Tue. Jul 5th, 2022


Journalists are about as welcome in the British Virgin Islands as hurricanes: the damage they cause can be comparable and may take longer to repair. Locals recall reporters posing as dodgy oligarchs, trying to trick company agents into setting up offshore entities to hide their ill-gotten gains.

Car number plates on the islands bear the slogan “Nature’s Little Secrets” – a reference to the BVI’s fabled turquoise seas and pristine white sandy beaches, rather than to financial sleight of hand.

But the offshore jurisdiction is internationally famous for financial secrecy – or, as residents prefer to call it, confidentiality. “And what is wrong with confidentiality?” one of the top local lawyers asked, speaking (of course) in private. “Would you like your personal financial affairs to be made public?”

An archipelago of 60-odd small islands strung like pearls around a corner of the eastern Caribbean, the BVI is home to just 30,000 people and around 400,000 offshore companies controlling an estimated $ 1.5tn of assets. Financial services are the lifeblood of the economy but the islands are also a global yachting capital, as evidenced by the flotilla of luxury boats in the marina.

Invented by savvy islanders in the 1980s, the cheap, easy-to-create offshore corporation made the BVI a major financial center in a couple of decades and lifted living standards far above those of its Caribbean neighbors. There are no regrets locally for what is seen as an entrepreneurial success story.

“We have made great progress,” says Bishop John Cline of New Life Baptist Church, recalling his early childhood in the 1970s without electricity, doing schoolwork by kerosene lamp and feeding pigs. “We have seen the quality of life and the standard of living of BV islanders greatly improved through financial services.”

Most islanders now live in comfortable homes and many drive American pick-up trucks. Few sympathize with global campaigns for tax justice or public disclosure of company beneficial ownership, especially when waged from countries with financial disclosure issues of their own, such as the UK and US. Although the BVI’s corporations control huge amounts of international wealth, very little of that money ever reaches the capital Road Town. The torrent of dollars from the global economy gushes through the BVI each year leaving barely a trace. The entire banking system of the territory holds just $ 2.5bn.

Wander the streets and you might think the offshore financial industry is a mirage. Unremarkable low-built office blocks and shops are reminiscent of modern American suburbia. Standing outside the modest, light blue, three-storey Akara building, it is hard to believe this was the local office of Mossack Fonseca, the law firm at the center of the Panama Papers scandal. Of the 214,488 offshore companies which were exposed in the leak, more than half were in the BVI.

Mossack was fined $ 440,000 by the BVI in 2016 for regulatory breaches and closed two years later. The authorities point to this as an example of tough enforcement. “We facilitate global trade and investment, but we are also co-operative in fighting international financial crime,” says Elise Donovan, head of BVI Finance. Impropriety, officials explain, does not occur on the BVI. Offshore companies have no tax to pay here. If taxes fall due elsewhere, they should be honored. If money was stolen, it was not misappropriated in the BVI; crimes should be prosecuted where they were committed.

A slightly old-fashioned sense of manners pervades the islands. Politeness and respect are highly valued, churchgoing is common and Premier Andrew Fahie likes to start work meetings with a prayer. There are jarring notes: drug trafficking is on the rise and the British government last year opened an inquiry into corruption, abuse of office or “other serious dishonesty” among public servants in recent years. Its report is due by mid-April.

And what do BV Islanders make of the Panama Papers? “Industrial-scale hacking and data theft,” mutters one lawyer, waving aside arguments about the public interest. “What is good about that?”

michael.stott@ft.com



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