The IMF staff doesn’t put the conclusion to their report on the British Virgin Islands’ antimoney laundering controls as starkly as the headline to this post does. But its February 27, 330-page assessment of the island nation’s efforts to curb money laundering leaves no doubt the headline is accurate.

The report finds regulatory oversight of the financial sector is sparing at best, and in the rare instance when a violation is detected, the penalty is laughably weak. What seals the deal for those needing a safe place to stash money from corruption, drug dealing, and other financial crimes is the “who cares about others” attitude of the authorities for crimes committed elsewhere.

“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.”

IMF Country Report No. 24/55. British Virgin Islands: Detailed Assessment Report on Anti-Money Laundering And Combatting The Financing Of Terrorism

In other words, if you want to put money you stole from the citizens of your country in our banks or take advantage of our lax approach to verifying who really owns a BVI corporation to keep your country from finding your assets, fine by us. Not our problem.

The “who cares/not our problem” approach starts with the gatekeepers to BVI’s financial system, professionals licensed to establish BVI corporations and trusts for non-islanders. In what is surely the cleverest euphemism ever devised for “willfully ignoring the law,” the report explains that many gatekeepers have a “heterogenous understanding” of their legal responsibilities to verify prospective clients are on the up-and-up.

Gatekeepers with a heterogenous understanding of BVI law is one reason clients wanting to hide stolen assets find BVI such a welcoming jurisdiction. Even more attractive is how little effort BVI puts into enforcing its antimoney laundering laws.

The IMF authors found criminal investigations limited to domestic drug trafficking cases and then just a handful of those (Report p.16, 18). Only one conclusion can be draw from their analysis of the regulation of BVI gatekeepers (known formally as trust and service company providers or TSCPs), banks, and others in the financial sector by the Financial Investigative Agency (FIA) and the Financial Services Commission (FSC). It is worthless. The report finds:

• The supervisory activities of the FSC (particularly, its onsite inspections) were assessed as being inadequate to cover the appropriately elevated risks assessed from the TCSP sector . . .. (p. 192)

• Where penalties are imposed by the FSC, those cannot be considered effective, proportionate, and dissuasive in most cases, and no monetary penalties have been imposed by the FIA (p. 14)

• The VI has not investigated or prosecuted cases of misuse of legal persons and arrangements and are unable to demonstrate that they have applied effective, proportionate, or dissuasive sanctions against legal entities, their beneficial owners, or registered agents (p. 185)

The report is maddening reading for those who remember the Panama Papers. The Papers exposed precisely the same abuses by BVI TCSPs and the same “who cares/not our problem” attitude by BVI authorities (here). The outcry in the press and the pressure from international organizations and governments forced BVI to close the loopholes in its antimoney laundering laws that made it such an inviting place to hide stolen assets. Now comes the IMF report. It finds nothing has changed. BVI’s “who cares/not our problem” attitude remains; enforcement of the new laws be damned.

The cavalier attitude BVI authorities take towards their obligations to uphold the law is not confined to international law. The same is true for BVI domestic law. The latest example of elites’ utter disregard for the rule of law is the U.S. arrest of then BVI premier Andrew Fahie (here). Had it not stepped in, he would likely still be moonlighting as a cocaine smuggler.

Senior BVI officials’ disregard for law of any kind has not gone unnoticed in Whitehall. The islands are a British Overseas Territory, and while, as with other territories, a locally elected parliament is responsible for domestic matters, executive power is formally vested in a Governor appointed by the Crown on the recommendation of the British government. Even before the Fahie conviction, appalled by rampant corruption at the top of BVI’s government, the Governor had appointed a Commission of Inquiry to determine whether “serious dishonesty in relation to public officials may have taken place in the BVI in recent years,” and if so,

“to make recommendations with a view to improving the standards of governance and operation of the agencies of law enforcement and justice.”

Although the Commission charge was to examine domestic crime and corruption, BVI’s interest in remaining a haven for stolen assets did not go unremarked. In explaining why the government was resisting establishment of a corporate register that would allow foreign law enforcement to know who actually, beneficially owns BVI corporations, the Commission fingered the source of BVI’s “who cares/not our problem” attitude:

“the elected Ministers (like their predecessors) appear to have failed even to acknowledge that there are interests in play over and above the short-term financial interests of the BVI. They adopt the approach that any interest of the BVI as they perceive it to be in a devolved [i.e., domestic] area must inevitably trump any other interests…”

British Virgin Islands Commission of Inquiry, Report of The Commissioner The Rt Hon Sir Gary Hickinbottom, Presented to His Excellency John James Rankin CMG, The Governor of the Virgin Islands, 4 April 2022, p. 664.

The Commission’s report, as carefully written, thorough, and damning as the IMF one, concludes that the rot at the top of the BVI government is so ingrained and pervasive, and citizens so oppressed by elite abuse, that the only solution is “a temporary suspension of those parts of the Constitution by which areas of government are assigned to elected representatives” (Commission Report p. 10). In other words, the Commission recommends the British government run BVI from London until such as time as its Augean crime and corruption stable is thoroughly cleansed.

At least for the moment, the United Kingdom has declined to follow the Commission’s recommendation in the hope that a new coalition government can clean up the several areas the Commission found need scrubbing.

Might Whitehall add to the Commission’s list enforcement of the antimoney laundering laws? And might it insist as a condition of keeping its hands off the BVI government that the “who cares/not our problem” attitude of BVI elites be firmly and finally interred?