New Beneficial Ownership regime now implemented by the British Virgin Islands

On July 1, 2017 in the British Virgin Islands (the ‘BVI’) a new legislation – The Beneficial Ownership Secure Search System Act – has been enacted. It is binding all registered agents to build and maintain a beneficial ownership database, access to which would be granted only to a limited number of designated persons and institutions. Moreover, the legislation requires the Government of the BVI to establish and keep up the search engine based on these databases called Beneficial Ownership Secure Search (‘BOSS’) System.

The date of implementation coincides with the Fourth Anti-Money Laundering Directive, which came into force on 26th June 2017. The Directive fundamentally changes some of the anti-money laundering procedures in order to fight tax avoidance and terrorism financing with, amongst others, requiring legal entities to maintain current information on their beneficial ownership and to provide that information to the government. The purpose of the Act was to codify the Exchange of Notes agreement between UK and BVI (UK Exchange of Notes, 2016) which requires the latter country to modernize the way in which its authorities access the UBO information concerning companies registered in the BVI. Previously, such authorities might have gained access only by contacting a registered agent directly every time it was necessary which resulted in long (24 – 48h) time needed for the data to be acquired.

Key assumptions of the new regime

The new legislation requires every agent registered in the BVI to establish and maintain the UBO Database which will consist of information such as: name, residential address, date of birth nationality and information on a documentary identifier. Each database will be kept on an electronic platform maintained by the BVI Financial Investigation Agency.

Access to each database maintained by a registered agent may be granted only to designated persons who will be appointed by the BVI Minister responsible for finance following the request of one of the BVI financial supervision authorities (amongst others BVI Financial Investigation Agency and BVI Financial Services Commission). Moreover, through request of one of above-mentioned authorities, the access can be granted to the law enforcement authorities of designated countries. Currently, only the UK is a designated country.

The scope of the legislation

In the light of the Act, it is necessary to maintain UBO database for all the companies that are incorporated, registered by continuation or re-registered under the BVI Business Companies Act. However, certain companies are considered, in contrary to In-Scope Entities,
out of scope entities:

  • companies that are listed on a recognized stock exchange including theirs subsidiaries
  • mutual funds as specified in Securities and Investment Business Act, 2010
  • companies with a license defined in Schedule 1 of the Regulatory Code, 2009

Moreover, the Act does not refer to entities which have been struck-off the Register of Companies before January 1, 2016.

According to the legislation, UBO is defined as an individual, who ultimately owns or controls a legal entity through holding at least 25% of shares or at least 25% of votes in the company. This threshold is in line with the Financial Action Task Force benchmark but is higher than the 10% threshold defined by the BVI AML legislation. In certain cases, a person whose ownership interest cannot be defined as ‘fixed’ might not be considered UBO – e.g. beneficiaries of a discretionary trust owning a company registered in the BVI.

Impact of the new regime on the BVI companies

All the companies in the BVI are obliged to:

  • determine, whether or not they are In-Scope Entities and prepare appropriate documentation if they are not
  • identify all the UBOs
  • request identified UBOs for all the necessary information

Failure to comply with the second obligation without a reasonable cause might be considered as a criminal offence and result in the fines up to $250,000 and / or five years imprisonment on indictment. Severe penalties suggest, that the Government of the BVI understands the importance of the modernization of the regime and will not tolerate any failure of compliance with the Act.

IBC Corporate Solutions, being a firm providing wide range of corporate and fiduciary services also on the British Virgin Islands, will advise all the clients who should comply with the Act. We will also advise and propose re-structuring of relevant BVI-registered structures, so that our clients’ private information is not disclosed to the public. Please feel free to contact us for any kind of assistance in regards to the above.