliance on business introducers, and obtain and hold accurate and up-to-date information on beneficial owners, considering licensee risk context. - The full set of remedial actions including effective, dissuasive, and proportionate monetary sanctions should be applied by supervisors in case of AML/CFT breaches, where applicable; range of administrative sanctions available to the FIA should be extended. - More targeted guidance should be issued to assist higher risk sectors in identifying and understanding their ML/TF risks. ### Immediate Outcome and Scope - The relevant Immediate Outcome considered and assessed in this chapter is IO.3. - Recommendations relevant for the assessment of effectiveness under this section are Rs.14, 15, 26–28, 34, 35 and elements of Rs.1 and 40. - Highest importance assigned to TCSPs (company management business, trust business, and other TCSPs), followed by investment business (IB), and VASPs given their risk profile. - Banks, legal professionals, accountants, and real estate agents considered medium level of importance. - Less importance given to MSB, financing, insurance, and HVGD. ### Licensing, Registration and Controls Preventing Criminals and Associates from Entering the Market (FSC) - FSC has measures to identify and assess beneficial owners of an applicant for a license to some extent; directors and senior officers of an applicant are assessed for fitness and propriety. - Where FSC relies on self-declaration by applicant and senior officers of possible conviction or prosecution, the beneficial owner of a person holding a significant or controlling interest in an applicant for a license is not adequately included under such self-declaration (only for approved investment managers is holder of a significant interest included). - Application requirements: - When applying for a license as a financial services business provider, information on ownership or group structure must be submitted and self-declaration of possible conviction or prosecution required to be appended for anyone not yet approved by the FSC. - Other means of control, other than voting rights exercisable directly or indirectly, are not to be identified under applied forms. - Only regarding a trust owning the applicant must the beneficiaries of the trust be named; if listed shareholders are corporate shareholders, beneficial owners of the shares need to be provided but the concept of beneficial owner is left open for interpretation. - Limited concepts of “controller” and “controlling interest” were applicable under sectoral legislation until the beginning of 2023 (banking and trust companies sectors) and the onsite visit in March 2023 (other sectors); the application form nor relevant guidance provide clarity on revised concept of beneficial owner. - FSC could not adequately demonstrate that the person holding or being the beneficial owner of a significant or controlling interest in any sector is adequately tested for propriety; private sector interviews confirmed absence of such practice. - FSC’s ongoing supervisory framework monitors changes in ownership without adequate test on fitness and propriety on complete range of beneficial owners as required under the standards. - Licensees must seek FSC’s prior approval for appointment of additional directors, senior officers, and COs and changes in ownership; ongoing assessment identical to licensing assessment. - FSC can only report one refusal in all sectors in the last five years. - Assessment of directors, senior officers, and beneficial owners (under noted limitations): - FSC to a limited extent demonstrates effective mechanisms to validate information on (absence of) criminal history. - Every application must, to the extent possible, be accompanied by a police report attesting to proposed senior officer’s criminal record or clean record. - FSC notes police record must be obtained from every jurisdiction to which proposed senior officer’s criminal record relates; private sector majority indicated applied criterion understood as only providing a police record from jurisdiction of residence. - FSC also conducts open internet searches, uses third-party databases, intelligence mechanisms, and MoU with FIA; utilizes international cooperation mechanisms to ascertain disciplinary or criminal history where applicable. - Over the last five years: - FSC reported 146 international cooperation requests with 123 responses received, of which 104 related to propriety. - Of those 104 responses, 53 related to the TCSP sector and 38 to the IB sector (relating to both applicant and post-applicant stages and concerning directors, senior officers, and beneficial owners under noted limitations). - FSC indicated majority of beneficial owners are connected to jurisdictions such as Hong Kong, Singapore, United States, United Kingdom, Cyprus, Cayman Islands, and Channel Islands and relies in part on the fact these beneficial owners may be regulated entities. - Withdrawals of applications: 86 in all sectors since 2018; never due to propriety-related issues but were fitness related. - Extremely low number of refusals: in total 3 refusals (2 insurance, and 1 financing sector, all in 2018) out of 1,115 applications in all sectors for appointment of directors, senior officers, and COs since 2018. *Source: 1vgbea2024001 - 443. Except for the banking sector, strategic deficiencies in ML/TF risk understanding by a wide range of entities within all categories of FIs and DNFBPs hinder the effective application of risk mitigation measures.* ### 453. The FSC states it applies automated third-party tools to identify PEP status when ### 1vgbea2024001 - 453. The FSC states it applies automated third-party tools to identify PEP status when ### FSC screening, PEPs, and TFS - The FSC states it applies automated third-party tools to identify PEP status when testing relevant persons—limited to the limited concept of beneficial owners as mentioned above—as well as screening for TFS purposes. - No hits with sanctions lists were reported. - Over a period of 5 years, 17 PEPs were identified—9 directors, 2 senior officers, and 2 beneficial owners. ### Fit and proper tests undertaken by the FSC on beneficial owners (Table 26) - 2018 - Investment Business: No. of Entities Seeking Change, Post-Licensing 15; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 38; No.of Applications for Licensing 6; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 11 - TCSPs: No. of Entities Seeking Change, Post-Licensing 32; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 35; No.of Applications for Licensing 5; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 11 - Banks: No. of Entities Seeking Change, Post-Licensing 0; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 0; No.of Applications for Licensing 0; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 0 - Totals: No. of Entities Seeking Change, Post-Licensing 47; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 73; No.of Applications for Licensing 11; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 22 - 2019 - Investment Business: No. of Entities Seeking Change, Post-Licensing 23; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 42; No.of Applications for Licensing 7; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 10 - TCSPs: No. of Entities Seeking Change, Post-Licensing 19; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 20; No.of Applications for Licensing 121; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 239 - Banks: No. of Entities Seeking Change, Post-Licensing 0; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 0; No.of Applications for Licensing 0; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 0 - Totals: No. of Entities Seeking Change, Post-Licensing 42; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 62; No.of Applications for Licensing 128; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 249 - 2020 - Investment Business: No. of Entities Seeking Change, Post-Licensing 9; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 27; No.of Applications for Licensing 3; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 25 - TCSPs: No. of Entities Seeking Change, Post-Licensing 28; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 40; No.of Applications for Licensing 10; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 9 - Banks: No. of Entities Seeking Change, Post-Licensing 2; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 4; No.of Applications for Licensing 2; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 6 - Totals: No. of Entities Seeking Change, Post-Licensing 39; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 71; No.of Applications for Licensing 15; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 40 - 2021 - Investment Business: No. of Entities Seeking Change, Post-Licensing 9; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 20; No.of Applications for Licensing 5; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 14 - TCSPs: No. of Entities Seeking Change, Post-Licensing 29; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 28; No.of Applications for Licensing 10; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 42 - Banks: No. of Entities Seeking Change, Post-Licensing 0; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 0; No.of Applications for Licensing 0; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 0 - Totals: No. of Entities Seeking Change, Post-Licensing 38; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 48; No.of Applications for Licensing 15; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 56 - 2022 - Investment Business: No. of Entities Seeking Change, Post-Licensing 12; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 36; No.of Applications for Licensing 11; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 28 - TCSPs: No. of Entities Seeking Change, Post-Licensing 31; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 53; No.of Applications for Licensing 10; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 14 - Banks: No. of Entities Seeking Change, Post-Licensing 0; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 0; No.of Applications for Licensing 0; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 0 - Totals: No. of Entities Seeking Change, Post-Licensing 43; Total No. of UBO Subject to Fit and Proper Assessment Post-Licensing 89; No.of Applications for Licensing 21; Total No. of UBOs Subject to Fit and Proper Assessment for New Licensees 42 ### Identification and enforcement regarding unauthorized financial services - Identification of unauthorized financial services businesses focuses principally on reputational damage from persons/entities purporting to act as FSC licensed entities or BVIBCs for fraudulent purposes. - From 2018 to 2022, the FSC reported 12 cases of persons or entities undertaking financial services business without an appropriate license, resulting in: - 1 strongly worded letter - 2 warning letters - 7 fines totaling US$100,000 (average of US$14,286 per entity) - The FSC also issued 72 public statements against persons carrying on or intending to carry on authorized financial services business, or holding themselves out as being a licensee, without holding a license. - Most of the entities purported to be VI companies and/or were registered and/or licensed in the VI (mostly investment business), representing 83 percent of the cases. ### VASP supervision and registration status - The FSC is developing supervision of VASPs and preparing the operationalization of supervision by July 31, 2023. - Limited measures are taken to ensure unregulated VA-related services are actively identified and facilitated to register and be supervised. - Legal and regulatory timeline: - AMLR and the AMLTFCOP apply as of December 1, 2022. - VASPA came into force as of February 1, 2023. - Transition period applied until July 31, 2023 for existing VASPs to apply for FSC registration before being considered unauthorized. - Prior to VASPA, the FSC conducted a survey of registered agents to estimate the potential size of the VASP sector; survey indicated 195 entities may have been carrying out VASP-related services without identifying individual service providers. - From FIA information, 13 entities filed crypto-related SARs and therefore should be considered VASPs; those entities are monitored to ensure registration before the transition period expires. - One cryptocurrency exchange is licensed under the Financial Services (Regulatory Sandbox) Regulations 2020 to operate as an investment exchange for buying and selling of derivatives related to VA; it will be converted into a VASP license once an application for registration is approved. - Except for the sandbox entity, VASPs are allowed to carry on activities without supervision or monitoring until July 31, 2023. ### Financial Investigation Agency (FIA) — DNFBP registration and fit and proper assessments - Registration requirement on DNFBPs introduced as of February 25, 2022 with a deadline by May 31, 2022; FIA is in the process of registering DNFBPs. - At the time of the onsite, applications and status (Table 27, as of March 27, 2023): - Total Applications Received: 100 (Legal Practitioner 41; Accountants 17; Real Estate Agents 19; Yacht Brokers 7; Vehicle Dealers 7; Jewelers & DPMS 7; Other HVGDs 2) - Applications Approved: 87 (Legal Practitioner 36; Accountants 16; Real Estate Agents 16; Yacht Brokers 6; Vehicle Dealers 7; Jewelers & DPMS 5; Other HVGDs 1) - Application withdrawn/entity no longer operating: 4 (Legal Practitioner 1; Real Estate Agents 2; Jewelers & DPMS 1) - Pending approval: 9 (Legal Practitioner 4; Accountants 1; Real Estate Agents 1; Yacht Brokers 1; Jewelers & DPMS 1; Other HVGDs 1) - Fit and Proper Tests Completed: 268 (Legal Practitioner 107; Accountants 64; Real Estate Agents 39; Yacht Brokers 17; Vehicle Dealers 27; Jewelers & DPMS 13; Other HVGDs 1) - Note: Legal Practitioner category includes lawyers, notaries, and other legal professionals. - FIA’s SEU staffing for AML/CFT regulatory and supervisory functions, including market entry: one deputy director, one Senior Compliance Examiner, four examiners, and one compliance assistant. - FIA’s fit and proper assessments include directors, senior officers, and persons holding a significant or controlling interest, including beneficial owners. - Registration process requires declaration of persons falling under four categories: director, senior officer, person holding significant interest, and person holding controlling interest. - FIA’s Guidance Notes on Fit and Proper Test (February 25, 2022) apply a sufficiently broad concept of beneficial ownership as holders of a significant and controlling interest. - To assess fitness and propriety: - A self-declaration by all four categories is required. - A police certificate in respect of a criminal history record or the absence thereof must be submitted “from every jurisdiction to which the interest of a proposed director, senior officer, or persons holding significant or controlling interests relate.” - The FIA states it undertakes its own screening of all individuals declared by using an online screening tool. - The SEU has an information-sharing agreement with the AIU to confirm whether any adverse information is held on individuals. - As of the onsite, where the FIA relies on self-declaration it was not demonstrated that police information was requested yet from foreign authorities to verify criminal records; verification is possible following legal amendments (March 2023) allowing the FIA to engage in such international cooperation. - Where an applicant is found not fit and proper, the FIA has the power to issue a notice declaring they are not fit and proper and require removal; no such notice has been issued to date. - The FIA seeks to identify PEP status and/or TFS designation of applicants using automated third-party screening tools; a hit would typically lead to senior-level review but no written procedure is in place. - FIA works with the Department of Trade to monitor compliance with trade licensing requirements and identify unregistered DNFBPs; since launch of registration, FIA became aware of 11 potentially unregistered DNFBPs (4 from Department of Trade notices, 2 previously supervised but failed to register, 5 from public awareness). FIA reaches out formally to those DNFBPs to rectify registration as a matter of urgency. ### Supervisors’ understanding and identification of ML/TF risks — FSC assessment - The FSC demonstrates a limited level of understanding of ML/TF risks in the sectors it regulates. - The 2022 MLRA improves upon the 2020 FSC SRA and recognizes high threat level of foreign proceeds of crime being laundered through BVIBCs and inherent vulnerabilities of the TCSP and investment business sectors. - Shortcomings in FSC risk understanding: - Insufficient appreciation of the nexus between illicit activities abroad and the risk of VI-established legal persons and arrangements contributing to layering and integration of proceeds of crime by foreign beneficial owners (e.g., complex corporate structures). - Limited appreciation of the risk that licensees may contribute to ML/TF on a global scale. - The Commission’s understanding of TF risk lags behind its ML risk understanding, including limited appreciation of TF vulnerabilities such as lack of adequate regulation and supervision of VASPs. - FSC follow-up and thematic work: - Thematic review on PTCs targeting compliance by Class I licensees in 2022; findings factored into supervision risk framework and updated risk assessment for relevant Class I TCSPs. - Banking sector risk assessment issues: - Domestic ML/TF risk exposure of the banking sector is not adequately reflected in FSC analyses; banking sector considered medium/low risk in 2022 MLRA but unclear how FSC identifies exposure to domestic ML threats such as corruption, “breach of trust,” and drug trafficking. - Main arguments refer to materiality rather than risk analysis. ### FSC risk-based supervisory framework (RAF/RAM) and data limitations - FSC RAF (“Risk-based Approach to Supervision Framework”) sets processes, methodology, and parameters for supervision; aims to target risk of non-compliance including AML/CFT obligations. - FSC collects data via sectoral annual returns (TCSP and investment business) and cross-sectoral AML/CFT returns. Collected data examples: - Product and services related data (e.g., ratio offered per risk category) - Delivery channels (e.g., ratio business relationships established face-to-face, reliance on third parties for introduction [Y/N]) - Licensee business plan, CO reports, operational manuals, due diligence checks, compliance inspection reports, compliance history, enforcement data - Data collection limitations affecting risk profiling: - For TCSPs, beneficial ownership information is limited to one data point in sectoral annual return: originating jurisdiction of beneficial owners of a company or the settlors of a trust, broken down per end-used clients and introduced clients. Investment business returns do not contain this data point. - Cross-sectoral AML/CFT returns include some information on reliance on business introducers but do not capture effective implementation of controls under introducer agreements or licensee ultimate responsibility for full range of CDD measures. - Banking quarterly returns focus primarily on prudential data and cover ML/TF inherent vulnerabilities to a very limited extent; missing data points include (i) background and activities of clients (except for PEP status), (ii) higher risk products/services, (iii) traceability of payments accepted, and (iv) geographical exposure of clients (e.g., nationality and/or residency), nor their beneficial owner(s). - RAM (risk matrix) and calibration issues: - Information is collected and aggregated in RAM for calibrating residual risks; intended to make risk matrix dynamic. - Tool provides an adequate institutional ML/TF risk profile only to a limited extent. - Risk matrix collects and weights data per segment (e.g., AML/CFT and Financial Crime segment) and sub-categories reflecting inherent vulnerabilities (geographic exposure, customer exposure, distribution channels). - Inconsistent application within the Framework: AML/CFT & Financial Crime segment should only consider AML/CFT controls in place, while Business Model segment should consider inherent vulnerabilities. - RAM factors are relatively broad and not sufficiently targeted to identify effective mitigants beyond verification of individuals. - RAM contains datapoints on adequacy of written agreements with business introducers and testing of introduced relationships but does not reflect effective implementation of a range of controls or licensee’s responsibility for full CDD measures. - It remains unclear to what extent FSC includes collected data in calibration of institutional risk using RAM, including detailed trust and company formation and management services, or the size of such services relative to overall provision. *Source: Extract from 1vgbea2024001 - 453. The FSC states it applies automated third-party tools to identify PEP status when (PDF chapter/section).* ### 470. In addition, since the RAM’s overall risk rating includes a broad range of risks beyond ### 1vgbea2024001 - 470. In addition, since the RAM’s overall risk rating includes a broad range of risks beyond ### RAM structure, heatmap, and bucket prioritization - The RAM’s overall risk rating aggregates multiple segments, including AML/CFT & Financial Crime, each with its calculated score and an overall risk score. - The weight of the AML/CFT & Financial Crime segment is limited to 35 percent of the overall risk. - An impact assessment considers criteria such as size, complexity, and impact on jurisdictional reputation, producing a composite rating per licensee that includes the overall risk rating and the impact rating using a heatmap. - The heatmap mapping Risk/Probability of distress against Impact produces bucket prioritization allowing the FSC to set up a supervisory plan at an entity level. - The heatmap (Figure 3) layout (rows: Risk/Probability of distress; columns: Impact) yields the following bucket placements: - High Impact: Bucket 5, Bucket 4, Bucket 4, Bucket 3, Bucket 3 - Medium Impact: Bucket 4, Bucket 4, Bucket 3, Bucket 2, Bucket 2 - Low Impact: Bucket 3, Bucket 3, Bucket 2, Bucket 1, Bucket 1 - The assessment notes that an isolated use of the AML/CFT & Financial Crime segment score for AML/CFT risk-based prioritization does not adequately include considerations and weighting of relevant inherent risk factors (e.g., licensee characteristics). ML/TF inherent risk factors are included under other segments and controls-related risk factors are included elsewhere in the model. ### Findings on bucket outcomes and sectoral risk distribution - The bucket prioritization results raised doubts about whether the RAM, as used by the FSC, adequately establishes institutional ML/TF risks while reflecting sectoral vulnerabilities. - Over the years 2018 to 2023 (average), 100 percent of entities from the banking sector (a medium-low sector) were placed in buckets 4 (extreme risk) and 3 (high risk) together, while 3.5 percent of the TCSPs (a high-risk sector) were placed in those buckets — an indication the model is not adequately supporting ML/TF risk understanding by the FSC. - Table 28: British Virgin Islands: Risk Distribution 2018–2022 (Up to June 2022) — sectoral bucket counts (selected highest-risk sectors only) - 2018 - TCSPs Totals: 79 (Bucket 1), 76 (Bucket 2), 15 (Bucket 3), 1 (Bucket 4), 0 (Bucket 5) - Investment Business Totals: 279 (Bucket 1), 186 (Bucket 2), 42 (Bucket 3), 12 (Bucket 4), 0 (Bucket 5) - Banking Totals: 0 (Bucket 1), 0 (Bucket 2), 3 (Bucket 3), 4 (Bucket 4), 0 (Bucket 5) - 2019 - TCSPs Totals: 154, 91, 13, 1, 0 - Investment Business Totals: 260, 239, 6, 2, 0 - Banking Totals: 0, 0, 3, 4, 0 - 2020 - TCSPs Totals: 153, 132, 4, 1, 0 - Investment Business Totals: 337, 129, 9, 3, 0 - Banking Totals: 0, 0, 3, 4, 0 - 2021 - TCSPs Totals: 154, 124, 4, 0, 0 - Investment Business Totals: 354, 94, 6, 3, 0 - Banking Totals: 0, 0, 3, 4, 0 - 2022 (note 1/): - TCSPs Totals: 163, 118, 6, 0, 0 - Investment Business Totals: 218, 169, 9, 3, 0 - Banking Totals: 0, 0, 3, 4, 0 - Footnote regarding 2019–2023 average: Average was calculated over the years 2019–2023 since it appears this model was not applied to the banking sector in 2018, and/or relevant data on the bucket placement of the banking sector could not be provided for this year. ### FIA: DNFBP sectoral and institutional risk assessment practices - The FIA demonstrates to a limited extent that it adequately identifies and maintains an understanding of ML/TF risks in and between supervised sectors. - SRA 2020 (ML) outcomes: all DNFBP sectors were assigned the same risk level (medium/high) due to limited availability, collection, and analysis of data obtained during 2015–2019. - 2022 MLRA: legal professions sector categorized as medium/high risk; all other sectors considered medium/low risk. - The FIA attributes the legal professions’ rating largely to sector size and potential gatekeeper vulnerability, primarily based on concerns regarding potential reputational risks and limited role in international “transactional work” (see 2022 MLRA section 13.14–13.18). - The FIA did not adequately consider factors such as legal professions’ potential involvement in providing legal advice to VI-established legal persons and arrangements, identified domestic threats of illicit trafficking in drugs and related illegal movement of cash, and potential roles of real estate agents and legal professionals. - Institutional risk assessments of individual DNFBPs are limited and not systematic, leading to a limited understanding of entity-level ML/TF risks. - FIA’s risk matrix for individual DNFBPs is described as very basic: limited in setup and not reflecting calibration using periodically collected data on inherent vulnerabilities and implemented controls. - The risk assessment questionnaire gathers information on some inherent vulnerabilities and controls (e.g., CO/MLRO, monitoring system on PEPs, record-keeping procedures) and DNFBP understanding of sectoral threats, but: - No indication questionnaires are applied systematically. - Few DNFBPs reported familiarity with such questionnaires. - The matrix’s inherent risk factors are limited to four risk drivers: - (i) level of transaction activity (low, moderate, or significant); - (ii) business undertaking cash transactions (yes, no, or some); - (iii) level of non-face-to-face business (very little, some, or very high); - (iv) volume of transactions conducted with PEPs, high-risk clients, or in high-risk jurisdictions (no, some or high). - Institutional assessments do not adequately assess entities’ control systems and controls: - Shared assessments (legal practitioner, accountant, real estate agent) lack sufficient detail and quantitative/qualitative elements to develop entity risk profiles. - CDD measures are considered under one broad “risk driver,” providing only broad rating arguments and preventing the FIA from assessing specific deficiencies in types of CDD measures (e.g., identity verification of clients or beneficial owners). - AML/CFT policies and procedures are rated at three levels (comprehensive, some, or no AML/CFT policies) without self-assessment of policy elements (e.g., periodic updates based on entity risk assessments or policy scope). - The FIA does not systematically rely on other information sources for risk identification beyond examiners’ experience and knowledge of DNFBPs. - Table 29: DNFBP Risk Assessments Undertaken (2020–2023) — counts of DNFBP assessments by year (as at March 30 for 2023) - Legal Practitioners: 24 (2020), 2 (2021), 20 (2022), 2 (2023) - Notaries: 1, 0, 0, 0 - Real Estate Agents: 7, 5, 11, 0 - Accountants: 3, 0, 10, 2 - Jewelers/DPMS: 5, 1, 3, 2 - Yacht Brokers 2/: 10, 1, 4, 0 - Car Dealers: 9, 0, 5, 0 - Total: 59 (2020), 9 (2021), 53 (2022), 6 (2023) - Footnotes: - 1/ Following the DNFBP Registrations process, and 2022 SRA data collection exercise, the SEU is currently in the process of updating risk assessments. - 2/ Yacht brokers and vehicle dealers are part of the FIA’s supervised businesses, but not included in assessment team’s weighting/rating since those are out of scope of the FATF standards. - The FIA’s sectoral questionnaires collect some client-related information (number of clients inside/outside VI, geographical risk exposures, level of non-face-to-face business, financial transactions with individuals and organizations outside the VI) but do not collect information on ownership and control of clients, limiting consideration of beneficial ownership-related risks. - FIA clarified sector questionnaires were intended for assessing individual entities as part of the 2022 MLRA and are not used for ongoing institutional risk assessments. Risk profiles for all DNFBP entities were updated following the most recent exercise. ### FSC risk-based supervision of AML/CFT compliance - The FSC demonstrated effective risk-based supervision to a limited extent. - Supervisory engagements: full inspections, thematic inspections, and desk-based activities. - Identified deficiencies in sectoral and institutional ML/TF risk identification limit FSC’s ability to prioritize engagements based on ML/TF risks. - FSC operated under its 2020–2022 AML/CFT Strategy but could not submit any detailed program or plan indicating risk-based selection of individual licensees for engagements over the past five years. - The supervisory strategy provides general instructions to build a risk-based supervisory framework following the NRA (2016) but does not set out adequate supervisory coverage or prioritization to ensure higher-risk areas are targeted. - It was not demonstrated that the AML/CFT strategy and programs are consistently applied and implemented; unclear extent of consistent and effective implementation over the last five years. - The Framework suggests intervention strategies per priority bucket and the use of Entity Compliance Overviews to set supervision plans for bucket 3 and bucket 4 licensees: - Bucket definitions in the Framework: - Bucket 1: “Lowest risk—routine acceptance of risk” - Bucket 2: “Moderate risk—actions taken will be focused on increased monitoring of licensee” - Bucket 3: “High risk—actions taken will be focused on fixing deficiencies and/or regulatory concerns” - Bucket 4: “Extreme risk—immediate and severe supervisory action required” - Bucket 5: “Entity is listed as critical and not suitable for licensing purposes” - No instrument demonstrated provides the FSC with an overview of all supervisory activities as suggested by the Framework (e.g., aggregating individual supervision plans in buckets 3 and 4), hindering effective scheduling and resource allocation for mitigation. - Intervention strategies are described as flexible and non-mandatory; individual intervention strategies are suggested but neither mandatory nor consistently applied. - The Framework suggests thematic inspections for entities in bucket 2 and upwards and excludes bucket 1, but practice differs: 27 percent of licensees selected for thematic inspections were placed in bucket 1 (see Table 30 reference). - No records provided to demonstrate the FSC’s internal process of scheduling and scoping engagements using RAF/RAM outputs, returns, complaints, media reporting, etc. - Individual supervision plans include general licensee risk profile information and recommendations (e.g., desk-based review of SAR reporting as priority for 2023; staff training on SAR, tipping-off, and PEPs; request for placement on the 2023 inspection schedule) but no examples were provided to show these lead to programmed engagements. - Onsite supervisory engagements since 2018 are mostly directed at the highest risk sector (TCSP), but not necessarily at the highest-risk licensees within that sector as identified under the RAM. - Over 5 years, FSC conducted 36 onsite examinations (full and thematic) at TCSPs — an average of 7 inspections per year out of a population of 257 entities. - This represents 2.7 percent of the total population of this sector annually included in a thematic and/or full inspection. - Only 10 full inspections of TCSPs have been conducted since 2018 — an average of 2 full inspections per year, representing 0.8 percent of all TCSPs annually. - Using an isolated application of the AML/CFT & Financial Crime segment (noted as insufficient from an RBA perspective), this leads to an average of 11 percent of all higher-risk entities in this sector being subjected to full scope onsite inspections. - FSC reported having 45 staff members available for AML/CFT supervision spread over different divisions and units, each allocating around 65 percent of his/her time to such supervision functions. FSC considered available resources sufficient for risk-based supervision of its supervised population. - Selection of TCSPs for compliance inspections: - Of the 36 TCSPs subjected to compliance inspections, 33 (91.6 percent) were placed in buckets 1 or 2 (lower-risk buckets). - When considering the AML/CFT & Financial Crime segment of the RAM in isolation, 80 percent of selected TCSPs for a full onsite are considered medium-high and high risk — supporting risk-based selection to some extent but highlighting the limitations of using that segment in isolation. - Framework suggests use of full inspections every two years for bucket 3 and upwards — de facto once every 10 years when using an isolated segment-based rating. Of the 10 full inspections since 2018, 3 were on bucket 3 licensees and 7 on low and moderate risk TCSPs; on average, 9 licensees were placed in buckets 3 or 4 during this period. - No information provided on whether onsite inspections are triggered by information from foreign supervisory authorities beyond the theoretical inclusion of “the extent of importance of the area to legal and regulatory assistance requirements” as a weighting factor under the RAM. *Source: BRITISH VIRGIN ISLANDS — INTERNATIONAL MONETARY FUND (excerpts).* ### 484. The onsite inspections in the investment business sector are somewhat more focused ### 1vgbea2024001 - 484. The onsite inspections in the investment business sector are somewhat more focused ### Onsite inspections: coverage and frequency - Investment business inspections are somewhat more focused at higher-risk licensees: "47 percent of the licensees inspected are placed in bucket 3 or 4, and the remaining 53 percent in the lower buckets." - Banking sector onsite inspections (limited in number) are all conducted at higher-risk licensees. Two banks from bucket 3 were fully inspected in 2018, and one bank placed in bucket 4 was fully inspected in 2019. - Despite all banks being considered high or extreme high risk, "the fact all banks are considered high or extreme high risk has not led to more intense or more frequent supervisory engagements since 2019." - Considering higher-risk licensees (from bucket 3 upwards) across all sectors, current practice indicates the chance of selection for an onsite inspection (full or thematic) would be "once every 4.8 years when both buckets 3 and 4 were considered." - TCSPs: "81 percent of all active companies (281,814) are clients of the TCSPs selected for these inspections." The assessment team notes this relates to size, not necessarily risk. FSC sampled "1,080 client files" at selected TCSPs since 2018, which is "0.4 percent of all active companies of these TCSPs." ### Inspection activity by sector and bucket (summary of Table 30) - Total compliance inspections across sectors (2018–2022) reported as: - TCSPs: Total 36 (breakdown by year and bucket in source tables) - Investment business: Total 15 - Banking: Total 3 - Financing and Money Services: Total 3 - Insurance: Total 7 - Note: "The total number of inspections in 2020 decreased to 10 due to delays experienced as a result of COVID-19." FSC conducted inspections on a fully virtual basis in 2020; in 2021 FSC conducted 16 inspections despite lingering effects from COVID-19. ### Thematic selection and inspection scope - Thematic inspection themes are determined in a risk-sensitive manner, with examples: - SAR reporting was identified in the 2020 MLRA as an issue across sectors and selected for thematic inspections in 2022. - Enhanced Customer Due Diligence (ECDD) was selected given inherent risk characteristics (e.g., PEPs, clients in high-risk jurisdictions) and FSC’s intelligence; this theme was carried out from late 2020 to 2021. - Concerns on entity selection for thematic inspections: - Absence of targeted risk-based supervisory programs and limited demonstration of FSC’s risk-sensitive selection raises doubts whether licensees chosen are the most appropriate given their risk profiles. - For TCSPs, "no higher-risk TCSPs are included (buckets 3 and 4)" among conducted thematic onsites. When reviewed against an isolated AML/CFT segment, "an average of 45 percent of the medium-high TCSPs is selected for a thematic onsite and the remaining 55 percent come from medium-low risk TCSPs." - Investment business thematic selection appears more risk sensitive: "13 out of 15 licensees from a medium-high and high-risk categorization under the AML/CFT segment solely." ### Inspection methodology and limitations - Inspections commence with a pre-inspection questionnaire requesting data and a list of all clients across business lines and risk categorizations, including: - (i) number of BVIBCs managed and trusts administered, - (ii) proportion of client base introduced by third parties, - (iii) main geographic location per category, - (iv) whether client monies are held. - Pre-inspection questionnaires and other supervisory activities do not target data on beneficial ownership of TCSPs’ clients and active companies, nor sufficiently on relevant CDD controls, and only to a limited extent on introduced business. - Inspection planning reviews policies and procedures (including compliance manuals) to develop an inspection plan, but the assessment team finds plans are "not adequately tailored to the ML/TF risks arising from selected licensees and the sectors." - Client sample testing is the main differentiating element; sample size "could be up to 50 depending on the profile of the licensee." - Overall supervisory focus emphasizes internal controls and governance (Board and Senior Management responsibilities, internal controls, internal audit and compliance/MLRO functions) and preventive measures (CDD/EDD) but does not adequately target residual risks from ownership and control structures of clients and active companies or reliance on professional business introducers. - Verification practices: verification of identity of individuals including beneficial owners is included to a certain extent, but the applied scope of the concept of beneficial ownership by licensees "does not seem to be considered systematically and consistently." ### Offsite engagements and desk-based reviews - Offsite engagements focus on data collection for risk identification and providing feedback for remediation. Desk-based tools include sectoral returns, the AML/CFT returns, and CO reports. - FSC reports undertaking 7 desk-based inspections in 2020/21 at Class I Trust licensees previously inspected between 2014 and 2016, requiring self-assessment of a sample of "50 active and inactive BVIBCs" on conducted CDD measures (including maintenance of basic and beneficial ownership information, but not on establishing ownership and control structure). - Between 2018 and 2022, FSC reports "6 stand-alone desk-based assessments or reviews" (details not known) covering "in total, 13 licensees." - Compliance manual reviews: "3" in 2022, "10" in 2021, and "18" in 2020. Deficiencies identified in respectively "two (2022), three (2021), and two (2020) cases" with feedback provided. - Banking and MSB sectors: desk-based review on SARs filing and internal procedures took place in 2022 including all banks and MSBs. ### Cooperation with foreign counterparts - It is "not clear to what extent the FSC cooperates with foreign counterparts on onsite and/or offsite engagements with licensees, including those with branches or subsidiaries operating in the VI, beyond the exchange of information on AML/CFT through supervisory colleges." ### Supervision of DNFBPs (FIA) - DNFBP supervision is fairly recent, evolving, and "to a limited extent conducted on a risk-sensitive basis." - Post-registration supervisory approach per SOPs Manual: - New DNFBPs may be given up to "a year" before returning their questionnaire and are not included in the supervisory program for a specified period regardless of risk rating. - Low or medium risk DNFBPs receive an email advising regulatory obligations. - High-risk DNFBPs receive an email and are requested to submit their compliance manual for review (desk-based supervision review), usually within "one month." - Desk-based compliance manual reviews use an internal checklist covering preventive measures and controls; DNFBPs are provided the checklist in advance. - FIA/SEU reported desk-based reviews: "around nine DNFBPs in 2020, around 18 DNFBPs in 2021, around 10 DNFBPs in 2022, and seven DNFBPs in 2023 (to end March)." Approximately "90 percent" of these were on DNFBPs rated as high risk; "10 percent" medium risk. Legal practitioners, real estate agents, and yacht brokers were included most often (around "six to seven included per sector"). - Inspections by FIA: apart from a series in Q2 2015, inspections only started in 2021 following SRA 2020 results and focused on all sectors (considered medium-high risk). "No inspections were conducted in 2022 and 2023 (as of the onsite visit)." - Selection of inspections: while the supervision manual states selection "should be done on the basis of risk" and "only the high-risk DNFBPs will be subject to an inspection," in practice "No risk factors are explicitly and systematically applied." Inspections in 2021 were offsite (COVID-19) and themed on due diligence requirements; high-risk DNFBPs were included after desk-based review and one medium-risk DNFBP was included following intelligence. ### Remedial actions, monitoring, and sanctions - FSC uses Remedial Action Plans (RAP) effectively for TCSPs: - "80 percent" of inspections of TCSPs result in the development of a RAP. - When TCSPs successfully conclude their RAP within the set time frame, the RAP is an effective tool; dataset indicates successful closure rate of "75 percent" for TCSPs (see Table 32). - Effectiveness by sector (Table 32): - TCSPs: Average # inspections (annually) "7"; "% of average inspections (leading to a RAP)" "80%"; "Average successful concluded RAP" "75%"; "Average remaining remedial action plan" "25%". - Investment business: Average # inspections "3"; "% of average inspections (leading to a RAP)" "80%"; "Average successful concluded RAP" "25%"; "Average remaining remedial action plan" "75%". - Banks: Average # inspections "0.6"; "% of average inspections (leading to a RAP)" "67%"; "Average successful concluded RAP" "100%"; "Average remaining remedial action plan" "0%". - Investment businesses: RAPs are less effective—only "25 percent" successfully concluded within set timeframes; "Entities in this sector seem to require pressure from the FSC (potentially) applying sanctions before successfully dealing with identified shortcomings in a timely manner." - Strongly worded letters: - Between 2018 and 2022, FSC issued "11 strongly worded letters following 54 compliance inspections" across TCSP, investment business, and banking sectors. Of those, "only 5 were specifically related to AML/CFT breaches" with an average of "1 per year." - Table 33 summary (AML/CFT-related strongly worded letters): - 2022: 0 - 2021: TCSP 1 - 2020: TCSP 1; Investment business 1 - 2019: 0 - 2018: Insurance business 1; Bank 1 - Total: 5 - Enforcement actions and penalties: - FSC has a range of enforcement tools: "(i) revocation or suspension of a licensee’s license, (ii) the issuance of a directive, (iii) the issuance of a warning letter, and (iv) the imposition of fines or administrative penalties." - FSC states it will publish Enforcement Committee decisions on its website. - Assessment: "the FSC uses enforcement actions to a limited extent, and the penalties imposed are not considered to be effective, proportionate, and dissuasive in most cases." *Source: 1vgbea2024001 - 484. The onsite inspections in the investment business sector are somewhat more focused (extracted content).* ### 500. While monetary penalties are increasing in value since 2021, the FSC appears to be ### 1vgbea2024001 - 500. ### Enforcement and sanctions (FSC) - Monetary penalties have been increasing in value since 2021, but the FSC appears reluctant to apply the available range and maximum of sanctioning measures. - Average annual enforcement actions during 2018 to 2022: - Warning letters: 3.5 per year - Directives: 0.3 per year - Administrative Penalties/Fines: 3 per year - Average penalty/fine value: $17,250 - Notable outlier (single TCSP in 2021): - Four penalties/fines totaling US$135,000: - US$35,000 for breaching sections 7(1) and (2), and 7B of the AMLR (third-party reliance) - US$20,000 for breaching section 19(2) of the AMLTFCOP (CDD) - US$40,000 for breaching section 20(2) of the AMLTFCOP (EDD/CDD) - US$40,000 for breaching sections 21(1) and (2) of the AMLTFCOP (updating CDD information) - Assessment conclusion: FSC’s sanctioning practices are not considered effective and dissuasive given the average fine being just above US$17,000 and not proportionate to the nature and severity of the breaches. - Extracted enforcement figures by year and sector (as reported): - 2018 total: Warning Letters 11, Directives 0, Administrative Penalties/Fines 4, Total Value of Administrative Penalties/Fines $25,000 - 2019 total: Warning Letters 2, Directives 1, Administrative Penalties/Fines 0, Total Value N/A - 2020 total: Warning Letters 3, Directives 0, Administrative Penalties/Fines 2, Total Value $10,000 - 2021 total: Warning Letters 4, Directives 1, Administrative Penalties/Fines 5, Total Value $165,000 - 2022 total: Warning Letters 2, Directives 0, Administrative Penalties/Fines 7, Total Value $80,000 - 2023 (March 31) total: Warning Letters 0, Directives 0, Administrative Penalties/Fines 2, Total Value $65,000 ### FIA remedial and enforcement actions - Since 2022 the FIA applies more remedial actions, but: - A very limited range of tools is used. - Numbers are low. - Sanctions cannot be considered effective, proportionate, and dissuasive. - Tools used mainly address failures to submit questionnaires, identified deficiencies in AML/CFT controls, and outstanding registration information. - 2022 actions: - Three Compulsory Directives issued to DNFBPs (two legal practitioners and one jeweller) for failure to complete and submit remediation actions. - Compulsory directives can lead to a monetary penalty up to US$75,000. - Two entities complied; one did not and FIA is pursuing enforcement. - 2023 actions (to date): - Two compulsory directives issued for failure to complete and submit the SRA questionnaire following failure to comply with Section 5D notices; one entity complied and one did not—enforcement will follow. - Section 5D Notices: - Tool under the FIA Act to require DNFBPs to provide specified information/documents within a timeframe, with enforcement threat under Section 5J. - Since the amendment to the FIA Act and publication of enforcement guidelines, seven Section 5D Notices have been issued (plus four more in 2023). - To date: six notices for failure to complete and submit the SRA questionnaire and five notices regarding outstanding information for registration applications. - No enforcement actions in accordance with Section 5J were reported to assessors. ### Remedial actions table summary (2020–2023/Q1) - Compulsory Directives issued by sector (2022 and 2023 Q1): - Legal practitioners: 2022 = 2, 2023 (Q1) = 1 - Jewelers: 2022 = 1 - Real estate agents: 2023 (Q1) = 1 - Total Compulsory Directives: 2022 = 3, 2023 (Q1) = 2 - Section 5D Notices by sector: - Legal practitioners: 2022 = 3, 2023 (Q1) = 4 - Real estate agents: 2022 = 1 - Accountants: 2022 = 1 - Jewelers: 2022 = 2 - Total Section 5D Notices: 2022 = 7, 2023 (Q1) = 4 ### Impact of supervisory actions on compliance - FSC supervisory actions (compliance inspection reports, RAPs, corrective actions, enforcement actions) have contributed to improvements in TCSPs’, investment businesses’, and banks’ compliance. - Improved implementation of CDD and EDD measures reflects positive impact, confirmed by private sector interviews. - Shortcomings remain: - Implementation of CDD measures by TCSPs is not yet adequate. - FIA’s desk-based reviews and inspections results were not seen by the assessment team; thus FIA’s impact on DNFBP compliance could not be concluded. - DNFBP experience with FIA/SEU interactions is mixed; some interviewees noted 2021 inspections triggered compliance improvements. - FSC’s RAPs are effectively used following inspections at TCSPs, less so in investment business sector. - Enforcement actions and penalties are increasing but remain limited over a longer period and are not considered effective, proportionate, and dissuasive in most cases. - FIA remedial actions increasingly applied but no sanctions breaches reported. ### Promotion of understanding and outreach - Supervisory authorities provide general guidance via: - Explanatory notes to the AMLTFCOP - Sectoral guidance material, e.g., “AML/CFT Guidelines for the Banking sector (2020)”; “A Money Services Business Guide to the Prevention of ML/TF Activities in and from the VI (2016)”; FATF publications; quick sheets by FIA. - Outreach video content on cross-sectoral AML/CFT topics. - Limitations of guidance: - Not particularly tailored to VI’s higher-risk sectors (TCSP, VASP, investment business). - New “TCSP Guide to the Prevention of ML, TF and PF (2023)” published but not noticed by interviewed private sector participants. - VASP-related guidance targets regulatory concerns more than threats and vulnerabilities. - Thematic inspection outcomes published in general terms; sectoral reports provide more detail but mainly aggregated feedback. - SRAs publications and webinars in 2020/2021 supported sector understanding of ML/TF risks. - Other outreach examples: - Virtual discussions in 2021 on AML/CFT returns. - Presentation in 2021 to a local industry conference on AML/CFT shortcomings in domestic insurance industry. - Master Course in Compliance Training required for selected licensees in 2018–2019. - FIA outreach since 2018 to DNFBPs on registration and AML/CFT requirements. ### Conclusions on IO.3 - Market entry controls exist but are deficient regarding assessing background of beneficial owners of applicant licensees, particularly when foreign. - Limited actions to detect unregulated VASPs since sector recently regulated; FIA is registering DNFBPs and supervision is recent. - FSC supervision weighted higher for TCSP and investment business given VI’s context and risk profile. - Supervisory frameworks: - FSC’s framework is more advanced than the FIA’s. - FSC seeks to assess risks using a wide range of risk factors but overall assessment is considered limited relative to risk profile. - RAM is a broad tool but falls short in assigning relevant weight to ML/TF risks. - FIA’s risk assessments are being developed but do not systematically set up institutional risk profiles. - Onsite engagements: - Directed at highest-risk sector (TCSPs) but not necessarily at highest-risk entities within sector and do not adequately consider licensees’ ML/TF risk profiles. - Overall: - Penalties imposed are not effective, proportionate, and dissuasive in most cases. - Some demonstrated effect on compliance, mostly due to FSC’s open relationship with licensees. - VI is rated as having a low level of effectiveness for IO.3. ### Legal persons and arrangements — Key findings - Authorities strengthened the legal framework (BVIBCA amendments in January 2023 and further amendments to BVIBCA, Partnerships Act, LPA, AMLTCOP, and AMLR in March 2023). - Authorities are making ongoing efforts to identify and assess ML risks of legal persons but have not fully assessed TF risks. - No comprehensive understanding of how features of VI-incorporated entities can be misused domestically or abroad. - System for holding adequate, accurate, and up-to-date basic and beneficial ownership information is dependent on information collected by TCSPs (registered agents) — overall effectiveness impacted by TCSP CDD shortcomings and supervisory capacity (see IOs.3 and 4). - Beneficial ownership information collected as part of ongoing CDD is not always adequate, accurate, and up-to-date because: - Predominant reliance on ownership thresholds to identify beneficial owners. - Updates required on a risk-sensitive basis that can range between one to four years. - Frequent reliance by TCSPs on professional business introducers to collect and verify information. - Registered agents provide basic information to the Registrar, but: - Information is not easily accessible to the public (search requests by email, upon payment of a fee, and require some information in advance). - Information is not directly accessible to all competent authorities (domestic and international). - Director information: - Not required at incorporation stage; may not be available to the Registry for several months and was not publicly available until January 2023. - Nominee services and director services by TCSPs: - Mechanisms and efforts to prevent abuse are insufficient. - Bearer shares: - Were immobilized and have now been prohibited. - Trusts: - Not required to be registered in the VI. - Some trust information held by TCSPs acting as professional trustees is collected through annual returns, but challenges remain to ensure adequate, accurate, and up-to-date information. - Enforcement and international cooperation: - VI has not investigated or prosecuted misuse of legal persons and arrangements and cannot demonstrate effective, proportionate, or dissuasive sanctions against legal entities, beneficial owners, or registered agents. - Competent authorities can furnish basic and beneficial ownership information in a timely manner for international cooperation requests, as far as information is available, but do not proactively seek international cooperation themselves. ### Legal persons and arrangements — Recommended Actions - Extend legal framework (in line with March 2023 BVIBCA amendments) to require changes to beneficial ownership information for all legal persons and legal arrangements to be reported in a timely manner, and establish dissuasive penalties against legal entities for failure to do so. - Implement the Register of Persons of Significant Control (per BVIBCA and VI policy decision) with: - A designated public authority responsible for receiving and holding adequate, accurate, and up-to-date beneficial ownership information. - Appropriate sanctioning powers. - Ensure basic information, including director information collected from registered agents and held in the Registry (VIRRGIN platform), is publicly available: - Basic information should be available online in a format easily accessible and searchable by all competent authorities and the public, domestic and overseas. - Require director information to be submitted at the incorporation stage to the Registrar: - Penalties for missing information should be effective, proportionate, and dissuasive. - Certificates of good standing should not be issued until such information is available to the Registrar. - Director information held by the Registry should clearly distinguish when TCSPs provide director services (individual or corporate director capacity) and include information on their nominators. - Require nominee shareholders (including TCSP-provided) to be identified as nominees in the register of members, with accompanying information on their nominators. - Ensure information collected through annual returns by supervised entities supports effective supervision of TCSPs providing trust services and assists supervisory focus on ensuring TCSPs hold adequate, accurate, and up-to-date information on trusts and their beneficial owners (see IO.3 Recommended Actions). - Provide explicit powers to take administrative, civil, or criminal actions when false/misleading information is submitted and based on findings of misuse from supervisory activities or by the FIA-AIU. - Enhance sanctioning powers for competent authorities to act against legal persons, legal arrangements, and registered agents who fail legal obligations and step-up efforts to use a range of proportionate and dissuasive sanctions. - Enhance understanding and raise awareness of ML/TF risks of misuse of VI legal persons, including how VI-created entities can be misused to facilitate ML and TF in the VI and abroad, including to launder foreign proceeds of crimes. *Source: 1vgbea2024001 - 500.* ### 513. The relevant Immediate Outcome considered and assessed in this chapter is IO.5. The ### 1vgbea2024001 - 513 ### Overview and scope - The relevant Immediate Outcome considered and assessed in this chapter is IO.5. - Recommendations relevant for the assessment of effectiveness under this section are R.24–25, and elements of R.1, 10, 37 and 40. - An overview of the types of legal persons and arrangements is included in Chapter 1. ### Types, scale, and providers of legal persons and arrangements - BVIBCs comprise the largest proportion of legal persons incorporated in the VI: there are 348,258 active BVIBCs as of the end-of March 2023. - 99 percent of all BVIBCs in the VI are incorporated to support international business and other activities abroad. - Authorities note they incorporate around 30,000 BVIBCs per year. - Other legal persons include foreign companies (55 to date), limited partnerships established under the LPA 2017, as well as those still in existence under the previous Partnerships Acts. - The Micro-business Companies Act is currently suspended; none have been created to date. - Limited available information on cooperatives and friendly societies; assessed as low risk and not the focus of this write-up. - Legal arrangements: - 6,227 express trusts set up to 2021. - 1,544 VISTA trusts set up as of 2021 (numbers do not capture trusts set up by non-professional trustees). - TCSPs: - 282 TCSPs licenses granted to date. - 103 licensees can provide services as registered agents. ### Public availability of information on creation and types - General information on legal persons and legal arrangements is available on the FSC’s website: Corporate Structures | British Virgin Islands Financial Services Commission (bvifsc.vg). - FSC website information includes characteristics of BVIBCs, micro-business companies (currently suspended law), limited partnerships, express trusts and VISTA trusts, and general requirements for setting up these legal entities (e.g., need to maintain a registered office and agent in the VI). - No information on the FSC website about companies designated for specific purposes such as restricted purpose companies or PTC. - Corporate laws outlining types, forms, features, creation, incorporation, and obtaining/recording basic information are available online through the FSC website. - No publicly available information on cooperatives and friendly societies and how these can be set up or their governing laws. ### Identification, assessment and understanding of ML/TF risks and vulnerabilities - Authorities have identified ML risks and vulnerabilities to an extent through the 2020 FSC SRA and the 2022 MLRA; neither risk assessment considers the risks of limited partnerships created under the Partnerships Act that have not yet re-registered. - Risk ratings (2022 MLRA): - BVI Business Companies — High - Limited Partnerships — Medium High - Micro-business Companies — Medium Low - Trusts — Medium High - Virgin Islands Special Trusts — Medium High (previously rated as Medium Low in the 2020 risk assessment) - Observations on risk assessments: - 2020 FSC SRA was primarily focused on rules and control measures with little on specific threats and vulnerabilities. - 2022 MLRA goes further into threats and vulnerabilities, identifying complexity of structures, availability of non-face-to-face transactions, and high-risk clients such as foreign PEPs as key issues. - 2022 MLRA had not been disseminated to other authorities or the private sector at the time of the onsite, resulting in an uneven understanding of risks and mitigation measures. - Gaps in risk understanding and recognition: - Competent authorities did not fully recognize the role VI-incorporated entities can play in facilitating ML/TF, particularly for foreign ML/TF activities. - No investigations or prosecutions against BVIBCs or registered agents in the VI were provided to demonstrate comprehensive efforts. - Competent authorities recognized allegations of misuse of BVIBCs are reported on average 10–12 times a month in international media reports; following FSC review, authorities considered these threats largely unsubstantiated. - Significant difference in risk understanding across private sector representatives. - Assessment team found authorities and private sector do not have a comprehensive risk understanding regarding: - How beneficial owners could control BVIBCs even with less than 10 percent ownership. - Risks arising from the frequent reliance by some TCSPs on professional business introducers. - The role of legal practitioners and accountants in creating and supporting complex legal structures involving VI-incorporated entities. - Possible misuse of director services provided by TCSPs (including nominee directors in practice). - Obfuscation of ownership from nominee shareholder services provided by TCSPs. - Possible misuse of shelf companies provided by some TCSPs. - Establishment of complex, multi-jurisdictional structures that involve BVIBCs and VI trusts. - Terrorist financing (TF) risk coverage: - 2020 financial services TF RA considers risks of TCSPs to an extent and notes threat of misuse of entities internationally is greater than domestic level. - Authorities have not focused on specific TF risks and vulnerabilities of all types of legal entities and the risk assessment does not contain TF risk ratings for legal persons. - Trust sector observations: - Authorities did not fully recognize how trusts can be used in layering or provide typologies of misuse or mitigating strategies. - Private sector notes common use of trusts for succession planning and asset protection. - 2022 MLRA reports US$183.66 billion in trust assets managed by VI professional trustees (systemically significant). - VISTA trusts and PTCs: - VI legal framework allows VISTA trusts (only purpose of holding shares in a BVIBC) and PTCs (can act as trustee and are not required to be licensed). - Authorities demonstrated limited risk understanding of how such arrangements could be misused to obfuscate ownership and control; a 2022 thematic inspection on PTCs reflects ongoing efforts to understand the PTC sector and risks. ### Mitigating measures to prevent misuse - Regulatory and supervisory responsibilities: - All BVIBCs and limited partnerships (under LPA 2017) are required to have a registered agent in the VI, licensed and supervised by the FSC. - Failure to have a registered agent results in the legal person being struck from the Register of Corporate Affairs. - Registered agents are responsible for collecting basic information of entities they incorporate and submitting this information to the Registrar of Corporate Affairs and are required to collect and hold beneficial ownership information as part of CDD obligations under relevant AML/CFT legislation. - TCSPs providing trust services are licensed and supervised by the FSC; registered agents are required to hold information on trusts as part of their CDD obligations. - System reliance and challenges: - Competent authorities and LEAs depend on information collected and held by registered agents; the system places huge reliance on registered agents holding adequate, accurate, and up-to-date information. - Shortcomings identified in IOs.3 and 4 indicate reliance on registered agents alone raises challenges for effective prevention of misuse. - Legal practitioners and accountants, domestic and abroad, can support company formation and management services; some VI law firms own or are affiliated with other members of business groups that perform services supervised as TCSPs. - FIA, as the supervisory authority for DNFBPs, had a more limited risk understanding (including on potential involvement of legal practitioners with BVIBCs), impacting supervision and ensuring DNFBPs collect adequate CDD information (see IO.3 findings). - Reliance on professional business introducers: - Frequent reliance by some TCSPs and gatekeepers on professional business introducers (some in the VI, others abroad) to conduct CDD raises inherent risk that information may not be accurate and up-to-date and poses verification challenges due to non-face-to-face transactions (further shortcomings elaborated in Chapters 5 and 6—IOs.3 and 4). - Nominee services and director services: - TCSPs may provide nominee shareholder services; prudential returns indicate such services decreased to around 1,300 entities in 2021 (data for 2022 not yet available). - TCSPs may provide director services; authorities reported such services are provided to about 10,000 companies or less on average (see Table 39). Specific known numbers: - 2018: 10,464 companies - 2019: 11,306 companies - 2020: 11,514 companies - 2021: 7,209 companies - Authorities and some private sector representatives view directors as having fiduciary obligations and operating in good faith and therefore not nominee directors; assessment finds this view inconsistent with the FATF understanding of nominee director. - 2022 SRA noted some TCSPs advertise provision of nominee director services (para 10.10, 2022 SRA). - March 2023 amendments now require TCSPs and other entities and professionals providing nominee shareholder and director services to provide this information to legal persons and for them to disclose their nominator information to the legal person (but not to any registry). - Information on nominee shareholder arrangements and director services is collected from TCSPs via fiduciary annual returns; unclear extent to which this information is accounted for in authorities’ risk-based supervision framework. - Nominee shareholder services — known counts: - 2018: 3,869 services - 2019: 3,166 services - 2020: 1,773 services - 2021: 1,344 services - Data for 2022 not yet available as 2022 prudential returns are not yet due. - Bearer shares and custodians: - Authorities immobilized bearer shares by requiring physical bearer shares and identifying information to be held with a custodian approved by the FSC or a recognized custodian. - At the end of 2022: - 10 recognized custodians (outside of the VI). - 1 authorized custodian (within the VI). - As of January 1, 2023, issuance of new bearer shares was prohibited. - Requirement: existing bearer shares held by custodians were to be surrendered to the company on or before the effective date of July 1, 2023. - By July 1, 2023, all existing bearer shares, if not already redeemed, converted, or exchanged, were deemed to be converted to registered shares. - As of December 2022: - 442 companies authorized to issue bearer shares, of which 52 were active on the Register. - 12 companies out of the 52 authorized have so far issued bearer shares totaling 11,472,813 shares. - Authorities reported that 99.1 percent of these shares were issued by two publicly listed companies listed on two foreign stock exchanges. - Prior to prohibition changes, it is not clear to what extent authorities were able to monitor compliance of foreign custodians. *Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf* ### 542. The authorized custodian in the VI reported that they only hold a very limited number ### 1vgbea2024001 - 542. The authorized custodian in the VI reported that they only hold a very limited number ### Bearer shares and authorized custodian - The authorized custodian in the VI reported that they only hold a very limited number of bearer shares in relation to two specific companies, which are only being held since they are part of an ongoing litigation case. - Information on these bearer shares has been regularly communicated to the FSC. - Measures were in place to surrender these bearer shares by the July 1 deadline. ### Legal arrangements, trusts, and trustee information - Express trusts are not required to be registered. - Until March 2023, only professional trustees were required by law to hold information as part of their CDD requirements. - Supervisory authorities can collect information on trusts created by TCSPs via fiduciary and AML annual returns, but: - This does not include trusts set up by non-professional trustees. - It is not clear to what extent such information is accounted for in authorities’ risk-based supervision framework. - Outreach and training have been conducted for private and public sectors on ML/TF risk of legal persons and arrangements (sessions/webinars with VI Association of Compliance Officers and VI Finance). - August 2022 AML/CFT amendments enhanced information requirements related to trusts; March 2023 amendments introduced requirements for all trustees, including non-professional trustees. - TCSPs indicated that the trust assets they manage are predominantly held outside of the VI. - Authorities conducted a thematic inspection in 2022 related to PTCs; findings: - Majority of PTCs provide unremunerated trustee services and therefore are not licensed and not obliged entities under the AML/CFT laws for CDD. - Average assets under management per trust amounted to US$13 million. - Authorities will continue ongoing monitoring of relevant Class 1 TCSPs and factor 2022 MLRA findings into their risk assessment. ### Basic information on legal persons and registration processes - Registered agents are obliged to obtain and maintain basic information; deficiencies existed for foreign companies and limited partnerships (some addressed via March 2023 amendments). - Registered agents must provide this information to the Registrar of Corporate Affairs through VIRRGIN (electronic portal). - To incorporate a legal person, registered agents submit an application through VIRRGIN with memorandum and articles; the portal only accepts an application if all required information is included. - Verifying/approving incorporations is performed by nine staff in the Registrar’s office; given ~30,000 VI-incorporated legal entities annually, nine staff is insufficient. - Incorporations can be done in a matter of a few hours. - Table 40: Number of Defected and Rejected Transactions Over the Period Under Review - 2018: No. of Defects Count 689; No. of Rejected Transactions 404 - 2019: No. of Defects Count 648; No. of Rejected Transactions 205 - 2020: No. of Defects Count 683; No. of Rejected Transactions 225 - 2021: No. of Defects Count 789; No. of Rejected Transactions 368 - 2022: No. of Defects Count 607; No. of Rejected Transactions 373 - 2023: No. of Defects Count 103; No. of Rejected Transactions 60 ### Company names, directors, and certificates of good standing - BVIBCs must elect to reserve company names during pre-incorporation; a range of suffixes may be used, which could create potential risks by giving the impression of incorporation in other jurisdictions. - For BVIBCs, director information: - Does not have to be provided at the outset if no director has been appointed. - Companies have up to (6 months + 21 days) to submit director information. - If not provided within this timeframe: - System automatically alerts the Registrar. - A penalty of US$100 is levied against the company. - An additional 90 days is available to provide the information or the company could be struck off. - Before striking, the Registrar will publish notice in the Gazette. - Director information may therefore be unavailable to the Registry for up to 10 months (as permitted by law). - Under section 235, BVIBCA, the Registrar can issue a certificate of good standing even if director information is not available in the registry. - Table 41: Number of Companies Which Did Not File Register of Directors (ROD) at Incorporation - 2018: No. of companies that did not file ROD during the year in which they were incorporated 2,382; Number filed subsequently within the period allowed 2,015; Number that did not file 367; Number struck for non-filing of ROD 366 - 2019: 1,442; 1,347; 95; 94 - 2020: 1,445; 1,356; 89; 87 - 2021: 1,908; 1,764; 144; 140 - 2022: 1,158; 960; 198; 0 - 1/ According to authorities, companies incorporated in 2022 had not met the criteria for being struck off at the time of the onsite. - Total: 8,335; 7,442; 893 ### Public access to basic company information and search costs - Basic information held by the Registrar is required to be publicly available for inspection but is not accessible online. - Public searches require completion of a search and document request form sent via e-mail to the Registrar; requestor must provide company number and/or company name. - Fees charged per search: - US$50 for company information (previously US$30) - Additional US$75 for information on the list of directors (if available) - Table 42: Number of Public Searches Requested from VIRRGIN - 2018: 11,876 - 2019: 13,674 - 2020: 12,862 - 2021: 16,096 - 2022: 17,473 - 2023 (end of March): 5,282 - On average more than 60 search requests are received by email daily (example years 2021, 2022). - There is currently no option to search this information in person at the Registrar’s office; authorities note plans to provide online access to the Register. - Search requests for limited partnerships initially provide only registered agent information and transaction history; names of partners are not included without follow-up. - The assessment team views high fees (US$50/US$75 per search) and formalities as having a negative impact on effective availability of basic company information. ### Access by competent authorities and LEAs - Only some competent authorities (FIA, FSC, AGC since 2022, and ITA) have direct access to VIRRGIN information; other LEAs must request information via mechanisms in place. - Limitations exist on information available from the Registry to competent authorities (e.g., names of directors but not addresses or further details), which may not suffice for investigations. - Prior to January 2023 amendments, the list of directors in a company's ROD was not publicly available; it was available only by court order or written request of a competent authority. - Table 43: Competent Authorities’ Requests for ROD - Agency / 2018 / 2019 / 2020 / 2021 / 2022 - Financial Investigation Agency: 0; 0; 0; 30; 36 - Financial Services Commission: 1; 2; 5; 1; 1 - International Tax Authority: 0; 0; 0; 2; 4 - Attorney General: 0; 0; 0; 28; 43 - Total: 1; 2; 5; 61; 84 - Authorities report that director information was typically made available to competent authorities within 24 to 48 hours, though filing deficiencies may have affected availability. ### Beneficial ownership information (BOI) - Until March 2023, the only source for holding BOI in the VI was TCSPs carrying out CDD measures; reliance on this single approach raises effectiveness concerns due to shortcomings in CDD implementation by registered agents and supervision of TCSPs. - Private sector understanding of "beneficial ownership" varies significantly; in practice: - Identification primarily based on a 10 percent ownership threshold. - Information primarily collected through self-declaration forms for direct relationships or via professional business introducers. - Verification, when performed, is primarily focused on shareholder information (register of members) and structure charts; few collect other documents to establish alternative means of control. - Frequent reliance on professional business introducers and non-face-to-face interaction raises challenges for adequacy and accuracy of BOI. - AML/CFT framework requires updated CDD including BOI on a risk-sensitive basis: - Higher risk customers: updated on at least an annual basis. - Lower risk customers: updated within every four years. - Most TCSP representatives indicated they did not consider a large portion of their clients to be high risk. - March 2023 amendments now require companies and foreign companies to hold BOI themselves and to file any changes to BOI with the registered agent in 15 days: - This does not apply to other legal persons or legal arrangements. - There are no subsequent penalties that can be applied against companies for failing to do so. - The measure had not been effectively implemented at the time of the onsite visit; effectiveness could not be measured. - Competent authorities can request BOI directly from TCSPs and DNFBPs; authorities indicated they typically can get this information in a day or two, noting challenges identified in IO 6. - Competent authorities demonstrated capacity to furnish basic and BOI in a timely manner for international cooperation requests during the period under review. - The VI’s engagement in bilateral initiatives (FIN-NET, BOSSS, Register of Overseas Entities) has supported timeliness of providing BOI; authorities have not proactively sought international cooperation for BOI (see IO.2). - Limitations in adequacy and accuracy of BOI may impact quality of information shared. ### BOSSS, thresholds, and BOI systems - Under the BOSSS Act, registered agents are required to submit BOI for BVIBCs and LPs for input into BOSSS on an ongoing basis. - BOSSS is used primarily to facilitate international cooperation requests (primarily from the U.K. National Crime Agency) and is accessible to other authorities on request. - Under the BOSSS Act, registered agents are required to submit BOI defined with a 25 percent ownership threshold, which differs from AML/CFT CDD obligations that use a 10 percent threshold, resulting in two different thresholds applied within the country. - No competent authority is responsible for monitoring BOSSS or verifying information uploaded by registered agents. ### Beneficial ownership registry and planned regulations - BVIBCA contains provisions for establishing a beneficial ownership registry of persons of significant control through regulations. - Authorities have prepared draft regulations and report ongoing efforts to implement such a registry. ### Timely access to BOI on legal arrangements and supervisory use of returns - Express trusts and VISTA trusts are not required to be registered; administration is based on common law and the VISTA Act (for VISTA trusts). - Majority of express trusts and VISTA trusts are managed by licensed TCSPs required to hold information on trusts under AML/CFT law. - Information collected via annual fiduciary returns provides a source for authorities to identify trusts held by TCSPs and total value of trust assets managed. - Authorities did not adequately demonstrate how they leverage this information for prioritization and conduct of supervisory activities or to test TCSPs’ adequacy, accuracy, and currency of trust information (see IO.3). - The possibility of VISTAs owning BVIBC shares and PTCs operating as trustees can add layers to corporate structures, complicating adequacy and accuracy of BOI for these structures. ### Effectiveness, proportionality, and dissuasiveness of sanctions - (Section header present in source; substantive discussion on sanctions not included in the supplied excerpt.) *Source: IMF staff compilation from the provided content unit.* ### 569. While the Registrar has no direct powers available to take any action if information ### 1vgbea2024001 - 569. While the Registrar has no direct powers available to take any action if information ### Enforcement powers, penalties, and Registrar actions - The Registrar can apply to the Court for an Investigation Order if it appears that persons concerned with the incorporation, business, or affairs of a company, or any of its affiliates have acted fraudulently or dishonestly. No such orders have been applied for. - The Registrar of Corporate Affairs can impose penalties or strike a legal person from the Registry in some circumstances. - Some offences attract very nominal fees. Example: failure to file a copy of the register of directors with the Registrar within the prescribed timeframe for BVIBCs is a fee of US$100 (slightly higher fees for companies set up before 2017, with some escalation clauses). - Penalty imposition is automatic through the system; authorities provided statistics showing significant numbers of penalties issued in 2018 and 2019 (due to higher penalties applicable for existing companies when the new law came into place). - While the overall value of penalties has remained high, the average value of penalties is very low: only US $340 in 2022. - Tabled statistics (exact figures preserved): - Table 44. British Virgin Islands: Penalties Levied for Failure to File RODs - 2018 — No. of Penalties: 14,829; Penalty Value: $25,042,050; Average Penalty Value: $1,688 - 2019 — No. of Penalties: 6,314; Penalty Value: $9,148,735; Average Penalty Value: $1,448 - 2020 — No. of Penalties: 4,542; Penalty Value: $3,737,050; Average Penalty Value: $822 - 2021 — No. of Penalties: 4,461; Penalty Value: $2,543,300; Average Penalty Value: $570 - 2022 — No. of Penalties: 4,118; Penalty Value: $1,426,100; Average Penalty Value: $346 - TOTAL — No. of Penalties: 34,264; Penalty Value: $41,897,235; Average Penalty Value: $1,222 ### Striking off, dissolution, and restoration of legal persons - The Registrar has the power to strike BVIBCs and LPAs for reasons prescribed in law, including non-payment of annual fees (majority of entities struck off) or resignation of the registered agent. - Prior to January 2023, a company could remain struck off for seven years before being considered dissolved; this meant the company was immobilized and could not legally perform transactions. This has changed so a company is now considered dissolved from the date the Registrar publishes the notice of striking-off. - Under the old framework, a struck BVIBC could retain some legal personality (with restrictions) for another seven years. - Number of BVIBCs struck off remains high: - Table 46. British Virgin Islands: Number of BVIBCs Struck Off and Restored - Number of Companies Struck Off: - 2018: 61,261 - 2019: 54,709 - 2020: 48,861 - 2021: 38,522 - 2022: 32,609 - Number of Companies Restored: - 2018: 8,047 - 2019: 5,708 - 2020: 4,861 - 2021: 4,308 - 2022: 3,607 - Legal persons can be restored to the register within five years (previously seven years prior to January 2023). At restoration, a company’s registered agent must declare that the company’s records (both basic and beneficial ownership information) have been updated. - Restoration volumes: - Around 8,000 companies restored in 2018; 3,607 restored in 2022. - Table 45. British Virgin Islands: Legal Persons Struck from the Register (Agent Resigned) - 2018 — No. BVIBCs: 1,915; No. of LPs: 8 - 2019 — No. BVIBCs: 1,123; No. of LPs: 17 - 2020 — No. BVIBCs: 1,223; No. of LPs: 17 - 2021 — No. BVIBCs: 1,088; No. of LPs: 8 - 2022 — No. BVIBCs: 406; No. of LPs: 4 - TOTAL — No. BVIBCs: 5,755; No. of LPs: 54 ### Enforcement against TCSPs, FIA actions, and trust-related sanctions - The FSC can take enforcement action against its licensees (TSCPs) that fail to comply with obligations; however, enforcement actions against TCSPs are insufficient to date. - The FIA can impose sanctions for not providing information on basic and beneficial ownership in the context of a Section 4 Notice. Criminal penalties are available but none have been applied to date. - Between 2018–2022, the FIA took six enforcement actions resulting in six administrative fines on registered agents, each in range of US$10,000–12,000, with a total value of US$64,000, all between August and October 2022. - For legal arrangements (express or VISTA trusts), no registration requirements exist; available sanctions apply only against TCSPs licensed to provide trust services. Authorities did not distinguish enforcement actions taken by the FSC or FIA specifically related to trusts or trustee services. - No cases have been investigated by the RVIPF or prosecuted with respect to misuse of legal persons and arrangements or against TCSPs and other gatekeepers (e.g., lawyers, accountants) for failure to comply with basic and beneficial ownership information requirements. ### Assessment of sanctions effectiveness and IO.5 conclusion - Assessors note nominal fees for missing director information, lack of enforcement or penalties against TCSPs responsible for holding basic and beneficial ownership information, and absence of criminal actions against legal persons, arrangements, beneficial owners, or TCSPs. - Assessors are not convinced that implementation of sanctions to date has been effective, proportionate, or dissuasive. - Conclusions on IO.5: - The VI’s system for holding adequate, accurate, and up-to-date basic and beneficial ownership information depends on information collected by registered agents; shortcomings in CDD implementation by registered agents and limited supervisory capacity impact overall effectiveness. - Basic information is not easily accessible to the public and beneficial ownership information may not always be adequate, accurate, or up to date. - Authorities can respond to international cooperation requests in a timely manner and provide information (if available) but do not proactively seek information themselves. - Competent authorities and private sector representatives did not share a comprehensive understanding of risks of misuse of VI legal entities, including nominee arrangements, misuse of complex legal structures, and risks from reliance on professional business introducers; they could not demonstrate sufficient mitigation measures. - Authorities did not demonstrate that they impose effective, proportionate, or dissuasive sanctions against legal entities or registered agents; no investigations or prosecutions related to misuse of legal entities have been carried out to date. - The VI is rated as having a moderate level of effectiveness for IO.5. ### International cooperation — key findings - AGC generally provides MLA in a timely manner despite limited human resources; indirect findings suggest AGC facilitates information of good quality. - AGC received only one extradition request over the period under review, which was successfully completed. The VI did not submit requests for extradition or to identify and seize assets. - The VI did not submit MLA requests or other forms of international cooperation in relation to TF; consistent with overall low domestic TF risk. - Limited number of outgoing requests is not consistent with overall medium-high ML risk of the country; differing views on legal basis to prosecute activities of BVIBCs abroad may affect this. - Quality of other forms of international cooperation could only be assessed for FIA-AIU and FSC, whose assistance is generally regarded as good; GO, FIA-AIU, LEAs, and FSC provided cooperation in a timely manner to varying extents. - FIA-AIU sought other forms of international cooperation in very few instances; requests (except for corruption-related crimes) do not fully reflect the ML threats. - RVIPF-FCU engaged widely with key VI partners on multiple offences (including drug trafficking); HMC requested cooperation mainly on drug trafficking. - AGC, FSC, FIA, and ITA can furnish basic and beneficial ownership information promptly; VI engaged in initiatives aimed at obtaining beneficial ownership information (exchange of notes and the Register of Overseas Entities with the United Kingdom). - Basic and beneficial ownership information available for international cooperation is subject to limitations noted in IOs.3, 4, and 5, potentially impacting quality and usefulness. ### International cooperation — recommended actions - Actively seek international cooperation from other jurisdictions in keeping with the VI’s ML and TF risk profile. Increasing investigations of transnational crime should result in increasing requests for assistance. - AGC should increase its staff allocation to facilitate continuity of operations during disruptive events such as resignation of limited key personnel. - Enhance capacity of the RVIPF-FCU to provide other forms of international cooperation by providing additional human and technological resources. - Enhance adequacy and accuracy of beneficial ownership information exchanged with foreign counterparts and ensure it is kept up to date by addressing deficiencies found in IOs.3, 4, and 5. ### Mutual Legal Assistance (MLA) — activity, requests, and timeliness - Legal/institutional framework: VI has clear procedures to execute incoming MLA requests set out in the C(JI)CA, PCCA, ATO, DTOA, and MLA (USA) Act; AGC issued Guidance for the Standard Operating Procedures for Mutual Legal Assistance Requests in 2014. AGC does not have written guidance to assist foreign authorities on how to present MLA requests. - FSC released Handbook on International Co-operation and Information Exchange in 2007, last updated in 2013; highlights VI’s approach based on reciprocity and that execution of treaties is not necessary to provide assistance. - AGC reviews MLA requests, transmits them to executing agencies (FIA, RVIPF, High Court, VI Shipping Registry, or deals with the request itself), and submits responses to foreign authorities. - FIA-AIU investigating officers respond to MLA requests transmitted by AGC jointly with RVIPF FCU; they initiate investigations, request additional information, and send results to AGC. - MLA request volumes and composition (exact figures): - From 2018 to December 2022, AGC received 443 MLA requests from 69 countries. - The 443 requests related to 20 offences; countries submitted 527 requests across those offences. - ML — requested on 201 occasions (38.14 percent) - Fraud — requested 113 times (21.44 percent) - Tax evasion — 42 requests (7.97 percent) - Corruption — 29 requests (5.50 percent) - No MLA requests received in relation to TF during the period under review. - Types of assistance across a total of 696 requests handled by AGC: - 294 requests referred to obtaining company documents (42.24 percent) - 217 related to beneficial ownership information (31.18 percent) - 85 concerned banking documents (12.21 percent) - 100 focused on obtaining evidence, conducting interrogations, gathering immigration records, shipping registry information, searches, and executing restraint orders/confiscating assets (14.37 percent) - VI did not engage in repatriation or sharing of assets during the period. - Quality of information provided: - One jurisdiction indicated insufficient experience to draw conclusions on effectiveness; others did not provide relevant feedback. - AGC sought feedback by including a query in responses to MLA requests but did not receive observations on quality. - No records of follow-up requests from requesting countries seeking more comprehensive submissions from the VI. - Timeliness (exact figures preserved): - AGC average response time to requests: - 2018: 56 days on average - 2019: 68 days on average - 2020: 95 days on average - 2021: 157 days on average - 2022: 78 days on average - At report writing, only two MLA requests from 2022 were pending processing by AGC. - Agencies executing MLA requests generally contributed to timely assistance: sample of 25 requests (2019–2021) from 8 jurisdictions show FIA-AIU provided assistance in 13 days on several occasions and in 22 days on one occasion; in 7 instances authorities took 6 months; one exceptional 12-month response. - Staffing issues can impact timeliness: example — restraint order request received February 2019; AGC applied February 2020 (rejected); counsel resigned; new counsel assigned February 2021; order granted December 2021 — almost three years after initial request. *Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf* ### 596. The number of requests refused varied throughout the period under review. In 2018, ### 1vgbea2024001 - 596. ### MLA requests refused: volumes and reasons - Annual refusals: - 2018: 35 requests (34.65 percent) refused. - 2019: 44 requests (44.44 percent) refused. - 2020: 16 requests (23.53 percent) refused. - 2021: 17 requests (21.79 percent) refused. - 2022: 15 requests (15.46 percent) refused (the lowest number of refusals over the period). - Reasons for refusals included: - (i) the company sought was not registered in the VI; - (ii) there was no clear nexus between the evidence sought and the offence under investigation; - (iii) the information provided on the nature of the investigation for which evidence was required was insufficient; - (iv) insufficient information on the nexus between the persons or entities registered in the VI and the alleged offence; - and, in one instance, (v) the request did not come from a Central Authority. - Clarification on nexus requirement: - "A request would have to show some connection between the alleged crime and the company on which the request is focused. The connection between the company and the offence must be clearly stated and must not be apparent; it is understandable that the nexus presented is intricate, but it must not be apparent only." - Other observations: - Refusals were in line with VI legislation. - There were no indications in international cooperation feedback that countries received unreasonable refusals. - No requests were declined based on dual criminality requirements. - One jurisdiction noted the VI could not assist in non-conviction-based asset recovery cases as this is not in line with the fundamental principles of law of the country. ### AGC actions to reduce refusals and administrative measures - Proactive measures by the AGC: - Reached out to requesting foreign competent authorities by phone to explain non-compliance and how to correct requests. - Changed approach to MLA requests seeking financial information about a legal person without reference to a specific FI: shifted from treating them as "fishing expeditions" to reviewing corporate information to identify specific FIs and channel requests to relevant entities. - Administrative hold: - In 2020, the AGC imposed an administrative hold on MLA requests from one country due to that country's failure to assist in two matters that resulted in court proceedings against the Attorney General. - Consequence: no requests from this country are transmitted nor executed by the VI (measure consistent with the principle of reciprocity). ### Extradition: legal framework, requests, and timeliness - Legal framework: - Extradition Act 2003 (Overseas Territories) Order 2016 (the Extradition Order) and the VI Extradition Manual (issued in 2022) outline the process. - Extradition requests may be refused under sections 80 to 96A of the Extradition Act, but there were no such refusals during the period under review. - The Extradition Order and VI Extradition Manual facilitate provisional arrest for urgent requests. - Extradition is expedited if the requested person consents. - Extradition activity: - The VI received only one extradition request during the period under review; it was completed in 2023. - The request related to offences of conspiracy to launder money and conspiracy to conceal and smuggle money. - A provisional warrant was issued in relation to the one extradition request during the review period. - The person sought leave to appeal to the Judicial Committee of the Privy Council; leave was denied because the appeal did not raise an arguable point of law. - Timeliness: - The extradition process can take anywhere between a few months to several years depending on consent and court challenges; this is consistent with other jurisdictions in the region. ### Prioritization, staffing, training, and case management in AGC - Prioritization: - The AGC applied informal criteria to prioritize MLA and extradition requests (e.g., elapsed time between request date and receipt, matters presently before a court, risk of dissipation of funds). - No evidence that current informal practice caused problems in provision of MLA, though formal risk-based criteria are recommended as best practice. - Staffing: - AGC human resources for MLA and extradition: - One Crown Counsel dedicated to processing MLA requests, supported by a consultant. - An additional Crown Counsel and an administrative assistant support MLA processing. - One Senior Counsel deals with extradition requests, among other matters. - Risks: temporary unavailability due to resignations or other circumstances may generate delays. - Recruitment challenges: - Recruitment processes can take up to six or seven months. - Compensation is considered very low; several candidates declined offers because of low salary or found alternative employment. - Training: - AGC staff received training regarding MLA and extradition on two occasions during the period under review, both in 2022: - March 2022: "Mutual Legal Assistance and Extradition." - June 2022: "International Cooperation and Mutual Legal Assistance in Criminal Matters." - Case management systems: - Two electronic systems are used to record MLA requests; case management is mostly manual. - First system (Records Unit): manages documents, stores digital versions, securely sends to executing agencies; creates electronic cabinet for each request; Records Team provides weekly reports requesting status (pending, completed, ongoing, etc.). Dates are not set for follow-up in the system; Counsel sets own reminders. - Second system: used to enter data from requests and conduct data queries; used to track processing stages manually. - No evidence that a more automated case management system is necessary currently, but incorporation would be beneficial if incoming/outgoing request volumes increase. ### Outgoing MLA, extradition, and asset recovery requests (2018–2022) - VI sought MLA on two occasions between 2018 and 2022: - 2018: successful request to a key international partner seeking information on whereabouts of an individual in a murder investigation. - 2020: request to foreign authorities seeking banking and court records related to an investigation regarding suspected sanctions breaches under the DPRK (Sanctions) Overseas Territories) Order 2012; request was granted and results were received in August 2022. - Neither request included identifying and seizing assets. - Observations on alignment with ML/TF risk: - The limited number and nature of outgoing requests are not consistent with the overall medium-high ML risk of the territory. - The 2020 Financial Services Risk Assessment and the 2022 MLRA indicate significant exposure to proceeds of predicate offences committed abroad and potential abuse of legal persons and arrangements established or registered in or from within the territory to launder proceeds generated in foreign jurisdictions. - The paucity of requests may indicate transnational ML investigations are not a priority and a lack of appreciation of how the financial services sector could be misused. - Terrorist financing (TF): - Lack of MLA requests relative to TF is broadly consistent with the overall low domestic TF risk of the territory. - The VI Financial Services Sector Terrorist Financing Risk Assessment 2020 found abuse of companies registered in the VI to facilitate TF was an important risk; however, the FIA and the RVIPF did not identify cases in this regard over the period under review. - Extradition and asset identification/seizure: - The VI did not submit requests for extradition or to identify and seize assets between 2018 and 2022. ### Other forms of international cooperation for AML/CFT purposes - General observation: - Low volume of requests for other forms of international cooperation apart from MLA is not consistent with the territory's risk profile. - FIA-AIU and LEAs seldom exchange financial intelligence, law enforcement, or other information for AML/CFT purposes, likely due to low operational priority for transnational cases and lack of appreciation of risks posed by international activities of BVIBCs. ### FIA-AIU international cooperation activity (2018–2022) - Outgoing requests: - FIA-AIU submitted 73 requests for international cooperation to 33 FIUs through the ESW between 2018 and 2022. - Most active year: 2022, when the FIA submitted 21 requests. - Most requests directed to three jurisdictions (two of which are key international partners), totaling 30 outgoing requests; the other 30 countries received fewer than 6 requests individually. - Feedback and spontaneous disclosures: - International cooperation feedback received from 16 jurisdictions demonstrated a modest number of requests from the VI. - Two responding jurisdictions noted the FIA did not provide its views on the usefulness of spontaneously-provided information on some occasions. - FIA-AIU received 349 spontaneous disclosures from 29 counterparts during the period; one jurisdiction submitted 211 (60.46 percent) of these disclosures and another 39 (11.17 percent). - Remaining jurisdictions submitted 16 or fewer disclosures (less than 5 percent) individually. - These spontaneous disclosures did not result in any dissemination to domestic law enforcement. - The volume of spontaneous disclosures (349) outnumbers outgoing requests (73), indicating limited FIA proactivity in seeking international cooperation. - Offences sought: - The FIA-AIU sought assistance concerning 11 offences; requests typically referred to more than one offence, totaling 97 offence-references: - 46 requests referred to ML; - 13 to misappropriation; - 11 to fraud; - 10 to corruption; - 9 to bribery. - Other offences (one to two requests each): drug trafficking, organized crime, bulk cash smuggling, counterfeiting, terrorism, TF, and scams. - Ancillary requests: seven requests for background information, three related to TFS, two to high cash transactions, one concerned immigration status. - Observation: types of crime for which the FIA-AIU sought information are not fully aligned with understood ML threats (drug trafficking, smuggling, and domestic corruption). ### LEAs, RVIPF-FCU, HMC, and supervisory international cooperation - RVIPF-FCU: - Submitted 18 requests for assistance to foreign police forces during the period: - Four in 2020; - 10 in 2021; - Others in 2022. - Most requests sent to two neighbouring jurisdictions to obtain intelligence concerning suspects not in the VI; these requests triggered MLA submissions. - Engages in informal cooperation and daily police-to-police communication with international key partners focusing on migrant smuggling, human trafficking, drug smuggling, ML, cash smuggling, commodity smuggling, proliferation and transportation of firearms, and border protection and security. - Communication methods: email and voice/message systems; lead LEA identified depending on urgency and location. - Case examples (2021–2022): international support led to apprehensions, drug and firearms seizures, initiation of parallel financial investigations, and prosecutions ongoing at time of report. - Participation in a foreign task force meeting every four to six months for intelligence sharing on drug trafficking, human trafficking, ML, proliferation, and illegal trafficking of firearms. - Access to foreign intelligence networks (including the 5-Eyes Community) via the GO for TF-related intelligence; the FCU did not use this resource for TF investigations during the review period. - RVIPF sought cooperation from a key partner to investigate potential links between a drug-trafficking/ML scheme and a terrorist organization; information obtained did not confirm involvement. - HMC: - Member of the Caribbean Customs Law Enforcement Council (CCLEC). - Requested assistance from CCLEC partners on four occasions between 2019 (three requests) and 2021 (one request); two requests resulted in discovery of drugs in vessels; others were vessel information queries. - Beyond CCLEC, HMC submitted 26 other requests between 2018 and 2022 to various foreign authorities on vessels/persons of interest, large undeclared cash transportation, and support in apprehension of individuals/vessels suspected of drug trafficking and human smuggling. - Submitted 31 requests specifically to foreign LEAs; occasionally these were relevant for LEAs in other countries. - Supervisors: - FSC made 151 requests for information from counterparts between 2018 and 2022. - FSC engaged regularly in supervisory colleges with regional counterparts and supervisors with branches/subsidiaries operating in the VI, exchanging supervisory information including AML/CFT. - FIA-SEU (DNFBP and NPO supervisor) did not seek cooperation from foreign competent authorities nor receive requests for assistance during the period; FIA indicated no situations requiring international cooperation were identified. *Source: 1vgbea2024001 - 596.* ### 627. The FIA receives RFIs from foreign FIUs via the ESW. The FIA received 1,314 requests for ### 1vgbea2024001 - 627. The FIA receives RFIs from foreign FIUs via the ESW. The FIA received 1,314 requests for ### International cooperation via FIUs, ESW, and INTERPOL - The FIA received 1,314 requests for assistance from foreign FIUs in the period 2018–2022; from these requests, 42 were related to TF. - The FIA-AIU received 247 indirect requests from INTERPOL (via the RVIPF) from 2018 to 2022; all these requests were executed and information disseminated to the RVIPF for onward transmission. - The FIA-AIU furnished high-quality international cooperation for AML/CFT intelligence-sharing purposes, subject to timeliness issues. - In September 2022, the FIA submitted International Feedback Forms via the ESW; of 13 respondent FIUs: - 12 indicated they were satisfied with assistance received; - 11 said the information received was timely and relevant; - 8 indicated the information received was new to them; - 7 expressed that the information provided new subjects or leads. - The FIA made 100 spontaneous disclosures to 37 countries between 2018 and 2022: - 27 disclosures were sent to 1 key international partner; - 5 countries received between 5–9 disclosures; - 32 countries received between 1–4 disclosures. ### Timeliness of responses and feedback - Of the 1,314 requests received from foreign FIUs: - 795 (60.50 percent) were completed in 1 to 15 days; - 217 (16.51 percent) were completed in 16 to 24 days; - 223 (16.97 percent) were completed in 25 to 49 days; - 60 (4.57 percent) were completed in 50 to 99 days; - 19 (1.45 percent) were completed in 100 to 300 days. - International cooperation feedback on timeliness was mixed: - 5 jurisdictions considered responses timely; - 6 jurisdictions reported delays: (i) completed after several months, (ii) often following reminders, or (iii) several requests still pending at time of feedback. - FIA identified causes of delays: need for further information or clarification (e.g., entity not registered in the VI or unclear nexus to the investigation), prompting the FIA to revert to the requesting country. ### Content and subject-matter of disseminations - Disseminations covered multiple offences/circumstances; counts of referred offence types (over the period under review): - 88 references to 7 offences overall; - 56 references to "other circumstances"; - 24 referred to fraud; - 20 referred to tax crimes; - 16 referred to ML; - 16 referred to TF; - 8 referred to corruption; - 2 referred to embezzlement and child abuse linked to VAs; - 35 referred to breaches with respect to TF/PF-sanctioned individuals; - 18 referred to international sanctions; - 3 referred to gambling with VAs; - 9 other disseminations related to VAs. ### Cooperation arrangement on designated persons and follow-up - June 2022: FIA entered an informal arrangement with the FIU of a key international partner to periodically notify that partner about persons designated who had interest in VI companies when identified. - Arrangement requires FIUs of both countries to perform internal checks and, if assets are located within their jurisdiction, take active steps to freeze them. - July 2022: FIA provided first set of information containing: - (i) name of the relevant BVIBCs; - (ii) the company's registration number; - (iii) names of individuals or entities with ownership interest (including beneficial owners) subject to UN and unilateral designations of which FIA was aware; - (iv) the status of the company. - By report writing, FIA had not received confirmation of receipt or feedback and redirected resources elsewhere. ### Law enforcement agencies (RVIPF, HMC) — informal and formal cooperation - RVIPF-FCU handles police-to-police international cooperation requests relating to financial crime; other RVIPF units handle non-financial-crime requests. - RVIPF developed informal processes with six Caribbean jurisdictions and three other-region jurisdictions to facilitate police-to-police sharing; informal results sometimes formed basis for formal requests. - The VI received 102 informal requests via RVIPF-FCU during the review period; these were typically completed and returned within 14 working days and focused on company information, criminal record checks, identification information, tax evasion, ML, human trafficking, arms trafficking, counterfeit currency, and contact information for third parties. - RVIPF participates in quarterly International Intelligence Managers Meetings involving multiple Caribbean and U.S. agencies to encourage intelligence sharing. - RVIPF recognizes need to formalize arrangements via MoUs to strengthen intelligence-sharing practices. - RVIPF resources for INTERPOL requests are very limited: the INTERPOL Sub-Bureau annexed to National Central Bureau Manchester in the VI consisted of one computer managed by one RVIPF officer with other duties; access to INTERPOL databases was down for a substantial period between July 2021 and November 2022 and some information was deleted during reinstatement. - International feedback from one East Asian police agency: only 1 out of 8 requests submitted to RVIPF via INTERPOL during the review period received a response (six in 2019, three in 2020, one in 2021, one in 2022); RVIPF can only identify three requests from this agency in the period (two from 2019 and one from 2020). ### Her Majesty’s Customs (HMC) international assistance - HMC received 12 requests for assistance between 2018 and 2022: 3 from CCLEC members and the remainder from one key partner. - Typical request topics: (i) vessels and cargo suspected of being involved in drug trafficking; (ii) identification and other information about migrants; (iii) movement of persons of interest; (iv) transportation of large sums of cash; (v) chasing of vessels. - Assistance was provided the same day in almost all instances; on one occasion it was provided in 15 days. - Under CCLEC arrangements, HMC maintains working relationships with French, Dutch, and British OTs; joint operations, training missions, K-9 Unit deployments, and use of the Regional Clearance System led to significant seizures and successful investigations. - Example operation (September 2022): HMC received information from Grenada about a vessel enroute to the VI carrying suspected narcotics; coordinated action with JTF, U.S. agencies, RVIPF Marines resulted in interception ~23 miles east of Virgin Gorda, recovery of four bales of suspected cocaine, and detention of three individuals; vessel and personnel taken to the USVI for further investigations. ### Supervisors — FSC and other supervisory cooperation - FSC received 656 requests from foreign competent authorities between 2018 and June 2022: - responded to 607; - refused 19; - 32 were still being processed at time of writing. - These requests referred to: - beneficial ownership of legal persons 175 times; - basic information on legal persons 134 times; - fit and proper details 154 times; - financial or trading information 98 times; - other types of assistance 70 times. - Of the 32 outstanding requests: 1 pending from 2018, 4 from 2019, 10 from 2020, 11 from 2021, and 6 up to June 2022. - One key international partner submitted 221 requests (33.43 percent) to the FSC; 14 other countries submitted 269 requests (40.70 percent) collectively; remaining requests from 79 countries sporadically. - Reasons for refusal of 19 requests: not submitted by a competent authority or requester did not respond to requests for further information. - FSC received 298 international cooperation requests from IOSCO members between 2018 and 2022; response time for these requests was 20.5 days on average throughout the period under review. - FSC received 203 requests related to criminal matters via FIN-NET between 2018 to 2020, and 14 requests for 2021 to June 2022; the decrease reflects a recording change in 2021. ### AGC and exchange of basic and beneficial ownership information - For MLA requests related to legal persons, AGC can access VIRRGIN to verify whether the entity is a VI company but cannot retrieve directors and shareholders information; AGC transmits requests to the FIA, which requests information from registered agents (provided in about two weeks), or AGC requests from the Registrar of Corporate Affairs. - AGC received 294 requests for basic information and 217 requests concerning beneficial ownership between 2018 and 2022. ### FSC international cooperation case examples (selected) - Case 1: Foreign regulatory authority urgently requested due diligence information on a former VI licensee; FSC provided licensing details and cessation circumstances within 48 hours. - Case 2: Foreign authority investigating a suspected pump-and-dump scheme requested corporate and beneficial ownership information for a VI nominee company and information from its liquidator within 48 hours; FSC issued a section 32 notice and obtained the information within the requested timeframe, enabling the foreign authority to proceed. - Case 3: Foreign authority investigating unregistered financial services and investor complaints requested corporate and beneficial ownership information for a VI company suspected of involvement with Company Z; FSC required registered agents to produce documents which were provided within four days; subsequent follow-up requests for three connected VI companies were processed and information shared. *Source: 1vgbea2024001 - Excerpt on international cooperation and information exchange (paragraphs 627–652).* ### 653. In a small number of cases, requests for information received via FIN-NET referred to a ### International cooperation and beneficial ownership information (IO.2) ### Timeliness and responsiveness of the Financial Services Commission (FSC) - FSC internal service standard: respond to all international requests within 21 days. - Performance: - Goal met on average in 2019 and 2021. - In 2018 and 2020, responses required around one month. - Reasons for responses taking more than 21 days: - (i) the volume of information requested was high; - (ii) the information requested was complex; - (iii) the data had to be produced under a notice; - (iv) the need for the recipient of a notice to obtain information and data from third parties outside the VI. - Registered agents’ response times to FSC notices: - Until 2019: seven days. - In most cases since 2019: further reduced to between 24 and 48 hours. - Extensions granted when registered agents show they are acting expeditiously; in very complex cases a second extension may be allowed. - Administrative challenges and case examples: - In 2022, two VI law firms acting for seven registered agents questioned reasonableness and proportionality of notices; discussions with the requesting authority and law firms led to extensive information being obtained. - FSC obtained basic and beneficial ownership information within 48 hours in urgent cases (case examples referenced). ### Support for U.K. Register of Overseas Entities - FSC provided HMRC with information on 7,413 VI companies that owned real property in England and Wales to assist U.K. registration obligations (Register of Overseas Entities; declaration deadline February 2023). - FSC arranged videoconferences with HMRC, U.K. Companies House, and GO to facilitate the process. ### Financial Intelligence Unit—AIU (FIA-AIU) international cooperation and BOSSS usage - FIA-AIU processed 1,314 requests for information between 2018 and 2022, of which 426 requests were related to basic and beneficial ownership information. - BOSSS Act, 2017: - Establishes the BOSSS to hold registered agents' information and obligates them to collect and identify their beneficial owners. - A designated LEA listed in Schedule 2 may request a search; currently, the NCA of the United Kingdom is the only foreign agency listed. - FIA responses via BOSSS (2018–2022): - FIA used BOSSS to respond to 544 international requests from the NCA for beneficial ownership information. - No requests were refused or are pending. - Ninety-two of these requests originated from the U.K. FIU and were routed by the NCA. - BOSSS response-time standards and practice: - Statutory response requirement: within 15 days, unless urgent. - Urgent requests require response within one hour; none were received between 2018 to 2022. - International BOSSS requests typically take three days to respond. - Exchange of notes process for beneficial ownership: very expedited, typical response time of 2–3 days and many being answered within 24 hours. - Identified implementation gap: - Lack of supervisory controls to ensure registered agents keep BOSSS information accurate and updated, potentially impacting information quality. ### Inland Revenue Department (ITA) international information exchange - ITA received (between 2018 and June 2022): - 668 requests for basic information and 782 for beneficial ownership information of legal persons = 1,450 requests total. - For legal arrangements: 24 requests for basic information and 24 for beneficial ownership information. - ITA outcomes for legal person requests: - Responded to 1,154 requests (79.86 percent). - Did not provide information in relation to 281 requests. - 4 requests still pending. - Reasons for not providing information included: - (i) the entity name did not exist in the VI; - (ii) the requesting jurisdiction was placed on administrative hold; - (iii) cases related to Mossack Fonseca Companies, and the information was no longer available; - (iv) the relevance standard was not met; - (v) the registered agent failed to comply with the notice to produce information. - Additional execution issues: - Five requests were withdrawn by the foreign requesting competent authority. - 58 requests could not be executed because the information requested related to years prior to which beneficial ownership information was required to be kept onshore (taxable periods prior to 2012; related companies had long been struck off). - Usefulness and feedback: - ITA shared six sample cases where information was useful to (i) recover taxes, (ii) impose administrative penalties, (iii) identify tax liability, and (iv) arrive at the right tax outcome. - One case indicated violations of ML legislation in the requesting country, but requesting countries have not used the information to investigate or prosecute ML or predicate offences. - International cooperation feedback from six countries confirmed VI provided valuable beneficial ownership information for investigative and tax purposes. - Timeliness against EOIR standards: - EOIR standard: respond in full within 90 days of acknowledgement; provide status updates if unable to respond in full within that period. - 2018 data: responses were provided to 178 requests (84.76 percent) over periods longer than 90 days and, in several cases, beyond a year. - 2021: responses given to 86 requests (63.24 percent) within the target timeframe. - January to June 2022: 33 requests (80.49 percent) successfully addressed within 90 days. ### Other international cooperation feedback and statistics - One international partner: its anti-fraud agency made over 30 beneficial ownership requests in the past 4 years; VI proactively shared sanctions-related beneficial ownership information supporting freezing of assets under non-UN regimes. - Another country: sent 289 requests for legal assistance in criminal cases through INTERPOL channels and received 137 responses which included company registration and beneficial ownership information; three successful cooperation cases within investigations. ### Quality and limitations of basic and beneficial ownership information - Assessment team did not receive broad feedback from countries regarding quality; FSC cited at least one instance where foreign regulator found provided information helpful in pressing criminal charges. - Findings in IOs.4 and 5 indicate deficiencies in implementing beneficial ownership requirements that could affect quality of shared information: - FIs and DNFBPs generally failed to collect enough information to determine if beneficial owners control assets through means other than ownership. - Reliance of TCSPs on professional business introducers for CDD and record-keeping with limited safeguards did not ensure accuracy and timeliness of beneficial ownership information. - BOSSS Register limitation: needs personnel responsible for monitoring accuracy of information. - Assessment team conclusion: - Sufficient information indicates beneficial ownership information provided by the VI may not be accurate, complete, and valuable for international cooperation purposes in all instances. ### Overall conclusions on IO.2 - Provision of international cooperation by the VI is generally timely and prioritized through formal and informal channels. - Quantity of cooperation is limited for most competent authorities; AGC, FIA, and the FSC demonstrated capacity to provide assistance of good quality. - Competent authorities seek MLA and other forms of international cooperation to a negligible extent, not in line with the ML risk profile; TF cooperation aligns broadly with VI’s TF risk profile. - Resource limitations in many competent authorities have potential to hamper international cooperation (examples recorded by AGC and RVIPF-FCU). - Deficiencies under IOs.5, 3, and 4 regarding understanding and implementation of beneficial ownership obligations, and availability/accuracy of basic beneficial information, may negatively impact effectiveness of international cooperation; jurisdictions with whom information was shared did not cite this as an issue. - Final assessment: The VI is rated as having a moderate level of effectiveness for IO.2. *Source: 1vgbea2024001 - 653.* ### 26.1 impact full compliance with some criterion under R.1. ### 26.1 impact full compliance with some criterion under R.1. ### Recommendation 2—National Co-operation and Co-ordination - Overall rating: Recommendation 2 is rated compliant. - Background: The VI was rated compliant on national cooperation (former R.31) in its Third Round MER. - Criterion 2.1 (Met) - The VI has a National AML/CFT Policy and a National AML/CFT Strategy informed by the NRA and periodically reviewed by the NAMLCC. - Approved by the VI Cabinet: the 2021 National AML/CFT Policy and the National AML/CFT Strategy for 2021–23 take into account risks identified in the 2016 NRA. - NAMLCC responsible for reviewing compliance, suggesting modifications, and periodic review. - February 2023 policy statement: NAMLCC committed to updating the national AML/CFT policy and strategy at least every two years. - Criterion 2.2 (Met) - NAMLCC is statutorily established as the main national coordinating body on AML/CFT issues (PCCA, Section 26B(2)). - NAMLCC responsible for developing and coordinating AML/CFT policies informed by risks across sectors (NAMLCC Rules of Procedure, paragraph 3.1(b)). - Criterion 2.3 (Met) - Multiple mechanisms for cooperation, coordination, and information sharing at policymaking and operational levels: NAMLCC, IGC, JALTFAC, CCA, CLEA. - NAMLCC is focal point for national policy coordination and guidance. - MoU for information sharing established in 2014 among IGC members. - Some mechanisms extend membership to private sector stakeholders (e.g., JALTFAC). - Criterion 2.4 (Met) - Cooperation and coordination mechanisms apply to combating financing of proliferation of WMD; covered under National Policy and National Strategy. - Criterion 2.5 (Met) - Under the DPA of 2021, the Information Commissioner is tasked to monitor compliance by public bodies with the Act and provide advice (Section 26(a) and (b)). - Personal data processed/disclosed for prevention or detection of crime or investigation is exempted from key DPA provisions (Sections 19 and 22). - Weighting and conclusion - VI has National AML/CFT Policy and Strategy informed by 2016 NRA; authorities committed to updating at least every two years. - NAMLCC is main coordinating body; various mechanisms enable inter-agency cooperation at policy and operational levels, including private sector stakeholders. - DPA provides mechanism for Information Commission to monitor compliance and advise relevant authorities. ### Recommendation 3—Money Laundering Offence - Overall rating: Recommendation 3 is rated largely compliant. - Background: In the Third Round MER, R.3 incorporated Rs.1 and 2, both rated “LC” for the VI. Main shortfalls previously: market manipulation and insider trading not criminalized; some scheduled chemicals not banned per Vienna Convention; low number of ML convictions. - Criterion 3.1 (Met) - ML criminalization framework: revised PCCA and DTOA. - Key statutory difference: PCCA links ML to laundering the PCC (indictable offences); DTOA links laundering to drug trafficking offences as predicate offences. - DTOA section 35 fully implements Article 3(1)(b) and (c) of the Vienna Convention. - DTOA section 33 includes two mental elements: (i) knowing that the transaction facilitates acquisition, retention, use, or control of proceeds, and (ii) knowing that the other person involved carries on or has carried on drug trafficking or has benefitted from those offences. - Palermo Convention: VI laws fully address Article 6(1); PCCA sections 29 and 30 consistent; Criminal Code section 19(1) covers aiding and abetting, counselling, enabling; conspiracy sections 345-349; attempt section 350. - Criterion 3.2 (Met) - ML offence applies to all offences (section 2(5)(d) PCCA). - Table 1 lists FATF designated offences and relevant domestic legislation (selected entries included below). - Participation in an organised criminal group and racketeering — Section 20 of the Criminal Code - Terrorism including Terrorism Financing — Sections 3 and 4 of Terrorism (United Nations Measures) (Overseas Territories) Order 2001; Sections 6 to 8 of Anti-Terrorism (Financial and Other Measures) (Overseas Territories) Order 2002; Sections 5 to 8 of the Counter-Terrorism Act, 2021 - Trafficking in human beings and migrant smuggling — Section 214 and 215 of the Criminal Code - Sexual exploitation, including sexual exploitation of children — Section 214 of the Criminal Code - Illicit trafficking in narcotic drugs and psychotropic substances — Sections 5 to 7 of the Drugs (Prevention of Misuse) Act - Illicit arm trafficking — Section 3 of the Firearms Importation Prohibition Proclamation 1967 (SO 18/1967) - Trafficking in stolen and other goods — Section 242 of the Criminal Code - Corruption and Bribery — Section 79 to 103 of the criminal code - Fraud — Parts 14 & 15 of the Criminal Code, Section 93 of the Criminal Code - Counterfeiting currency — Section 250(1)©, sections 263 to 275 of the Criminal Code - Counterfeiting and piracy of products — Section 45 of the Criminal Code - Environmental crime — Part X of the Fisheries Act 1997 - Murder, grievous bodily harm — Sections 148 and 163 of the Criminal Code - Kidnapping, illegal restraint and hostage-taking — Section 207 to 212 of the Criminal Code - Robbery and theft — Sections 224 and 225 of the Criminal Code - Smuggling — Sections 43 to 45 of the Customs Management and Duties Act, 2010 and 78 of the Criminal Code - Tax crimes — Section 236A of Criminal Code - Extortion — Section 240 of the Criminal Code - Forgery — Section 248 to 262 of the Criminal Code - Piracy — Section 21 of the 1956 Copyright Act (UK) extended to the Territory no. 2185 of 1962. Copyright (VI) Order 1962. - Insider Trading, & Market Manipulation — Sections 88 and 91 of Securities and Investment Business Act, 2010 - Criterion 3.3 (Not applicable) - VI does not apply a threshold approach or a combined approach that includes a threshold approach. - Criterion 3.4 (Met) - PCCA: ML offence (sections 28 to 30) extends to any property, whether in whole or in part, directly or indirectly, represents the PCC. - Definition of property includes money and all other property, real or personal, including things in action, VAs, and other intangible or incorporeal property. No limitation on value. - Similar provisions under DTOA (sections 33 to 35). - Criterion 3.5 (Met) - Sections 28 to 30 PCCA and 33 to 35 DTOA do not require conviction of a predicate offence to convict for ML. - Criterion 3.6 (Met) - PCCA: “criminal conduct” includes conduct that would constitute an offence if it had occurred in the Territory (covers extraterritorial conduct implicitly). - DTOA references drug-related criminal activities “whether in the Territory or elsewhere.” - Law does not expressly exclude proceeds of conduct that is not an offence under the domestic law of the State where it is committed, as required by the conventions. - Criterion 3.7 (Met) - Self-laundering covered: section 29(1)(a) PCCA and section 34(1)(a) DTOA. - Criterion 3.8 (Met) - R v. Anwoir [2008] EWCA Crim 1354 establishes intention in ML can be inferred from objective factual circumstances. - Criterion 3.9 (Partially Met) - March 21, 2023 amendments to DTOA and PCCA addressed some inconsistencies in penalties. - Table of criminal sanctions (selected entries, exact figures preserved): - PCCA Failing to comply with Code of Practice — 27(4) — $200,000 (admin penalty) — $150,000 — 3 years - PCCA Assisting and facilitating the laundering by another person — 28 (1) and (8) — $250,000 2 years — $500,000 — 14 years 10 years - DTOA Assisting and facilitating the laundering by another person — 33 (1) and (9) — $300,000 or 3x the value of the drugs — 7 years No less than 3 years — $600,000 or 3 times the value of the drugs — 15 years No less than 5 years - PCCA Acquisition, possession or use of criminal proceeds (self-laundering) — 29 (1) and (11) — $250,000 2 years — $500,000 14 years — $750,000 - DTOA Acquisition, possession or use of criminal proceeds (self-laundering) — 34 (1) and (11) — $500,000 or 3 times the value of the drugs — 5 years — $1,000,000 or 3 times the value of the drugs — 15 years - PCCA Concealing, disguising, converting or transferring — 30 (1) and (4) — $250,000 2 years — $500,000 — 10 years - DTOA Concealing, disguising, converting or transferring — 35 (1) and (6) — $300,000 — 7 years No less than 3 years — $600,000 — 15 years No less than 5 years - PCCA Failure to disclose a suspicious transaction — 30 (1) and (10) — $150,000 3 years — $500,000 5 years - DTOA Failure to disclose a suspicious transaction — 36 (1) and (10) — $150,000 3 years — $500,000 5 years - PCCA Tipping-off — 31 (1) and (9) — $250,000 2 years — $500,000 5 years - DTOA Tipping-off — 37 (1) and (8) — $50,000 5 years — $100,000 15 years - PCCA Prejudicing an investigation — 34B (2) and (5) — $50,000 3 years — $10,000 5 years - Note: "Text underlined and in blue reflects amendments made in 2023." - Observed shortcoming: Significant differences in penalties for drug trafficking-related ML versus laundering from other serious predicate offences. - Two parallel regimes imply a de facto obligation to prove exact nature of the predicate offence to determine applicable regime. - Maximum imprisonment for non-drug trafficking-related ML (two to three years on summary conviction) are inadequate for organized crime/international ML. - Palermo Convention defines a serious crime as punishable by more than four years imprisonment; VI prosecutes non-drug related ML on summary conviction and does not consider it a serious offence. - Criterion 3.10 (Met) - Criminal liability and sanctions apply to legal persons (section 36(1) Interpretation Act defines person to include a body corporate). - Parallel civil or administrative penalties can be applied; managing officer may also be subject to administrative sanctions (Sect. 57 (2) AMLTFCOP, Sect. 27(5) PPCA). - Administrative sanctions appear proportionate and dissuasive (see R.35). - Criterion 3.11 (Met) - DTOA: offence of assisting another to retain benefit of drug trafficking; section 28: assisting another to retain benefit of criminal conduct. - Criminal Code section 19(1) covers ancillary offences of aiding and abetting, counselling, enabling (facilitating); conspiracy sections 345-349; attempt section 350; section 21 deals with counselling; section 351(1) establishes inciting offence. - Weighting and conclusion - Definition of ML offence consistent with Vienna and Palermo Conventions. - VI adopted an “all offences” approach; all FATF-listed offences covered. - Definition of assets aligns with Conventions and Recommendations. - Shortcoming: penalties for drug trafficking-related ML differ significantly from penalties for ML relating to other predicate offences; two parallel inconsistent regimes weaken the sanction framework. - To the extent all ML crimes are generally prosecuted on summary conviction, penalties cannot be considered proportionate and dissuasive. Shortcoming considered moderate/minor. ### Recommendation 4—Confiscation and Provisional Measures - Overall: In the Third Round Mutual Evaluation, the VI was rated compliant with R.3 on its Confiscation framework. - Legal framework: PCCA, DTOA, Anti-Terrorism (Financial and Other Measures) (Overseas Territories) Order, 2002 (AT(FOM)(OT)O), and Terrorism (United Nations Measures) (Overseas Territories) Order (T(UNM)(OT)O) establish tracing, investigatory, confiscatory, and freezing measures and procedures for dealing with and disposing of confiscated property. - Criterion 4.1 (Met) - Section 34A PCCA and section 50 DTOA allow confiscation of real property, conveyances, and any article, money, or valuable consideration related to the offence (including proceeds of crime and property laundered). - Section 6 PCCA and section 5 DTOA allow confiscation based on a person’s benefit from relevant criminal conduct and drug trafficking offences (including proceeds and income). Sections 34A PCCA and 50 DTOA deal with confiscation of instrumentalities. - Section 76 (1) CTA allows Judge or Magistrate to order forfeiture to the Crown if court satisfied property is terrorist property. - Section 2 CTA: terrorist property includes property owned or controlled by a designated terrorist entity; property used in, intended, or allocated for use in financing of terrorism or terrorist acts; proceeds of acts for purposes of terrorist act; any property derived from such property. - Article 15 of AT(FOM)(OT)O addresses forfeiture of property used or intended to be used in financing of terrorism, terrorist acts or terrorist organisations. - Confiscation of property of corresponding value possible via combined application of Section 6, 17, and 19 of PCCA and 5, 18, and 21 of DTOA. - Court issues a Confiscation Order to pay amount assessed (Sect. 5 (4) DTOA and 6(3) PCCA); amount may be recovered through realisation of any property held by defendant, which may be subject to a restraint order (Sect. 17 PCCA and 18 DTOA). - Court may appoint a receiver to recover amount determined by confiscation order on any realisable property (Sect.19 PCCA and 21 DTOA). - Limitation: Court may not issue a confiscation order of an amount greater than the property identified as “realizable” at time of prosecution (Sect.6 (8) PCCA and Sect. 10 (3) DTOA). - Criterion 4.2 (Largely met) - a) Investigative powers - Section 36 PCCA and 40 DTOA give RVIPF and FIA ability to apply for production order in ML/drug ML or confiscation investigations. - Section 37 PCCA and 41 DTOA allow application for warrant to enter and search premises in ML/drug ML or confiscation investigations. - Confiscation investigation defined in section 34B(1)(a) PCCA and 37(1)(a) DTOA. - Section 9(1) T(UNM)(OT)O gives Governor authority to request any information for ensuring compliance or detecting evasion. - Article 17 and Schedule 4 AT(FOM)(OT)O allow police officer to apply for an account monitoring order for terrorist investigation, tracing terrorist property, and to enhance effectiveness of investigation. - PCCA Amendment, 2023 and DTOA Amendment, 2023 (entered into force March 21, 2023) granted power to apply for an account monitoring order in ML and drug-related ML cases. - b) Restraint orders and seizure - Section 17 PCCA and section 18 DTOA: prosecutor may apply for restraint order preventing dealing with any realisable property that is or may become subject to confiscation or is suspected of being proceeds of crime. - Sections 5 and 6 AT(FOM)(OT)O allow High Court to make restraint orders prohibiting dealing with property for which a forfeiture order has been or could be made. - Section 7(1) Schedule 2 AT(FOM)(OT)O allows constable to seize property subject to a restraint order to prevent removal from territory. - Application for a restraint order may be made ex parte (Section 17 (4)(b) PCCA). - c) Voidance of prejudicial actions - Laws do not provide measures to void actions that can prejudice the country’s ability to freeze, seize, or recover property subject to confiscation. - Restraint order applies to all realizable property held by any specified person (including a third party) even after transfer post-issue of the order. - d) Investigative authorities and powers - Police Act: RVIPF conducts criminal investigations. - PCCA and DTOA allow RVIPF and FIA to conduct ML/drug ML and confiscation investigations. - RVIPF and FIA have powers to require information via production orders and to search and seize via search warrants. - T(UNM)(OT)O gives Governor authority to direct any person to furnish information. - Article 17 and Schedule 4 AT(FOM)(OT)O allow police officer to apply for account monitoring order for terrorist investigations/tracing terrorist property. - Section 21(e) Police Act: police officers may stop, search, and detain aircraft, vessel, boat, vehicle, cart, or carriage suspected of stolen/unlawfully obtained or smuggled goods; and any person reasonably suspected of having/conveying stolen/unlawfully obtained or smuggled goods. - Section 90 Telecommunications Act: Governor may make written requests and issue orders to telecommunications networks and providers to intercept communications for law enforcement purposes. - Criterion 4.3 (Met) - Section 34A (3) PCCA and 50 (3) DTOA prevent Court from ordering property forfeiture unless person claiming to be owner or otherwise interested has been given opportunity to show cause. - Section 17(4) PCCA requires restraint order to provide for notice to persons affected; subsection (6) allows any person affected to apply to discharge or vary the order. *Source: 1vgbea2024001 - 26.1 impact full compliance with some criterion under R.1.* ### Section 15(7) of the AT(FOM)(OT)O requires the court to give a person other than the convicted ### 1vgbea2024001 - Section 15(7) of the AT(FOM)(OT)O requires the court to give a person other than the convicted ### Forfeiture, restraint and rights to be heard - Section 15(7) of the AT(FOM)(OT)O requires the court to give a person other than the convicted person that claims to be the owner or otherwise interested in anything which can be forfeited by an order an opportunity to be heard before making a forfeiture order. - Paragraph 6(2) of Schedule 2 of the AT(FOM)(OT)O gives affected persons the ability to make an application before the Court for the discharge or variation of a restraint order. - Paragraph 9 of Schedule 3 of the AT(FOM)(OT)O allows a person who claims ownership of the whole or part of an amount of terrorist cash which was seized, and in respect of which a forfeiture order was made, to apply to the magistrate’s court for the cash or such part of the cash to be released. ### Receivership and management of realizable property - Criterion 4.4 (Met)—Under section 17(7) of the PCCA, the High Court may appoint a receiver to take possession of any realizable property and to manage or otherwise deal with the property for which he or she is appointed, in accordance with the court’s directions, where a restraint order is issued. - The court’s directions may allow the receiver to sell or dispose of frozen or seized property prior to the making of a final confiscation order. - Sections 19 (3) and (4) of the PCCA allow the Court, where a confiscation order is made, to appoint a receiver to enforce any charge imposed on realisable property or on interest or dividends payable in respect of such property, subject to conditions or exceptions specified by the Court. - Section 7(2) of Schedule 2 of the AT(FOM)(OT)O requires property seized to be dealt with in accordance with the High Court’s directions. ### Asset Seizure and Forfeiture Act 2020 (ASA) and ASFMC - The Asset Seizure and Forfeiture Act 2020 (ASA) establishes an ASFMC with the aim to manage seized or restrained property, to manage and dispose of forfeited assets, and to share the proceeds of the disposition of such assets with the LEAs which participated in the investigations (Sect. 3). - Assets are placed under the control of the Committee on the application made by the Attorney General for a Management Order to the Court. - The Committee has the power to sell or destroy any seized asset even before it is forfeited. - There is no indication as to whether this Committee is operational. ### Weighting, conclusions and outstanding gap - The VI laws generally comply with the requirements of the standards, save and except for: - the power to void contracts (absence noted), and - the limitation on some investigative powers available to the police. - A minor shortcoming: absence of a legal mechanism to void fraudulently established transfers or conversion of assets. - Recommendation 4 is rated largely compliant. ### Recommendation 5 — Terrorist Financing Offence (overview) - VI was largely compliant during the Third Round MER; remaining deficiency was inability to assess effectiveness in absence of investigations and convictions for TF. - Amendments and enactments since last MER: Criminal Code amended in 2013, 2014, and 2021 and CTA enacted in 2021. - February 2016: FATF amended R.5 to require countries to criminalize the financing of travel for terrorist purposes. ### Recommendation 5 — Legal framework and coverage - Criterion 5.1 (Met)—VI criminalizes TF in sec. 8 of the CTA. Where CTA does not cover specific elements, authorities can rely on the OIC related to TF issued by the United Kingdom: AT(FOM)(OT)O and T(UNM)(OT)O. - Offenses provided across instruments include: - prohibition on making property, or financial or related services, available to a designated terrorist entity (sec. 10 of the CTA); - fund-raising (art. 6 of the AT(FOM)(OT)O); - funding arrangements (art. 8 of the AT(FOM)(OT)O); - the collection of funds with a terrorist purpose (art. 3 of the T(UNM)(OT)O); - making funds available (art. 4 of the T(UNM)(OT)O); - contravening a freezing of funds notice (art. 5(9) of the T(UNM)(OT)O). - Definitions of “economic resources”, “funds”, “property”, and “terrorist property” align across CTA, AT(FOM)(OT)O, and T(UNM)(OT)O as referenced in the provisions cited. ### Recommendation 5 — Specific criteria findings - Criterion 5.2 (Met)—TF in sec. 8 of the CTA extends to any person who willfully provides or collects funds by any means, directly or indirectly, with unlawful intention or knowledge relating to terrorist acts; definitions align with FATF definition (secs. 2, 8(1) and (3), and 10 of the TCA; art. 6 of the AT(FOM)(OT)O; and arts. 3 and 4 of the T(UNM)(OT)O). - Criterion 5.2bis (Met)—TF offences include financing travel for terrorist purposes (sec. 8(c) of the CTA). - Criterion 5.3 (Met)—TF offence extends to funds from a legitimate or illegitimate source (sec. 2 of the CTA, arts. 3 and 5 of the AT(FOM)(OT)O and art. 2 of the T(UNM)(OT)O). - Criterion 5.4 (Met)—Offence does not require funds/assets be used to carry out or be linked to a specific terrorist act (sec. 8(3)(a) and (b) of the CTA). - Criterion 5.5 (Met)—Intent can be inferred from objective factual circumstances based on Common Law practice (R v. Anwoir and others [2008] EWCA Crim 1354). - Criterion 5.6 (Met)—Sanctions: - summary conviction: imprisonment not exceeding 10 years, or fine not exceeding US$500,000, or both; - conviction on indictment: imprisonment not exceeding 20 years or fine not exceeding US$1,000,000, or both (sec. 8(2) of the CTA). - Penalties compared to other offences: examples of imprisonment maxima cited (14 years for several serious offences; life for genocide, murder, etc.) and references to relevant Criminal Code and PCCA sections. - Criterion 5.7 (Met)—“Person” includes corporations and unincorporated bodies; fines of US$500,000 (summary) or US$1,000,000 (indictment) apply to legal persons (sec. 36 of the Interpretation Act (Cap. 136)). No provisions preclude parallel proceedings against legal persons. - Criterion 5.8 (Met)—Attempt, accomplice, organizer/director, and group contribution liability covered in sec. 8(1A) of the CTA. - Criterion 5.9 (Met)—TF is a designated ML predicate offence (secs. 5 and 28-30 of the PCCA). - Criterion 5.10 (Met)—TF offence applies irrespective of geographic location of alleged offender or location of terrorist acts (sec. 8(3) of the CTA). - Weighting and Conclusion: Recommendation 5 is rated compliant. ### Recommendation 6 — Targeted Financial Sanctions (TFS) related to TF (overview) - Third Round MER: VI rated Compliant on SR.III with no deficiencies noted. - TFS regime sources: CTA, Sanctions Guidelines (Updated March 2023), Procedures for Addressing Possible Financial Sanctions Breaches and Freezing and Unfreezing of Assets, and implementation through U.K. regulatory framework. - Relevant UNSCRs implemented include UNSCRs 1267 (1999) (and successors) and 1373 (CTA, Schedule 5). - U.K.’s Sanctions and AML Act 2018 empowers Ministers to issue regulations; U.K. Regulations are extended to the VI via Overseas Territories Orders having direct legal effect in the VI. - Relevant U.K. regulations and their Overseas Territories Orders cited (Afghanistan (Sanctions) (EU Exit) Regulations 2020; ISIL (Da’esh) and Al-Qaida (UN Sanctions) (EU Exit) Regulations 2019; and Overseas Territories Orders listed). ### Recommendation 6 — Identifying and designating (summary of criteria) - Criterion 6.1 (Mostly met): - a) (Met)—Governor identified as competent authority to propose listing, in coordination with FIA, FSC, and FCDO (CTA, Schedule 4 and Sanctions Guidelines, arts. 150 and 153). Governor submits proposals through FCDO. - b) (Partly met)—No domestic law or OIC-defined mechanism for detecting/identifying targets; CTA requires reasonable suspicion/belief but no procedure. Sanctions Guidelines require DIA form post-identification. As of March 2023, RVIPF is only agency with SOPs for identifying persons (RVIPF sanction Designation Policy). - c) (Met)—Evidentiary standard of reasonableness applied (CTA Schedule 4, section 11(2)). No requirement for existing criminal proceeding. - d) (Met)—Governor required to follow UNSC Committee procedures and standard forms (CTA Schedule 4, section 11(3)(a)). - e) (Met)—Governor required to provide as much relevant identifying information as possible and specify whether status as designating state may be made known (CTA Schedule 4, section 11(3)(b) and 11(3)(d)). - Criterion 6.2 (Mostly met): - a) (Met)—VI can designate persons/entities under UNSCR 1373 on its own motion and via request from another country; CTA empowers Governor (sections 38(1) and 40(1)) and allows final designation on request (section 40(5)). CT(S)(OT)O also empowers Governor for asset freezes (sections 5(1) and (2)). - b) (Partly met)—No mechanism/process in law or OICs for detection/identification under UNSCR 1373; only DIA form post-identification and RVIPF SOPs as of March 2023. - c) (Partly met)—Sanctions Guidelines describe GO determination procedure (sections 195–199) but no timeframe stipulated. - d) (Met)—Evidentiary standard of reasonableness applied under CTA sections 38(1) and 40(1); no prerequisite of criminal proceedings. - e) (Met)—Same DIA form used for requesting other countries to give effect; form requires identifying information and evidence. - Criterion 6.3 (Met): - a) (Met)—CTA allows Governor to collect or solicit information for identifying entities (sections 38(4) and 40(2)). - b) (Met)—CTA (Schedule 4, section 11(4)) and Terrorist Freezing Act 2010 (Schedule 2, section 3) allow Governor to operate ex parte against an identified entity while proposal is considered. ### Recommendation 6 — Freezing, reporting, and de-listing - Criterion 6.4 (Met)—Designations by UNSC take immediate effect in the U.K. and by extension the VI (PFPA, section 8(1)); obligations to freeze and report triggered upon UN designation. - Criterion 6.5 (Partly met): - a) (Partly met)—Domestic framework requires freezing without delay when a person “knows or has reason to suspect” that a designated entity is dealing with funds/resources (CTA Schedule 4, section 2(1)); OICs contain prohibitions but no affirmative freeze obligation; the mens rea of knowingly or recklessly narrows prohibitions compared to the standard. - b) (Met)—Obligation to freeze extends to all types of economic resources (CTA Schedule 4, section 2(1)); no requirement for tie to a terrorist act. - c) (Partly met)—Neither domestic nor U.K. framework contains sufficiently broad prohibition on making funds/assets available to designated persons; prohibitions conditioned on knowledge or reason to suspect (Schedule 4, sections 2–6). - d) (Mostly met)—National AML/CFT Strategy requires publication of notices of designation within 24 hours. Supervisory authorities (FSC and FIA) must immediately communicate designations; FIA and FSC maintain publicly available updated lists (CTA section 12(3)) and publish new designations on websites within six hours of OFSI notice (generally within 24 hours of UN notification). GO publishes in VI Gazette (weekly) but amended procedures to publish extraordinary gazette when received. Guidance to FIs and DNFBPs provided; no clear guidance to other persons holding targeted funds/assets. - e) (Met)—CTA requires FIs and DNFBPs to report to the Governor any actions taken and any attempted transactions (Schedule 4, section 13(5)). - f) (Met)—Protections for bona fide third parties: good faith freezing or withholding shields from liability unless negligence proven (CTA Schedule 4, section 2(5)). - Criterion 6.6 (Mostly met)—De-listing procedures: - a) (Mostly met)—VI has procedures for petitioning the Governor for de-listing; Governor has no self-initiated de-listing procedure. Sanctions Guidelines Chapter 10 describes petition procedure to submit de-listing to relevant UN sanctions committee and related actions once delisting occurs (sections 163, 205, 224). Procedures for Addressing Possible Financial Sanctions Breaches and Freezing and Unfreezing of Assets describe supervisors’ dissemination actions. - b) (Mostly met)—A less prescriptive procedure exists for requesting de-listing under UNSCR... *Source: 1vgbea2024001 - Section 15(7) of the AT(FOM)(OT)O requires the court to give a person other than the convicted* ### 1373. Section 165 of the Sanctions Guidelines permits a designated person (or someone ### 1vgbea2024001 - 1373. Section 165 of the Sanctions Guidelines permits a designated person (or someone ### De-listing, unfreezing, and appeals - Section 165 of the Sanctions Guidelines permits a designated person (or someone acting on their behalf) to submit a petition for de-listing to the Governor. - Where the Governor agrees with the delisting request, he may confer with the Secretary of State in determining whether to revoke the designation. - No procedure exists for the Governor to propose a de-listing of his own accord. - Section 224 of the Sanctions Guidelines lays out the procedure for un-freezing the assets of a de-listed person/entity. - The Procedures for Addressing Possible Financial Sanctions Breaches and Freezing and Unfreezing of Assets describes actions supervisors must take to disseminate de-listing and un-freezing notices related to designations under the CTA. - For designations under UNSCR 1373: - The CTA allows a designated person or entity to make an appeal to the court of any decision to make or vary an interim or a final designation, renewal of a final designation, or variation of a designation (Schedule 4, section 20(2)). - If a petition for delisting under the Sanctions Guideline is declined, the designated person may appeal such decision to the Supreme Court (section 217). ### Procedures related to UN review and Ombudsperson - The CTA authorizes the Governor to develop procedures to facilitate a review by the 1988 Committee of designations made under UNSCR 1988 (Schedule 4, sections 11(5) and (6)(c)); captured in Sanctions Guidelines sections 204 and 205. - The CTA authorizes the Governor to develop procedures to inform designated terrorist entities on the Al-Qaida Sanctions List of the availability of the United Nations Office of the Ombudsman, pursuant to UNSCRs 1904, 1989, and 2083 (Schedule 4, sections 11(5) and (6)(d)). - Sanctions Guidelines explain that requests to challenge or remove a designation from the ISIL (Da’esh) and Al-Qaida Sanctions List can be submitted directly to the UN Office of the Ombudsperson to the ISIL (Da’esh) & Al-Qaida (1267/1989/2253/2368) Sanctions Committee (section 207). ### False positives and supervisory communications - Sections 218–221 of the Sanctions Guidelines set out the procedure for addressing false positives: - First recourse: contact the institution instituting the asset freeze with supporting documentation. - If unresolved, bring the matter to the FIA. - The FIA will determine whether the person/entity correctly matches the designated person/entity and instruct the relevant institution accordingly. - If the FIA is unable to determine, it will inform the GO, which will liaise with the FCO (if the claim has merit) to request an authoritative finding; upon receipt the FIA informs the institution and person/entity of results. - The FIA and FSC are required to communicate de-listings and unfreezing to supervised institutions through an appropriate medium (CTA, Schedule 4, section 12(2)), but only “as soon as is reasonably practicable.” - In practice, the FIA and FSC issue alerts expeditiously, usually within a matter of hours and generally within 24 hours of the de-listing by the U.N. - As required by the CTA (Schedule 4, section 12(3)), the FIA and FSC maintain a publicly available and updated list of all designated terrorist entities and entities that have been de-listed. - Guidance on unfreezing assets is in the Procedures for Addressing Possible Financial Sanctions Breaches and Freezing and Unfreezing of Assets. ### Licensing and exemptions (TFS related to TF) - Overseas Territories Orders relating to Afghanistan and ISIL and Al-Qaida allow the Governor to grant licenses to permit access to frozen funds/assets for: - basic needs (for a designated person or their family member(s)); - legal fees and disbursements; - fees and service charges for routine holding or maintenance of frozen funds or economic resources; - to satisfy prior court judgments or arbitration decisions against a designated person or entity; - to satisfy prior contractual obligation of the designated person; - to enable an extraordinary expense of a designated person to be met (Schedule 2, section 3–5). - Domestic framework contains only limited exceptions (e.g., crediting a frozen account with interest or other earnings due) (Schedule 4, section 8) and an authorization for the Governor to issue general licenses (Schedule 4, section 9). - For designations under UNSCR 1373, article 19A of the CT(S)(OT)O contains general language on exemptions but is not sufficiently detailed to ensure UNSCR 1452 requirements are met. - Weighting and conclusion for TF TFS: - The VI has minor shortcomings in the legal and regulatory framework governing implementation of TFS relating to TF. - Shortcomings include: no mechanisms/processes for identification of targets for designations; no procedures for prompt determination whether designation criteria for UNSCR 1373 have been met; some prohibitions require knowledge or recklessness; no procedures for Governor to initiate de-listing of his/her own accord. - Recommendation 6 is rated largely compliant. ### TFS related to Proliferation (Recommendation 7) — legal framework and implementation - U.K. regulations relevant to UNSCR 1718 (2006) and 2231 (2015): - DPRK (Sanctions) (EU Exit) Regulations 2019 (DPRKR) - Iran (Sanctions) (Nuclear) (EU Exit) Regulations 2019 (ISNR) - Extended to the VI by Overseas Orders: The DPRK (Sanctions) (Overseas Territories) Order 2020 (DPRKR Order) and the Iran (Sanctions) (Nuclear) (Overseas Territories) Order 2020 (Iran Order). - Domestic primary legislation: PFPA and CTA; PFPA allows UNSCRs and Committees to take immediate effect; CTA governs TFS for TF and extends to PF. - Criterion 7.1 (Met): - Pursuant to section 8(1), designation by the UNSC or its Committee under UNSCR applies in the VI with immediate effect from the date of designation and imposes prohibitions. - Criterion 7.2 (Partly met): - Governor is competent authority to implement PF TFS under national law and relevant OICs; PFPA grants Governor authority to designate (section 9). - FIA identified as competent authority for enforcement (Part V). - Section 5A of DPRKR and ISNR give Governor authority to implement orders, including asset freezes. - Specific findings: - a) (Partly met)—Domestic framework and OICs prohibit dealing with assets of or related to a designated person, with “dealing with” defined broadly; prohibition takes immediate effect (section 8(1)(b)) but applies only where person has knowledge or reasonable suspicion (Schedule 4, section 2(1) CTA, section 15 PFPA, Section 13 DPRKR and 12 ISNR) or is acting recklessly (section 15 PFPA), making prohibition narrower than the standard. - b) (Met)—Prohibitions apply to assets owned, controlled, or held directly or indirectly, wholly or jointly, on behalf of or at direction of a designated person (PFPA section 15, DPRKR section 13, ISNR section 12). - c) (Partly met)—PFPA and OICs lack sufficiently broad prohibition on making funds/assets available to designated persons; mens rea of knowingly or recklessly narrows scope; no offense where person lacked knowledge or reason to suspect. - d) (Mostly met)—Section 13 PFPA requires the Governor to, without delay, notify FIs, DNFBPs, FIA, FSC, Attorney General, tax authority, with required content; CTA defines “without delay” as not exceeding 24 hours; FIA and FSC communicate designations generally within hours of update. - e) (Mostly met)—FIs and DNFBPs required to report to competent authorities possible PF offenses or related funds, but reporting on compliance actions taken is not sufficiently robust; PFPA requires reporting of holdings or attempted transactions and separate reporting when amounts exceed US$10,000 (section 37(1)(a)); U.K. framework requires institutions to inform Treasury as soon as practically possible when they know or suspect a customer is designated but not reporting of attempted transactions or compliance actions. - f) (Met)—Bona fide third parties protected: PFPA section 68 precludes civil/criminal liability for actions done in good faith. - Criterion 7.3 (Met): - Under PFPA, FIA is tasked with enforcement (section 38); functions include monitoring PF risks, issuing guidance, requesting information, entering premises, conducting onsite inspections (sections 39–41). - Contraventions punishable by warning or civil penalty not to exceed US$100,000 unless approved by a court (sections 45–47); penalties not applied where FIA satisfied that person took all reasonable steps and due diligence (section 47(2)). - Criterion 7.4 (Met): - a) (Met)—Procedures for petitioning Governor to submit delisting request under UNSCR 1730 are in Chapter 10 of VI Sanctions Guidelines. - b) (Met)—A person/entity whose asset has been frozen may apply to Governor to unfreeze (PFPA, section 61); if Governor satisfied applicant is not designated and funds not associated with PF, Governor shall direct unfreeze and return funds and notify relevant holders (section 61(2)–(3)). Sections 128–130 Sanctions Guidelines address false positives. - c) (Met)—Exemptions in line with UNSCRs 1718 and 2231 are provided in PFPA sections 54 and 55; procedure in Chapter 6 of Sanctions Guidelines with “Model Licence Application Form (Asset Freeze)”. - d) (Mostly met)—Primary communication of updates/de-listings is via alerts linked to OFSI updates and FIA/FSC websites; de-listing notices published on FIA/FSC websites within six hours of OFSI publication; both FIA and FSC provide links to OFSI consolidated list and issue alerts when de-listings occur. No other mechanisms beyond website publication developed; unclear whether outreach/guidance to non-FI/DNFBP holders of targeted assets has occurred. - Criterion 7.5 (Met)—Contracts/obligations prior to designation: - a) (Met)—Exemptions permit frozen accounts to be credited with interest or other earnings if payments are also frozen (PFPA section 16(4); DPRKR regulation 81(3); ISNR 37(4)). - b) (Met)—Domestic and U.K. frameworks permit payments under pre-existing contracts where payment is not for the benefit of a designated person; PFPA section 54(2)(g) authorizes such payments with conditions; U.K. regulations allow transfer to discharge obligations that arose before designation (DPRKR regulation 81(5); ISNR 37(5)). - Weighting and conclusion for PF TFS: - VI has minor shortcomings: no mechanisms/processes for identification of designation targets; prohibitions in some instances require knowledge or recklessness; reporting of actual and attempted transactions required only when exceeding US$10,000; PFPA does not define “without delay.” - Recommendation 7 is rated largely compliant. ### Non-profit organisations (Recommendation 8) — overview and deficiencies - Background: In Third Round MER the VI was rated Partially Compliant on SR.VIII due to lack of assessment of NPO laws/regulations, lack of supervisory program to identify AML/CFT non-compliance in NPOs, absence of periodic assessments of sector vulnerabilities to TF, and no outreach to educate sector on TF risks. - Criterion 8.1 (not met): - a) (Not met)—VI has not identified the relevant subset of entities within the FATF standard (those primarily engaging in raising and disbursing funds) or the features and types of NPOs likely at risk of TF abuse. - Authorities view all NPOs formed in the VI as falling within the FATF definition. - NPO Act defines an NPO as “body of persons whether incorporated or unincorporated, established solely or primarily for the promotion of charitable, religious, cultural, educational, social or fraternal purposes [...] and which raises or disburses funds in pursuance of its objectives.” - Among registered NPOs, those whose primary purpose is to raise or disburse funds have not been identified. - 2020 national TF RA included the NPO sector but appears based primarily on international TF typologies without identifying specific TF threats/vulnerabilities in the VI NPO sector. - Example: TF RA notes proportion of NPOs sending or soliciting funds exceeding US$10,000 annually but does not indicate how this leads to heightened TF risk or whether large donations/grants exceeding US$10,000 have been linked to TF threat. - b) (Not met)—VI has not identified nature of threats posed by terrorist entities to the subset of at-risk NPOs. - 2020 TF RA highlighted general typologies (e.g., sham NPOs, deception) but recognized these typologies have not been seen in the VI. - Risk assessment described general TF threats (use of funds for recruitment, training, facilitation) without correlating relevance to the jurisdiction using country-specific information. *Source: 1vgbea2024001 - 1373.* ### Conclusions appear to be primarily based on whether international typologies have been ### Conclusions appear to be primarily based on whether international typologies have been ### Review of NPO measures and legal framework - The adequacy of measures, laws, and regulations concerning the NPO sector were reviewed during the 2016 NRA exercise. - The NRA concluded that sections 4 and 5 of the AMLTFCOP should be reviewed to reduce the compliance burden on smaller NPOs that are not at a high risk of ML/TF. - The NRA recommended that the NPO Act be reviewed to reduce the burdens that have prevented most NPOs from being able to register with the NPO Board. - Following this review, the NPO Act was amended in October 2022. - The VI does not periodically reassess the NPO sector to identify potential vulnerabilities to TF or to ensure the effectiveness of mitigation measures. - The NPO sector was covered in the 2020 TF RA, but it has not been reassessed for TF risk. ### Sustained outreach concerning terrorist financing issues (Criterion 8.2) - a) (Met) - Policies to promote accountability, integrity, and public confidence in the administration and management of NPOs are contained in Schedule 1 of the AMLTFCOP (on Best Practices for Charities and Other Associations Not for Profit). - Schedule 1 outlines guiding principles, including on the transparent and accountable use of funds and management and oversight of operations. - The NPO Act tasks the FIA with conducting outreach to NPOs with the dual objectives of raising awareness of ML and TF risks and to promote transparency, accountability, integrity and public confidence in the administration and management of organizations (section 18). - b) (Mostly met) - The FIA is tasked with conducting outreach to NPOs to raise awareness of TF risks (NPO Act, section 18). - Until recently, outreach covered AML/CFT obligations generally and appeared to be more focused on CDD obligations and did not appear to have meaningful coverage of TF risks and mitigation measures. - In early 2023, the FIA held a webinar on TF and issued a guidance note on TF risks for NPOs. - c) (Not met) - The FIA works with NPOs to develop and refine best practices through the context of the FIA’s supervisory activities; however, aside from advising NPOs of general TF risks, FIA guidance does not appear to be focused on TF mitigation. - The FIA has not yet identified the specific TF threats facing VI NPOs and the specific TF vulnerabilities present in the sector, and no best practices in this area have yet been developed. - d) (Met) - NPOs are encouraged to conduct transactions through regulated financial channels where possible. - The Best Practices for NPOs in Schedule 1 of the AMLTFCOP recommends that NPOs maintain registered bank accounts to keep funds and use formal channels for transferring funds locally or oversees and performing other financial transactions to the extent feasible and necessary (para. C(a)(iii)). ### Targeted risk-based supervision or monitoring of NPOs (Criterion 8.3) - Criterion 8.3 (Not met) - The VI has not yet identified the relevant subset of NPOs under the FATF standard; therefore the FIA’s supervision cannot be said to be focused on NPOs at risk of TF abuse. - In accordance with the FIAA, the FIA may supervise any NPO where it is satisfied that the NPO presents a ML, TF, or PF risk. - The VI has taken steps to promote effective supervision and monitoring of NPOs, but not in the context of TF; supervisory resources are also directed at detecting and mitigating against ML and other illicit activity, such as fraud. - The FIA has not developed an inspection plan to guide its supervisory activities; its supervision is not yet fully in line with an RBA. - All registered NPOs fall within the FIA’s supervisory remit; the FIA conducts an institutional risk assessment of all NPOs to determine their risk profile. - Individual risk assessments include: type of NPO and nature operations, management structure, whether any foreign activities are undertaken, involvement of PEPs, adequacy of AML/CFT controls, types, and volumes of transactions, whether the NPO deals in large amounts of cash, and the organization’s approach to compliance. - These assessments support an NPO’s risk rating, which would not necessarily reflect its exposure to TF. - Where the FIA determines that an NPO has a high-risk rating, the FIA reviews the NPO's compliance manual and undertakes a comprehensive desk-based review; based on results, the FIA will determine whether an onsite inspection is warranted. - In practice, the FIA’s supervisory activities have not been entirely guided by the risk matrix; not all NPOs rated as high-risk have been subject to a full inspection. - The VI has not demonstrated that supervisory measures are truly risk-based or are targeting NPOs at risk of TF. ### Monitoring compliance and sanctions (Criterion 8.4) - Criterion 8.4 (Partly met) - a) (Not met) - While the FIA is responsible for monitoring the compliance of NPOs with relevant legislation, the activities undertaken by the FIA do not incorporate risk-based monitoring of NPO compliance within the scope of R.8. - Risk-based measures cannot be said to be applied to the subset of NPOs at risk for TF, as this subset has not yet been identified (as discussed under 8.3). - b) (Met) - Competent authorities in the VI are able to apply effective, proportionate, and dissuasive sanctions for violations by NPOs or persons acting on behalf of NPOs. *Source: 1vgbea2024001 - Conclusions appear to be primarily based on whether international typologies have been* ### section 25(1) of the NPO Act, the FIA may impose an administrative penalty on a person who ### 1vgbea2024001 - section 25(1) of the NPO Act, the FIA may impose an administrative penalty on a person who ### NPO enforcement powers and sanctions - Under section 25(1) of the NPO Act, the FIA may impose an administrative penalty on a person who fails to comply with the requirements of the NPO Act. - Penalty ranges: - US$1,000 and US$20,000 depending on the type of infraction. - Section 27 of the NPO Act allows the FIA to consider varying factors in determining a proportionate penalty (examples: nature and seriousness of the contravention and any prior contraventions). - De-registration: - Pursuant to section 15(1) of the NPO Act, the NPO Board may de-register an NPO where it has contravened any provision of this Act or the relevant legislation. - FIAA enforcement: - Pursuant to section 5I of the FIAA, the FIA has the power to issue a directive to ensure compliance or remedy a contravention by an NPO of the FIAA or any other enactment relating to ML, TF, or PF. - Section 5J of the FIAA allows the FIA to take enforcement action against NPOs in the form of warnings; recommendations to the government to suspend, revoke, or withdraw the NPOs registration; or the imposition of administrative penalty as prescribed, or where not prescribed, up to US$75,000. ### Effective information gathering and investigation (Criterion 8.5) - Overall rating: Criterion 8.5 (Met) - a) Cooperation and information-sharing: - Both the NPO Board and the FIA are members of the IGC and party to the MoU on information sharing. - The FIA is periodically invited to NPO Board meetings to provide updates and discuss matters. - b) FIA investigative capabilities: - The FIA has investigative expertise and capabilities to examine NPOs suspected of being exploited by or actively supporting terrorist activity or organizations. - FIA investigating officers have the power to investigate when NPOs are suspected; substantiated suspicions are disseminated to the RVIPF or other relevant LEAs for further action. - To date, no such investigations have been warranted. - c) Access to NPO administration and management information: - FIA may initiate an inquiry and compel production of information or records necessary to discharge its functions (NPO Act, sections 20(1)–(2)). - Pursuant to section 5 of the FIAA, the FIA has power to request documents and information and apply for search warrants. - d) Information-sharing mechanisms for suspected TF activity: - If the FIA reasonably believes there is a risk of TF activities by or through an NPO, it may initiate an inquiry (NPO Act, section 20) and share information via the IGC MoU for preventive or investigative action. - The FIAA permits the FIA to disclose information to any LEA in the VI and to other institutions in the VI for purposes of detecting, preventing, or facilitating investigation of an offence (section 5A(1)(b)). ### Effective capacity to respond to international requests (Criterion 8.6) - Overall rating: Criterion 8.6 (Met) - For international requests for information on NPOs suspected of TF or involvement in other forms of terrorist support, the Attorney General is the point of contact in accordance with section 8 of the C(JI)CA and pursuant to section 4 of the MLA(USA) Act. ### Weighting and conclusion on NPO supervision (Recommendation 8) - Identified shortcomings: - The VI has major shortcomings in its approach to and regulation and supervision of NPOs. - The VI has not identified the subset of NPOs that are at risk for TF, nor the main TF threats posed to NPOs formed in the jurisdiction—this is a fundamental requirement of R.8. - Failure to identify at-risk NPO subsets and TF threats bears a substantial negative impact on FIA’s supervision and calls into question whether FIA supervisory activities are risk based and relevant to CFT. - Outreach promoting accountability and integrity exists but is not focused on TF as required by R.8. - Information sharing, cooperation, and coordination among relevant bodies appears good but mechanisms have not been tested; no NPO investigations have been warranted to date. - FIA appears to have necessary investigative capacity. - Recommendation 8 is rated non-compliant. ### Summary of selected Recommendations and key thresholds/requirements - Recommendation 9—Financial Institution Secrecy Laws - Criterion 9.1 (Met): No financial secrecy laws in the VI; information can be obtained by LEAs through court order. FIA and FSC have powers to require FIs to provide documents and information (FIAA, s. 4(2)(d) and 5D; FSCA, ss. 30 and 32). DPA exemptions permit processing personal data for prevention or detection of crime (DPA, s. 22(2)(a)(i)). Recommendation 9 is rated compliant. - Recommendation 10—Customer Due Diligence (CDD) - Deficiency: scope of FIs excludes some foreign exchange traders (minor negative impact). - Criterion 10.2 (Mostly met): CDD required when: - establishing a business relationship; - one-off transaction involving funds of US$15,000 or above (or lower threshold set by FI); - wire transfer one-off transaction involving funds of US$1,000 or above (or lower threshold set by FI); - suspicion of ML, TF, or PF, irrespective of exemptions or thresholds; - FI has doubts about veracity/adequacy of previously obtained customer identification data. - Timing of verification: FIs must verify identity before or during establishing relationship; verification after establishment permitted to avoid business disruption but must be completed as soon as reasonably practicable (AMLTFCOP, s. 23(1)(b); s. 23(2)(a) and (c)). - Failure to complete CDD: FIs must not open account, establish relationship, or must terminate relationship if unable to carry out required CDD (AMLTFCOP, s. 23(2C)). - Recommendation 10 is rated largely compliant. - Recommendation 11—Record Keeping - Record retention: FIs required to maintain transaction and CDD records for five years from completion of transactions or following termination of business relationship (AMLTFCOP, s. 45(1) and (2); Regulations 9(1)(a) and 10(1); AMLR Regulations 8 and 10(1)). - Internal SARs and supporting documentation must be retained for at least five years from date internal reports were made (AMLTFCOP, s. 45(1)(c) and (d)). - Records must be easily retrievable and promptly provided when requested (AMLTFCOP, s. 42(2); Regulation 11(1)). - Recommendation 11 is rated largely compliant. - Recommendation 12—Politically Exposed Persons (PEPs) - AMLTFCOP defines PEPs and requires risk-based policies/processes for identifying PEPs (s. 2(1); s. 22(1)). - For foreign PEPs, FIs must: obtain senior management approval to establish/maintain relationship; take reasonable measures to establish source of funds and source of wealth; ensure enhanced ongoing monitoring (s. 22(1A)(a)–(c)). - Measures apply to domestic and international organization PEPs when higher risk is determined (s. 22(1B)). - For life insurance, reasonable measures no later than at payout to determine whether beneficiary/beneficial owner is a PEP and inform senior management (s. 22(4)). - Recommendation 12 is rated largely compliant. - Recommendation 13—Correspondent Banking - Requirements for correspondent banking relationships include CDD and, where necessary, EDD on respondent bank; assessment of reputation/regulation/enforcement history; senior management approval before entering new CBR; ensuring AML/CFT measures of each party are understood and recorded (AMLTFCOP, ss. 34–36). - Prohibition on relationships with shell banks and respondent banks servicing shell banks (AMLTFCOP, s. 34(1)(a); s. 35(1)(a)). - Recommendation 13 is rated compliant. - Recommendation 14—Money or Value Transfer Services (MVTS) - Criterion 14.1 (Mostly met): Any person carrying on MSB is required to be licensed (s.7(2) FMSA). The FMSA definition of MSB (s.6) does not include transfer/transmission of other stores of value beside money. - Criterion 14.2 (Partly met): Some indications FSC seeks to identify unlicensed MVTS; no reports of identified unauthorized MVTS 2018–2022 though intelligence suggests hawala-style systems. - Criterion 14.3 (Met): MVTS are considered licensees of the FSC and monitored except for transfers of other stores of value (s.4(1)(ca) FSCA). - Criterion 14.4 (Met): Agents/franchise holders of MSB must be licensed (s.6(b) FMSA). - Criterion 14.5 (Met): MSB using agents must include agents in AML/CFT programs and monitor compliance (s.53B AMLTFCOP as amended March 2023). - Conclusion: MVTS providers required to obtain license and monitored except for transfers of other stores of value; limited demonstration of actions to identify unauthorized MVTS; no proportionate and dissuasive sanctions applied. Recommendation 14 is rated largely compliant. - Recommendation 15—New Technologies (including VAs/VASPs) - Criterion 15.1 (Mostly met): FIs required to identify and assess ML/TF risks from new products, business practices, delivery channels, and new technologies (s.12(3)(a) AMLTFCOP). Authorities are not required/instructed to identify/assess such risks, though the VI MLRA identifies ML/TF risks from new products/technologies (Chapter 11). - Criterion 15.2 (Met): FIs must undertake required risk assessment prior to launch/use and take measures to mitigate risks (s.12(3)(a) and (b) AMLTFCOP). - VAs and VASPs: - Criterion 15.3 (Mostly met): - a) VAs and VASPs assessed as inherently vulnerable and overall ML risk assessed as High in Financial Services Sector MLRA 2020, Financial Services Sector 2020 TF RA, and 2022 MLRA. - b) National AML/CFT Policy and Strategy 2021–2023 called for legislation for regulation and supervision of VA and VASPs; the VASPA 2022 enacted and came into force February 1, 2023. - FSC developing supervisory framework for VASPs and preparing operationalization of supervision by July 31, 2023; staff training undertaken. - Concern: the high risk assessment does not match allowing a transitional period where unauthorized and not-supervised VASPs can operate while not actively brought under supervision. - c) AMLR (2022) introduce concepts of VAs and VASPs per FATF Glossary; VASPs subject to AMLR and AMLTFCOP as of December 1, 2022; entities required to identify, assess, and mitigate ML/TF risks. *Source: 1vgbea2024001 - section 25(1) of the NPO Act, the FIA may impose an administrative penalty on a person who* ### 1.10 and 1.11 (ss.11 and 12 AMLTFCOP). ### 1vgbea2024001 - 1.10 and 1.11 (ss.11 and 12 AMLTFCOP) ### Recommendation 15 — Virtual Asset Service Providers (VASPs) - Findings: - s.5(1) VASP Act requires VASPs that are legal persons created in the VI to be registered by the FSC when carrying on the business of providing a VA service in or from the VI; natural person VASPs to be registered in the VI where their place of business is located. - The VASP Act was not in full effect for existing companies at the time of the onsite visit; it came into effect for these companies on July 31, 2023. - s.7(1)(d) VASP Act and Schedule 1A of the Regulatory Code require fit and proper assessments for proposed VASPs, their directors, senior officers, and (beneficial owners of) persons with a significant or controlling interest; s.11(3)–(4)(a) require FSC prior approval for directors/senior officers. - s.21 requires FSC prior approval for transfers of significant or controlling interests; s.21(6) conditions approval on fit and proper criteria. - Schedule 1A (Guidance Note on Fit and Property Test) considers convictions, connections to convicted persons, pending criminal proceedings when assessing honesty, integrity, reputation. - Transitional period: VASP activities by service providers active on February 1, 2023 can be carried out without registration until July 31, 2023; limited measures to identify and sanction entities not registered outside the transitional period. - Since VASPs are subject to the AMLR and the AMLTFCOP as entities/professionals as of December 1, 2022, the FSC has responsibility to monitor compliance (s.8(1) AMLTFCOP; s.3(1)(b) VASP Act; s.4(1) FSCA). However, existing VASPs were not subject to adequate regulation, risk-based supervision, or monitoring during the transitional period (application window until July 29, 2023 noted). - Registered VASPs are subject to FSC supervision and powers under FSCA and AML/CFT legislation (s.4(2) VASP Act). - Explanatory Notes in AMLTFCOP and targeted guidance (FSC’s Virtual Assets Service Providers Guide to the Prevention of Money Laundering, Terrorist Financing and Proliferation Financing, 1 February 2023) assist VASPs. - Sanctions: concerns whether available monetary sanctions are proportionate and dissuasive vis-à-vis larger (international) entities (see R.35 comments). - Occasional transaction threshold for VASPs is above US$1,000 (reg. 6(3) under (c) AMLR). - Originator/beneficiary information requirements: s.41C(1)–(7) and s.41D(1)(a), (3), (7) AMLTFCOP require obtaining, maintaining, verifying, accompanying transfers, making information available to FSC or FIA within three days of request; LEAs can compel immediate production under s.36(1) PCCA. - TFS communications and reporting mechanisms applicable to VASPs, but shortcomings under criteria 6.5(d), 6.6(g), and c.7.2(e) affect full compliance; Criterion 7.4(d) not met—no mechanism demonstrated and no reports to VASPs submitted. - Deficiencies / Risks: - Main issue: transitional period allowing unauthorized VASPs to operate without registration, supervision, or exposure to sanctions until July 31, 2023; not risk-based given sector’s high-risk profile. - No action reported against persons carrying out VASP activities without proper license/registration prior to July 31, 2023. - Shortcomings on TFS communications and reporting obligations. - Rating and conclusion: - Many criteria met or mostly met; primary deficiency is the applied transitional period and gaps in TFS mechanisms. - Recommendation 15 is rated largely compliant. ### Recommendation 16 — Wire Transfers - Findings: - Historical note: Third Round MER rated largely compliant with former SR.VII; previous weakness: penalties and sanctions (ss. 37–41 AMLTFCOP) were not dissuasive. - Ordering FIs: - Required to ensure every transfer of funds (regardless of the amount) is accompanied by originator information: (i) name of the originator; (ii) account number or unique identifier; (iii) originator’s address or customer identification number or national identity number or date and place of birth (AMLTFCOP, ss. 39(1) and 37(1)). - Required to verify originator information for accuracy except for transfers not made from an account and not exceeding US$1,000 (AMLTFCOP, ss. 39(3) and (4)). - Required beneficiary information (name and beneficiary account number or unique identifier) for all transfers (AMLTFCOP, ss. 39(1) and 37(1)). - Batch transfers: s.39(2) requires full traceability and inclusion of account number or unique identifier. - No de minimis threshold applied for most provisions; originator information for transfers under US$1,000 is broader than the criterion’s minimum requirements (AMLTFCOP, s.39(1)). - Exception: originator information need not be verified for transfers not from an account not exceeding US$1,000, including linked operations, where no suspicion exists (AMLTFCOP, s.39(5)). - Domestic ordering and beneficiary FIs: account number or unique identifier suffices, with obligation to provide required originator information within three working days upon request (AMLTFCOP, ss. 39(7)–(10)). - Record-keeping: ordering FI must keep records for at least five years (AMLTFCOP, s.39(6)). - Prohibition: ordering FI prohibited from executing transfers not complying with requirements (AMLTFCOP, s.39(12)). - Intermediary FIs: must ensure originator/beneficiary information is kept with transfer (s.41(2)); may retain records for at least five years if technical limitations prevent information accompanying cross-border transfers (ss.41(3) and (6)); must have procedures to detect transfers lacking required information and apply risk-based decisions to execute/reject/suspend and report (ss.41(7)–(8)). - Beneficiary FIs: required procedures for detection and verification (ss.40(2), 40(3A), 40(3B), 40(4)). - MVTS providers with Class A license must comply with R.16 in countries they operate (AMLTFCOP, s.37(3)); MVTS providers controlling both sides must consider both originator and beneficiary information and file STRs in any affected country (s.41A(a)–(b)). - Implementation of Targeted Financial Sanctions (c.16.18) impacted by deficiencies identified under c.6.5(a) and (b). - Rating and conclusion: - Legal framework largely provides for all R.16 criteria; minor deficiency on TFS implementation impact. - Recommendation 16 is rated largely compliant. ### Recommendation 17 — Reliance on Third Parties - Findings: - Third Round MER deficiency: FIs not required to immediately obtain from all third parties necessary CDD information (customer identification, beneficial ownership, purpose/nature of business). - AMLR Regulation 7(1) permits reliance on third-party introduction where the relying FI is satisfied that the third party has obtained and verified identity, beneficial ownership, ownership/control structure, and purpose/intended nature of relationship; ultimate responsibility remains with relying FI (AMLR, Regulation 7(7)); FIs must take measures in Regulations 7(2)(a)–(c). - Risk-level country consideration required when relying on third party (AMLR, Regulation 7(3)). - Intra-group reliance exemption exists where group-wide CDD measures, supervision, and safeguards are in place (AMLTFCOP Part III; AMLR, Regulation 7(5)(a)–(c)). - Deficiencies / Impact: - Minor deficiency in scope of FIs negatively impacts compliance. - Rating: - Recommendation 17 is rated largely compliant. ### Recommendation 18 — Internal Controls and Foreign Branches/Subsidiaries - Findings: - Third Round MER: partially compliant on internal controls and foreign branches/subsidiaries—no requirement for adequately resourced independent audit function; lack of obligation to ensure consistent AML/CFT measures in branches/subsidiaries in jurisdictions with weaker AML/CFT standards; no requirement to inform home supervisors when foreign branch/subsidiary unable to observe measures. - FIs required to maintain written and effective internal controls approved by senior management (AMLTFCOP, s.11(1)). Requirements include AML/CFT compliance function, senior-level responsibility, staff competence/probity assessment (s.49(1)), periodic training (s.11(3)(o); s.47), and an independent audit function adequately resourced to test compliance (s.11(3A)(ii)). - Group-wide requirements: policies/procedures/controls, information sharing, group-level compliance/audit/AML/CFT functions, confidentiality safeguards (AMLTFCOP, s.53A). However, provisions not sufficiently broad to cover all elements required by the chapeau of c.18.2 (e.g., appointment of CO at management level, screening procedures for hiring). - Foreign branches/subsidiaries: required to observe standards at least equivalent to AMLR and AMLTFCOP to the extent permitted by foreign laws; must inform FIA or FSC if unable to observe appropriate measures and apply additional measures (AMLTFCOP, s.53(1), s.53(1A), s.53(3), s.53(3A), s.53(3B)). - Deficiencies / Impact: - c.18.2 not sufficiently broad to cover all c.18.1 elements; scope of FIs deficiency has minor negative impact. - Rating: - Recommendation 18 is rated largely compliant. ### Recommendation 19 — Higher Risk Countries - Findings: - Third Round MER: partially compliant with former R.21—no effective measures to advise FIs of weaknesses in other countries’ AML/CFT systems; no requirement to examine transactions with no apparent economic/visible lawful purpose from higher-risk countries. - AMLTFCOP requires FIs to consider higher risk when relationships/transactions involve persons located in high-risk jurisdictions (including FATF-identified jurisdictions) and to perform EDD proportionate to risks (AMLTFCOP, s.20(4)(c); Interpretation Act, s.36(1)). AMLTFCOP defines high-risk countries (s.2(1)). - Counter-measures: AMLTFCOP s.54(2) prescribes non-exhaustive counter-measures; FIA or FSC may require counter-measures where FATF/CFATF advise or the FIA/FSC forms opinion jurisdiction poses significant ML/TF/PF risk (s.54(1A)(b)). - Advisories: FIA and FSC may issue advisories to inform FIs of weaknesses (AMLTFCOP, s.54(1A)(a)); FSC posts notices on its public website about FATF/CFATF statements and issues industry circulars encouraging EDD. - Deficiencies / Impact: - Minor negative impact due to scope of FIs deficiency. - Rating: - Recommendation 19 is rated largely compliant. ### Recommendation 20 — Reporting of Suspicious Transactions - Findings: - Third Round MER: largely compliant (former R.13) and compliant with SR.VI; earlier deficiency related to insider trading/market manipulation not qualifying as predicate offences no longer noted here. - PCCA s.30A and DTOA s.36 require any person who knows/suspects another is engaged in ML or drug ML in course of profession/business to report to the FIA as soon as reasonably practicable. CTA s.60 requires reporting for TF. - AMLTFCOP requires reporting officers to report suspicious customers/transactions promptly and in writing to the FIA (s.17(1)); employees must report internally (ss.18(1)–(2)); reporting officer must determine whether to submit to FIA and may report where uncertain (ss.18(4), 18(6)). - Rating: - Recommendation 20 is rated compliant. ### Recommendation 21 — Tipping-off and Confidentiality - Findings: - Third Round MER: largely compliant with former R.14; prior limitation on tipping-off offence only after an STR. - FIAA provides protection against civil, criminal, disciplinary proceedings for persons transmitting information or reports to the FIA in good faith (s.8(2)). PCCA, DTOA, and CTA provide similar protections (PCCA s.30A(4); DTOA s.36(4); CTA s.63(1)–(2)). - Offence for disclosure of SAR/SAR-related information that may prejudice investigation (PCCA ss.31(2)–(3); DTOA ss.37(2)–(3); CTA s.60(4)). Exceptions for disclosure in accordance with group-wide information-sharing programs under s.53A AMLTFCOP (PCCA s.31(6A); DTOA s.37(6A); CTA s.60(4A)). - Rating: - Recommendation 21 is rated compliant. ### Recommendation 22 — DNFBPs: Customer Due Diligence - Findings: - Third Round MER: partially compliant with former R.12—deficiencies in CDD, PEPs, new technologies, non-face-to-face business, unusual transactions; implementation assessment limited due to recent AMLTFCOP/AMLR enactment. - TCSPs qualify as FIs and are regulated/supervised by FSC but for FATF purposes considered DNFBPs. - Casinos subject to AMLR/AMLTFCOP when executing transactions of US$3,000 or more (AMLR, s.2(1)(l); AMLTFCOP s.19(4)(bb)). - All other DNFBPs defined in AMLR reg.2(1) and AMLTFCOP s.2(1) are required to undertake R.10 CDD measures when performing relevant activities. - Record-keeping and PEP requirements for DNFBPs align with R.11 and R.12 analyses. - New technologies requirements apply to DNFBPs in the situations specified; deficiency in c.15.1 has minor negative impact. - Reliance on third parties applicable to DNFBPs per R.17 analysis. - Rating: - Recommendation 22 is rated largely compliant. ### Recommendation 23 — DNFBPs: Other Measures - Findings: - Third Round MER: partially compliant with former R.16—deficiencies in STR, tipping-off/confidentiality, internal controls/compliance/audit, higher-risk countries applicable to DNFBPs; implementation effectiveness could not be assessed at the time. - STR requirements (R.20), internal control requirements (R.18), higher-risk country requirements (R.19), and tipping-off/confidentiality (R.21) apply to DNFBPs in specified situations. - FIA (supervisor for DNFBPs except casinos) posted FATF/CFATF statements on public website and issues alerts and clarifications to DNFBPs. - Rating: - Recommendation 23 is rated largely compliant. ### Recommendation 24 — Transparency and Beneficial Ownership of Legal Persons - Findings: - Third Round MER: partially compliant with R.33 (now R.24); main past deficiency: inability to assess adequacy/accuracy of beneficial ownership information held by registered agents due to low number of FSC inspections; pre-2005 companies bearer shares issue noted historically. - Corporate and AML/CFT laws (BVIBCA, LPA, PA, Co-operatives Societies Ordinance and Regulations, Friendly Societies Ordinance and Regulations, AMLTFCOP, AMLR) provide TC analysis basis. Micro-Business Companies Act suspended. - Recent amendments to BVIBCA and LPA came into force January 2023; March 2023 amendments re-introduced provisions in PA. - Types/processes/features of legal persons and basic information recording outlined in corporate laws; as of March 2023, companies and foreign companies required to collect and maintain beneficial ownership information and file with registered agent (BVIBCA s.96 1A, 187B). - Gaps: - Authorities have not fully assessed ML/TF risks for all legal person types; 2022 MLRA assesses ML risks for some legal persons but TF risks not assessed. - Director information not required at incorporation outset; directors must be appointed within six months and file ROD within 21 days, with additional 90 days available—information can be missing up to 10 months. - Some registers available for public inspection; Register of Co-operative and Friendly Societies not available for inspection. - Limited partnerships under LPA/PA: registers of partners held at registered agent; limited formal requirements for some basic information. - Beneficial ownership mechanisms fragmented: companies required to collect BO info as of March 2023, but no requirement for company registry to hold BO; limited partnerships not covered under LPA/PA for BO filing similarly. - Reliance on FIs/DNFBPs CDD to obtain BO information in practice. - No BO requirements for Co-operative Societies or Friendly Societies. - Filing timelines: companies/foreign companies must file changes to BO with registered agent within 15 days (BVIBCA s.96(3A), 187B); no similar requirement for limited partnerships under LPA/PA. - Ongoing CDD updates including BO are risk-sensitive or upon trigger events determined by senior management (AMLTFCOP, s.21(1)(c)) — insufficient to ensure up-to-date info. - Registered agents required; competent authorities have compulsory powers to request info from registered agents (FSCA s.32; FIAA s.4(2); PCCA s.36, 37; MLA (United States) s.6). - Bearer shares: issuance prohibited as of January 1, 2023; requirement to surrender existing bearer shares to the company on or before July 1, 2023; by July 1, 2023 existing bearer shares deemed converted to registered shares (BVIBCA S.35, 37, 38, Part IV, Schedule 2). - Nominee services: s.25A AMLTFCOP requires entities/professionals offering nominee shareholder/director services to inform legal person and disclose identity of nominator, but no requirement to record activity in registries; unlicensed nonprofessional nominees not required to maintain nominator identification. - Sanctions exist but some are not proportionate/dissuasive (e.g., failure to file copy of register of directors penalty US$100; other fines range US$1,000–$50,000; limited partnership penalties range US$5,000–$50,000 or US$100–10,000 under PA). PCCA s.27(4) allows fine up to US$200,000 or imprisonment up to three years or both for contravention of AMLTFCOP provisions. - Registrar’s database accessible directly to certain authorities via VIRRGIN (FSC, FIA, AGC, ITA); other competent authorities and foreign competent authorities may request basic information. - Authorities have provisions to receive/provide feedback to foreign authorities on assistance usefulness (FSCA s.33G(1); FIAA s.5A(3); C(JI)CA s.4(8)). - Deficiencies / Impact: - TF risks not fully assessed for legal persons. - Timely availability of director information can be delayed up to 10 months. - BO collected via CDD updated on risk-sensitive basis—not sufficient to ensure adequacy, accuracy, and timeliness. - BO obligations do not apply to limited partnerships, Co-operative Societies, Friendly Societies; no record-keeping for foreign companies prior to March 2023. - Nominee arrangements and nonprofessional nominees not fully captured. - Rating: - Recommendation 24 is rated partially compliant. ### Recommendation 25 — Transparency and Beneficial Ownership of Legal Arrangements (Trusts) - Findings: - Third Round MER: largely compliant with R.34 (now R.25); past deficiency: inability to assess adequacy/accuracy of trust BO info held by registered agents due to low FSC inspections. - Trusts governed by common law (no comprehensive trust statute except VISTA Act for company share-holding trusts); AMLTFCOP s.28A extends requirements to trustees as of March 2023. - Trustees (including professional trustees) required to obtain/maintain BO information on settlor, trustees, protector, beneficiaries, and any natural person exercising ultimate effective control (AMLTFCOP, s.28A, s.2(1)); information must be accurate, up to date, and updated on a timely basis (s.28A(4)); professional trustees must identify and verify BO (s.28(1)(b)). - Trustees must obtain name/address of regulated agents/service providers to trust (s.28A, s.3, s.38(1A)). - Record-keeping: maintain information for at least five years after involvement ceases or business relationship formally ends for professional trustees (s.28A(5), s.45, AMLR s.10). - Trustees must disclose trustee status when acting on behalf of a trust (s.28A(1)). - Competent authorities have powers to obtain trust-related information and share with foreign counterparts (FSCA s.32, 49A; FIAA s.4; MLA (USA)). - Trusts not required to be registered; no basic information held by registries on trusts. - Sanctions: professional trustees subject to FSCA enforcement (revocation/suspension, investigations, insolvency application, warning letters, administrative penalties US$60,000–$100,000 per AMLTFCOP Schedule 4; PCCA s.27(4) fines up to $150,000 or imprisonment up to 2 years or both for failing to obtain/maintain information per s.28A). - Non-professional trustees: administrative/criminal sanctions do not extend to non-professional trustees for failing to grant timely access to information—application of s.27(4) PCCA only with respect to s.28A(2)–(5). - Deficiencies / Impact: - No trust registry or basic trust information held centrally; inability to ensure timely updates beyond risk-sensitive or trigger-based reviews. - No sanctions available to nonprofessional trustees for failing to grant timely access to information. - Rating: - Recommendation 25 is rated largely compliant. ### Recommendation 26 — Regulation and Supervision of Financial Institutions - Findings: - Third Round MER: partially compliant with former R.23—MVTS operators not subject to effective AML/CFT monitoring; FSC resource constraints historically limited effective supervision. - FSC established under FSCA s.3; functions include regulation, supervision, monitoring compliance with PCCA, AMLRs, AMLTFCOP (s.4(1); s.8(1) AMLTFCOP). - Market entry: core principle FIs required to be licensed by FSC under BTCA, IA, SIBA; prohibited to carry on banking, insurance, or investment business without license (s.3(1) BTCA; s.4(1) IA; s.4(1) SIBA). Approved Managers regime for managing/advising on assets up to US$400 million or closed-end funds up to US$1 billion (Investment Business (Approved Managers) Regulations Reg.12). - Shell bank prohibition: s.16A BTCA. - Fit and proper: directors, senior officers, beneficial owners/significant owners/controllers required to satisfy fit and proper criteria at application and on ongoing basis (Regulatory Code ss.2, 15(c), 16; Schedule 1A). FSC’s Guidance considers convictions, connections to convicted persons, pending proceedings. - Prior approval requirements for changes in significant/controlling interests in sectoral legislation (BTCA, FMSA, IA, SIBA) though some inconsistencies noted for foreign insurers and certain BTCA provisions. - Some entities (e.g., post office conducting MBS) exempt from FSC prior approval requirement for appointments—they do not go through fit and proper prior approval. - Risk-Based Approach (RBA) to supervision: - FSC Risk-Based Approach to Supervision Framework exists (amended 2022) but AML/CFT risks not adequately prioritized: composite risk rating equally weights different risks and assigns 35 percent weight to ML/TF risk; framework focuses on likelihood of non-compliance rather than sufficient inherent ML/TF risk factors; lacks direct collection of FI-specific client base/product/service geographic exposure data; no explicit group-level supervisory engagement references. - Reviews of licensee risk profile to be undertaken at least annually and when significant changes occur, but not explicitly required when major events/developments at management or group level occur. - MVTS and money/currency changing services (except post office) are FSC licensees and subject to AMLTFCOP; however, AMLTFCOP does not require FSC to conduct monitoring activities having regard to ML/TF risks in the sectors it monitors. - Deficiencies / Impact: - Trading in foreign exchange not covered under sectoral legislation. - Several deficiencies regarding prevention of criminals/associates entering financial sector: foreign insurer approvals, lack of explicit FSC requirement to conduct MVTS monitoring with regard to ML/TF risks, insufficiency of supervisory engagement determination based on ML/TF risks, and failure to require risk profile review on major events. - Rating: - Recommendation 26 is rated partially compliant. ### Recommendation 27 — Powers of Supervisors - Findings: - FSC mandated to supervise and monitor licensee compliance with AMLTFCOP and related enactments (FSCA s.4(1)(ca); AMLTFCOP s.8(1)). - FSC powers include inspections of licensees (in or outside the VI) (s.35(2), (2A) FSCA), examination of procedures/systems/controls/assets/documents, seeking explanations from officers/employees/agents (s.35(2) FSCA), and requiring specified information or documents (s.32 FSCA) without court order. - Enforcement powers include revocation/suspension of license, directives imposing prohibitions/restrictions, warning letters, administrative penalties, cost recovery, and banning employment in financial services (s.37(2); s.40; s.57(1) AMLTFCOP; AMLTFCOP Schedule 4). - Rating: - Recommendation 27 is rated compliant. ### Recommendation 28 — Regulation and Supervision of DNFBPs - Findings: - Third Round MER: partially compliant with former R.24—DNFBPs covered by AML/CFT regime but monitoring and enforcement systems were ineffective; supervisory resource/sanction deficiencies applied to TCSPs. - AMLR reg.2(1) designates DNFBPs: gaming and betting (US$3,000 threshold), real estate agents, DPMS (in scope), legal practitioners/public notaries/accountants (in scope), TCSPs (company management/trust business), and businesses buying/selling high-value goods for cash payments of US$15,000 or more per Non-financial Business (Designation) Notice 2008. - Casinos: - GBCA requires licensing by GBCC (s.29); “gaming” broadly defined (s.2 sub (a) VI Gaming and Betting Control (Amendment) Act, 2021). - Fitness and propriety required for license applicants (s.40 GBCA; Schedule 3) but lack of clarity on chain ownership/control, undefined minimum percentage for corporate entity assessment, and “controlling stakeholder” defined as entitlement to control at least one-third of voting power and control 25 percent or more—may insufficiently capture beneficial owners. - GBCC being set up; gaming and betting operators are DNFBPs under supervisory remit of FIA; fitness/propriety requirements of FIA under s.5C FIAA applicable where relevant. - Other DNFBPs: - FSC designated competent authority for TCSPs (FSCA s.4(ca); AMLTFCOP s.8(1)); FIA designated for other DNFBPs (FIAA s.5C; AMLTFCOP s.8(2)). - All DNFBP categories are relevant persons under AMLR and subject to AML/CFT requirements; supervisors empowered to undertake compliance inspections (AMLTFCOP s.9(1)–(2)). - FIA powers include requiring regular compliance reports/declarations (s.5C(8)(b)), requesting documents/information (s.5D), examining persons under oath (s.5G); powers to enter/search premises and seize documents require Magistrate’s order (s.5E). - TCSPs licensed as FIs by FSC subject to fit and proper requirements; deficiencies in c.26.3 apply. - FIA must satisfy itself that directors/senior officers/persons with significant or controlling interest are fit and proper before or at registration (s.5C(6) FIAA) and must be notified on changes (s.5C(4)); FIAA does not prescribe prior approval based on fitness/propriety criteria. - FIA Guidance Notes on Fit and Proper Test (February 25, 2022) include consideration of convictions, connections to convicted persons, pending proceedings (para 3.2.1.1); FIA may require removal of unfit persons (s.5C(8)). - FIA can impose administrative penalties under s.57(1) AMLTFCOP and enforcement actions under s.5J(1) FIAA. - Deficiencies / Impact: - Casinos: gaps in fit and proper clarity for ownership/control chains and definitions may leave some beneficial owners out of assessment. - Entry/search seizure powers for FIA contingent on Magistrate’s order may limit immediate supervisory effectiveness. - TCSP supervision subject to FSC resource and sanction concerns previously identified. - Rating: - Recommendation 28: mixed compliance—specific criteria partly met; overall supervisory framework in place but with notable gaps. *Source: 1vgbea2024001 - 1.10 and 1.11 (ss.11 and 12 AMLTFCOP).* ### Section 5J(2) of the FIAA further prescribes the enforcement actions that the FIA can take ### Section 5J(2) of the FIAA further prescribes the enforcement actions that the FIA can take ### Enforcement powers under the FIAA for DNFBPs - Section 5J(2) prescribes enforcement actions the FIA can take against a DNFBP, being: - (i) the issuance of a warning; - (ii) the recommendation to the government department or institution by which the person is licensed, registered, approved, authorized, or otherwise established to suspend, revoke, or withdraw the person’s license, registration, approval, authorization, or other form by which the person is established; and - (iii) imposing an administrative penalty in the amount prescribed under the FIAA or any other enactment or, where a penalty is not prescribed, in an amount not exceeding US$75,000. - A recommendation to a licensing, authorizing, or registration authority to suspend, revoke, or withdraw a license, authorization, or registration "cannot be considered a sanction because it has no punitive effect per se." - The FIAA does not define “person” but the term appears to include both the DNFBP and any relevant natural person; this is confirmed by s.36 of the Interpretation Act. ### Administrative penalties and related provisions - s.57(1) of the AMLTFCOP: a person who contravenes or fails to comply with provisions specified in Schedule 4 of the AMLTFCOP "is subject to the penalties prescribed." - Where no penalty is prescribed under the FIAA or another enactment, administrative penalties may be imposed up to US$75,000. ### Supervision, scope, and identified deficiencies (DNFBPs, TCSPs, and the FIA) - Criterion 28.5 (Not met) — For TCSPs, FSC’s supervisory practices under c.26.5 apply and deficiencies under c.26.5 apply accordingly. - For other DNFBPs, "no requirements nor any framework ensuring the FIA to conduct supervision on a risk-sensitive basis could be identified." - Consequent deficiencies highlighted: - determination of the frequency and intensity of supervisory engagements on the basis of risk for DNFBPs is not ensured; - scope of measures to prevent criminals and associates from holding or controlling significant or controlling interests or operating a casino is "too limited"; - ML/TF risk of individual TCSPs is not adequately taken into account under FSC’s risk-based supervision framework when determining supervisory engagements with individual entities; - the FIA lacks adequate powers to: - enter premises of supervised entities, search, and take possession and/or copies of documents or information without a Magistrate’s order; - require FIA approval based on fitness and propriety prior to appointing directors, senior officers, or persons holding a significant or controlling interest; - revoke, withdraw, or suspend a license, authorization, or registration. - The FIA is not required to conduct supervision on a risk-sensitive basis, nor is such approach systematically applied. - Conclusion: Recommendation 28 is rated partially compliant. ### FIU (FIA) functions, authorities, and capacity (Recommendation 29) - Criterion 29.1 (Met): - The FIA established under Section 3 of the FIAA is the FIU of the VI and consists of two divisions: - one division supervises NPOs (s.18(1) NPOA) and DNFBPs excluding TCSPs and casinos (sections 5C of the FIAA and 8(2) of the AMLTFCOP); - the other division (s.4 FIAA) can receive, obtain, investigate, analyse, and disseminate information relating to a financial offence or proceeds of a financial offence, including ML, TF, and breaches of sanctions (s.2(1) FIAA). - Requirement to report suspicious activity relating to TF is under section 60 of the CTA. - Criterion 29.2 (Met): - Section 26(A) of the PCC (Amendment) Act 2021 designates the FIA as the authority for receipt of reports of suspicious transactions and other reports relating to ML and TF. - The FIA is designated to receive disclosures relating to ML or TF, including cross-border cash declarations above US$10,000.00 (s. 26(A) PCC (Amendment) Act 2021; s. 87(5A) CMDA (Amendment) Act 2021). - Criterion 29.3 (Met): - Section 7(2) of the AMLTFCOP permits the FIA to seek further information from reporting entities or professionals. - Section 4(2)(i) of the Financial Investigation Agency (Amendment) Act 2021 requires FI, DNFBPs, NPOs, or other persons, in writing, to produce documents or other information (excluding legal professional privilege) relevant to the Agency’s functions; documents required to be provided within five business days (s. 4(4) FIAA). - The FIA can access databases (Registrar of Companies online registry), open-source information (World Check), covert methods, and request information via the IGC MoU. - Criterion 29.4 (Met): - s.4(2)(e) FIAA requires operational analysis to identify specific targets and links to PCC, ML, TF, PF, and trends. - s.4(2)(f) FIAA requires strategic analysis to identify ML, TF, and PF trends and patterns using available and obtainable information, including from domestic and foreign authorities. - Criterion 29.5 (Met): - s.4(1) FIAA permits the FIA to disseminate information relating to financial offences or requests for legal assistance; s.4(2)(a) FIAA Amendment Act 2021 allows dissemination to local competent authorities (including Police via FIA/RBVIPF MoU) through dedicated, secure, and protected channels (FIU SOPs). - Criterion 29.6 (Met): - Confidentiality obligations: FIA SOP; s.9(1) FIAA; unlawful disclosure punishable upon summary conviction to a fine or term of imprisonment not exceeding one year or both. - s.10 FIAA mandates an oath of confidentiality for Board members, director, and staff. - Vetting and Security Policy: background checks, professional and criminal history checks, oath of confidentiality, IT and building security protocols. - IT Security Policy details staff clearance levels, data storage, virus/malware/ransomware, firewalls, and other IT security requirements. - Criterion 29.7 (Met): - FIA can carry out functions freely without interference; receives a budgetary subvention from the VI government and the FSC administered by the director. - Board of Directors approves the budget and issues policy directions; paragraph 11 of Schedule 1 restricts Board interference in daily management which is the director’s responsibility. - FIA can independently engage domestic and foreign counterparts; created as a stand-alone agency (Section 3(2) FIAA); Section 17(1) permits hiring its own staff. - Criterion 29.8 (Met): - The FIA has been a member of the Egmont Group since 2004. - Conclusion: Recommendation 29 is rated compliant. ### Responsibilities and powers of Law Enforcement and Investigative Authorities (Recommendations 30 and 31) - Recommendation 30 (rated compliant): - Criterion 30.1 (Met): Section 4(1) Police Act empowers RVIPF to enforce all laws required to enforce, including ML and TF offences. FCU of RVIPF has primary responsibility for investigation of fraud, ML, and TF offences. FIA and other LEAs (HMC, Immigration) have relevant investigative powers under various Acts (DTOA, C(JI)CA, PCCA, CDMA, Immigration and Passport Ordinance). - Criterion 30.2 (Met): Section 5(A) PCC (Amendment) Act 2021 permits parallel ML/TF investigations by police or the FIA. - Criterion 30.3 (Met): Sections 36–37 PCCA and 40–41 DTOA authorize court orders to facilitate identification/tracing of proceeds; sections 95, 97, 103 CMDA provide Customs powers to search/seize; restraint orders available under section 17 PCCA and section 18 DTOA; section 7(1) AT(FOM)(OT)O permits seizure of property subject to restraint order. - Criterion 30.4 (Not applicable): No non-LEAs pursue financial investigations of predicate offences. - Criterion 30.5 (Met): No anti-corruption authorities designated to investigate ML/TF arising from corruption under R.30. - Recommendation 31 (rated largely compliant): - Criterion 31.1 (Mostly met): - Section 36(1) PCCA and section 40 DTOA permit police to apply for court orders for material; Section 102 CDMA permits Customs to require information on goods; section 5(2) IPA permits Immigration Officer to summon and require documents; section 9 T(UNM)(OT)O permits Governor to direct furnishing of information. - Section 37 PCCA and section 41 DTOA permit entry and search warrants; section 21 Police Act provides stop and search powers; section 95 CDMA permits magistrate-authorized entry and search; section 5(1)(b) IPA permits Immigration Officer to search without warrant vessels and contents. - Powers to take witness statements limited: s.6(2) C(JI)CA only relates to international cooperation cases — no other provisions identified. - Seizure powers: section 37(5) PCCA, section 42(5) DTOA, section 95(1)(a) CDMA, section 102(2) CDMA permit seizure and detention of evidence and documents. - Criterion 31.2 (Mostly met): - No statutory provision for undercover operations; RVIPF may conduct when authorized by the Governor; reliance on common law and High Court ruling (R v. Andreas Norford, 2021) demonstrates evidence admissibility but notes lack of implementing legal framework; legislation is being drafted. - Section 90 Telecommunications Act permits interception by Governor’s written requests/orders. - Section 14L Computer Misuse and Cybercrime Act Amendment Act 2019 permits accessing computer systems. - No statutory provision for controlled delivery; legal basis asserted as common law but no case law demonstrating use within VI jurisdiction. - Criterion 31.3 (Met): - Production orders (Magistrate) under section 36 PCCA and section 40 DTOA permit identification of account holders; FIA can require production of documents excluding legal professional privilege (s.4(2)(i) FIAA); documents required within five business days (s.4(4) FIAA). - A police officer may identify assets without prior notification to the owner (s.36(6) PCCA). - Criterion 31.4 (Met): MoU between FIA and RVIPF and the IGC MoU permit information sharing between FIA and LEAs including Immigration and Customs. - Limitations noted: absence of enabling legislation to take witness statements other than under C(JI)CA for international cooperation cases and absence of statutory provisions for controlled deliveries. ### Cash couriers and cross-border cash controls (Recommendation 32) - Criterion 32.1 (Met): Section 87(2)(d) of the CMDA (amendment) Act 2021 requires inbound and outbound declarations of cash (coins, notes, traveller's cheques, money orders, cheques, stocks, and bonds in any currency) exceeding US$10,000. - Section 87(2A) CMDA (Amendment) Act 2021 extends declaration requirements to means other than baggage, including mail or cargo. - Criterion 32.2 (Met): Section 87(2)(d) CMDA requires a written declaration for persons entering or departing the VI for cash exceeding US$10,000. - Criterion 32.3 (Not applicable): The VI uses a declaration system, not a disclosure system. - Criterion 32.4 (Met): Section 87(3) CMDA requires persons entering or about to depart to answer questions from proper officers and produce baggage/items for examination; Customs officers may question false declarations or failures to declare currency or BNIs. - Criterion 32.5 (Met): Section 115(1) CMDA makes it an offence to provide HMC with information that is untrue in declarations or statements; penalty on summary conviction to a fine not exceeding US$10,000 or imprisonment not exceeding two years or both; goods related to the false statement are liable to forfeiture. - Criterion 32.6 (Met): Section 87(5A) CMDA requires the Commissioner of Customs to report suspicious cross-border transportation incidents to the FIA, including explanations by the suspected person. - Criterion 32.7 (Met): CLEA (created 2017) coordinates intelligence sharing among FIA, RVIPF, ODPP, HMC, and Immigration; bilateral MoU between HMC and FIA assists exchange on cross-border transportation of currency and BNIs; s.87(5A) CMDA imposes duty on HMC to report to the FIA. - Criterion 32.8 (Met): - Section 37(A)(2) PCCA empowers police or customs officers to seize and detain cash being imported or exported if there are reasonable grounds to suspect that the cash directly or indirectly represents PCC. - s.37A(1)(a) defines cash to include coins, notes in any currency, cheques, and any other monetary or type of BNI. *Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf* ### section 48(1) of the DTOA. Cash can be seized for an initial period of 72 hours (s. 48(3) DTOA ### 1vgbea2024001 - section 48(1) of the DTOA. Cash can be seized for an initial period of 72 hours (s. 48(3) DTOA ### Cash seizure and declaration system (Recommendation 32) - Cash can be seized for an initial period of 72 hours (s. 48(3) DTOA and s. 37A(4) PCCA), longer (three months), and further (s. 48(4) DTOA) by order of a Magistrate up to a period not exceeding two years. - Cash may not be released under any power conferred by s. 48 until any proceedings in pursuance of the application, including and proceedings on appeal are concluded. - Finding (Not met): There is no provision to stop or restrain currency or BNIs where there is a false declaration. As such, there is no specification regarding a reasonable time for restraint regarding false declarations as required under this criterion. - Criterion 32.9 (Met): - a) (Met) — Reports of declarations made by the Commissioner of Customs to the FIA pursuant to section 87(5A) of the CMDA can in turn be shared by the FIA under section 4(1) of the FIAA to facilitate international cooperation. The provisions in the FIAA are consistent with the requirements under Rs. 36 to 40. - b) (Met) — Assessment at sub-criterion 32.9(a) applies. - c) (Met) — Assessment at sub-criterion 32.9(a) applies. - Criterion 32.10 (Partly met) — Section 87(5C) of the CMDA requires the Commissioner to establish appropriate safeguards and policies to ensure that information collected or received under this section in respect of declarations, under-declarations or non-declarations of cash is properly maintained and used so as not to restrict (i) trade payments between the territory and other countries for goods and services; or (ii) the freedom of capital movements in any way, save as may be required under an enactment. However, there is no accompanying provision in the Cash Seizure Policy provided that outlines the safeguards for information collected or received pursuant to the requirements under this recommendation. - Criterion 32.11 (Met) — A person commits an offence if he converts or transfers any property that represents the PCC from the VI (S. 30(1)(b) PCCA and S. 35(1)(b) DTOA). Fines range from US$10,000 to $500,000. Terms of imprisonment range from 6 months to 14 years with combinations of both fines and imprisonment. The fines and imprisonment are both dissuasive and proportionate. The provisions are consistent with the requirements of R.4 and enable the confiscation of such currency and BNIs. - Weighting and Conclusion: The VI has a declaration system in place with provisions that account for the seizure and detention of currency and BNIs. There is no provision that ensures the strict safeguarding of information collected through the declaration system. There is no provision to stop or restrain currency or BNIs where there is a false declaration. As such there is no specification regarding a reasonable time for restraint regarding false declarations. Recommendation 32 is rated largely compliant. ### Statistics (Recommendation 33) - Background: The VI was rated largely compliant on statistics (former Recommendation 32) in its Third Round MER. No records on ML investigations or number of production orders or search warrants were maintained by the police. - Criterion 33.1 (Met) — Competent authorities maintain statistics on matters relevant to the effectiveness and efficiency of the VIs’ AML/CFT system. These statistics are reported to the IGC Secretariat on a quarterly basis. - a) (Met) — The FIA maintains statistics on the number of STRs received and disseminated, which are also published in the FIA’s Annual Reports. - b) (Met) — The RVIPF FCU, ODPP, Magistrate Court and Supreme Court maintain statistics on ML/TF investigations, prosecutions, and convictions via their case management systems. The RVIPF-FCU’s Financial Investigation Policy mandates the maintenance of AML/CFT/CPF statistics and the provision of monthly statistics to the IGC and RVIPF management. - c) (Met) — The RVIPF-FCU, ODPP, Magistrate Court, and Supreme Court maintain statistics on property frozen, seized and confiscated via their case management systems. - d) (Met) — All relevant competent authorities maintain information on MLA (maintained by the AGC) and international requests for co-operation made and received. The FIA publishes in its Annual Reports statistics on the number of requests for information received from foreign FIUs and LEAs, as well as outgoing requests for information (disaggregated by entities, countries, and sectors). - Weighting and Conclusion: The authorities maintain appropriate statistics on their AML/CFT systems. Recommendation 33 is rated compliant. ### Guidance and feedback (Recommendation 34) - Context: In its Third Round MER, the VI was rated largely compliant for former R.25 since FIA annual reports did not include results of disclosure and information on typologies. Due to the recent enactment of the AMLTFCOP on February 22, 2008, its effective implementation was not yet assessed at that time. - Criterion 34.1 (Mostly met): - The AMLTFCOP includes explanatory notes providing comprehensive guidance to assist FIs and DNFBPs in applying the AML/CFT requirements. The AMLTFCOP (Sch. 3) also provides guidance on indicators for suspicious transactions by sector for various sectors and types of transactions. - The FSC has published sector-specific guidance on its website for banking, insurance, money services, VASPs, and TCSPs. Investment business sector receives sectoral feedback via an Investment Business Sector Report (onsite inspections 2020–2021). Guidance for the TCSP sector was published on March 21, 2023, including guidance on detection and reporting of suspicious transactions. - The FIA issued “Guidance Notes on Suspicious Transaction Reports” in 2019 (revised in 2021) and supporting material such as FAQs. These predominantly focus on legal requirements and procedures to file STRs and provide a list of red flags. Sector-specific STR FAQs were issued in September 2022 for each of the DNFBP sectors and for FIs, but this material does not specifically address the TCSP sector. - The FIA issues typologies within their annual reports to a limited extent. In February 2022 (revised February 2023), the FIA issued sector-specific Guidance Notes and “Quicksheets” for legal practitioners, accountants, real estate agents, and HVGD. Corresponding webinars are available on the FIA’s website. - The FIA’s SRA Reports on ML and on TF from 2020 are communicated via its website and inform sectors on risk-related information and vulnerabilities. A webinar presented SRA outcomes. The SRA report on TF is jointly produced with the FSC. - The FIA’s “Themed Examinations Key Findings Report: Due Diligence (2021)” shares key findings and was followed by two webinars on “Due diligence requirements for DNFBPs.” - Feedback mechanisms: The FIA provides feedback on the quality of STRs at section 8.8 of the AIU’s SOPs. A standard feedback letter advises whether the report filed led to a disclosure to relevant authorities (templates in paragraph 8.8.2 of the SOPs). The senior analyst monitors quality of reports not leading to dissemination; this informs outreach (paragraph 8.8.3 of the SOPs). - Weighting and Conclusion: The FSC and the FIA have frameworks to provide guidance and feedback to FIs and DNFBPs. FIA guidelines focus on filing STRs and detecting suspicious transactions; sector-specific STR FAQs do not specifically address the TCSP sector. Recommendation 34 is rated largely compliant. ### Sanctions (Recommendation 35) - Background: The VI was rated partially compliant in its Third Round MER under former R.17, because sanctions imposed in the AMLR and the AMLTFCOP were not dissuasive. - Criterion 35.1 (Mostly met): - R.6: Offence for contravening freezing requirements or making funds/financial services available to a designated person: - Summary conviction: term of imprisonment of five years or to a fine not exceeding US$100,000, or both. - Conviction on indictment: term of imprisonment of seven years or to a fine not exceeding US$250,000, or both. - Making funds or financial services available for the benefit of a designated person: - Summary conviction: term of imprisonment not exceeding five years or to a fine not exceeding US$100,000, or both. - Conviction on indictment: term of imprisonment not exceeding seven years or to a fine not exceeding US$250,000, or both. - Similar liabilities exist for making economic resources available to, and for the benefit of, designated persons pursuant to paragraphs 5(3) and 6(4) of Schedule 4 of the CTA. These sanctions can be considered dissuasive and proportionate. - R.8: Administrative penalties for contraventions of the NPOA range from US$1,000 to $20,000 depending on the nature and seriousness of the contravention, recidivism, level of negligence, and financial capacity of the offender (ss.25 and 27, and Schedule 3 of the NPOA). An NPO that has contravened the NPOA is also liable to de-registration. These sanctions can be considered dissuasive and proportionate. - Rs. 9 to 21: The FSC is authorized to take enforcement actions under FSCA, Regulatory Code or a practice direction (s.37(1)(a)(i) and (ii) FSCA), including: - Power to revoke or suspend licensee’s license (s.38). - Issue directives imposing prohibition, restriction, or limitation (s.40). - Issue warning letters; impose administrative penalties as provided in regulations or pursuant to AMLTFCOP or other enactment; require payment for costs/expenses of investigations; issue orders prohibiting employment in the financial services industry (s.37(2)). - Administrative penalties under s.57(1) of the AMLTFCOP range from US$50,000 for an individual for not complying with s.43(1) and (2) to US$75,000 for a corporate body for non-compliance with s.52. The available sanctions can be considered proportionate and dissuasive. - Rs. 22 and 23: DNFBPs are subject to administrative penalties under the AMLTCOP. The FIA may take enforcement actions against DNFBPs pursuant to the FIAA (s.5J(1) and (2)): (i) issuance of a warning, and (ii) imposing an administrative penalty in the amount prescribed under the FIAA or any other enactment or, where a penalty is not prescribed, in an amount not exceeding US$75,000 and may issue a directive under s.51 FIAA. - Section 27(7) of the PCCA allows both the FSC and the FIA to impose administrative penalties for breaches of the AMLTFCOP that have been deemed offences. The penalties for offences range from US$50,000 to $75,000, as outlined in Schedule 4 of the AMLTFCOP. - Criterion 35.2 (Met) — Where a body corporate fails to comply with the requirements of the AMLTFCOP, every director, partner, or other senior officer of the body corporate shall be proceeded against as if the director, partner or other senior officer committed the offence and is liable on conviction to the penalty prescribed, unless this person can show that neither he or she knew nor connived in the commission of the offence (s.27(5) and (6) PCCA). - Weighting and Conclusion: The range of administrative sanctions available to the FIA with respect to the DNFBPs under its supervision is limited. Recommendation 35 is rated largely compliant. ### International instruments (Recommendation 36) - Background: The VI was largely compliant with this Recommendation during the Third Round MER; the United Kingdom had not extended the Palermo and TF Conventions to the Territory and the Territory had not prohibited all chemicals scheduled under the Vienna Convention. The VI amended Schedule 2 of the C(JI)CA in 2009 to include a complete list of prohibited chemicals. - Criterion 36.1 (Met) — The United Kingdom has extended the Vienna, Palermo, TF, and Merida Conventions on behalf of the VI (declarations on the extension of the Vienna, Palermo, TF, and Merida Conventions). - Criterion 36.2 (Met) — The VI fully implements the relevant articles of the Vienna and Palermo Conventions with the provisions of the DPMA, DTOA, C(JI)CA, Extradition Act 2003 (Overseas Territories) Order 2016, MLA(United States) Act, CC, and PCCA. - The TF Convention is implemented with provisions from the previously mentioned laws and the CTA, T(UNM)(OT)O, AT(FOM)(OT)O, the Afghanistan (Sanctions), (Overseas Territories) Order 2020 and the ISIL (Da’esh) and Al-Qaida (United Nations Sanctions) (Overseas Territories) Order 2020. - The relevant articles from the Merida Convention are mostly implemented with provisions from the CC, PCCA, DTOA, CTA, CDMA, AMLTFCOP, AMLRs, the Interpretation Act (Cap 136), FSCA, FIAA, C(JI)CA and Extradition Act 2003 (Overseas Territories) Order 2016; however, there are no provisions that address Articles 29, 30, 44(9) and (17), 48(1)(c) to (f), 50, 52(2), (5) and (6), 53-55 and 57 of this Convention. - Weighting and Conclusion: The United Kingdom has extended the Vienna, Palermo, TF, and Merida Conventions to the VI and the country has enacted domestic legislation to implement their relevant provisions; notwithstanding, there are some deficiencies regarding the implementation of the TF and Merida Conventions. Considering that the VI has introduced legislation to cover most of the relevant Articles from these Conventions, the remaining shortcomings are regarded as proportionally minor. Recommendation 36 is rated largely compliant. ### Mutual Legal Assistance (Recommendation 37) - Background: The VI was rated compliant with the requirements of this Recommendation during the Third Round MER. - Criterion 37.1 (Mostly met) — The VI provides a wide range of MLA as indicated in the following table (table content summarized as provided): - C(JI)CA (All crimes): - Service of overseas process (sec. 2(3)(b)). - Obtaining documentary evidence, statements and witness testimony (secs. 6(3) and 8). - Conduct searches in premises and seizure of evidence found there (sec. 6(7) of the C(JI)CA). - Registration and enforcement of foreign forfeiture orders (sec. 6). The Criminal Justice (International Cooperation) (Enforcement of Overseas Forfeiture Orders) Act complements the C(JI)CA with secs. 4 and 7-10. - PCCA (All indictable offences other than drug trafficking offences save for the purposes of the making of a confiscation order): - Registration and enforcement of foreign forfeiture orders (sec. 33 of the PCCA). Complemented with sec. 19 of the Proceeds of Criminal Conduct (Enforcement of Overseas Confiscation Orders) Order. - ATO (Terrorism financing): - Registration and enforcement of foreign forfeiture orders (sec. 11 of Schedule). - DTOA (Drug offences): - Registration and enforcement of foreign forfeiture orders (secs. 38 and 39). Complemented with the Drug Trafficking Offences (Enforcement of Overseas Confiscation Orders) Order. - MLA (USA) Act (Any conduct punishable by more than one year’s imprisonment / Racketeering / Narcotics trafficking / Specific types of fraud / Insider trading / Fraudulent securities practices / Foreign corrupt practices): - Compel witness or for production of evidence (sec. 6). - Authentication of official documents (sec. 7). - Transfer of persons in custody (sec. 11). - Service of notices and documents (sec. 14). - Note: The Criminal Justice (International Cooperation) (Enforcement of Overseas Forfeiture Orders) Act, mentioned in the first row, is applicable to “drug trafficking offences” and “any offence corresponding or similar to an indictable offence which Part III of the C(JI)CA applies,” but further table details are as provided in source. *Source: 1vgbea2024001 - section 48(1) of the DTOA. Cash can be seized for an initial period of 72 hours (s. 48(3) DTOA* ### Part III of the C(JI)CA does not set out offences, which makes legislation unclear. ### Part III of the C(JI)CA does not set out offences, which makes legislation unclear. ### Overview - Part III of the C(JI)CA does not set out offences, creating legislative ambiguity. - There is no legal basis that allows the VI to provide a range of MLA rapidly. - Weighting and overall conclusions are provided per Recommendation sections below. ### Mutual Legal Assistance (Recommendation 37) — key findings and criteria - Criterion 37.2 (Mostly met)—The Attorney General and the DPP transmit and execute MLA requests related to investigations and to obtaining statements or other relevant evidence for criminal proceedings (secs. 6 and 8 of the C(JI)CA and sec. 4 of the MLA(USA)A). The Attorney General is also the central authority for foreign forfeiture and confiscation requests and treaty-based requests with the United States (sec. 6 of the C(JI)CA, sec. 33 of the PCCA, sec. 19 of the PCC (Enforcement of Overseas Confiscation Orders) Order, and sec. 4 of the MLA(United States)A). The Governor of the VI is the central authority specifically responsible for the enforcement of foreign forfeiture or restraint orders applicable to terrorist property (sec. 11 of Schedule 2 of the AT(FOM)(OT)O). - AGC processes for timely execution of MLA requests exist but do not include prioritization (secs. 9.2 to 9.6 of the GC's SOPs for MLA approved in March 2023). FIA responses to Attorney General-transmitted requests are required between 7 and 14 days of receipt. FIA must assign a Senior Investigating Officer or senior person when receiving a request from the United States (Section XIV of the FIA’s SOPs). - Case management: AGC uses a combination of software and manual procedures; FIA and FSC use software to store digital copies and manage requests; other competent authorities lack case management systems. - Criterion 37.3 (Met)—MLA is not prohibited or made subject to unreasonable or unduly restrictive conditions (sec. 6(2)(b) of C(JI)CA; art. 3 of the Schedule to the MLA (United States) A; section 4.1.9 of the Handbook on International Co-operation and Information Exchange; section 1 of AGC’s Guidance for the SOP for MLA Requests). - Criterion 37.4 (Met)— - (Met)—VI does not refuse MLA requests solely because the offence involves fiscal matters except where the Governor cannot provide assistance on fiscal-offence requests if criminal proceedings have not been instituted and the requesting country is not a Commonwealth country or territory or party to a relevant UK treaty (sec. 5(3) of the C(JI)CA). - (Met)—FIs are not subject to secrecy or confidentiality requirements that could be relied on to refuse MLA; MLA (United States) Act protects persons, including FIs and DNFBPs, who divulge confidential information in conformity with a request; legal professional privilege for communications between lawyer and client cannot be seized for MLA (sec. 6 of the C(JI)CA; sec. 9 of the MLA (United States) Act; and sec. 6.8 of the Handbook on International Co-operation and Information Exchange). - Criterion 37.5 (Met)—Officers of all competent authorities must maintain confidentiality of MLA requests (sec. 58 of the Service Commissions Regulations 2014). Attorney General must maintain confidentiality for requests from the United States (art. 12 of the Schedule to the MLA (United States) A). - Criterion 37.6 (Mostly met)—Dual criminality is not a general condition for MLA where requests do not involve coercive actions; exception is fiscal offences where dual criminality is required if no treaty and no proceedings instituted (sec. 5(3) of the C(JI)CA). - Criterion 37.7 (Met)—Dual criminality for fiscal-offence MLA is satisfied regardless of offence categorization or terminology provided underlying conduct is criminalised (sec. 5(3)(b) of the C(JI)CA). - Criterion 37.8 (Mostly met)— - (Mostly met)—Attorney General can direct police officers to interrogate and take statements, produce records, and apply for warrants to enter and search premises and seize evidence; legislation does not cover searching of persons and seizing evidence in cases not related to searches in premises (secs. 6(3), (7) and (9) of the C(JI)CA and joint reading of sec. 8(3) of the C(JI)CA and sec. 36 of the PCCA). - (Mostly met)—Attorney General can direct police to conduct investigations to give effect to a request; RVIPF investigative powers analysed in R.31 can be utilised for such directed investigations. - Weighting and Conclusion: VI has central authorities and extensive legislation to provide wide-ranging MLA without unduly restrictive conditions, but legislation does not ensure timely provision of MLA; dual criminality requirement for fiscal offences is a minor deficiency; limitations in investigative powers may impact MLA delivery. Recommendation 37 is rated largely compliant. ### Freezing and Confiscation (Recommendation 38) - Recommendation 38 covers identifying, freezing, seizing, or confiscating property and property of corresponding value; since the MER, VI enacted the ASA, 2020. - Criterion 38.1 (Mostly met)—VI has authority to act on foreign requests to freeze, seize, or confiscate laundered property, proceeds, instrumentalities used or intended for use in ML, predicate offences, or TF, or property of corresponding value (secs. 3, 4, 6 17(3) and (8), 32 and 33 of the PCCA as amended by the PCC (Enforcement of External Confiscation Orders) Order). No provisions ensure expeditious action or specify identification of types of property. - Criterion 38.2 (Met)—VI does not execute requests for non-conviction-based confiscation; PCCA and DTOA require confiscations based on sentences (sec. 6 of the PCCA and sec. 5 of the DTOA). - Criterion 38.3 (Partly met)— - (Partly met)—No legislative arrangements for coordinating seizure and confiscation actions with other countries; RVIPF-FCU can arrange cooperation through Asset Recovery Inter-Agency Network for the Caribbean. - (Met)—Attorney General can initiate management and disposal mechanisms for frozen, seized, or confiscated property; High Court may register external confiscation orders enabling restraint orders (secs. 17, 32, and 33 of the PCCA). Receivers can realise property as Court directs (sec. 19(4) of the PCCA). Attorney General can apply for management of seized/confiscated property to be entrusted to the ASFMC with power to sell or destroy property (secs. 4(1), 5, 7, 8 and 9 of the ASA, 2020). - Criterion 38.4 (Met)—VI can share confiscated property with other countries when confiscation results from coordinated law enforcement actions and sharing is based on agreements with foreign governments (sec. 13 of the ASA, 2020). At report time, VI had not signed agreements; ad hoc sharing is not prohibited. - Weighting and Conclusion: Good framework for freezing, confiscating, and disposing of realizable property in response to MLA requests, but weaknesses on expeditious action and legal basis for joint cross-border confiscations. Recommendation 38 is rated largely compliant. ### Extradition (Recommendation 39) - Since the Third Round MER, Extradition Act 2003 extended to VI via The Extradition Act 2003 (Overseas Territories) Order 2016. - Criterion 39.1 (Met)— - (Met)—ML and TF are extraditable if conduct constitutes an extradition offence in an extradition territory, would be an offence under VI law punishable by 12 months or greater imprisonment, and is punishable under the law of the extradition territory (sec. 137(3) and Schedule 2 of The Extradition Act 2003 (Overseas Territories) Order 2016). - (Met)—AGC can use MLA systems and procedures to execute extraditions; processes ensure timely processing though procedures do not set prioritization criteria (Sections 72, 74, 75, 93, 105, 108, 110 and 114 and Schedule 3 Part 2 of the Extradition Act 2003 (Overseas Territories) Order 2016 and the Extradition Manual). - (Met)—VI does not place unreasonable or unduly restrictive conditions on execution; Governor can refuse certificates for well-founded fear of persecution or breach of right to life or not to be subjected to torture (sec. 70(1), (2) and (8)). Judges may deny extradition for double jeopardy, extraneous considerations, passage of time, hostage-taking considerations, forum, or incompatibility with Human Rights Convention (secs. 79-84 and 87). - Criterion 39.2 (Met)—VI extradites its nationals; no legislative barrier based on nationality. - Criterion 39.3 (Met)—Dual criminality required for extradition; satisfied regardless of categorization or terminology if underlying conduct criminalised and punishable with minimum one year imprisonment (secs. 137 and 138). - Criterion 39.4 (Met)—Simplified extradition procedure exists where requested person consents; formal hearings not required and case goes to Governor for final decision (sec. 127). - Weighting and Conclusion: Recommendation 39 is rated compliant. ### Other Forms of International Co-operation (Recommendation 40) — general principles and agency-specific findings - Criterion 40.1 (Mostly met)—Competent authorities (FIA, FSC, RVIPF, HMC, ODPP, ITA, GBCC) can provide a reasonable range of international cooperation for ML, predicate offences, and TF: - FSC: examinations, appoint examiner or commissioner, 21-day turnaround for incoming cooperation requests; no spontaneous exchange provision (sec. 33D of the FSCA; FSC’s International Cooperation Guide). - FIA (as agency and FIU): disclose information on DNFBPs, request production of information (secs. 2(1), 4(1)(b) and (2)(d), and (5A) of the FIAA); can freeze accounts upon foreign FIA/LEA request and can spontaneously disclose (sec. 4(2)(c) and 5A). - HMC: cooperate with foreign LEAs on request or spontaneously (sec. 142A(1) of the CDMA); party to CCLEC MoU; Ship Rider Agreement with U.S.; no requirement for rapid provision of information. - RVIPF: provides info via INTERPOL aiming to process in four weeks; engages informal assistance and Ship Rider Agreement cooperation with U.S. - ODPP: no information on types or rapidity of cooperation. - ITA: assists on tax matters, legal and beneficial ownership, based on TIEAs with 28 jurisdictions; TIEAs set 90-day timeframe for RFIs; powers to issue RFIs, apply for search warrants, allow foreign interviews/tax examinations (secs. 5, 6, 7 and 10 of the MLA (Tax Matters) Act). - Gaming and Betting Control Board: not yet in operation; no international cooperation framework. - Criterion 40.2 (Partly met)— - (Mostly met)—FSC, FIA, ITA, RVIPF, and HMC have legal bases or arrangements for cooperation; no legal basis set out for GBCC or prosecutors. - (Met)—No laws prevent use of most efficient means of cooperation; FSC and FIA can cooperate directly with foreign supervisors/FIUs; RVIPF via INTERPOL; ITA via TIEAs; HMC via CDMA and CCLEC MoU. - (Mostly met)—Secure channels used by FSC, FIA, RVIPF, ITA; gaps for ODPP and GBCC. - (Mostly met)—FIA and FSC have prioritization/timeliness procedures (FIA SOPs; FSC 72-hour service standard). ITA follows TIEA timeframes. ODPP, RVIPF, HMC, GBCC lack prioritization criteria. - (Partly met)—FIA, FSC, ITA have information safeguarding processes; GBCC, RVIPF, ODPP, HMC lack such processes. - Criterion 40.3 (Partly met)—FSC and FIA party to bilateral/multilateral agreements; VI party to 28 TIEAs; no provisions requiring ODPP, RVIPF, HMC, GBCC to enter agreements. - Criterion 40.4 (Met)—AGC, FSC, FIA, HMC obliged to provide feedback on information received if requested (sec. 4(8) of the C(JI)CA, sec. 33G of the FSCA, sec. 5A (3) and (4) of the FIAA, sec. 142A(3) of the CDMA). - Criterion 40.5 (Met)— - (Met)—FSC can assist on taxation matters if lawfully required (sec. 33C(3) of the FSCA); FIA does not refuse assistance on fiscal grounds; ITA’s role centres on fiscal information (MLA (Tax Matters) Act and TIEAs). - (Met)—No laws require FIs or DNFBPs to maintain secrecy; FIA cannot obtain information subject to legal professional privilege (sec. 4(2)(d) of the FIAA). - (Met)—Legislation does not require refusing requests due to domestic proceedings underway. - (Met)—No restrictions on type/nature of requesting counterparts. - Criterion 40.6 (Partly met)—FSC can refuse assistance if foreign authority lacks adequate legal restrictions on disclosure or will use information for other purposes without written permission (sec. 33D(7) of the FSCA). FIA, ITA have controls and safeguards; RVIPF, ODPP, HMC, Gaming and Control Board lack required safeguards. - Criterion 40.7 (Mostly met)—MoUs by FSC and confidentiality oaths for FSC and FIA staff; criminal sanctions for disclosure apply to HMC and ITA staff; ODPP, RVIPF, GBCC covered by general confidentiality requirements but, except for FSC, no provision to refuse if requesting authority cannot protect information effectively. - Criterion 40.8 (Partly met)—FSC and ITA can require information, conduct examinations on behalf of foreign counterparts (sec. 33D(1) of the FSCA; secs. 5, 6, 7, and 10 of the MLA (Tax Matters) Act). FIA can provide and compel production of information domestically for FIU requests (secs. 4(1)(b) and (2)(d) and 5A(2) of the FIAA). No provisions for ODPP, RVIPF, HMC, GBCC. - Exchange of information between FIUs (Criteria 40.9–40.11): FIA has adequate legal basis to cooperate irrespective of counterpart nature (secs. 4(1) and 5A(2) of FIAA); must provide feedback upon request (sec. 5A); can exchange STRs and reporting-entity information excluding legal privilege (secs. 4(2)(a) and (d) and 5A(2) of the FIAA and sec. 26A of the PCCA). - Exchange of information between financial supervisors (Criteria 40.12–40.16): FSC has legal basis to cooperate and exchange supervisory/AML/CFT information, conduct inquiries, and ensure prior authorisation for dissemination (sec. 33C(1) and sec. 33D). - Exchange of information between law enforcement authorities (Criteria 40.17–40.19): RVIPF provides criminal information via INTERPOL; HMC can cooperate under sec. 142A(1) of the CDMA and CCLEC MoU; RVIPF can apply investigative techniques subject to R.31 limitations; Ship Rider Agreement with United States allows RVIPF to form boarding/search teams limited to U.S.; VI has formed joint investigative teams with agencies from the USVI but lacks bilateral/multilateral arrangements to enable joint investigations. - Exchange of information between non-counterparts (Criterion 40.20 Partly met)—FSC cannot exchange indirectly with non-counterparts; FIAA language allows FIA indirect cooperation; FIA subject to Egmont Principles; ITA exchanges via TIEAs; GBCC, RVIPF, prosecutors, HMC have no legal provisions for non-counterpart exchanges. - Weighting and Conclusion: Legislation for RVIPF, FSC, FIA, HMC, ITA covers most general principles for forms of international cooperation beyond MLA, but deficiencies exist regarding rapid assistance, safeguarding information, conducting inquiries on behalf of foreign counterparts, and exchanging all domestically obtainable information. FIA and FSC meet expected requirements for FIU/supervisor exchange. RVIPF can apply investigative techniques for foreign police services. FIA is the only authority able to exchange with non-counterparts. Recommendation 40 is rated largely compliant. ### Ratings and final conclusions - Recommendation 37 — largely compliant. - Recommendation 38 — largely compliant. - Recommendation 39 — compliant. - Recommendation 40 — largely compliant. *Source: Part III of the C(JI)CA does not set out offences, which makes legislation unclear. (1vgbea2024001).* ### Annex II. Summary of Technical Compliance—Key Deficiences ### Annex II. Summary of Technical Compliance—Key Deficiences ### Key deficiencies and factors underlying ratings (by Recommendation) - 1. Assessing risks & applying a risk-based approach — LC - Scope deficiency of financial institutions (trading in foreign exchange) impacts full compliance with some criterion under R.1. - 2. National cooperation and coordination — C - The recommendation is fully met. - 3. Money laundering offences — LC - The existence of two parallel and inconsistent regimes of ML offences weakens the legal framework for penalties. - Penalties provided by law for such offences cannot be considered as proportionate and dissuasive. - 4. Confiscation and provisional measures — LC - Minor shortcoming related to the absence of a legal mechanism to void fraudulent transfers or conversion of assets. - 5. Terrorist financing offence — C - The recommendation is fully met. - 6. Targeted financial sanctions related to terrorism & TF — LC - No mechanisms or processes exists for the identification of targets for designations or for promptly determining whether the designation criteria for UNSCR 1373 have been met. - In some instances, prohibitions are only required where a person was knowingly or recklessly dealing with funds or economic resources belonging to or associated with a designated individual or entity. - 7. Targeted financial sanctions related to proliferation — LC - No mechanisms or processes exists for the identification of targets for designations. - In some instances, prohibitions are only required where a person was knowingly or recklessly dealing with funds or economic resources belonging to or associated with a designated individual or entity. - No obligations exist to report on compliance actions taken. - 8. Non-profit organizations — NC - The VI has not yet identified the subset of NPOs that are at risk for TF, including the main features that would put them at risk of TF. - The VI has not yet identified the main TF threats posed to NPOs formed in the jurisdiction. - The FIA’s supervision over the NPO sector does not appear to target NPOs most at risk of TF and is not sufficiently risk based. - 9. Financial institution secrecy laws — C - The recommendation is fully met. - 10. Customer due diligence — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - 11. Record keeping — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - 12. Politically exposed persons — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - 13. Correspondent banking — C - The recommendation is fully met. - 14. Money or value transfer services — LC - The transfer or transmission of other stores of value beside money in any form is not included. - Actions to identify unauthorized MVTS could only to a limited extent be demonstrated. - No proportionate and dissuasive sanctions are applied. - 15. New technologies — LC - The applied transitional period for VASP registration and supervision is not risk based and allows unauthorized VASPs to operate without supervision and fear for sanctions until July 31, 2023. - No action reported against persons carrying out VASP activities without proper license or registration, and no systems or framework for regulating and risk-based supervision or monitoring on compliance by VASPs. - Shortcomings are identified regarding the communication mechanisms and reporting obligations concerning TFS. - 16. Wire transfers — LC - Deficiencies identified regarding the implementation of TFS (c.6.5(a) and (b)) have a minor impact on VI’s compliance with Recommendation 16 (c.16.18). - 17. Reliance on third parties — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - 18. Internal controls and foreign branches and subsidiaries — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - The requirement to implement group-wide programs against ML/TF is not sufficiently broad to cover all elements of c.18.1. - 19. Higher-risk countries — LC - Scope issue: the activity of trading in foreign exchange does not qualify as a FI in the VI and is therefore not subject to AML/CFT measures. - 20. Reporting of suspicious transaction — C - The recommendation is fully met. - 21. Tipping-off and confidentiality — C - The recommendation is fully met. - 22. DNFBPs: Customer due diligence — C - The recommendation is fully met. - 23. DNFBPs: Other measures — LC - The deficiency identified in the analysis of R.18 has a minor impact on compliance with R.23. - 24. Transparency and beneficial ownership of legal persons — PC - Authorities have not fully assessed the TF risks associated with legal persons. - Director information is not collected at the outset when a company is incorporated which impacts the timely availability of this information. - Beneficial ownership information collected in the context of CDD requirements is only updated on a risk-sensitive basis which does not ensure that information is adequate, accurate and up to date. - There are no record keeping requirements for foreign companies registered in the VI. - Mechanisms in place with respect to nominee shares and directors do not capture nonprofessional nominee arrangements. - 25. Transparency and beneficial ownership of legal arrangements — LC - There are no sanctions available to nonprofessional trustees for failing to grant competent authorities with timely access to information. - While information held by trustees is required to be accurate and up to date and updated for professional trustees, the requirement to review and update CDD information, including information on beneficial ownership (AMLTFCOP, s. 21(1)) is only to be done on a risk-sensitive basis or upon certain trigger events as determined by senior management which is not sufficient to ensure information is adequate, accurate and up to date. - 26. Regulation and supervision of financial institutions — PC - Trading in foreign exchange is not covered under VI’s sectoral legislation. - foreign insurers do not need prior approval for persons owning or controlling a significant or controlling interest. - directors and senior officers of a post office are not required to meet and be tested under the fit and proper criteria. - the FSC is not required to conduct its monitoring activities on MVTS having regard to the ML/TF risks in the sector. - determination of supervisory engagements is insufficiently based on ML/TF risks of an FI or group, and - the FSC is not held to review the assessment of an FI’s risk profile when there are major events or developments in the management of the entity or group. - 27. Powers of supervisors — C - The recommendation is fully met. - 28. Regulation and supervision of DNFBPs — PC - The scope of the measures to prevent criminals and associates from holding or controlling (or being the beneficial owner of) a significant or controlling interest or being the operator of a casino is too limited. - ML/TF risk of individual TCSPs is not adequately taken into account under FSC’s risk-based supervision framework when determining supervisory engagements with individual entities. - The FIA does not have adequate powers to enter premises of supervised entities, to search, and take possession and/or copies of documents or information since this is predicated on the need to require a Magistrate’s order. - It is not required to get FIA’s approval based on fitness and propriety prior to appointing directors, senior officers, or persons holding a significant or controlling interest. - The FIA lacks sufficient powers of enforcement where it cannot revoke, withdraw or suspend a license, authorization or registration. - The FIA is not required to conduct supervision on a risk-sensitive basis, nor is such approach systematically applied. - 29. Financial intelligence units — C - The recommendation is fully met. - 30. Responsibilities of law enforcement and investigative authorities — C - The recommendation is fully met. - 31. Powers of law enforcement and investigative authorities — LC - There are limitations, in the absence of enabling legislation to take witness statements other than under the CJIA for international cooperation cases. - There is no statutory provision in the VI for the conduct of controlled delivery. - 32. Cash couriers — LC - There is no provision that ensures the strict safeguarding of information collected through the declaration system. - There is no provision to stop or restrain currency or BNIs where there is a false declaration. - There is no specification regarding a reasonable time for restraint regarding false declarations. - 33. Statistics — C - The recommendation is fully met. - 34. Guidance and feedback — LC - The FIA guidelines focus only to a certain extent on detecting suspicious transactions. - Where the FIA also issued sector specific STR FAQs this material does not specifically address the TCSP sector. - 35. Sanctions — LC - The range of administrative sanctions available to the FIA with respect to the DNFBPs under its supervision is limited. - 36. International instruments — LC - There are no provisions that address some Articles of the Merida Convention. - 37. Mutual legal assistance — LC - No legal basis allows the VI to provide MLA rapidly. - Some competent authorities do not have criteria for the prioritization of MLA requests and a case management system. - Certain powers and investigative techniques are not available for MLA requests. - 38. Mutual legal assistance: freezing and confiscation — LC - No provisions for quick action on freezing and confiscation assistance requests or identifying property types under c38.1. - No legislative arrangements for coordinating seizure and confiscation actions with other countries. - 39. Extradition — C - The recommendation is fully met. - 40. Other forms of international cooperation — LC - Some competent authorities have deficiencies concerning the rapid provision of assistance, safeguarding the information exchanged, conducting inquiries on behalf of foreign counterparts, and exchanging all information that would be domestically obtainable. - The FIA is the only authority able to exchange information with non-counterparts. *Annex II. Summary of Technical Compliance—Key Deficiences (British Virgin Islands).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1vgbea2024001.pdf_