British Virgin Islands news: UK court rules against “serial avoidance promoter”

The BVI Beacon reports:

“A United Kingdom court has ruled against a man who allegedly promoted a massive “scheme” wherein UK bondholders transferred earnings to VI-registered companies to avoid paying tax. The UK’s Court of Appeal recently ruled against Matthew Jenner, who operates the UK-based firm NT Advisors. Her Majesty’s Revenue and Customs, which sued Mr. Jenner to stop the strategy, claims that the ruling will save taxpayers more than $163 million, according to the UK publication Professional Adviser.”

The International Adviser website adds:

“HMRC said the “complex” scheme…involved transferring millions of pounds of UK government bonds, known as gilts, backwards and forwards to the British Virgin Islands to manufacture an unwarranted tax deduction of £1.2m. The Court of Appeal said the scheme was specifically designed to avoid tax.”

British Virgin Islands: Recent visit by high-level delegation from Shenzhen cast in new light

There seems to have been no reaction or coverage yet in the British Virgin Islands media of yesterday’s revelations by the ICIJ that key members of China’s elite control offshore companies in BVI.

However, the ICIJ reports do cast a new light on some parts of Premier Orlando Smith’s 2014 budget speech from last week:

– “As well, Madam Speaker there is no better manifestation of our forward leaning vision for economic growth, than last week’s very successful visit to the Territory of a high level delegation from Shenzhen. Shenzhen is one of the wealthiest cities in China. That visit Madam Speaker, was a direct result of opening the office in Hong Kong. After more than thirty years of providing financial services to China, during the visit we moved to the next level by signing a Memorandum of Understanding to strengthen our relationship with Shenzhen.”

– “Madam Speaker, we have established a visible presence in the Asia/Pacific region, by opening the Hong Kong Office, further extending our footprint and positioning ourselves to better serve our customers and establish new relationships in this region. At least 40% of our financial services business comes from Asia and we are hoping to see this increase as a result of our presence there.”

– “Madam Speaker a significant part of the success of the BVI and the Government’s ability to provide the services it does today rests with the success of our financial services industry. This industry has faced challenges in the past year, and though I remain optimistic, it is clear that in this sector we have some hurdles to overcome if we intend to remain competitive. We will not, however, compromise on our reputation of a well regulated jurisdiction.”

The budget speech until a few hours ago was available for download here as a pdf, as that link is now broken it is here.

British Virgin Islands: Upcoming conference on competitiveness to discuss future of financial sector

Tomorrow, January 15th 2014, the fourth annual BVI Business Outlook conference will look at the competitiveness of the BVI’s economy, reports the BVI Beacon.

With the theme “Taking our game to the next level”, speakers include the premiers of BVI and Bermuda, the chief minister of Gibraltar and representatives of KPMG and PWC, as well as a PR specialist who works in “media choreography”.

A look at the conference program shows that there will be sessions on financial services, tourism, public-private partnerships, education and training, and “smart government”.

Another website has detail on the topics to be covered in the financial services session:

• Global Wealth Management – New opportunity?
• Doubling Down on Asia
• Emerging Markets
• Cybersecurity – Lessons from the DATA DUMP (almost certainly a reference to Offshore Leaks)
• Global Regulatory Changes – Keeping Up

Richard Branson was a keynote speaker at a former Business Outlook conference.

British Virgin Islands: Latest data confirms downward trend in company incorporations

Incorporations in the British Virgin Islands continue their decline, according to the most recent data from the BVI Financial Services Commission.

While company registrations are recovering and already above 2008 levels in other offshore jurisdictions, the 21% fall year-on-year in the third quarter of 2013 means the BVI maintains a downward trend.

Quarterly BVI incorporations, year-on-year % changes

Source: based on data from the BVI Financial Services Commission

It seems the fallout from Offshore Leaks continues. Despite the declining numbers, however, BVI still registered over 40.000 companies in the first three quarters of 2013  and “continues to dominate offshore new company registration activity by volume” as noted by a recent offshore service provider report.

Offshore provider: company registrations recovering from recession, total now 5% above 2008 levels

Offshore service provider Appleby yesterday published a report (pdf) with statistics on company registrations in Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey and Mauritius. All of these jurisdictions are in the top 20 on the 2013 Financial Secrecy Index except for the Isle of Man, ranked 34th.

“As the global economy appears to be stabilising, the company registration data reveals that levels of new company registrations in several jurisdictions have accelerated following a faltered growth pattern during the second half of 2012.”

“In the first half of 2013 there were 38,416 new offshore company incorporations in total. Although this represented a small decrease of 3% on the preceding six months in 2012, this was primarily due to a seasonal decline in incorporations in the British Virgin Islands (BVI), which has a disproportional effect on the total figures. Elsewhere, with growth at around 8-9%, most offshore jurisdictions are close to growth levels seen in onshore comparators the UK and Hong Kong. The UK is, as we would expect, leading this growth with an 11% increase.”

Looking a bit closer at the data in the report, it would have made sense to also compare numbers for the first half of 2013 with the same period in 2012 rather than just with the second half.  But this would have shown either a 9% fall year-on-year if BVI is included, or a slight fall of 0,3% if BVI is excluded, which doesn’t fit as well with the upbeat message an offshore service provider wants to be sending to its customer base.

In any case, despite its decline BVI “continues to dominate offshore new company registration activity by volume, and has consistently maintained a six-fold lead ahead of its nearest comparator, the Cayman Islands, and kept up a steady pace of circa 30,000 new companies registered each half year”.

The graph below shows the leading role of the British Virgin Islands among these 7 offshore markets.

New offshore company incorporations, first half 2013

*estimated

Source: based on data compiled by Appleby Global

The report also has statistics on the total number of companies registered in the seven jurisdictions: 674.385 as of the 1st half of 2013, a figure “5% larger than pre-recession 2008”.

British Virgin Islands news: BVI fund sues HSBC subsidiary in Ireland to recover Madoff losses

Today it is exactly 5 years since Bernard Madoff’s sons went to the authorities to tell them about their father’s massive Ponzi scheme. Offshore tax havens played a key role in his fraudulent investments, as was reported by the Tax Justice Network and the New York Times, among others.

Five years later, funds operating in secrecy jurisdictions are still trying to clean up the mess.

Last week the BVI Beacon reported:

“A Virgin Islands-registered “feeder fund” that funneled clients’ money into Bernie Madoff’s $65 billion Ponzi scheme is suing an Irish subsidiary of HSBC bank for $539 million, alleging that the bank breached an agreement by not carrying out adequate due diligence on Mr. Madoff.”

“The fund, Defender Ltd., filed the suit in an Irish court Monday against the Ireland-registered HSBC Institutional Trust Services Incorporated.”

“However, Irving Picard, the US trustee liquidating BLMIS [Bernie L. Madoff Investment Securities], has previously alleged that Defender and affiliate entities that did business in the name of the Reliance Group also ignored warning signs that Mr. Madoff was running a Ponzi scheme.”

Full story at bvibeacon.com and the Independent (Ireland).

British Virgin Islands news: Company incorporations show “continued decline”

The BVI Beacon reports that company incorporations in the British Virgin Islands (FSI rank: 20) show a “continued decline”.

“Company incorporators in the Virgin Islands formed 29,144 companies during the first six months of 2013, about 400 fewer than were formed in the first six months of 2012.”

“Incorporation figures declined nearly 18 percent during the second quarter of 2013 compared to the same period during the previous year.”

The article explains that incorporations “have yet to recover fully after suffering a sharp drop from 2007 highs due to the global slowdown in economic activity.”

The incorporation figures are also available in a statistical bulletin on the British Virgin Islands Financial Services Commission website, and in fact show an accelerating decline, from -7% year-on-year in the first quarter of 2013 to -18% year-on-year in the second quarter.

In April the first articles in the Offshore leaks series by the International Consortium of Investigative Journalists were published, uncovering the identities of thousands of previously anonymous owners of BVI registered companies.

According to the statistical bulletin, as of 30 June 2013 there were 457,151 active incorporated companies in the British Virgin Islands (population 30,000).

Cayman Islands: Licensing fee for hedge funds proposed for 2014

(via Compass Cayman) During the presentation of the 2014 budget, the Cayman Islands government proposed

” … the implementation of a licensing and registration fee for hedge fund directors whose investment funds are registered in the Cayman Islands. [Finance Minister] Mr. Archer said that revenue stream was delayed during the last government budget to allow “for proper consultation with the financial services industry.”

“Premier Alden McLaughlin said the regulatory measures aimed at hedge fund directors had been envisioned for some time as part of Cayman’s efforts to comply with international standards for transparency within the financial services industry; an industry that currently accounts for more than half of all local government revenues.”

“Cayman cannot stand alone against this global tide,” Mr. McLaughlin said, adding that participation in international reporting initiatives would “come at a cost.”

“But this is necessary and indeed inevitable as the alternative would surely have brought us ruin.”

In related news, the BVI Beacon reports that the Caribbean Community (Caricom) has formed “two committees to create a unified response to revive the Caribbean’s stagnant economies.

“At a meeting in Port of Spain, Trinidad, on Sept. 17, the leaders of 15 Caricom members agreed to form a “Commission on the Economy” that will focus on regional strategies for revival, according to Barbados Prime Minister Freundel Stuart, who will lead the new group.”

Reducing economic dependence on the financial services sector will be key for the political sustainability of any transparency reforms in Caribbean secrecy jurisdictions.

BVI news : South Korea to collect 64m USD in tax thanks to Offshore leaks; public talk on FATCA

(via Bvi Beacon)

South Korean tax officials to collect $64m after VI data leak

“Months after a massive data leak made public the names of some Virgin Islands company owners, South Korea’s tax agency has ordered 11 of the country’s citizens to pay more than $64 million in overdue taxes.”

FATCA Talk : During a public meeting last week Doug Harrell, a consultant for KPMG, discussed the effects  that the United States’ Foreign Accounts Tax Compliance Act will have on the Virgin Islands. According to the article, the BVI government hired KPMG “to better understand individuals’ obligations and the ramifications for non-compliance, in addition to highlighting those persons who may be exempt from reporting under FATCA”

23rd Oxford Offshore Symposium: Notes from a parallel universe

Over 5 days in early September this year, participants in the 23rd Oxford Offshore Symposium enjoyed presentations on topics such as “hybrid entities” and “how international financial centres can continue redefining and re-engineering themselves” followed by dinners of “fillet of beef wellington and fruits of the forest brulee”.

Among the participants was the director of the British Virgin Islands Financial Services Commission. The programme included sessions with titles such as “The legitimacy of tax planning” which asked:

“As governments continue to blur the distinction between tax avoidance and tax evasion, and even between tax planning and money laundering, is the perceived right of every citizen legitimately to minimise the amount of tax he or she pays being eroded?  Is there any clear guidance on what is acceptable tax planning in today’s global environment?”

A full review of the event is available on the Offshore Investment site here, below are a few highlights:

– “The first speaker of the day, Kristin Konschnik, Partner and Head of Withers Voluntary Disclosure Practice in London broached the subject of the Foreign Account Tax Compliance Act.  She explained its complex provisions and developments in relation to Intergovernmental Agreements with ease.  A panel discussion followed and Kristin was joined by Richard Cassell, Andrew De La Rosa and Dr. Terry Dwyer to contemplate: extra-territorial regulation and globalisation – what does it all mean?”

– “After morning coffee, Robert Mathavious, Managing Director/Chief Executive Officer of the British Virgin Islands Financial Services Commission offered his observations, from his vantage point in the world’s leading company formation jurisdiction, on the demands of the international standard setters and how international financial centres can continue redefining and re-engineering themselves and their financial services product offerings to show that they are compliant with these continually evolving standards.”

– “Chairman Nicholas Jacob, a specialist in family governance and tax and estate planning for wealthy families delivered a very impactful presentation on the precision balancing act of tax planning and the increasingly blurred lines between tax avoidance and tax evasion.”

– “The final lecture of the day was delivered by Richard Hay who tackled the very topical subject of tax information exchange and proffered his views on riding the transparency tidal wave.”

– “Guests made their way, for the last time, to the Mansell Room for the Closing Dinner.  After almost a week in the College, the Group had bonded greatly and enjoyed an intimate feast of roasted figs, gorgonzola and peashoots followed by fillet of beef wellington and fruits of the forest brulee served with the finest red and white wines and soft drinks.”