The British Virgin Islands has enacted legislation to implement a networked database of beneficial ownership interests in companies incorporated or domiciled in the jurisdiction. The database, known domestically as the Beneficial Ownership Secure Search (BOSS) System, is being rolled out so that the British Virgin Islands can comply with its obligations under the April 2016 Exchange of Notes Agreement entered into with the United Kingdom. The agreement modernises the way in which the BVI competent authorities may gain access to beneficial ownership information of BVI companies.

Beneficial ownership information

For years BVI registered agents have been subject to extensive obligations under anti-money laundering legislation to obtain and keep up-to-date information on the ultimate beneficial owners of companies to which they provide services. At the end of 2016 those obligations were further strengthened by requiring registered agents to obtain ultimate beneficial owner information on businesses introduced to them by professional and regulated intermediaries based outside the British Virgin Islands.

Before BOSS's implementation, the government would extend cooperation with competent authorities based overseas, including in the United Kingdom, following the receipt of a legitimate and valid request for information. Typically, this would be a request for ultimate beneficial owner or similar know-your-customer information relating to an ongoing foreign investigation. To comply with the request, the government would issue a notice to a person in the British Virgin Islands assumed to be in possession of the underlying information, usually a registered agent. The recipient would then have a short timeframe in which to comply with the notice, typically between 24 and 48 hours.

How will BOSS work?

Under the BOSS system, registered agents – although no other BVI institutions – must record basic information on certain ultimate beneficial owners of the BVI companies that they administer in the BOSS database. In turn, BVI law enforcement officials – in accordance with the UK Exchange of Notes Agreement and applicable legislative safeguards – may search the system for the ultimate beneficial owner information, in order to exchange it with the United Kingdom. Each BVI registered agent will have and maintain its own database.

Information maintained on each database will be confidential to the registered agent and accessible externally only by specially designated BVI law enforcement officials.

Access to BOSS is permissible only from a physical location in the British Virgin Islands and following a formal request from the BVI competent authorities:

  • the Financial Investigation Agency;
  • the Financial Services Commission;
  • the International Tax Authority; and
  • the Attorney General's Chambers.

The identities of each designated person competent to search the BOSS database will be publicly gazetted in secondary legislation in due course. The competent authorities may request the designated person to search BOSS solely in order to assist the British Virgin Islands in complying with its obligations under the UK Exchange of Notes Agreement. This means that a request would need to originate from the UK authorities before a BOSS search can take place in the British Virgin Islands.

What ultimate beneficial owner information will be stored on BOSS?

Registered agents must enter the following basic information for every ultimate beneficial owner who is a natural person and meets the threshold requirements:

  • name;
  • residential address;
  • date of birth; and
  • nationality.

The threshold requirement for ultimate beneficial owner interests disclosable under BOSS is 25% of the ownership interests (shares or voting rights) in a company. This is in line with the Financial Action Task Force benchmark recommendations and the UK public ultimate beneficial owners register,(1) but represents a relaxation from the 10% threshold under the BVI anti-money laundering regime (ie, the Anti-money Laundering Regulations 2008 and the Anti-money Laundering and Terrorist Financing Code of Practice 2008 (BVI AML legislation)).

In practice, the necessary ultimate beneficial owner information will already be in possession of the registered agent; therefore, it is unlikely that agents will need to vary materially know-your-customer collection procedures with clients or intermediaries.

Exemptions from disclosure

Companies regulated by the Financial Services Commission or whose shares are listed on a recognised stock exchange are out of scope. Subsidiaries of BVI regulated funds and listed companies are also exempt.

For the investment funds industry, this means that all BVI regulated funds and investment managers will fall outside the scope for providing unique beneficial owners information through BOSS. Some private equity funds structured as companies may fall within the requirements, although the 25% threshold means that any requirement to provide information in relation to investors will be limited.

In addition, the definition of 'beneficial owner' is limited to persons with a sufficiently 'fixed' ownership interest in the company. In this way, beneficiaries of a discretionary trust which owns a BVI company may not be considered unique beneficial owners where their interests have not been sufficiently vested by the trustee. This would also be the case for third parties with merely a contractual, as opposed to a proprietary, exposure to the assets or performance of the company.

Security measures

The government has employed top-tier cyber security measures in the deployment of the BOSS system in order to develop a rich yet secure search portal. The standardised database has been developed with the corresponding objective to protect data sovereignty and the security principles of all industry stakeholders. To this end, leading technological methods have been and will be utilised to ensure continued safety, protection and security of information stored on the BOSS system.

For further information on this topic please contact Colin Riegels, Aki Corsoni-Husain, Ayana Hull or Mirza Manraj at Harneys by telephone (+1 284 494 2233) or email (colin.riegels@harneys.com, aki.corsoni-husain@harneys.com, ayana.hull@harneys.com or mirza.manraj@harneys.com). The Harneys website can be accessed at www.harneys.com.

Endnotes

(1) The People with Significant Control Register, maintained at UK Companies House.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.