The beginning of a new year always provides a moment for reflection on the previous 12 months as well as looking toward the year to come, and 2009 was certainly an interesting and transitional year for the financial services industry. The financial crisis that rocked the global economy to the core has impacted us all, and the actions of governments and regulators have added to the pressure on smaller financial centres like the British Virgin Islands.
As an international finance centre, upholding our reputation and meeting international standards in the way we do business has always been a key part of our strategy to keep our competitive edge. We have therefore welcomed the scrutiny of the international community and the resulting initiatives, since the BVI has long maintained robust regulatory standards.
One of the most significant events of 2009 was the meeting of the G20 countries, whose focus included the need for increased transparency in tax matters and the new standards for exchange of information introduced by the Organization for Economic Co-operation and Development.
The OECD drew up a new three-tiered system where jurisdictions with 12 tax information exchange agreements (Tieas) were considered to have ‘substantially’ implemented the internationally agreed tax standards and placed on a ‘white list’.
Today, the BVI is firmly on the OECD white list, having signed 17 Tieas, and it will continue to meet international standards set by the OECD, the European Union and others. We will work tirelessly to protect and enhance the BVI’s reputation as a centre for excellence. But more importantly, the BVI will continue to show that whatever their size or location, reputable and well-run international finance centres make a valid and important contribution to the global economy.
A number of reports published over the last year have examined the role of offshore jurisdictions in the financial crisis and focused on their suitability to continue to play a role in the international financial community in the future.
One high-profile report was commissioned by the UK government on its crown dependencies and overseas territories, including the BVI, and conducted by Michael Foot. While the Foot Report highlighted certain areas in which jurisdictions including the BVI need to continue to develop, its findings were positive about the role of jurisdictions such as the BVI, concluding that the UK was better off as a consequence.
Meanwhile, a report by Professor James R. Hines from the University of Michigan on behalf of the Society of Trust and Estate Practioners concluded that offshore jurisdictions such as the BVI contribute strongly to investment, employment and the efficient functioning of markets and government policies in other countries.
These endorsements of the role played by offshore jurisdictions are certainly encouraging. However, given the legal and regulatory changes currently underway throughout the world, other factors are also likely to be relevant in the future in determining whether offshore jurisdictions such as the BVI will continue to play an important role in the international financial community.
The BVI has been working hard to ensure it has in place all the legislation and regulations required to enable it to remain an important member of this community. While it may be small in terms of physical size and population, its role within the global financial system is disproportionately large.
Sherri Ortiz is executive director of the British Virgin Islands International Finance Centre