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British Virgin Islands

Last updated: 11/01/2010

CENTRAL AUTHORITY FOR REPORTING

The Financial Services Commission (FSC) is the designated national Financial Intelligence Unit (FIU) for the British Virgin Islands (BVI).

The FSC is involved in investigating, monitoring, detecting and preventing financial crime, as well as assisting in the prosecution of crime. It also provides guidance on anti-money laundering for regulated persons.

OTHER ANTI-MONEY LAUNDERING REGULATOR(S).

ARE LAWYERS COVERED BY MONEY LAUNDERING LEGISLATION?

The Anti-Money Laundering Regulations (AMLR), 2008 focuses on regulating the activities of “regulated persons”. Lawyers are only deemed “regulated persons” whenever they conduct transactions that fall within the category of “relevant business”.

Therefore, according to section 2(1)(i) AMLR, lawyers conduct “relevant business” whenever they are involved in transactions concerning one of the following and must comply with the AMLR: 

  1. Buying and selling of real estate;

  2. Management of client money, securities or other assets;

  3. Management of bank, savings or securities accounts;

  4. Organisation of contributions for the creation, operation or management of companies;

  5. Operation and Management of legal persons or arrangements; and

  6. Buying and selling of business entities.

As regulated persons, lawyers are required to:

  1. Maintain identification, records, internal controls and communication procedures at a level appropriate for the purposes of forestalling and preventing money laundering;

  2. Educate their employees on the provisions of the money laundering regulations in the BVI and the measures listed in 1 above;

  3. Provide training to employees, so that they can clearly identify and know how to deal with high risk clients.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

Main Legislation

Secondary Legislation

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Generally, lawyers visiting the British Virgin Islands to undertake work, for example a commercial trial must be called to the Bar in the BVI. Practically, this is done before the trial starts. Having been called to the Bar, the visiting lawyer will fall under the ambit of the anti-money laundering regulations. The obligations would be equivalent to those borne by a resident BVI lawyer. 

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

There is no guidance other than the above mentioned legislation. The Financial Services Commission Act, 2001 in section 34, however, requires regulated persons to appoint a Compliance Officer who shall be responsible for establishing and maintaining a manual of compliance to be followed by all members of staff.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

The BVI Bar Association does not enforce anti-money laundering regulations. The BVI Bar Association’s constitution is silent on the issue.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

The consolidated text of the Anti-Money Laundering and Terrorist Financing Code of Practice (the “Consolidated Code”), require lawyers to conduct client due diligence when:

  1. Establishing a business relationship;

  2. Effecting a one-off transaction (including a wire transfer) which involves funds of or above US$15,000 or such lower threshold as lawyer may establish;

  3. There is a suspicion of money laundering or terrorist financing, irrespective of any exemption or threshold that may be referred to in the Consolidated Code; and

  4. The entity has doubts about the veracity or adequacy of previously obtained customer identification data.

According to section 19 of the Consolidated Code, the process of conducting the client due diligence entails:

  1. Inquiring into and verify the identify of the client;

  2. Obtaining information on the purpose and intended nature of the business relationship;

  3. Using reliable evidence through such inquiry as is necessary to verify the identity of the applicant for business or intended customer;

  4. Utilising such measures as are necessary to understand the circumstances and business of the applicant for business or the intended customer, including obtaining information on the source of wealth and funds, size and volume of the business, and expected nature and level of the transaction sought; and

  5. Conducting where a business relationship exists, an ongoing monitoring of that relationship and the transactions undertaken for purposes of making an assessment regarding consistency between the transactions undertaken by the customer and the circumstances and business of the customer.

Pertinently, section 4 of the Anti-Money Laundering Regulations, 2008 (AMLR) provides further guidance on the process of identifying the client. The AMLR provides that the process should commence as soon as initial contact is made. This requires the lawyer to commence the due diligence exercise promptly and request “satisfactory evidence of identity” from the client.

The verification procedure is elaborated on in the Consolidated Code. Effectively, the following is required in order to comply with the client due diligence requirements:

  • Individuals. The full legal name (including any former name, other current name or aliases used); gender; principal residential address and date of birth are required;

  • Legal Persons. The full name; the official registration or other identification number; the date and place of incorporation, registration or formation; the address of the registered office in the country of incorporation of the legal person and its mailing address, if different; the principal place of business and the type of business engaged in; and identity of each director and any shareholder who owns at least ten percent of the legal person must be obtained.

  • Companies. Required are the memorandum and articles of association; resolution, bank mandate, signed application form or any valid account-opening authority, including full names of all directors and their specimen signatures, signed by no fewer than the number of directors required to make a quorum; copies of powers of attorney or other authorities given by the directors in relation to the company; and a signed director’s statement as to the nature of the company’s business.

  • Partnerships. The partnership agreement; the full name and current residential address of each partner; in the case of the opening of an account, the postcode and any address printed on a personal account cheque tendered to open the account; and the date, place of birth, nationality, telephone number, facsimile number, occupation, employer and specimen signature of each partner or other senior officer who has the ability to give directions, sign cheques or otherwise act on behalf of the partnership are required.

Notably, the AMLR in section 6 (3) limits the extensive client due diligence exercise requirements outlined above, for one-off transactions under US$10,000 (or equivalent in another currency).

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Pursuant to the AMLR, the BVI follows a risk based approach to client due diligence requirements by lawyers.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

Section 20 (4) of the Consolidated Code requires enhanced due diligence measures to be taken where the:

  1. Client is a politically exposed person;

  2. Business activity, ownership structure, anticipated, or volume or type of transaction that is unusual, having regard to the risk profile of the applicant for business or customer; or

  3. Person is located in a country that is either considered or identified as a high risk country or that has international sanctions, embargos or other restrictions imposed on it.

Additionally, under Article 4(2)(e) AMLR, enhanced due diligence measures exist for transactions where the lawyer is not engaged in a face-to-face relationship with his client or any third party. Note however, that the Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2009 reduces the level of verification required for non-face to face business (discussed below).

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Section 6 AMLR, provides simplified client due diligence procedures for the following:

  1. A regulated person, who is defined in section 2(1) AMLR s a person licensed or registered to carry on a relevant business;

  2. A foreign regulated person;

  3. A legal practitioner or an accountant who belongs to a professional body whose rules of conduct or practice embody legal requirements for the detection and prevention of money laundering that are consistent with the requirements of the CFATF Recommendations or FATF Recommendations and the legal practitioner or accountant is supervised by his professional body for compliance with those requirements.

The exception in section 6 AMLR does not apply when the lawyer knows or suspects that the client is engaged in money laundering.

The Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2009 reduces the level of verification required for non-face to face business. Essentially, lawyers are not required to conduct full client due diligence (as outlined above) if the client is assessed as being “low risk”. This amendment can be found in sections 19 and 29 of the Consolidated Code. Where the client is deemed a “low risk”, any two of the following forms of identification will suffice:

  1. The certificate of incorporation, together with the memorandum and articles of association or equivalent document or, in the case of a partnership, the partnership agreement or equivalent documents;

  2. The latest audited financial statements, provided they are not older than one year prior to the establishment of the business relationship;

  3. Information acquired from an independent data source or a third party organisation that the entity or professional considers is reasonably accepted;

  4. A research of the relevant registry or office with which the legal person is registered; and

  5. Any wire transfer information, where a subscription or redemption payment is effected through a wire transfer from a specific account in a financial institution that is regulated in a jurisdiction which is recognised.

Recognised jurisdictions can be found in the Schedule two of the Consolidated Code. Such jurisdictions are deemed to be a low risk and their citizens doing business with entities in the BVI will be assessed by the low risk criteria.  

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes. The Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2009 allows for an entity or a professional to rely on an introduction made of an applicant for business or a customer. This amendment can be found in section 31(1) of the Consolidated Code.  

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

A lawyer is under a duty to report a suspicious transaction to the firm’s internal Reporting Officer. The Reporting Officer must then assess the situation and report the matter to the Director of Financial Services. A list of suspicious transactions can be found in Schedule three of the Consolidated Code.

Also, the firm’s Compliance Officer must prepare and submit reports to the Director of Financial Services detailing compliance with all relevant money laundering legislations. 

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Attorney/client privilege does not provide a defence to the requirement to report a suspicious transaction.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

Section 8 (1) of the Financial Investigation Agency Act 2003 provides protection to any person, director or employee of a financial or business entity who in good faith transmits information or submits reports in accordance with financial services legislation.

Additionally, section 8(2) states that no civil or criminal action may be brought nor any professional sanction taken against any person who, or against any director or employee of a financial or business entity that, in good faith transmits or submits reports to the Financial Investigation Agency.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

The Reporting Authority is neither required nor authorized to give or withhold consent. Lawyers must use their judgment in deciding whether to proceed.

Please see the Financial Services Commission’s Questions and Answers here.  

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Tipping-off is prohibited by section 31 POCCA, which explicitly states that:

  1. If someone knows or expects that any member of the Reporting Authority or other person is acting, or is proposing to act, in conjunction with an investigation which is being, or is about to be, conducted into money laundering; or

  2. If someone suspects that a disclosure has been made to the Reporting Authority, and discloses to any other person information or any other matter whish is likely to prejudice the (proposed) investigation is guilty of the offence of tipping-off.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Not applicable.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

For the purpose of retaining sufficient information on transactions, section 44 of the Consolidated Code requires an entity to take necessary measures to ensure that the records it maintains include the following:

  1. The name and address of the customer;

  2.  In the case of a monetary transaction, the kind of currency and amount involved;

  3. The name and address of the beneficiary to the transaction;

  4. Where the transaction involves a customer’s account, the number, name or other identifier with respect to the account;

  5. The date of the transaction;

  6. The nature of the transaction and, where the transaction involves securities and investment, the form in which funds are offered and paid out;

  7. In the case of a transaction involving an electronic transfer of funds, sufficient detail to enable the establishment of the identity of the customer remitting the funds and compliance with paragraph (c); and

  8. Sufficient details of the transaction for it to be properly understood.

The records must be kept for a minimum of 5 years, or longer if the FSC so require.

Lawyers should also keep up-to-date client due diligence information for high risk clients. Updates should be made at least once every year. Where the client is deemed low risk, updates should be made at least once every three years. The Consolidated Code also requires records to be kept after the verification process has been completed.

The post verification records should indicate:

  1. The steps taken and the evidence obtained in the process of the verification; and

  2. Any exemption granted or relied upon and the reasons for the reliance.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

The Anti- Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2009 allows law firms to outsource certain functions, where doing so would improve compliance with the BVI anti-money laundering regulations.

Outsourcing is permitted where:

  1. It is made pursuant to a written contract, which must be kept by the firm for inspection by the Financial Services Commission;

  2. It is not inconsistent with any anti-money laundering regulations in the BVI;

  3. The work is given to qualified and competent persons in the BVI or a recognised jurisdiction; and

  4. Records are maintained, regularly updated and easily retrievable.

Law firms are able therefore to outsource for example the reporting officer function.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

According to the INSCR Country Reports 2009, from January to June 2008, pursuant to the AMLR, the Financial Services Commission conducted eight on-site inspections and issued four warnings, one advisory, and assessed one fine. However, it is not known how many of these cases relate to lawyers.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The Third Round Mutual Evaluation of the British Virgin Islands by the Caribbean Financial Action Task Force (CFATF) was completed on 22 December 2008. The Report concluded that the BVI is largely compliant with the Financial Action Task Force (FATF) 40+9 Recommendations.

However, some of the areas which were not compliant with the FATF 40+9 recommendations include:

  • The application of simplified or reduced due diligence measures are not limited to countries that the authorities are satisfied have complied with the FATF’s 40+9 Recommendations;

  • The absence of a requirement for account files and business correspondence to be maintained for at least five years following the termination of an account or business relationship;

  • There is no effective system for ensuring lawyers’ compliance with the AML requirements.

Information provided by:

Livia Freeman
Compliance Officer
Appleby Spurling Hunter
Jayla Place, Wickhams Cay I
P.O. Box 3190,
Road Town, Tortola
British Virgin Islands,
VG 1110

Tel: +1 284 494 4742
Fax: +1 284 494 7279
lfreeman@applebyglobal.com  
www.applebyglobal.com  


Resources:

BVI Bar Association.
BVI Association of Compliance Officers.