General climate and recent developments
State of legal development
In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?
The British Virgin Islands is an overseas territory of the United Kingdom and one of the world’s premier financial hubs for corporate domicile. To protect its global reputation, the BVI anti-money laundering (AML) and terrorist financing regime is cutting edge in terms of both the law and the authorities’ approach to enforcement and cooperation with overseas regulators. In addition, the United Kingdom supplements the AML and terrorist financing regime in the British Virgin Islands in a number of important ways, particularly in the context of terrorist financing and sanctions legislation.
Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?
Notable recent developments include:
- the enactment of the Beneficial Ownership Secure Search System Act 2017, which established a networked register of beneficial ownership information for BVI companies in order to implement the framework exchange of notes agreement entered into with the United Kingdom in April 2016;
- the enactment of the Criminal Justice (International Cooperation) (Enforcement of Overseas Forfeiture Orders) Order 2017, which updated and repealed equivalent measures from 1996 in order to provide a cutting-edge framework for cooperation in the processing of forfeiture orders between the British Virgin Islands and overseas courts, police forces and other regulatory authorities;
- the enactment of the Proceeds of Criminal Conduct (Enforcement of External Confiscation Orders) Order 2017 and the Drug Trafficking Offences (Enforcement of Overseas Confiscation Orders) Order 2017, which cumulatively updated and expanded the BVI regime for the enforcement of confiscation orders issued by overseas courts and authorities;
- the enactment of the Terrorist Asset Freezing Etc Act 2010 (Overseas Territories) (Amendment) Order 2017, which enhanced cooperation powers between the United Kingdom and the British Virgin Islands in listing persons for the purposes of freezing orders under the terrorist financing regime; and
- the strengthening of the obligations on BVI institutions that rely on eligible introducers under the Anti-money Laundering and Terrorist Financing (Amendment) Code of Practice 2015 and the Anti-money Laundering (Amendment) Regulations 2015.
Legal and enforcement framework
What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?
The key legislation in this regard is:
- the Proceeds of Criminal Conduct Act 1997 and its subsidiary legislation:
- the Anti-money Laundering Regulations 2008; and
- the Anti-money Laundering and Terrorist Financing Code of Practice 2008;
- the Drug Trafficking Offences Act 1992;
- the Terrorism (United Nations Measures) (Overseas Territories) Order 2001, as supplemented by the Terrorist Asset Freezing Etc Act 2010 (Overseas Territories) Order 2017; and
- the Criminal Code 1997, which criminalises fraud on a statutory basis.
To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?
The legislation applies to both individuals and corporations. Corporations found in breach of the heightened know-your-customer obligations under the Anti-money Laundering and Terrorist Financing Code of Practice may be subject to an expedited administrative penalties enforcement regime. The BVI regulator is not reluctant to impose administrative penalties when, for example, breaches in the systems and controls of institutions have been identified.
Court prosecutions under the anti-money laundering (AML) and terrorist financing regime are rare, but still occur, as was the case in R v IPOC International Growth Fund Limited (BVIHC 12/2008).
The AML legislation is extra-territorial in the sense that underlying criminal activity that occurs outside of the British Virgin Islands may be considered relevant criminal conduct for the purposes of the predicate offences that arise under the AML and terrorist financing regime.
Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?
Yes. The British Virgin Islands is an active participant in Financial Action Task Force-inspired initiatives and a member of one of its regional subdivisions, the Caribbean Financial Action Task Force (CFATF). As a CFATF member, the BVI AML and terrorist financing regime is subject to ongoing inspection and review.
The Financial Investigation Agency, the British Virgin Islands’ financial intelligence unit, is a full and active member of the Egmont Group of Global Financial Intelligence Units and thus maintains constant dialogue with law enforcement authorities in other Egmont jurisdictions.
In addition, the British Virgin Islands has signed numerous agreements (both on its own and through the United Kingdom) providing for:
- the extradition of individuals;
- cooperation with Interpol;
- cross-border assistance in criminal investigations and prosecutions; and
- the implementation of EU restrictive measures and the UN sanctions regime.
Which government authorities enforce the law on anti-money laundering, terrorism financing and fraud, and what is the extent of their powers?
Enforcement of the AML regime is split between numerous competent authorities, including:
- the Financial Investigation Agency;
- the Financial Services Commission;
- the attorney general;
- the director of public prosecutions;
- the Royal Virgin Islands Police Force;
- the BVI courts, ranging from the Magistrates Court through to the superior courts of record; and
- the Joint Anti-money Laundering and Terrorist Financing Advisory Committee.
These competent authorities have various administrative, quasi-judicial and judicial powers at their disposal, including the ability to levy criminal penalties and custodial sentences on individuals and corporations.
Enforcement of criminal fraud is undertaken by:
- the director of public prosecutions;
- the Royal Virgin Islands Police Force; and
- the BVI courts.
Statute of limitations
What is the limitation period for bringing actions in relation to money laundering, terrorism financing and fraud offences?
In terms of formal court-based prosecutions, there is no limitation period for offences relating to money laundering, terrorist financing and fraud.
Although there is no legal limitation in the context of the administrative penalties regime, in practice, the regulatory authorities will not enforce contraventions that occurred two or more years previously.
How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?
‘Money laundering’ is defined by reference to a number of offences, as outlined in the next section. In general terms, money laundering covers all activities relating to the proceeds of criminal conduct.
‘Terrorism financing’ is not expressly defined in the British Virgin Islands. However, according to the International Convention for the Suppression of the Financing of Terrorism 1999, the definition and primary objective of ‘terrorism’ is “to intimidate a population, or to compel a Government or an international organisation to do or abstain from doing any act”.
‘Fraud’ is defined under the Criminal Code as:
- obtaining a pecuniary advantage by deception (Section 219); or
- dishonestly dealing, concealing or falsifying any account or record or document made or required for an accounting or other purpose (Section 221).
In addition, fraud may mean that theft has been committed. Under Section 203 of the Criminal Code, ‘theft’ is defined as the dishonest appropriation of property belonging to another with the intent of permanently depriving the other. Further, common law offences, such as conspiracy to defraud, may also be triggered. These laws are largely determined by English common law, the seminal authority being Scott v Metropolitan Police Commissioner ( AC 819).
Principal and secondary offences
What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?
Under the Proceeds of Criminal Conduct Act 1997 and the Drug Trafficking Offences Act 1992, the key money laundering offences are:
- assisting another to retain a benefit of criminal conduct;
- acquiring, possessing or using the proceeds of criminal conduct;
- concealing or transferring the proceeds of criminal conduct;
- failing to report a suspicion of money laundering; and
- prejudicing an ongoing investigation into money laundering (ie, tipping off).
Relevant businesses – such as credit institutions, financial institutions and professional firms – are subject to numerous heightened anti-money laundering (AML) obligations. These are principally set out in the Anti-money Laundering and Terrorist Financing Code of Practice 2008 and the Anti-money Laundering Regulations 2008.
As far as terrorist financing is concerned, the key offences are set out in the Terrorism (United Nations Measures) (Overseas Territories) Order 2001. Under the order, it is an offence for any person to invite another to provide or receive funds with the intention of using them, or with the knowledge that they may be used, for the purpose of terrorism. This includes wilfully providing or making funds available – by any means, whether directly or indirectly – for the purposes of terrorism. Finally, it is an offence to fail to disclose knowledge or suspicions of terrorist financing to the authorities.
In terms of fraud, the key offences are those set out in in the preceding section.
How are predicate offences defined?
Predicate offences are those set out in the preceding section in relation to the Proceeds of Criminal Conduct Act and the Drug Trafficking Offences Act. The British Virgin Islands has adopted an ‘all crimes’ approach to predicate offences under its AML and terrorist financing regime (although foreign crimes which are not crimes in the British Virgin Islands are excluded).
De minimis rules
What de minimis rules apply to money laundering, terrorism financing and fraud offences?
No de minimis rules apply to money laundering, terrorism financing and fraud offences in the British Virgin Islands.
Penalties and plea agreements
What penalties may be issued for money laundering, terrorism financing and fraud offences?
A person who commits an offence under Proceeds of Criminal Conduct Act 1997 or the Drug Trafficking Offences Act 1992 is liable, on summary conviction, to up to two years’ imprisonment, a fine of up to $250,000 or both. On conviction on indictment, the offender may be sentenced to up to 14 years’ imprisonment, a fine of up to $500,000 or both.
Convictions for fraud under the Criminal Code may result in up to 10 years’ imprisonment on indictment.
Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?
Yes. If a plea agreement is entered, the director of public prosecution has discretion as to whether to accept it in exchange for a reduced offence or reject it.
What defences are available in your jurisdiction to parties accused of money laundering, terrorism financing or fraud?
The following defences may arise under the anti-money laundering and terrorist financing regime:
- A party may have a defence if it:
- disclosed the act concerned to the Financial Investigation Agency (FIA) before performing it; and
- perfomed the act with the FIA’s consent and in aid of a law enforcement function (in rare cases, this may also extend to situations where disclosure is made after the fact).
- A defence may arise where a party can show that it acquired, transferred, used or possessed the property for adequate consideration.
- A statutory defence is created where a party reports a suspicious transaction to the FIA. A party may also have a defence where it can show that it did not know or suspect and had no reasonable grounds to know or suspect that another party was engaged in money laundering.
The terrorist financing regime contains similar consent and notification defences.
Record keeping, disclosure and compliance
Record-keeping and disclosure requirements
What record-keeping and disclosure requirements apply to companies and relevant individuals under the anti-money laundering, terrorism financing and fraud legislation?
Under the Anti-money Laundering Regulation’s 2008, where a relevant person is required under the regulation to verify a person’s identity, the relevant person must establish and maintain a record in the British Virgin Islands which:
- indicates the nature of the evidence obtained; and
- comprises a copy of the evidence or, where this is not reasonably practicable, contains such information as would enable a copy of the evidence to be obtained.
Regulation 9 of the Anti-money Laundering Regulations requires that where a relevant person is required under the regulation to verify a person’s identity, the relevant person must maintain a record of:
- all transactions carried out by or on behalf of that person (eg, records sufficient to identify the source and recipient of payments from which investigating authorities will be able to compile an audit trail for suspected money laundering);
- all reports made by it to the Financial Investigation Agency (FIA); and
- all inquiries relating to money laundering received by it from the FIA.
A record of suspicious activity reports filed with the FIA must be maintained as a register.
What internal compliance measures are required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?
Companies are advised to:
- establish internal systems and controls;
- effect customer due diligence measures;
- practice good record keeping; and
- provide employee training.
What customer and business partner due diligence is required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?
Can private actions be brought in your jurisdiction for damages arising from money laundering, terrorism financing or fraud? If so, who may file such actions and what filing procedures apply?
Yes. Any private person, so long as they have standing, can file an action based on a cause of action for damages in the BVI courts.
How are damages calculated?
Damages are calculated to put the aggrieved party in the position that it would have been in had the breach not occurred.
What other remedies may be awarded to successful claimants?
Apart from the common law award of damages, other equitable remedies might apply, such as:
- an injunction;
- an account of profit;
- a rescission; or
- a rectification.