IN RESPONSE TO MOTION ON DE-RISKING PRESENTED BY GRENADA BY PREMIER AND MINISTER OF FINANCE
THE HONOURABLE ANDREW A. FAHIE DURING THE 67TH MEETING OF THE OECS AUTHORITY AND THE 4TH SITTING OF THE OECS ASSEMBLY
ANTIGUA AND BARBUDA
JUNE 17TH, 2019
De-risking continues to place excessive burdens on the region’s financial infrastructure and impedes our countries’ and territories’ abilities to effectively engage in global business and have sustainable economic growth.
De-risking has led to restricted access and, in some instances, the complete loss of correspondent banking relationships.
Correspondent banking relations are the axles that keep the wheels turning in the systems of global finance and trade. Connectivity in our highly interdependent world means that there must be conduits to facilitate trade. International business and finance centres, like the BVI, have evolved to be those conduits and meet the needs of global businesses and investors, and internationally mobile individuals.
This year marks 35 years since the BVI introduced its first version of its international business company, a tool that has been used globally for cross border trade, investment and business.
To quote from the report produced by London-based research firm Capital Economics, Creating Value: The BVI’s Global Contribution, “The BVI Business Companies are much more than just a piece of paper - even those which hold assets without active operations have substance and are vital to the efficient operation of an increasingly globalized world.”
The BVI Business Companies are used by companies, institutions and private individuals for holding companies for various assets such as real estate, family, trust and succession planning; investment business, joint ventures, listings and vessel or aircraft registration; and for corporate group structuring.
The important role of the BVI Business Companies in international investment flows is evident from data on foreign direct investment flows. According to the United Nations Conference on Trade and Development, World Investment Reports, in the last decade the BVI has been among the top ten countries for both inward and outward investment flows globally.
According to Capital Economics, the BVI mediates global investments of one and a half trillion US dollars. This is equivalent to six percent of global banks’ cross border liabilities, two percent of global GDP or two percent of global portfolio and direct investment.
To facilitate this global role, the BVI has established one of the most robustly regulated systems to combat money laundering and counter terrorist financing in compliance with the recommendations set out by the Financial Action Task Force (FATF).
We also cooperate in a number of international initiatives established to increase tax transparency by the Organisation for Economic Cooperation and Development (OECD), the European Union (EU) and we have an extensive network with countries across the global for mutual legal assistance and tax information exchange.
The BVI is ahead of most with these regulatory systems and international cooperation initiatives. Companies incorporated in the BVI must comply with rigorous customer due diligence and know-your-customer checks, and enhanced customer due diligence for persons identified as politically exposed persons (PEP).
The FATF, the OECD and the EU and other bodies have assessed and recognized the BVI as compliant with the global standards established for anti-money laundering, to counter terrorist financing and to stop tax evasion.
In spite of the important role in the global economy and its robust regulatory regime, the BVI like other regional international financial centres, continues to suffer from an increasingly risk-averse global banking environment that has categorized our jurisdictions as high risk, resulting in discriminatory policies being levied on our corporate service providers and their clients doing or trying to do business facilitated by the jurisdiction. Companies need bank accounts to do global business. The inability to open bank accounts and to engage in other banking business has severely curtailed business growth, especially in the last six years.
With little transparency in how these banking de-risking policies are established or administered, it has been challenging to address the cause of the underlying concerns and to provide remedial actions to alleviate the burdens being put on our financial services industry. With only seven* (check) banks (the regulator has approved only one banking license in the last 20 years), the BVI is not a banking centre per se, but still relies on the banking infrastructure to engage in its global business.
Our trust and corporate service providers are being outright denied services or are being indiscriminately charged exorbitant fees in the tens of thousands of dollars to do basic banking business for their clients. The fees are applied and deducted with no explanation and no recourse. The banking situation critically impacts our economic vulnerability and further impedes and threatens our ability for economic recovery from the devastating effects of the 2017 hurricanes.
We continue to invest heavily in our infrastructure to thwart financial crime and to actively build walls to prevent those involved in nefarious activities from finding haven in our jurisdiction. Our robust regulatory systems and the stamps of approval by the international standard setters, such as the Financial Action Task Force, should provide the necessary assurance that banks require to stop de-risking from our jurisdictions and to allow correspondent banking relationships to continue and to be established with banks in our jurisdictions.
We therefore call on the international banking community to stop de-risking and to allow us to continue to play our vital role in the global economy, through the use of our Business Companies, which for 35 years have been a conduit to facilitate cross border trade, investment and business.