GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 2 Implementation of the Standard in Practice
BRITISH VIRGIN ISLANDS

TABLE OF CONTENTS – 3

Table of Contents

About the Global Forum ����������������������������������������������������������������������������������������� 5 Executive Summary ������������������������������������������������������������������������������������������������� 7 Introduction��������������������������������������������������������������������������������������������������������������11 Information and methodology used for the peer review of the Virgin Islands������11 Overview of the Virgin Islands����������������������������������������������������������������������������� 13 Recent developments����������������������������������������������������������������������������������������������16 A. Availability of Information������������������������������������������������������������������������������� 19 Overview��������������������������������������������������������������������������������������������������������������� 19 A.1. Ownership and identity information������������������������������������������������������������� 21 A.2. Accounting records��������������������������������������������������������������������������������������� 48 A.3. Banking information������������������������������������������������������������������������������������� 57 B. Access to Information ��������������������������������������������������������������������������������������� 61 Overview��������������������������������������������������������������������������������������������������������������� 61 B.1. Competent Authority’s ability to obtain and provide information ��������������� 62 B.2. Notification requirements and rights and safeguards����������������������������������� 71 C. Exchanging Information����������������������������������������������������������������������������������� 75 Overview��������������������������������������������������������������������������������������������������������������� 75 C.1. Exchange of information mechanisms����������������������������������������������������������� 76 C.2. Exchange of information mechanisms with all relevant partners����������������� 84 C.3. Confidentiality����������������������������������������������������������������������������������������������� 85 C.4. Rights and safeguards of taxpayers and third parties����������������������������������� 88 C.5. Timeliness of responses to requests for information������������������������������������� 91 Summary of Determinations and Factors Underlying Recommendations������� 99

PEER REVIEW REPORT – PHASE 2 – VIRGIN ISLANDS © OECD 2013

4 – TABLE OF CONTENTS Annex 1: Jurisdiction’s Response to the Review Report������������������������������������105 Annex 2: List of All Exchange-Of-Information Mechanisms��������������������������� 107 Annex 3: List of All Laws, Regulations and Other Material Consulted��������� 109 Annex 4: Persons Interviewed During On-Site Visit������������������������������������������111

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ABOUT THE GLOBAL FORUM – 5

About the Global Forum
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined – Phase 1 and Phase 2 – reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.

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EXECUTIVE SUMMARY – 7

Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in the Virgin Islands, as well as the practical implementation of that framework. The international standard which is set out in the Global Forum’s Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authority’s ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information (EOI) partners. 2. The Virgin Islands is one of the Overseas Territories of the United Kingdom. Economically it is mainly dependent on tourism and the financial services industry, including a significant number of company registrations. With respect to the financial services industry the Virgin Islands has a developed regulatory framework, but this was not enacted with the specific objective of enabling effective exchange information for tax purposes. In recent years, the Virgin Islands has made a number of changes to its legal and practical framework to increase transparency and enable the effective exchange of information for tax purposes. 3. Obligations to ensure availability of ownership and identity information for companies and partnerships are generally in place, as both companies and limited partnerships are required to keep a register of its shareholders or partners. In addition, the registered agents of these entities must also keep full ownership information on their clients. In practice, ownership information on companies has not been exchanged in all cases where this was requested, including in cases where such information was not available. The Virgin Islands should therefore continue to use all mechanisms at its disposal to ensure that ownership information in respect of companies is available. The issuance of bearer shares by Virgin Islands companies is possible, but these are immobilised through a custodial arrangement. This custodial arrangement effectively immobilises all bearer shares. Since July 2012, not only the custodians but also the registered agents of the companies that have issued bearer shares, must keep full ownership information on the owners of such shares.

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8 – EXECUTIVE SUMMARY
4. In respect of trusts the Virgin Islands rely for the most part on AML/ CFT legislation, which requires that identity information on the trustees, settlors and beneficiaries be kept in all cases where the trust represents a “normal or a higher level of risk” in terms of money laundering or terrorist financing. In other circumstances, such as for non-professional trustees, reliance can be placed on common law obligations for the availability of information on the identity of the settlors and beneficiaries. Taken together, the obligations under AML/CFT legislation and common law ensure the availability of identity information in respect of trusts. 5. Although general record-keeping obligations already existed, more comprehensive requirements were introduced in November 2012 for companies and limited partnerships to keep reliable accounting records, including underlying documentation, for a period of at least 5 years. However, the requirement to keep underlying documentation does not specify the type of underlying documentation to be kept, although it is noted that the Virgin Islands interprets it as including invoices and receipts. In respect of general partnerships and trusts no consistent obligations to maintain reliable accounting records, including underlying documentation, are in place. In practice, accounting information was not fully provided in many of the cases where requested. Although this may be mainly due to deficiencies in the processes of the Virgin Islands competent authority at the time, the lack of regular monitoring and enforcement of the accounting record keeping obligations of the entities that are not licensed service providers may affect the availability of this information. 6. Banking information is required to be kept by all banks, and has also been available where this was requested in practice. 7. The Virgin Islands has enacted a specific law to grant their authorities access powers to obtain and exchange information for the purposes of complying with a request for information under a Tax Information Exchange Agreement. Since July 2011, this law provides the Virgin Islands competent authority with the power to obtain any information held by any person believed to be in possession or control of that information, without any further conditions. Previously, access to information other than ownership information (and most notably accounting information) was not guaranteed. 8. The Virgin Islands has a total of 23 signed TIEAs, which cover a range of relevant partners. The TIEAs contain all provisions which allow the Virgin Islands to exchange all foreseeably relevant information. Currently, 14 of these TIEAs are in force, and the Virgin Islands has taken all steps necessary for almost all of the other TIEAs to enter into force. 9. During the three-year review period from 1 July 2009 to 30 June 2012, the Virgin Islands received 123 EOI requests from nine partners. A

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EXECUTIVE SUMMARY – 9

final response was provided within 90 days in 64% of cases, and within 180 days in 80% of the cases. Ten requests from 2012 are still outstanding, and a response was provided after more than 180 days in respect of the remaining requests. However, peers have indicated that in a significant proportion of the cases, the responses were incomplete and no explanations were given as to why this was the case. The main reason for this is that no clear organisational process was in place during the review period, and the Virgin Islands competent authority did not check whether the information obtained fully and accurately fulfilled the request. In addition, information was generally only obtained from the registered agents of the entities, which did not always have the obligation to have the information available, meaning that they were not always in a position to provide it. Finally, the available compulsory powers have not been used to enforce the production of information in cases where the information was not or only partially obtained. 10. In July 2012, the International Tax Authority (ITA) was established and designated to act as the Virgin Islands competent authority. The ITA has established comprehensive procedures and checklists for the gathering and exchange of information for tax purposes. Information is now obtained from the person who has the obligation to have that information available, and checks are performed by the ITA before transmitting the information to the requesting jurisdiction. The new procedures established by the ITA appear to be sufficient to handle incoming requests in a timely manner, but its practical implementation could not be assessed as they were established outside of the review period. 11. A follow up report on the steps undertaken by the Virgin Islands to answer the recommendations made in this report should be provided to the PRG within twelve months after the adoption of this report.

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INTRODUCTION – 11

Introduction
Information and methodology used for the peer review of the Virgin Islands
12. The peer review process of the Virgin Islands has been undertaken across three reports: the 2011 Phase 1 Report, a Supplementary Phase 1 Report, and a Phase 2 Report. The assessments of the legal and regulatory framework of the Virgin Islands as well as its practical implementation and effectiveness were based on the international standards of transparency and exchange of information as described in the Global Forum’s Terms of Reference, and were prepared using the Methodology for Peer Reviews and Non-Member Reviews. 13. The 2011 Phase 1 Report was based on the laws, regulations and exchange of information mechanisms in force or effect as at May 2011, other information, explanations and materials supplied by the Virgin Islands, and information supplied by partner jurisdictions. 14. The Supplementary Phase 1 Report, which followed the 2011 Phase 1 Report of the Virgin Islands, was prepared pursuant to paragraph 58 of the Global Forum’s Methodology and was adopted by the Global Forum in October 2011. The supplementary report was based on information available to the assessment team including the laws, regulations, and exchange of information arrangements in force or effect as at August 2011 and information supplied by the Virgin Islands. 15. The Phase 2 assessment is based on the laws, regulations, and exchange of information mechanisms in force or in effect as at May 2013, the Virgin Islands responses to the Phase 2 questionnaire, supplementary questions and other materials supplied by the Virgin Islands, information provided by exchange of information partners, and explanations provided by the Virgin Islands during the on-site visit that took place from 10-12 December 2012 in Road Town, Tortola, Virgin Islands. During the on-site visit, the assessment team met with officials and representatives of the Ministry of Finance (including the International Tax Authority and the Inland Revenue Department), the British Virgin Islands Financial Services Commission (including the Registry of Corporate Affairs), the Attorney General’s Chambers and the BVI Association of Compliance Officers (see Annex 4).

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12 – INTRODUCTION
16. The following analysis reflects the integrated 2011 Phase 1, supplementary Phase 1 and Phase 2 assessments of the legal and regulatory framework of the Virgin Islands in effect as at May 2013, and the practical implementation and effectiveness of this framework in the three-year review period of 1 July 2009 to 30 June 2012. 17. The Terms of Reference (“ToR”) break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information. This review assesses the Virgin Islands legal and regulatory framework as well as the practical implementation of that framework against these elements and each of the enumerated aspects. In respect of each essential element, a determination is made that either: (i) the element is in place; (ii) the element is in place but certain aspects of the legal implementation of the element need improvement; or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. A summary of the findings against the elements is set out on pages 69-72 of this report. As outlined in the Note on Assessment Criteria, following a jurisdiction’s Phase 2 review, a “rating” will be applied to each of the essential elements to reflect the overall position of a jurisdiction. However, this rating will only be published “at such time as a representative subset of Phase 2 review is completed”. This report therefore includes recommendations in respect of the Virgin Islands legal and regulatory framework and the actual implementation of the essential elements, as well as a determination on the legal and regulatory framework, but it does not include a rating of the elements (see Summary of Determinations and Factors Underlying Recommendations at the end of this report). 18. The assessments in respect of the 2011 Phase 1 Report as well as the Supplementary Phase 1 Report were conducted by a team which consisted of two expert assessors and a representative of the Global Forum Secretariat: Mr. Richard Green, States of Guernsey Income Tax; Mr. Olivier Vallaeys, Ministry of Economy, Finance and Industry of France; and Mr. Mikkel Thunnissen from the Global Forum Secretariat. For the assessment in respect of the Supplementary Phase 1 Report, Mr. Olivier Vallaeys was no longer available. The assessment team examined the legal and regulatory framework for transparency and exchange of information and relevant exchange of information mechanisms in the Virgin Islands. 19. The Phase 2 assessment was conducted by an assessment team which consisted of two expert assessors and two representatives of the Global Forum Secretariat: Mr. Robert Gray, States of Guernsey Income Tax; Mr. Jean-Marc Seignez, Ministry of Economy and Finance of France; and Mr. Francesco Positano and Mr. Mikkel Thunnissen from the Global Forum

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INTRODUCTION – 13

Secretariat. The assessment team assessed the practical implementation and effectiveness of the legal and regulatory framework for transparency and exchange of information and relevant EOI arrangements in the Virgin Islands.

Overview of the Virgin Islands
20. The Territory of the Virgin Islands 1 is one of the Overseas Territories of the United Kingdom, and is located within the Virgin Islands archipelago, with the United States Virgin Islands at its immediate west, in the Lesser Antilles. The Virgin Islands consists of approximately sixty islands, islets and cays, twenty of which are inhabited. The largest island is Tortola, which is approximately 20 km long and 5 km wide, and on which the capital, Road Town, is situated. The total population of the Virgin Islands amounted to 23 000 people in 2008, the vast majority of whom reside on Tortola. 21. In 2011, the GDP of the Virgin Islands was USD 915 856 million. Tourism and other services industries are responsible for almost 90 per cent of this amount. The financial services industry generates approximately 60% of the government revenues, consisting mostly of fees for incorporating and maintaining companies and obtaining licenses. Since 1964, the official currency of the Virgin Islands is the US dollar (USD). 22. The Virgin Islands is governed by a democratically elected National Assembly which comprises 13 elected members, the Speaker of the House and the Attorney General who is an ex officio member, and by a Cabinet presided over by a Governor, an appointee of the British Crown. The Governor sitting as the representative of the United Kingdom is responsible for external affairs, internal defence, security and the administration of the courts. The Virgin Islands court system is part of the Eastern Caribbean court system which was established in 1967 and now has a specialist commercial court, the headquarters of which is located in the Virgin Islands. The final court of appeal is the UK Privy Council. 23. The Virgin Islands is a common law jurisdiction which derives its law from English common law and Virgin Islands statutes, including Ordersin-Council made by the United Kingdom and extended to the Virgin Islands.

1.

The name of the Territory is the “Virgin Islands”, but since 1917 the Territory has been universally referred to as the “British Virgin Islands” (BVI) to distinguish the islands from the American Territory, the United States Virgin Islands.

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14 – INTRODUCTION

The financial services industry in the Virgin Islands
24. Since the mid 1980s the Virgin Islands has offered a wide range of financial services and now has a well established financial services business. A well-known aspect of this business is the company registration. The number of companies registered in the Virgin Islands is impressive with 459 005 registered active companies as at 31 December 2012 in a small economy. In 2012, 64 099 companies were incorporated and/or registered. 2 Since 1994 more than 1.1 million companies have registered in the Virgin Islands. 25. No stock exchange exists in the Virgin Islands. Nevertheless, companies registered in the Virgin Islands may be listed 26. The size of the financial services industry can also be shown by looking at inward and outward foreign direct investment. During 2009-11, an annual average of USD 49 759 million was invested in the Virgin Islands, and the FDI stock in the Virgin Islands totalled USD 288 987 million. Investments from within the Virgin Islands averaged USD 52 122 million, and the total outstanding FDI of the Virgin Islands in 2009 was USD 245 101 million. 3 These numbers are similar to numbers for significantly larger economies and it makes clear that the Virgin Islands is an important player in the financial services world. 27. The financial services industry is regulated by a number of different laws which ensure that service providers operate in accordance with the requirements of financial and regulatory standards, apply corporate governance procedures and that money laundering and terrorist financing are prevented. Persons carrying on financial services business in or from within the Virgin Islands, are only allowed to do so if licensed by the Financial Services Commission (“FSC”). These regulated businesses are: • Company management business: the formation of companies in the Virgin Islands, providing registered agent and registered office services, providing directors or officers and providing nominee shareholders.

2. 3.

The data in this paragraph is drawn from statistics of the Financial Services Commission (FSC) in the Virgin Islands (www.bvifsc.vg). The data in this paragraph is drawn from statistics of the United Nations Conference on Trade and Development (UNCTAD), available on http://unctadstat.unctad.org. The data are based on the following definition of the term “foreign direct investment” (FDI): an investment involving a long-term relationship and reflecting a lasting interest in and control by a resident entity in one economy (foreign direct investor or parent enterprise) of an enterprise resident in a different economy (FDI enterprise or affiliate enterprise or foreign affiliate). Such investment involves both the initial transaction between the two entities and all subsequent transactions between them and among foreign affiliates.

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INTRODUCTION – 15

Licenses are granted either under the Company Management Act or the Banks and Trust Companies Act. • Trust business: acting as a professional trustee, protector or administrator of a trust or settlement; or managing or administering any trust or settlement. Licenses are granted under the Banks and Trust Companies Act. Banking business: accepting deposits of money and the employment of such deposits (e.g. by giving loans or making investments) for the account and the risk of the person accepting such deposits. Licenses are granted under the Banks and Trust Companies Act. Insurance business: undertaking liability under a contract of insurance to indemnify or compensate a person in respect of loss or damage, including life insurance business and reinsurance business. Licenses are granted under the Insurance Act. Financing business: providing credit (either as a business or in the course of another business) or leasing property to a resident in the Virgin Islands. Licenses are granted under the Financing and Money Services Act. Money services business: money transmission services, cheque cashing services, currency exchange services, and the issuance, sale or redemption of money orders or traveller’s cheques. Licenses are granted under the Financing and Money Services Act. Investment business: dealing in investments or arranging such deals, managing investments, providing investment advice, providing custodial or administration services with respect to investments and operating an investment exchange. Licenses are granted under the Securities and Investment Business Act.

28. The FSC is also the regulatory body which monitors all financial services businesses and has a wide range of enforcement powers in its regulatory toolkit including the power to impose fines or suspend or revoke licenses. Some monitoring tasks are shared with the Financial Investigation Agency. The Virgin Islands is transparent in providing the names of licensees on the website of the FSC (www.bvifsc.vg). 29. Most of the regulatory rules in the Virgin Islands have been either introduced or substantially amended in the last decade. One of the most important changes has been the introduction of the BVI Business Companies Act in 2004. Before, the Virgin Islands had separate regimes for companies doing business in the Virgin Islands and International Business Companies, which were subject to a separate offshore regime and were only allowed to do business from within the Virgin Islands. The BVI Business Companies

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16 – INTRODUCTION
Act abolished the distinction between local and offshore companies and introduced a regime which was designed to meet international standards. Re-registration of all companies under the BVI Business Companies Act was completed in 2009.

Taxation and international cooperation
30. Until 2005, the Virgin Islands levied an income tax on all companies, except International Business Companies, and individuals. To comply with the EU Tax Code of Conduct for Business Taxation, the Virgin Islands moved at the beginning of 2005 to a zero rated income tax regime for all corporate entities in conjunction with a move to one corporate statute. To provide equity between corporate and individual taxpayers, it was decided to move to a zero rated tax regime for individuals at the same time. To recoup the lost revenue from the zero rated income tax regime, annual fees for companies were increased and a payroll tax was introduced in the Payroll Taxes Act, 2004, which became effective 1 January 2005. Under this Act every employer and self-employed person who carries on business in the Virgin Islands is charged with payroll tax at rates up to 14% (of which a part may be deducted from the employees’ salaries). The Income Tax Ordinance, under which the former income tax was levied, however, still exists and provisions on the powers of the Commissioner are still being applied. The rate of the income tax has been reduced to 0%. 31. In addition to the payroll tax several other taxes are levied, including property taxes, stamp duty and customs duties. 32. The Virgin Islands has been involved in the OECD’s work on standards for the exchange of information for tax purposes over the last decade. In 2002, the Virgin Islands committed to the international standards for transparency and exchange of information. It developed a plethora of regulatory laws to ensure transparency and availability of information. In addition, the Virgin Islands introduced the Mutual Legal Assistance (Tax Matters) Act to be able to access and exchange information pursuant to international information exchange agreements. This allowed the Virgin Islands to be active in concluding Tax Information Exchange Agreements (TIEAs), and signing many of them in recent years.

Recent developments
33. In 2012, the Virgin Islands made a number of changes to its legal and practical framework to increase transparency and further comply with the international standard on transparency and exchange of information for tax purposes. Since 1 January 2012, with the entry into force of the Mutual Legal

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INTRODUCTION – 17

Assistance (Tax Matters) (Automatic Exchange Information) Order 2011, the Virgin Islands has exchanged information automatically with European Union Members States within the framework of the EU Savings Directive (2003/48/EC). 34. With effect from 10 May 2012, the Anti-Money Laundering and Terrorist Financing Code of Practice (“CoP”) was amended to extend the obligation on trust service providers to obtain identity information on all the beneficiaries of trusts in relation to trusts presenting a normal level of risk, whereas previously this obligation was limited to trusts presenting a high level of risk. The Business Companies Act was amended in July 2012 to require the registered agent to keep updated identity information on the owners of bearer shares and on the custodian holding these shares. Finally, amendments to the Partnership Act and the Mutual Legal Assistance Act were passed by the National Assembly in November 2012. These legislative changes established that the accounting records of companies and limited partnerships must be kept for at least five years. These amendments also introduced the obligation on these entities to keep underlying documentation. 35. With respect to the practical organisation of tax information exchange, the International Tax Authority was established within the Ministry of Finance to deal with cross border tax matters with effect from 9 July 2012. The International Tax Authority has replaced the Commissioner of Inland Revenue as the authority designated to perform the function of Competent Authority for the exchange of information.

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 19

A. Availability of Information

Overview
36. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period of time, a jurisdiction’s competent authority may not be able to obtain and provide it when requested. This section of the report describes and assesses the Virgin Islands legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of this framework. 37. Availability of ownership and identity information in respect of companies and limited partnerships is ensured under the Virgin Islands legal and regulatory framework, as both the entities and their registered agent are required to keep full ownership information. In practice, the Virgin Islands competent authority has always asked the registered agent to provide the ownership information for the purposes of exchanging it with another jurisdiction. Peer input indicated that this information has not been exchanged in all cases. These cases include situations where the registered agent should have had the information available. The results of inspections by the FSC also indicate that in some cases the registered agent has not kept sufficient CDD information and/or the register of members. Although in general appropriate enforcement action is taken by the FSC against non-compliant registered agents, it is recommended that the Virgin Islands continues to use all mechanisms at its disposal to ensure that ownership information in respect of companies is available in practice. 38. In respect of trusts, information on the identity of the beneficiaries is required to be kept for AML/CFT purposes where the trust presents a “normal or a higher level of risk” in terms of money laundering or terrorist financing. Where the trust service provider considers the trust as posing a

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20 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
low level of risk, which is likely to occur only in a limited number of cases, if at all, reliance can be placed on common law obligations for the availability of information on the identity of the beneficiaries. 39. Under the BVI Business Companies Act, the issuance of bearer shares is possible, but these are immobilised through a custodial arrangement. This custodial arrangement immobilises all bearer shares as the physical share must be in the possession of a custodian. Since July 2012, the registered agent of a company that has issued bearer shares is also required to maintain full ownership information on the owners of bearer shares. It may obtain this information from the person depositing the share(s) or the custodian, which are required to submit the ownership information to the registered agent. Some of these obligations have only been recently introduced. Although they are already included in the on-site inspection program of the FSC, the Virgin Islands should closely monitor whether registered agents keep the information on the owners of bearer shares under this new requirement. 40. Companies and limited partnerships are required to keep reliable accounting records, including underlying documentation, for a period of at least 5 years. However, the requirement to keep underlying documentation does not specify the type of underlying documentation to be kept, although it is noted that the Virgin Islands interprets it as including invoices and receipts. In respect of general partnerships and trusts no consistent obligations to maintain reliable accounting records, including underlying documentation, exist. Accounting information has not always been provided in response to requests from other jurisdictions in the three-year review period. It is difficult to assess whether the information was in fact available in these cases, as the reasons for not providing the information seem to lie primarily in deficiencies in the organisational process and use of access powers of the Virgin Islands competent authority at that time. Nevertheless, the Virgin Islands should closely monitor whether accounting information is in practice available. 41. The AML/CFT legislation ensures that all records pertaining to the accounts as well as to related financial and transactional information is required to be kept by all banks. 42. In general, where an obligation exists in the Virgin Islands to keep relevant records, enforcement provisions are in place to address the risk of non-compliance. In most cases, it is the FSC which can apply its wide range of enforcement powers. Enforcement measures consist of fines, imprisonment and, in the case of licensees, suspension or revocation of a licence is also possible. The FSC has an active monitoring and enforcement program in place in respect of all licensed service providers, which are subject to regular on-site inspections where samples are taken of the information they are required to keep. This includes ownership information and banking information. Accounting information is generally kept by the entity rather than by

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 21

the service provider. These entities are generally not fully covered by the inspection process of the FSC and therefore no regular monitoring in respect of the obligation to keep accounting records takes place, which may affect the availability of such information for the purposes of exchange of information. It is therefore recommended that the Virgin Islands sufficiently exercise their monitoring and enforcement powers to support the legal requirements which ensure the availability of accounting information.

A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.

Companies (ToR A.1.1)
43. The BVI Business Companies Act (BCA) is the central piece of legislation governing the establishment of and further arrangements with respect to companies. Under the BCA, three types of companies may be incorporated: • Companies limited by shares: this type of company has only shareholders as its members. Their liability is limited to the amount unpaid (if any) on their shares. As at December 2012, there were 454 608 companies limited by shares. Specific sub-types include segregated portfolio companies and restricted purposes companies (see below). Companies limited by guarantee: this type of company can have both shareholders and guarantee members. Guarantee members are liable to contribute an amount defined in the memorandum of the company to the company’s assets in the event that the company is liquidated. There has to be at least one guarantee member (s. 79(2) BCA). As at December 2012, there were 254 companies limited by guarantee. Unlimited companies: this type of company can have both shareholders and unlimited members. Unlimited members have unlimited liability for the liabilities of the company. There has to be at least one unlimited member (s. 79(3) BCA). As at December 2012, there were 203 unlimited companies.

44. A company limited by shares can be designated as a Segregated Portfolio Company (SPC) or a Restricted Purposes Company (RPC). An SPC is a company which may create one or more segregated portfolios for the purpose of segregating the assets and liabilities of the company held within a certain segregated portfolio from the assets and liabilities of the company not held within a segregated portfolio or within any other segregated portfolio (s. 138(1)

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BCA). An SPC is a single legal entity (s. 138(2) BCA), but it is allowed to issue shares in respect of any segregated portfolio (s. 139 BCA). A company may only be incorporated or registered as an SPC after written approval of the FSC, which can only be obtained if the company will be licensed as an insurer or if it will be a mutual fund (s. 135 BCA). As at December 2012, a total number of 95 SPCs were registered in the Virgin Islands, of which 7 were insurance companies and the others were mutual funds. 45. At its incorporation, a company may state that it is an RPC and define its purposes (s. 10 BCA), which can be any purpose. These purposes may be changed, but its status of RPC has to remain as such throughout its existence (s. 14 BCA). RPCs are predominantly used as special purpose vehicles, usually formed to issue debt instruments. Persons acquiring securities issued by the RPC have the additional layer of comfort that if the RPC seeks to engage in any transactions prohibited by its constitutional documents, those transactions will be void. As at December 2012, 25 companies were registered as an RPC. 46. The obligations regarding retention of ownership information which are applicable to other companies limited by shares apply equally to SPCs and RPCs. 47. All companies are required to have a registered office and a registered agent in the Virgin Islands (s. 90 and 91 BCA). The registered office and registered agent must be identified upon registration of the company (s. 6 BCA) and any subsequent changes must be registered as well (s. 92 BCA). A company which does not have a registered agent is liable on summary conviction to a fine of USD 10 000. In practice, the FSC, which is responsible for maintaining the Register of Companies, will not accept a registration of a company without a registered agent. There is no obligation for companies other than companies licensed to carry on financial services business to have directors that are resident in the Virgin Islands. 48. Replacement of the registered agent can be initiated by either the company or the registered agent itself. A company that wishes to replace its registered agent must file a notice in the approved form, identifying the new registered agent (s. 92 BCA). In each of the last three years (2010-12), around 7 500 notices were filed with the FSC for changing the registered agent, which usually also means that the company’s registered office changed to the address of the new registered agent. Changing the address of the registered office without changing the registered agent is less common, with only around 350 notices a year filed for this reason. 49. Where a person intends to resign from being a registered agent of a specific company, it has to inform both the company and the FSC of this intention. The company must then appoint a new registered agent within 90

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days (s. 93 and 94 BCA). If the registered agent does not inform the company, it commits an offence and may be liable upon summary conviction to a fine of USD 10 000. In practice, the company is always informed, as the registered agent must provide the FSC with a copy of the notice of intention to resign it has given to the company (see Form R702 of the FSC). Circumstances under which a registered agent may resign include a failure to obtain customer due diligence information, non-payment of the fees by the company and the loss of contact with the company. During 2010-12, registered agents sent more than 5 000 intentions of resignation to the FSC. In around 3 500 of these cases, the company had not appointed a new registered agent within 90 days. 50. If the company has not appointed a new registered agent within 90 days of the agent’s intention to resign, the company commits an offence and is liable to a fine of USD 10 000 (s. 94(5) BCA). From the date of resignation, a company is given another 30 days in practice to appoint another registered agent or it will be struck off the register. Compliance has increased in this respect; the number of companies that were struck off the register after resignation of the registered agent and failure to appoint another registered agent, fell from 1 294 in 2010, to 754 in 2011 and to 143 in 2012. 51. Registered agents are licensed and regulated by the FSC under the Company Management Act and the Banks and Trust Companies Act. These Acts set out licensing requirements for persons carrying on company management business. “Company management” is defined as: (a) the formation of Virgin Islands companies, including the continuation of companies as Virgin Islands companies; (b) the provision of registered agent services; (c) the provision of registered office services; (d) the provision of directors or officers for companies, whether such companies are Virgin Islands companies or companies incorporated or registered in a jurisdiction outside the Virgin Islands; and (e) the provision of nominee shareholders in companies, whether such companies are Virgin Islands companies or companies incorporated or registered in a jurisdiction outside the Virgin Islands”. 52. The FSC can issue a license to carry on company management business to any person, taking into account the detailed requirements set out in the Regulatory Code. Persons who carry on company management business without being licensed are liable upon summary conviction to a fine not exceeding USD 50 000 or to imprisonment for a term not exceeding two years, or both.

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53. The FSC maintains a Register of Approved Registered Agents, recording the name of the approved registered agent, its address, the date when the registered agent was issued a license under the Company Manage­ ment Act or the Banks and Trust Companies Act and when it obtained the approval to provide registered agent services, and in case it ceased to be an approved registered agent the date on which this occurred and the reason. As at December 2012, there were 145 persons authorised by the FSC to offer registered agent services.

Ownership information held by companies
54. All companies incorporated under the BCA are required to keep a register of members. This register should contain the following information, as appropriate for the company (s. 41 BCA): (a) the names and addresses of the persons who hold registered shares in the company; (b) the number of each class and series of registered shares held by each shareholder: (c) in the case of a shareholder who holds bearer shares, the total number of each class and series of bearer shares held; (d) with respect to each bearer share certificate issued by the company, (e) the identifying number of the certificate, (f) the number of each class or series of bearer shares specified in the certificate, (g) the date of issue of the certificate, and (h) the name and address of the custodian of the certificate; (i) the names and addresses of the persons who are guarantee members of the company; (j) the names and addresses of the persons who are unlimited members; (k) the date on which the name of each member was entered in the register of members; and (l) the date on which any person ceased to be a member. 55. Section 54 BCA prescribes that registered shares are transferred by written instrument signed by the transferor and containing the name and address of the transferee. This instrument must be sent to the company and upon receipt the company shall enter the name of the new shareholder in the register of members. In the case of an SPC, the same rules apply in respect of shares in any segregated portfolio (s. 139(4) BCA).

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56. The company is required to keep the register of members or a copy thereof at the office of its registered agent. If a copy is kept at the office of the registered agent, the company shall notify the registered agent within 15 days, in writing, of any change. Failing to comply with these register-keeping obligations results in the company being liable on summary conviction to a fine of USD 10 000 (all s. 96 BCA). 57. The FSC monitors that ownership information on companies is available through off- and on-site inspections on the registered agents (see below under Ownership information held by the registered agent).

Ownership information held by the registered agent
58. Section 38(1) Regulatory Code prescribes that the registered agent is required in its own right to keep adequate and orderly records of anything that it is required to maintain under the BCA which includes the register of members as described above. The registered agent has to retain these records for at least five years after the end of its business relationship with the company (s. 39 Regulatory Code). Under section 37(1)(a)(i) FSC Act, the FSC can take a number of different enforcement actions, such as imposing an administrative penalty or suspending the registered agent’s license, if the registered agent fails to comply with this obligation. 9. In addition, the registered agent is subject to AML/CFT legislation under the Anti-Money Laundering Regulations (AMLR) and the Anti-Money Laundering and Terrorist Financing Code of Practice (CoP). This means that Customer Due Diligence (CDD) rules apply on the basis of which the registered agent must verify certain details in respect of the ownership of the company (details of the CDD rules are explained below in the section on foreign companies). A registered agent who fails to comply with the CDD rules is liable on summary conviction to a fine not exceeding USD 25 000 or to imprisonment for a term not exceeding two years, or both (s. 25(8) CoP). Documentation in respect of the CDD carried out must be maintained in the Virgin Islands by the registered agent for at least five years after the end of its business relationship with the company (s. 8 AMLR and s. 39 Regulatory Code). 60. A registered agent is not required to perform CDD when its customer is a regulated company (s. 6 AMLR). These companies are subject to regulatory rules on ownership information in addition to the requirement to keep a register of members under the BCA. 61. The Legal and Enforcement Division of the FSC is tasked with the monitoring of licensed entities operating in the Virgin Islands. The Compliance Inspections Unit carries out both off-site monitoring and on-site inspections. On-site inspections at the registered agent premises in respect of specific companies are made on a risk-based approach, but random inspections

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may also take place. The inspections verify the documentation that the registered agent must have in respect of its clients in the context of anti-money laundering and regulatory legislation. The Compliance Inspections Unit uses a checklist of documents and information that should be in the possession of a registered agent. This includes the register of members, details of the beneficial owners, and the list of directors. In a number of cases, it was found that the registered agent did not maintain sufficient CDD information and/or did not maintain the register of members. In such cases, appropriate enforcement action has been taken by the FSC, as described under A.1.6 below. 62. In practice, during the three-year review period the Virgin Islands competent authority has always asked the registered agent to produce the register of members where ownership information is sought in a request for information from another jurisdiction. Peers have indicated that in some cases this information was not exchanged. This includes situations where the business relationship between the registered agent and the company was ended less than five years before the registered agent was asked to produce the register of members.

Ownership information held by the authorities
63. Upon the incorporation of a company in the Virgin Islands, it has to be registered in the Register of Companies (s. 7 BCA). Various information has to be provided upon registration (s.  6 and 9 BCA), but this does not include information identifying the owners of the company. However, a company may elect (s. 231 BCA) to file a copy of its register of members (= shareholders or other members). In that case, ownership information will be available at the Register of Companies. During 2010-12 almost 4 000 companies have filed their register of members with the Registrar, representing approximately 2% of the newly incorporated companies in those years. 64. The Registrar maintains a database which is publicly accessible at its premises. All information has been kept in an electronic format from 2006 onwards, and the Registrar is in the process of digitising all information from prior to 2006. The information contained in the database includes the name of the company, the name and address of the registered agent, the address of the registered office, and a copy of the articles of association and the memorandum. Any change to this information must be communicated to the Registrar and it is effective as soon as it is received by the Registrar. The procedures to change a registered agent as described above as well as the effective supervision conducted by the FSC (see also A.1.6) ensure that the Registrar always has the contact details of each company, and can identify the last-known registered agent for each company. In practice, the Virgin Islands competent authority always obtains the contact details of the company and its registered agent from the Registrar.

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Tax law
65. The Income Tax Ordinance (ITO) under which the Virgin Islands used to levy an income tax from both individuals and companies, is still in force but the rate of income tax is now 0%. Taxpayers still must register with the Commissioner when they become liable to tax, i.e. when they derive income from the Virgin Islands (s. 4A and s. 5 ITO). Under the Payroll Taxes Act (PTA) all employers having employees who render services wholly or mainly in the Virgin Islands, and all self-employed persons, also must register with the Commissioner (s. 3 and s. 3A PTA). Both the ITO and the PTA do not impose any obligations on providing ownership information to the authorities upon registration or keeping such information. The Inland Revenue Department keeps a database of the companies which are liable to tax in the Virgin Islands. As at December 2012, the total number of companies registered under the ITO was 2 035 and the number of companies registered under the PTA was 3 425.

Regulated companies
66. Companies are only allowed to carry on company management business, trust business, banking business, insurance business, financing business, money services business or investment business if licensed by the FSC. As part of the license application process, section 10 Regulatory Code requires a company to fill out an approved form (F100) which contains a list of all shareholders and controllers, which includes the beneficial owners. Any subsequent ownership change resulting in any person holding five or ten percent (depending on the kind of business) or more in the licensed company or resulting in a change of the ownership interest of a person already holding five or ten percent or more in the licensed company, is subject to prior approval by the FSC. In addition, licensees must notify the FSC of any other change of ownership within 14 days of that change (s. 19A of Schedule 3 Regulatory Code). Ownership information is therefore available to the FSC.

Foreign companies
67. Foreign companies are only allowed to carry on business in the Virgin Islands if they are registered in the Register of Foreign Companies (s.  186 BCA). There is no general definition of carrying on business in the BCA, but it includes a foreign company having a place of business in the Virgin Islands. As at December 2012, 37 foreign companies were registered. Upon registration various information has to be provided, including evidence of its incorporation, but this does not include ownership information. Like all companies, foreign companies which carry on business in the Virgin Islands are required to have a registered agent in the Virgin Islands or are otherwise liable upon summary conviction to a fine of USD 10 000 (s. 189 BCA).

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68. All registered agents shall apply CDD rules under the AMLR and the CoP. In general, service providers must adopt a risk-based approach towards their customers and determine customer risk, product/service risk and country/geographic risk (Explanation to section 19 CoP). Section 19(5) (d) CoP prescribes that where the registered agent wishes to enter into a business relationship with a company, it must determine the ownership of the company and details of any group of which the company is a part, including details of the ownership of the group. This determination must be reviewed at least once every three years or, in case of companies posing a high moneylaundering or terrorist financing risk, at least once every year (s. 21 CoP). 69. The level of detail of ownership information that must be determined by the registered agent is not entirely clear. On the one hand, there are three references mentioning beneficial ownership in general. The officially published Explanation – which serves as a guide to understand the requirements of the CoP – to section 19 states that “It is also important that, in respect of a legal person, the entity or professional [such as a registered agent] identifies the beneficial owner thereof”. In addition, section 25(1) CoP requires the registered agent to verify specific information in respect of the ownership of a company and of the beneficial owner of that company. Finally, section 26(2) CoP states that, where a company is assessed to be of low risk with respect to money-laundering or terrorist financing, CDD still requires the verification of the beneficial owners or controllers of that company. The combination of sections 19, 25 and 26 CoP and the Explanation therefore suggests that all beneficial owners should be determined by the registered agent in applying CDD. 70. On the other hand, section 25(2) CoP sets out the specific information that must be obtained for determining the identity of a company, and the only requirement to identify shareholders is that the identity of each individual who owns at least ten percent of the company should be obtained (s.  25(2) (g) CoP). It is not immediately clear whether this requirement refers to either beneficial ownership or indirect ownership (because indirect owners may also have substantial control of a company). It also seems not consistent with other indications in the CoP as mentioned above, which suggest that also corporate beneficial owners must be identified. Taking into account that the official Explanation to the CoP states that it is “essential […] to be able to ascertain and verify the identity of the controlling elements or owners in relation to every legal person”, it may be concluded that all individuals who are the ultimate owners and hold an interest of at least ten percent in the company must be identified according to section 25(2)(g) CoP. 71. The Virgin Islands advised that they consider the rules of the CoP to prescribe that registered agents are in all cases obliged to obtain full information on all beneficial owners in the company. This does, however, not align

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with the specific information that is set out in section 25(2) CoP, which only mentions information on certain – not all – beneficial owners. The more specific provision may well be what registered agents take as their guideline. Although a system is in place to identify (certain) owners of foreign companies, the lack of clarity and consistency of the CoP on this matter may lead registered agents to apply the rules unevenly. However, it is clear that at a minimum all individuals with a controlling interest of at least ten percent in the foreign company must be identified. Further ownership information on these companies should be available in the jurisdiction where they were incorporated. 72. It should be noted that no CDD has to be carried out where the foreign company is regulated in another jurisdiction where it performs activities similar to activities which are regulated in the Virgin Islands (s. 6 AMLR). In this case, the requirements to maintain ownership information will generally depend on the law of the jurisdiction in which the company is incorporated. Considering the low number of foreign companies registered in the Virgin Islands (37) and the fact that in most cases some ownership information will be available through the CDD measures carried out by the registered agent, the instances where no full ownership information on foreign companies is available are not expected to significantly impede the effective exchange of information. 73. The inspections carried out by the Compliance Inspections Unit of the FSC also cover the availability of ownership information on foreign companies. No specific issues have been raised by peers, or encountered by the Virgin Islands in practice, with respect to foreign companies in the three-year review period.

Nominees
74. Acting (or providing for another person to act) as a nominee shareholder for another person is considered a “relevant business” under the AMLR and CoP (s. 2(1) AMLR). Consequently, persons acting as a nominee shareholder are required to carry out CDD and identify the persons for whom they act as a legal owner in accordance with section 19 CoP. Documentation in respect of the CDD carried out must be maintained in the Virgin Islands by the nominee for at least five years after the end of its business relationship with the person for whom they act (s. 8 AMLR and s. 39 Regulatory Code). 75. The Virgin Islands indicated that most licensed service providers do in practice provide services as a nominee shareholder. Therefore, the FSC’s checklist includes the question whether the service provider provides such services. During its on-site inspections, the Compliance Inspections Unit of the FSC then verifies whether, for the relevant companies, the service provider has the identity details of the actual beneficial owner on file. In the

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three-year review period, two requests for EOI included a request for the identity of nominees only (no information about the nominees’ clients or the beneficial owners of the shares was requested). The Virgin Islands authorities confirm that the information was provided in these cases. 76. A related issue may arise where legal practitioners represent their clients in setting up a company in the Virgin Islands. In that context, it should be noted that section 6(1)(c) AMLR makes an exception to the obligation to carry out CDD if the “applicant for business” (the party proposing to a relevant person in the Virgin Islands that they enter into a business relationship, s. 2(1) AMLR) is a legal practitioner or accountant who is subject to similar obligations in the area of anti-money laundering as the registered agent in the Virgin Islands would be. Although the applicant for business of a registered agent would normally be the company, the AMLR could also be read that the legal practitioner representing that company is the applicant for business, as this is the party in contact with the registered agent. In the latter case, the requirement to maintain ownership information does not exist for the registered agent under the AML/CFT legislation, and identifying nominee shareholders and beneficial owners may depend on the law governing this legal practitioner or accountant. It is noted that information on the legal owners of the company is in any case available through the register of members that the Virgin Islands company is required to keep.

Mutual funds
77. For the operation of mutual funds in the Virgin Islands additional registration and regulatory rules apply. A fund is not allowed to carry on business as a mutual fund in or from within the Virgin Islands unless it is registered with or recognised by the FSC under the Securities and Investment Business Act (“SIBA”). Contravention of this rule could lead to a penalty of USD 40 000 on summary conviction or USD 75 000 on indictment (s.  4(1) and Schedule 7 SIBA). Four categories of mutual funds can be registered in the Virgin Islands: • • Public funds: funds that offer their investment shares to the general public. Professional funds: funds the shares of which are made available only to professional investors. The initial investment of each investor shall not be less than USD 100 000. Private funds: funds which are not authorised to have more than fifty investors or invitations to subscribe for the fund interests are made on a private basis only. Recognised foreign funds: this can be any type of fund.

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78. As at December 2012, there were 1 590 professional funds, 577 private funds and 151 public funds active in the Virgin Islands. The assets under their management are estimated to represent a value of several hundred billion USD. 4 79. Public funds can only be Virgin Islands companies or unit trusts governed by the Virgin Islands trust law and with a trustee based in the Virgin Islands (s. 45 SIBA). No such restrictions apply with respect to other mutual funds, which can take the form of companies, trusts, partnerships or any other form. All mutual funds must have an authorised representative, which is either a Virgin Islands company, a partnership formed under the Virgin Islands laws or an individual residing in the Virgin Islands (s.  64 and 65 SIBA). Such authorised representative must be certified by the FSC and acts as the main intermediary between the FSC and the mutual fund he/she represents. Public funds, professional funds and private funds are also required to have a fund administrator (s. 7 and 16 of the Mutual Fund Regulations), which must be a licensee under the SIBA in case he operates from within the Virgin Islands (s. 4 and Schedule 2 SIBA). 80. Depending on the legal form of the mutual fund, it will be subject to the same requirements to keep ownership information as other companies, partnerships or trusts, including having a registered agent in the case of a company or limited partnership. This would ensure availability of ownership information in respect of mutual funds in all cases where it is ensured for other entities with the same legal form. The Virgin Islands authorities indicated that in practice more than 90% of the mutual funds are established as a company. As explained above, in these cases both the fund itself and the registered agent are required to keep a register of members. 81. The SIBA was enacted in 2010, and it has been complemented by the Mutual Fund Regulations and the Public Funds Code. All references to the former Mutual Funds Act are now to be read as reference to the SIBA, following the general rule of interpretation laid down in section 30(1) Interpretation Act. This means that, regardless of their form, mutual funds themselves and their authorised representatives are subject to the AML/CFT legislation, which obliges them to identify and verify the owners of their customers. 82. On-site inspections by the FSC in respect of mutual funds are carried out on the fund administrators, but may also include the manager or any other entity which provides services to the fund and is licensed by the FSC (such as
4. No complete statistics are available. For 2009, 55% of the assets representing USD 238 billion were reported; for 2010, 60% of the assets representing USD 288 billion were reported; for 2011, 62% of the assets representing USD 271 billion were reported.

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the authorised representative). The fund administrator keeps information on the identity of the investors, which are in most cases also the legal owners. The FSC has found that this information is in practice always kept; any non-compliance by fund administrators has been found to generally occur in relation to operation of its investment policy affecting the performance of the fund. 83. In practice, it is not necessarily expressly stated in an EOI request whether the request pertains to a mutual fund, as these can take the form of either a company, a partnership or a trust. Statistics have therefore not been compiled on this specific point.

Conclusion and practice
84. All companies are required to keep updated information identifying its members (shareholders and other members) at the office of its registered agent. In addition, regulated companies are required to submit ownership information to the FSC upon registration and ask permission for any significant ownership change. Foreign companies, like domestic companies, are required to have a registered agent which must perform CDD under the AML/ CFT legislation to identify its customer’s beneficial owner(s). Although there is some lack of clarity on the level of detail of this information, sufficient information is available on the owners of foreign companies. Overall, information identifying the owners of companies is available in the Virgin Islands. 85. In practice, the information available with the Registrar of Companies within the FSC identifies the registered agent of each company. During the three-year review period, the Virgin Islands competent authority has always asked the registered agent to provide ownership information on the company identified in the EOI request. 86. In the three-year review period, more than 60 requests included information in respect of the shareholders of a company. Peer input indicated that this information has not always been available with the registered agent, or was only partially available. Although this may have been partly due to the failure of the Virgin Islands competent authority to check that the information was included before transmitting it to the requesting jurisdiction (see C.5.2) and the failure to exercise enforcement measures (see B.1.4), the cases include a limited number of situations where the registered agent should have had the information available but did not. The results of inspections by the FSC also indicate that in some cases the registered agent does not keep sufficient CDD information and/or the register of members. Although in general appropriate enforcement action is taken by the FSC against non-compliant registered agents (see A.1.6), it is recommended that the Virgin Islands continues to use all mechanisms at its disposal to ensure that ownership information in respect of companies is available in practice.

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Bearer shares (ToR A.1.2)
87. Any Virgin Islands company that can issue shares is allowed to issue bearer shares if it is stated so in its memorandum as filed at the Register of Companies (s. 9(2) and 38 BCA) and kept by the registered agent (s. 96(1)(a) BCA), except for a company limited by shares which is registered as a segregated portfolio company. As at December 2012, there were 539 companies incorporated in the Virgin Islands authorised to issue bearer shares according to its memorandum, but it is not known how many bearer shares these companies have issued. Under the BCA a system has been established to identify the beneficial owners of bearer shares through a custodial arrangement. 88. A bearer share must be held either by an “authorised custodian” or a “recognised custodian”, and is otherwise disabled (s. 70 BCA). Authorised and recognised custodians need to be approved or recognised as such by the FSC (s. 50A and 50B of the Financial Services Commission Act). An authorised custodian may be either a person holding a license under any Virgin Islands regulatory law (“BVI authorised custodian”), or a licensed foreign body corporate (“foreign authorised custodian”). Recognised custodians must be an investment exchange or a clearing organisation carrying on business in a jurisdiction that is a member of the Financial Action Task Force. There are currently 12 persons approved by the FSC to act as authorised custodians, of which five are foreign authorised custodians, and 10 institutions are recognised by the FSC to act as recognised custodians. 89. Upon delivery of the bearer share to or the deposit with the authorised custodian, the following information shall be provided to the authorised custodian in a notice (s. 71(1) BCA): (a) the full name of the beneficial owner of the bearer share; (b) the full name of any person having an interest in that share, whether by virtue of a charge on the share or otherwise, or containing a statement that no other person has an interest in that share; and (c) such other information as may be required. 90. An authorised custodian shall send a notice to the registered agent of the company that it is the custodian of the bearer share (s. 72(1) BCA). Where the bearer share is delivered to or deposited with a foreign authorised custodian or with a recognised custodian, the information mentioned in s. 71(1) BCA shall be submitted by the company or the person depositing the share to the registered agent of the company within 14 days of the delivery or the deposit (s. 71(3) BCA).

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91. A change of ownership of a bearer share held by an authorised custodian is effective as soon as this authorised custodian receives a notice of this change including the details identifying the new owner (s. 75(1) BCA). Where the bearer share is held by a recognised custodian, the change of ownership is effective only from the time this recognised custodian or another person submits a notice including the details of the new owner to the registered agent of the company (s. 75(2) BCA). 92. An authorised custodian shall keep the notice containing the ownership details provided to him upon delivery or deposit and any notices of subsequent changes in the ownership at its office (which has to be an office approved by the FSC if it is located outside the Virgin Islands) and shall ensure that the bearer share remains at all times within its custody and control (s. 72(2) BCA). The notice containing the ownership details of the bearer share and any subsequent notices of a change of ownership must be provided where an authorised custodian transfers possession of the bearer share (s. 73(2) BCA). 93. The custodial arrangement described above effectively immobilises all bearer shares, ensuring that the beneficial owners of these shares are known by the custodians at all times. However, the custodians may not in all cases fall within the territorial jurisdiction of the Virgin Islands. Until July 2012, there was no clear obligation on a person within the territorial jurisdiction of the Virgin Islands to keep full ownership information on the owners of bearer shares where the authorised custodian was located abroad. On 26 July 2012, a new provision was inserted in the BCA (s. 76A), placing an obligation on the registered agent of a company that has issued bearer shares to keep the following information: (a) the identifying number of the bearer share certificate representing the bearer share; (b) the full name of the beneficial owner of the bearer share; (c) the full name of any other person that has an interest in the bearer share, whether by virtue of a charge on the share or otherwise; and (d) the name and address of the custodian of the bearer share. 94. The registered agent will generally be able to obtain this information. In fact, there are legal obligations to provide the ownership information to the registered agent. Where the bearer shares are delivered to or deposited with a recognised custodian or a foreign authorised custodian, the company or the person depositing the share must submit the ownership information to the registered agent within 14 days of such delivery or deposit (s. 71(3) BCA). In addition, where a change of ownership occurs of a bearer share held by a

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recognised custodian, the details of the new owner must also be submitted by the custodian to the registered agent (s. 75(2) BCA). 95. Changes of ownership of a bearer share held by an authorised custodian should also be submitted to the registered agent of the company. This obligation is not as such contained in the BCA, but it is included in Aide Memoire #3 of May 2004 (paragraph 2.3(b)(ii)). This Aide Memoire was issued by the FSC to establish detailed criteria for authorised custodians, which are also considered during inspections by the FSC and non-compliance may eventually lead to revocation of the authorisation. The obligations in the BCA and the Aide Memoire should ensure that the registered agent can in practice comply with the obligation to have identity information on the holders of bearer shares available. It is noted that where a custodian would not cooperate, the registered agent should resign as it cannot meet its legal obligations, and report the non-cooperation to the FSC which can take enforcement measures vis-à-vis the custodian. 96. From 2010-12, the Compliance Inspections Unit of the FSC conducted on-site inspections on seven BVI authorised custodians and four on-site inspections of a foreign authorised custodian located in Panama. During these on-site inspections, the Compliance Inspections Unit verifies whether the custodian keeps information on the owners of the bearer shares and whether transfers have been carried out in accordance with the law. According to the Compliance Inspections Unit, the authorised custodians kept all of the information required, but they were not always in compliance with the obligation to carry out a reconciliation process (verifying whether the information is still up-to-date) at least twice a year. Recognised custodians are not subject to inspections by the FSC, as these must be an investment exchange or a clearing organisation carrying on business in a jurisdiction that is a member of the Financial Action Task Force. 97. The on-site inspections by the Compliance Inspections Unit on registered agents now include a verification of compliance with the obligation to keep information on the owners of bearer shares where their client is a company that has issued bearer shares. However, this obligation was only introduced in July 2012, and it is therefore recommended that the Virgin Islands closely monitors whether registered agents keep this information, in particular where they have to obtain the information from a foreign authorised custodian. 98. In the three-year period under review, the Virgin Islands received two requests concerning ownership information where the requesting jurisdiction indicated that bearer shares were involved. However, in both cases the Virgin Islands obtained information that the relevant companies had not issued bearer shares and were legally not able to do so. This information as well as the information on the owners of the shares was provided in both cases.

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Conclusion
99. Virgin Islands companies may issue bearer shares. These are immobilised through a custodial arrangement, meaning that the custodian will have the physical share in its possession and is also required to keep the identity information on the owner of the bearer share. Although the custodian may be located outside the Virgin Islands, and therefore outside of its territorial jurisdiction, a new provision was introduced in July 2012 to also require the registered agent of the company that has issued bearer shares to keep full ownership information on the owners of the bearer shares. This means that in all cases full ownership information on the owners of bearer shares must be kept by a person within the territorial jurisdiction of the Virgin Islands. In practice, obligations on the custodians to report ownership information to the registered agent facilitate compliance by the registered agents. Both the authorised custodians and the registered agents are subject to the monitoring and enforcement program of the FSC. The obligations placed on registered agents to maintain full ownership information have only come into effect in July 2012. It is therefore recommended that the Virgin Islands closely monitors whether the registered agents keep full ownership information on the owners of bearer shares.

Partnerships (ToR A.1.3)
100. The law governing partnerships in the Virgin Islands is the Partner­ ship Act. A partnership is defined as “the relation of which subsists between persons carrying on a business in common with a view of profit” (s. 3 Partnership Act). The Partnership Act provides for both general partnerships and limited partnerships to be formed. Limited partnerships are one of the following two types: • • local limited partnerships international limited partnerships

Limited partnerships
101. Limited partnerships are not allowed to carry on banking business, insurance business or trust business (s. 50(1) Partnership Act). Furthermore, international limited partnerships shall not carry on business with persons resident in the Virgin Islands or own an interest in real property in the Virgin Islands. All 547 limited partnerships registered as at December 2012 in the Virgin Islands were registered as international limited partnerships. 102. All limited partnerships are required to have a registered office and a registered agent in the Virgin Islands (s.  82 and 84 Partnership Act). A general partner that wilfully contravenes these requirements is liable on summary conviction to a penalty of USD 100 for each day the contravention

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continues (s.  85 Partnership Act). Registered agents of limited partnerships are licensed and regulated by the FSC under the Company Management Act and the Banks and Trust Companies Act in the same way as registered agents for companies (see section on companies above). In the case of a local limited partnership, one of the general partners can also be the registered agent (s. 84 Partnership Act).

Ownership information held by the authorities
103. Upon forming a limited partnership in the Virgin Islands, it has to be registered with the Registrar of Limited Partnerships within the FSC, which issues a registration certificate (s. 55 Partnership Act). If a partnership which according to its articles is a limited partnership, is not so registered, it is deemed to be a general partnership and every partner shall be deemed to be a general partner (s. 56 Partnership Act). 104. Upon registration, a memorandum has to be submitted to the Registrar. This memorandum shall include the full name of each of the general partners and their respective addresses, as well as the address of the registered office and the name and address of the registered agent (s. 53 Partnership Act).

Ownership information held by partnerships and its registered agents
105. The general partners of a limited partnership shall maintain at the registered office of the limited partnership, or at such other place as the general partners may determine, a register containing “the name and address, amount and dates of contributions of each partner and the amount and date of any payment representing a return of any part of any partner’s contribution”. The register shall be updated within 21 business days of any change (s. 83 Partnership Act). Such register should therefore contain ownership and identity information on every partner in a limited partnership. An obligation was introduced in November 2012 that, where the register is not maintained at the registered office of the limited partnership, the general partners of the limited partnership must maintain a copy of the register at the registered office, which must be updated within 14 days of any change to the original register (s. 83(3) Partnership Act). A general partner that wilfully contravenes this requirement is liable on summary conviction to a penalty of USD 100 for each day the contravention continues (s. 85 Partnership Act). 106. The registered agent of a limited partnership is subject to AML/ CFT legislation under the AMLR and the CoP. This means that CDD rules apply. Section 19(5)(d) CoP prescribes that where the registered agent wishes to enter into a business relationship with a legal person (which includes any partnership for the purposes of the CoP), it must determine the ownership of the partnership. This determination shall be reviewed at least once every three

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years or, in case of partnerships posing a high money-laundering or terrorist financing risk, at least once every year (s. 21 CoP). Specific information that must be verified by the registered agent in respect of the ownership of a limited partnership includes the full name and current residential address of each partner (s. 25(5) CoP). A registered agent who fails to comply with the CDD rules is liable on summary conviction to a fine not exceeding USD 25 000 or to imprisonment for a term not exceeding two years, or both (s.  25(8) CoP). Documentation in respect of the CDD carried out must be maintained in the Virgin Islands by the registered agent for at least five years after the end of its business relationship with the partnership (s. 8 AMLR and s. 39 RC).

General partnerships
107. General partnerships carrying on business in the Virgin Islands follow the common law principle whereby all information in respect of ownership is detailed in the partnership agreement/deed subscribed to and agreed upon by all partners. Section 30 of the Partnership Act further states that partners “are bound to render true accounts of all things affecting the partnership to any partner, agent or representative”. It is unclear whether this obligation includes a requirement for identity information in respect of the partners to be retained. However, it is noted that a general partnership is essentially the sum of its partners and the English common law rule on partnerships applies where all partners are equally and severally obligated and liable to the partnership. 108. Under the PTA, all partners in a partnership which is carrying on business in the Virgin Islands are deemed employees of that partnership if they render services to the partnership and participate in the income or profits of the partnership (s.  6(a) PTA). General partners will normally fall in this category. This means that the general partnership, as the deemed employer of the general partners under the PTA, must register with the Commissioner and tax has to be paid on the (deemed) remuneration paid to the general partners. The annual tax return that has to be submitted by the general partnership requires all (deemed) employees to be identified and the nature of their employment has to be indicated. This means that it will generally be clear from this form who the general partners of the general partnership are, and the tax authorities will have this information available in their administration. As at April 2013, there were approximately 200 general partnerships registered with the Commissioner of Inland Revenue.

Conclusion and practice
109. All limited partnerships are registered with the Registrar within the FSC, and information on general partnerships is registered with the Inland

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Revenue Department. The general partners of a limited partnership must keep a register of all partners and their contributions to the partnership, while the partners in a general partnership are generally identified in the annual tax return they have to submit. In addition, the registered agent of a limited partnership must verify the identity of each partner and keep this information. 110. All limited partnerships are required to have a registered office and a registered agent in the Virgin Islands, the details of which are available with the Registrar. The inspections carried out by the Compliance Inspections Unit of the FSC on registered agents includes the taking of samples of information kept on their clients that are partnerships. The checklist used by the FSC includes the partnership agreement and the details of all partners. 111. In the three-year review period, the Virgin Islands has received no EOI requests for information relating to the identity of partners in a partnership.

Trusts (ToR A.1.4)
112. The rules governing trusts in the Virgin Islands are based on English common law, supplemented by the Trustee Act and the Virgin Islands Special Trusts Act. Section 2 Trustee Act defines a trust as “the legal relationship created, either inter vivos or on death, by a settlor when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a special purpose”. 113. The Virgin Islands Special Trusts Act creates a special opt-in trust regime for shares of Virgin Islands companies. Trusts created under this regime are commonly called VISTA trusts. The reason to create a VISTA trust is to enable trustees to retain shares in a Virgin Islands company, irrespective of the financial benefits of holding them. 5 This will for example enable trustees to accommodate a settlor’s intention for the company shares to be held for his children. The sole trustee of a VISTA trust must be a trustee licensed under the Banks and Trust Companies Act. The Virgin Islands authorities indicated that as at December 2012, there were 1155 VISTA trusts established by Virgin Islands licensees. 114. The Banks and Trust Companies Act sets out licensing requirements for companies carrying on trust business. Section 2(1) of this Act defines “trust business” as “the business of (a) acting as a professional trustee, protector or administrator of a trust or settlement; or (b) managing or administering any trust or settlement”. The FSC can issue a license to carry on trust business (either a Class I or a Class II license, depending on whether the company
5. According to the “prudent man of business rule” under English common law, a trustee may be obliged to sell the shares for a profit or to reduce risk in certain situations.

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is also licensed to carry on company management business) to any company, taking into account the detailed requirements set out in the Regulatory Code and the Banks and Trust Companies Act. One of the requirements is that the licensee designates (and notifies to the FSC) a principal office in the Virgin Islands and two individuals resident in the Virgin Islands as its authorised representatives (s.  9 Banks and Trust Companies Act). Companies which carry on trust business without being licensed are liable to a fine not exceeding USD 50 000 or to imprisonment for a term not exceeding two years, or both. As at December 2012, there were 195 companies licensed to carry on trust business in the Virgin Islands. Together, these companies reported to the FSC that they administer approximately 40 000 trusts. 115. There are two exemptions to the rule that a company is not allowed to carry on trust business without a license, both introduced under the Financial Services (Exemptions) Regulations. The first exemption is the Private Trust Company (“PTC”). A PTC is regarded as such if its business consists solely of unremunerated trust business (no direct or indirect remuneration is received by the PTC for its services) or related trust business (each beneficiary of the trust has a specified family relationship with the settlor or is a charity). A PTC shall not solicit trust business from members of the public and its registered agent shall be a person holding a Class I license. 6 A total of 1021 PTC’s were registered in the Virgin Islands as at December 2012. 116. A company which acts solely as a bare trustee 7 is also not required to obtain a license to carry on trust business.

Information held by the authorities
117. There is no requirement for trusts to be registered. In fact, the Trustee Act provides for an express exemption from registration under the provisions of the Registration and Records Act (s. 91 Trustee Act). Also, trusts are generally not subject to any tax in the Virgin Islands (s. 90 Trustee Act).

Information held by trustees and service providers
118. The Trustee Act only imposes obligations to keep certain ownership information on trustees in respect of purpose trusts, which are trusts without a particular beneficiary. Such trusts may be used for commercial purposes, such as isolating assets in financial deals or separating voting from economic control. The trustee of a purpose trust, of which at least one has to be a
6. 7. A person holding a Class I license is licensed to carry on both trust business and company management business. A trustee acts as a bare trustee if he/she only conveys the trust’s assets to the beneficiary (according to trust’s provisions) and has no other duty under the trust.

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professional, must keep records of the identity of any other trustees and of the settlors (s. 84(21) and s. 84A(28) Trustee Act). 119. Companies that carry on trust business are required to obtain a license to do so. Other persons can act as a trustee, administrator or protector of a trust without being licensed. However, any person professionally engaging in trust business is subject to AML/CFT legislation (s.  2(1) AMLR and s. 2(1) CoP). Section 19(3)(a) CoP prescribes that in case the trust service provider wishes to enter into a business relationship with respect to a trust, CDD rules apply. This requires the trust service provider to obtain the following information (s. 28 CoP): (a) the name of the trust; (b) the date and country of establishment of the trust; (c) where there is an agent acting for the trust, the name and address of the agent; (d) the nature and purpose of the trust; (e) identifying information in relation to any person appointed as trustee, settlor or protector of the trust. 120. Until May 2012, section 28(2) CoP provided that the trust service provider was only required to identify the beneficiaries with a vested right in the trust where it considered that the trust presented a higher level of risk in terms of money laundering or financing of terrorism. With effect from 10 May 2012, section 28(2) CoP was amended and now requires the trust service provider to “obtain and verify the identities of all the beneficiaries with a vested right in the trust at the time of or before distribution of any trust property or income” in relation to trusts presenting a normal or a higher level of risk. It is clear that this amendment results in an increase in the number of cases for which the trust service provider must identify the beneficiaries of the trust, as it now includes all cases where it considers that the trust presents a normal level of risk in addition to the cases where it would present a higher level of risk. 121. However, the CoP clearly distinguishes another category of risk, namely low risk (see, for example, sections 19(6) and 21(2) CoP). Customers are sometimes regarded as “low risk” in practice. While section 28(2) CoP does not specifically place an obligation on service providers to obtain identity information on the beneficiaries in this situation, the Virgin Islands authorities stated that, in practice, service providers are subject to the requirement to identify the beneficiaries in all cases. This is because “normal risk” should be read to include “low risk” in the context of section 28(2) CoP, as only two categories are mentioned (“normal risk” and “higher level of risk”) and every trust should fall in one of these two categories. Although it is not

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clearly mentioned in the CoP that every trust should fall in one of these two categories, this can be construed from the way in which the risk profile of a customer must be determined. 122. In general, service providers must adopt a risk-based approach towards their customers and determine customer risk, product/service risk and country/geographic risk (Explanation to section 19 CoP). The customer will therefore always be regarded as posing a “low risk”, a “normal risk” or a “higher risk”. When determining the risk profile of an applicant for business (potential customer, which can be an individual, a company representative etc.) the service provider will take note of the products requested by that applicant, which would include whether the applicant wishes to utilise a trust within its structure. Therefore, the trust itself will form part of the risk assessment of the applicant. This will determine how CDD in relation to identification and verification of the client is undertaken. According to the Virgin Islands authorities, the fact that a client utilises or wishes to utilise a trust within the structure would lead the service provider to determine that the risk of that client would be at a minimum within the category of “normal risk”. This is evidenced by the factors mentioned in section 19(6) CoP which may lead to a determination that the customer presents a low risk. These factors mostly refer to circumstances that are not applicable to or not common for trusts, such as being a listed company or where insurance policies with low annual premiums are involved, and it is difficult to see how a service provider could use these factors to determine that a structure which includes a trust falls within the “low risk” category. In addition, where there is a non-face to face business relationship, enhanced CDD measures should be applied because a higher level of risk exists (s. 29(4) CoP). The cases where trusts would represent a low level of risk are therefore likely to be limited, if they exist at all. This is confirmed by the Virgin Islands authorities, which indicate that instances where a trust would be considered as posing a “low risk” are almost non-existent in practice. In any case, trustees are subject to the common law obligations as set out below. 123. It is noted that where the trust service provider does not itself act as the trustee but rather is hired by the trustee to provide its services (which will, for example, usually be the case for the registered agent of a PTC), the following additional information has to be obtained by the trust service provider (s. 19(5) CoP): (a) the type of trust; (b) the nature of the activities of the trust and the place where its activities are carried out; (c) where the trust forms part of a more complex structure, details of the structure, including any underlying companies;

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(d) classes of beneficiaries, charitable objects and related matters; (e) whether the trust or trustee is subject to regulation and, if so, details of the regulator. 124. A person who fails to comply with the CDD rules is liable on summary conviction to a fine not exceeding USD 25 000 or to imprisonment for a term not exceeding two years, or both (s.  28(3) CoP). Documentation in respect of the CDD carried out must be maintained in the Virgin Islands by the registered agent for at least five years (s. 8 AMLR and s. 45(1)(a) CoP).

Common law obligations
125. The rules governing trusts in the Virgin Islands are based on English common law as a result of the Common Law (Declaration of Application) Act of 1705. This means that for a discretionary trust to be valid, it needs to meet the three certainties: the certainty of intention, the certainty of subject matter and the certainty of object. As a consequence, a trust is only valid if evidenced by a clear intention on behalf of the settlor to create a trust, clarity as to the assets that constitute the trust property and identifiable beneficiaries (Knight v. Knight (1849) 3 Beav 148). In addition, the trustee has several obligations which all suggest that he/she is required to know who the beneficiaries of the trust are in order to be able to comply with these obligations. Examples are the obligation to avoid conflicts of interests between the trustee’s fiduciary duties and their own self interest (Bray v Ford [1896]) and the obligation to familiarise themselves with all information regarding the trust including the trust documents and assets (Hallows v Lloyd (1888) 39 Ch D 686, 691). Finally, trustees are under a fiduciary duty to keep accounts of the trust and to allow beneficiaries to inspect them as requested (Pearse v. Green (1819) 37 E.R. 327 at 329). 126. In summary, the obligations placed on trustees by English common law, which are applied in the Virgin Islands, ensure the maintenance of identity information on the settlors and beneficiaries. This means that even where a trustee would not be required under the CoP to identify the beneficiaries of the trust because it regards the trust as presenting a “low risk” in terms of money laundering or financing of terrorism, he/she is still required to have this information available based on the common law obligations. In practice, reliance on common law obligations in respect of trusts has not prevented effective exchange of information in the three-year review period.

Conclusion and practice
127. Trustees of purpose trusts must keep identity information on the settlors and other trustees. In addition, AML/CFT legislation applies to all

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trustees, administrators or protectors of trusts which carry on trust business as a professional. This would include any professional PTC or any professional acting as a bare trustee. Under AML/CFT legislation, trust service providers are required to identify trustees, settlors and protectors of trusts. In relation to trusts which the trust service provider considers as posing a “normal or a higher” level of risk in terms of money laundering or terrorist financing, beneficiaries with a vested right in the trust shall also be identified. Where the trust service provider considers the trust as posing a low level of risk, reliance can be placed on common law obligations for the availability of information on the identity of the beneficiaries. Similarly, non-professional trustees are subject to these common law obligations. 128. Where a trust is created under the laws of the Virgin Islands which has no other connection with the Virgin Islands, there may be no information about the trust available in the Virgin Islands. 129. The Compliance Inspections Unit of the FSC is responsible for carrying out off-site monitoring and on-site inspections on trust service providers. During these inspections, samples of identity information are taken and examined to ensure that trusts are in compliance with identity keeping obligations. The checklists used by the Compliance Inspections Unit include the trust instrument, the trustee agreement and the identity of the settlors and beneficiaries. Where a service provider has a PTC as its client, it is verified whether ownership and identity information is being kept on both the PTC itself and the trust(s) it administers. Throughout the inspections in recent years, it was found that the compliance rate is generally high for service providers that only conduct trust services, while some enforcement actions needed to be taken in respect of service providers conducting both trust services and company management services (see also A.1.6). 130. In the three-year review period, the Virgin Islands received 14 EOI requests for identity information in respect of trusts. In at least two cases, no or incomplete information was transmitted to the requesting jurisdiction. In one of these two cases, the information obtained and exchanged was not the information requested, and this was not verified by the Virgin Islands competent authority before it was transmitted to the EOI partner (see also C.5.2). In the other case, the person who was served the Notice to Produce Information claimed that the information was available, but protected by privacy laws of another jurisdiction. This statement was simply forwarded to the requesting jurisdiction without the Virgin Islands using its compulsory powers to gather the information (see also B.1.4).

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Foundations (ToR A.1.5)
131. The Virgin Islands law does not allow for the establishment of foundations.

Enforcement provisions to ensure availability of information (ToR A.1.6)
132. The Virgin Islands should have in place effective enforcement provisions to ensure the availability of ownership and identity information, one possibility among others being sufficiently strong compulsory powers to access the information. This subsection of the report assesses whether the provisions requiring the availability of information with the public authorities or within the entities reviewed in section A.1 are enforceable and failures are punishable. Questions linked to access are dealt with in Part B. 133. As described in the respective subsections, persons are generally liable to penalties if they contravene a requirement to keep any kind of ownership information. Key penalties are available if: • • a company does not keep a register of members: USD 10 000. a limited partnership does not keep a register containing details on each partner: USD 100 for each day a general partner wilfully contravenes this obligation. a service provider fails to comply with the CDD rules under the AML/CFT legislation: USD 25 000 or imprisonment for a term not exceeding two years, or both. a company does not have a registered agent: USD 10 000. a limited partnership does not have a registered agent: USD 100 for each day a general partner wilfully contravenes this obligation.

• •

134. In addition to the penalties related to a specific contravention, the FSC has a wide range of enforcement powers in its regulatory toolkit in case of a contravention of the Financial Services Commission Act, the Regulatory Code and any other financial services legislation, which includes the BCA, the Partnership Act and the CoP. These powers include applying to the Court for a protection order (s. 39 Financial Services Commission Act), suspension or revocation of a license (s. 38 Financial Services Commission Act) and the imposition of administrative penalties ranging from USD 100 and USD 5 000 (s. 2(2) Financial Services (Administrative Penalties) Regulations). Administrative penalties may also be imposed under the CoP separately, and they have been increased in August 2012 to a range of USD 50 000 to USD 75 000 (s. 57(1) and Schedule 4 CoP).

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135. No specific penalties apply in respect of the duties of authorised and recognised custodians holding bearer shares. However, administrative penalties and other enforcement powers as described in the previous paragraph can be imposed on authorised custodians by the FSC. Moreover, since July 2012 the registered agent must maintain a register recording ownership information in respect of bearer shares where it has a company as a client which has issued bearer shares. Because the registered agent is obliged under section 38(1)(b) of the Regulatory Code to keep adequate and orderly records of all services provided to, and transactions undertaken for, its customers, the FSC may impose the enforcement actions where it ascertains that the registered agent fails to keep the register of bearer shares appropriately.

Practice
136. All Virgin Islands companies and limited partnerships must have a registered office and a registered agent in the Virgin Islands. The registered agent must keep ownership information under AML/CFT legislation, and the BCA and Partnership Act require that the register of members or partners is kept by the registered agent or at the registered office provider. In respect of trusts, all professional trust service providers are subject to the obligations under the AML/CFT legislation and must therefore keep identity information on the trust(s) they administer. Together, these requirements should ensure that ownership and identity information in respect of all Virgin Islands companies and limited partnerships, as well as in respect of trusts administered in the Virgin Islands, is available with a company and/or trust service provider. All of these service providers are generally subject to licensing and supervision by the FSC. 137. The FSC has approximately 145 officers across divisions including the Compliance Inspections Unit, Legal and Enforcement, Operations, Finance, IT, Investment Business, Banking and Fiduciary Services, Insurance, Insolvency, Policy, and the Registry of Corporate Affairs. All FSC staff are given annual training in AML/CFT, training on the inspection process as well as other financial services matters. The Compliance Inspections Unit consists of 6 dedicated personnel and is responsible for the coordination of the on-site inspections of licensed service providers. An on-site inspection team, generally consisting of 3-5 persons, is headed by an officer of this unit and further consists of other FSC officers from the relevant areas of expertise, depending on which type of service provider is inspected. 138. The Compliance Inspections Unit uses a risk-based approach to determine which service providers should be subject to inspection, taking into account, among other factors, the number of clients, the nature of the business of the clients and previous non-compliance. In addition, the continuing off-site monitoring carried out by each regulatory division within the

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FSC may trigger an on-site inspection. In the period 2010-12, the Compliance Inspections Unit conducted between 40-60 on-site inspections a year. In 2012 the FSC focused on the registered agents, and conducted on-site inspections on 25-30 registered agents, including nine out of the top ten registered agents in terms of number of clients (together, the top ten registered agents are responsible for approximately 70% of the company registrations). 139. During on-site inspections, the Compliance Inspections Unit takes samples of ownership and identity information of the clients kept by the service provider. Determination of the sample size is based on criteria such as type of business and size of organisation. For example the on-site inspection would include reviewing information kept on end-user clients, trust clients, clients who utilise bearer shares and clients to whom nominee director and shareholder services are offered. For each one of these types/categories of clients separate sample sizes of files are reviewed. Depending on the outcome of the risk assessment, the sample size of clients/files reviewed could range from 30 to 200. In addition, where irregularities are found during the inspection, more files will be checked. 140. Different checklists are used depending on the type of entity or arrangement. These checklists are updated regularly, for example when relevant legislation changes. Following the inspection, the Compliance Inspections Unit reports to the Enforcement Committee, which decides on the appropriate action to be taken. In most cases, the service provider is first given two to six weeks to rectify the non-compliance. This is found to be sufficient in the majority of the cases. Where the service provider does not rectify the noncompliance within the prescribed time limit, the Enforcement Committee may take further enforcement actions. 141. The statistics on enforcement actions as kept by the FSC do not distinguish between the types of non-compliance. It is therefore not possible to determine whether the enforcement actions taken relate to failure to comply with ownership and identity information keeping requirements. However, the FSC has indicated that failures to comply with these requirements have been identified, in particular with respect to registered agents. The combined statistics on enforcement actions taken by the FSC show that in the years 2010-12 on average 180 cases a year were brought before the Enforcement Committee, leading to a total of 334 enforcement actions ranging from imposing an administrative penalty (approximately 100 such penalties have been applied) to the revocation of a license (there have been more than 15 such cases, almost all in 2012). The total amount of penalties levied amounts to USD 216 450. 142. It is noted that there is no active enforcement of the obligation on companies and partnerships themselves to keep a register of members or ownership information on the partners. However, the system in the Virgin

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Islands is such that this ownership information must generally also be in the possession of a service provider. As an active monitoring and enforcement programme is in place in respect of these service providers, it is considered that effective enforcement of the obligations to keep ownership and identity information on relevant entities and arrangements is in place in the Virgin Islands. The Virgin Islands is encouraged to continue to monitor compliance by the service providers of ownership information keeping requirements, in particular where it relates to information on the shareholders as kept by the registered agents of the companies (see also A.1.1).
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed. Factors underlying recommendations During the three-year review period (1 July 2009 until 30 June 2012), ownership information in respect of the shareholders of companies was not exchanged in some cases, while the person (the registered agent) who was requested to produce the information was required by law to have this information. The obligation on the registered agent of a company that has issued bearer shares to keep full ownership information on the owners of these bearer shares has been recently introduced. Recommendations The Virgin Islands should ensure that ownership information in respect of companies is available in all cases in practice.

The Virgin Islands should closely monitor whether registered agents keep full ownership information on the owners of bearer shares where their client is a company that has issued such shares.

A.2. Accounting records
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.

143. A condition for exchange of information for tax purposes to be effective, is that reliable information, foreseeably relevant to the tax requirements

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of a requesting jurisdiction is available, or can be made available, in a timely manner. This requires clear rules regarding the maintenance of accounting records.

General requirements (ToR A.2.1)
144. Under section 98 BCA all Virgin Islands companies are required to keep records that “are sufficient to show and explain the company’s transactions and will, at any time, enable the financial position of the company to be determined with reasonable accuracy”. A company that fails to keep such records is liable on summary conviction to a fine of USD 10 000. The same obligation applies to companies under section 5A of the Mutual Legal Assistance (Tax Matters) Act, which was added in November 2012. It is noted that there is no express obligation to prepare financial statements or allow them to be prepared under the Companies Act. With records explaining all transactions (receipts, payments and other transactions) and sufficient to determine the financial position of the company (assets, liabilities and other rights and obligations having a bearing on the financial position), all elements allowing for financial statements to be prepared seem present. Therefore the existing rule may be considered sufficient to allow financial statements to be prepared. In practice, where accounting records of companies were exchanged by the Virgin Islands competent authority to its partner jurisdictions (which was only in a limited number of cases, see below under Conclusion and practice), peers have indicated that financial statements were provided. 145. For partnerships, section 30 Partnership Act states that partners “are bound to render true accounts and full information of all things affecting the partnership to any partner, his agents or representatives”. In addition, section 81 of the Partnership Act was amended in November 2012 to prescribe that a limited partnership shall keep accounting records that are sufficient to show and explain the limited partnership’s transactions and will, at any time, enable the financial position of the limited partnership to be determined with reasonable accuracy. This new provision mirrors the obligation on companies, and is therefore considered sufficient to allow financial statements to be prepared. A general partner that wilfully contravenes this requirement is liable on summary conviction to a penalty of USD 100 for each day the contravention continues (s. 85 Partnership Act). General partnerships are not subject to this new provision and rely on section 30 Partnership Act for the obligation to keep reliable accounting records. As it is not clear from this obligation that general partnerships must keep accounting records that are sufficient to show and explain the limited partnership’s transactions and will, at any time, enable the financial position of the limited partnership to be

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determined with reasonable accuracy, the Virgin Islands is recommended to ensure that general partnerships also keep reliable accounting records. 146. Under common law all trustees resident in the Virgin Islands are subject to the fiduciary duty to the beneficiaries to keep proper records and accounts of their trusteeship, and to allow the beneficiaries to inspect the accounts as required (Pearse v. Green (1819) 37 E.R. 327 at 329 and Re Tillot [1892] 1 Ch. 86). The Trustee Act does not hold an additional obligation for a trust to keep any records. Only in the case of a purpose trust, the Trustee Act (s. 84(21) and s. 84A(28)) requires one of the trustees to keep the accounts of the trust within the Virgin Islands, but no further specification of the nature of the accounts is prescribed. It is not clear whether the existing obligations ensure that reliable accounting records are available in all cases in respect of trusts.

Licensed persons
147. As mentioned in the Introduction, persons carrying on company management business, trust business, banking business, insurance business, financing business, money services business or investment business are required to obtain a license from the FSC to do so. In regulating these businesses, additional requirements to keep accounting records apply. The regulating laws 8 all contain a provision requiring the licensee to keep financial records that: (a) are sufficient to show and explain its transactions; (b) will, at any time, enable its financial position to be determined with reasonable accuracy; (c) will enable them to prepare financial statements; and (d) will enable their financial statements to be audited. 148. Licensees are required to keep their financial records in the Virgin Islands, either at their (principal) office or at a place of which the FSC is notified in writing. Foreign licensees (if applicable) shall at least keep accounting records in the Virgin Islands in respect of the business it undertakes in the Virgin Islands and shall notify the FSC in writing where the other financial records are kept. Licensees failing to comply with the record keeping rules commit an offence 9. Under the Banks and Trust Companies Act and the Company Management Act, licensees are then liable upon summary
8. 9. Banks and Trust Companies Act (s.  17), Company Management Act (s.  17), Insurance Act (s.  52), Financing and Money Services Act (s.  19) and Securities and Investment Business Act (s. 17 and s. 59). Except persons carrying on investment business other than mutual funds.

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conviction to a fine of USD 25 000 or to imprisonment for a term not exceeding one year, or to both. Under the Insurance Act and the Financing and Money Services Act, licensees are then liable upon summary conviction to a fine of either USD 40 000 (corporate body) or USD 30 000 (individual). Mutual funds failing to comply with the record keeping rules are liable upon summary conviction to a fine of USD 20 000 (corporate body) or USD 15 000 (individual). In addition, all licensees are subject to the wide range of enforcement powers of the FSC as described under A.1.6.

Records to be kept for customers of licensees
149. Section 38(1)(b) Regulatory Code requires all licensees to keep adequate and orderly records of all services provided to, and transactions undertaken for, its customers. All companies and limited partnerships are required to have a licensed registered agent, but there is no obligation to conduct all transactions through them or any other licensee. This requirement on licensees does therefore not ensure availability of full accounting records for all companies and limited partnerships. Nevertheless, section 5A of the Mutual Legal Assistance (Tax Matters) Act and section 83 of the Partnership Act were amended in 2012 to prescribe that companies and limited partnerships keep their accounting records and underlying documentation at the office of their registered agent (in the case of companies) or at their registered office (in the case of limited partnerships) in the Virgin Islands. The records may also be kept at another place, within or outside the Virgin Islands, but in that case the company or the general partners must notify the registered agent of the place where the records are being kept (s. 5A(2) Mutual Legal Assistance (Tax Matters) and s. 83(3) Partnerships Act). 150. Most Virgin Islands trusts will have a professional trustee or administrator, which has to be a licensee under the Banks and Trust Companies Act. In general, trustees or administrators will undertake all transactions with respect to the trust and the requirement in section 38(1)(b) Regulatory Code would therefore require records to be kept for most trusts. It is, however, not clear whether this obligation would satisfy the requirements of aspect A.2.1 of the Terms of Reference as there is no express reference for the trustee to be able to determine the financial position of the trust and this does then also not necessarily allow for financial statements to be prepared.

Records to be kept under the AML/CFT legislation
151. Section 9 AMLR requires a relevant person to maintain a record of all transactions carried out by or on behalf of its customer. A relevant person includes any person whose business it is to act as a service provider, such as registered agents and professional trustees. This language is very broad, and

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implies that, although there is no obligation for companies or limited partnerships to conduct all transactions through its registered agent, the registered agent must still keep records of all transactions “carried out by” the company or limited partnership whether or not the agent is involved in the transaction. However, the Virgin Islands advised that the reference to “transactions carried out by the customer” refers to transactions reported by the customer to the service provider as part of their business relationship. 152. In any case, the requirements under the AML/CFT legislation in respect of accounting records only pertain to “transactions”. This does not necessarily enable the financial position of the customer to be determined and allow for financial statements to be prepared.

Underlying documentation (ToR A.2.2)
153. The BCA and the Trustee Act do not expressly impose an obligation to retain underlying documentation, such as invoices, contracts, etc. Section 5A of the Mutual Legal Assistance (Tax Matters) Act, and section 83 of the Partnership Act, both amended in 2012, however, specifically require companies and limited partnerships to keep underlying documentation. Nevertheless, the requirements do not specify the type of underlying documentation to be kept. In both cases, it is stated that the records and underlying documentation which must be kept “are sufficient to show and explain the company’s transactions and will, at any time, enable the financial position of the company to be determined with reasonable accuracy”. Furthermore, the term “records and underlying documentation” shall be construed to include accounts. These guidelines are general and could result in an uneven application of the obligation to keep underlying documentation. The Virgin Islands interprets underlying documentation to include any document necessary for the construction or recreation of a transaction and would include receipts and invoices. However, as this interpretation is not clearly reflected in the legislation or any guidance, it is recommended that the Virgin Islands clarifies the legal requirements to keep underlying documentation in respect of companies and limited partnerships. In addition, the Virgin Islands should introduce express obligations on general partnerships and trusts to keep underlying documentation. 154. Where a general partner of a limited partnership wilfully contravenes the requirement to keep underlying documentation, he/she is liable on summary conviction to a penalty of USD 100 for each day the contravention continues (s. 85 Partnership Act). A company that fails to keep underlying documentation commits an offence and is liable to a fine not exceeding USD 100 000 or to imprisonment for a term not exceeding five years (s. 21 Mutual Legal Assistance (Tax Matters) Act).

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AML/CFT legislation
155. The AML/CFT legislation requires records of transactions to be kept “from which investigating authorities will be able to compile an audit trail for suspected money laundering” (s.  9 AMLR). This may require that underlying documentation in relation to those transactions should be kept. However, as mentioned before, there is no obligation for any person to conduct all its transactions through a service provider. In addition, the requirements under the AML/CFT legislation only pertain to “transactions”, which does not cover underlying documentation reflecting details of all assets and liabilities of a person.

5-year retention standard (ToR A.2.3)
156. The BCA and the Trustee Act do not provide for a minimum retention period of any records. However, section 5A of the Mutual Legal Assistance (Tax Matters) Act and section 83 of the Partnership Act, both amended in 2012, require companies and limited partnerships to keep accounting records and underlying documentation for at least five years from the date of completion of the transaction to which the records relate or from the date the company or the limited partnership terminates the business relationship to which the records relate. Non-compliance with this obligation can result in a penalty of USD 100 for each day the contravention continues in the case of limited partnerships (s. 85 Partnership Act), and a fine not exceeding USD 100 000 or imprisonment for a term not exceeding five years (s. 21 Mutual Legal Assistance (Tax Matters) Act).

Licensed persons
157. Under the various laws governing licensees, it is required that they keep all financial records for a period of at least five years (six years under the Insurance Act) after the completion of the transaction to which they relate. The same penalties for non-compliance apply 10 as described in paragraph 147 above. 158. A retention period of at least five years for records kept by licensees (except licensees licensed under the Securities and Investment Business Act) is also required under the Regulatory Code (s.  39). Under this Code (s.  38(1)(b)) licensees also have to keep records of transactions undertaken for their customers. Under the Financial Services (Administrative Penalties) Regulations the FSC can impose an administrative penalty between USD 500 and USD 5 000 in case a person fails to comply with this requirement.
10. Except for mutual funds.

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AML/CFT legislation
159. Section 10 AMLR and section 45 CoP require that records pertaining to a transaction are kept for a period of at least five years from the date the business relationship was ended. Failing to comply with this obligation results in the person being liable upon summary conviction to a fine not exceeding USD 25 000 or to imprisonment for a term not exceeding two years, or both.

Conclusion and practice
160. Companies and limited partnerships are required to keep reliable accounting records, including underlying documentation, for a period of at least 5 years. However, the requirement to keep underlying documentation does not specify the type of underlying documentation to be kept. 161. General partnerships and trusts must maintain certain forms of accounting records under a combination of common law, the Partnership Act and the Trustee Act, regulatory rules and AML/CFT legislation. However, the approach taken under the various rules is inconsistent and focuses on keeping records of transactions only, which means that they are not sufficient in terms of their comprehensiveness. Reliable accounting records may therefore not be available for general partnerships and trusts in all cases. 162. In practice, accounting records do not have to be provided to the authorities in the Virgin Islands, except in the course of inspections on licensed service providers. The FSC is the authority responsible for ensuring that companies, limited partnerships and service providers comply with the requirements to keep accounting records. The FSC has an active programme of off-site monitoring and on-site inspections of licensed service providers. As described under A.1.6, in the years 2010-12 between 40-60 on-site inspections have been conducted each year by the Compliance Inspections Unit. During these inspections, the FSC checks whether the service provider keeps adequate accounting records for its own business, and transaction records with respect to the transactions of its clients in which the service provider was involved (for AML/CFT purposes). Generally, the FSC found such records to be present and adequate. 163. However, as noted above, records that are being kept under AML/ CFT legislation only pertain to transactions and do not necessarily enable the financial position of the customer to be determined and allow for financial statements to be prepared. This means that, apart from the accounting records kept for the business of the service provider and the documents the service provider keeps in respect of its customers under AML/CFT legislation, no regular monitoring of the obligations on relevant entities and arrangements to keep accounting records is carried out. Enforcement of these obligations will then generally only occur in practice when the FSC has been notified of a case of potential non-compliance. It is recommended that the Virgin Islands

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sufficiently exercises its monitoring and enforcement powers to support the legal requirements which ensure the availability of accounting information. 164. It is noted that in the course of 2012 new provisions were introduced in the Virgin Islands legal framework requiring companies and limited partnerships to keep their accounting records and underlying documentation at the office of their registered agent (in the case of companies) or at their registered office (in the case of limited partnerships) in the Virgin Islands. However, the records may also be kept at another place, within or outside the Virgin Islands, in which case the company or the general partners must notify the registered agent of the place where the records are being kept. This new rule should facilitate locating the accounting records when needed, and in case they are being kept in the Virgin Islands the records may be included in the inspections carried out by the FSC on the registered agents. It is recommended that the Virgin Islands monitor that these new obligations ensure the availability of accounting records. 165. During the three-year review period, more than 50 requests received by the Virgin Islands included an enquiry for accounting information. The types of information requested included financial statements and underlying documentation (payment documents, invoices, correspondence, agreements). In most cases, the information was not or only partially exchanged with the requesting jurisdiction. The Virgin Islands authorities explained that this was caused by the practice, at that time, of the competent authority to only approach the service provider (i.e. the registered agent) to access accounting information (see B.1). As the registered agent was only obliged to keep certain accounting information in relation to AML/CFT legislation, the competent authority did not obtain all of the requested accounting information in most cases. As the information that was exchanged was also not verified before transmitting it to the requesting jurisdiction (see C.5.2), many incomplete responses were sent in respect of accounting information. 166. The Virgin Islands authorities explained that since July 2012 (with the establishment of a new competent authority, the International Tax Authority (ITA)) this practice has changed. The ITA now serves Notices to Produce Information in respect of accounting information to both the registered agent of the entity and the entity itself. Because of the deficiencies in the procedures within the Virgin Islands competent authority in the threeyear review period, it is difficult to assess whether accounting information was in fact available. With the exception of the records to be kept by licensed service providers, there are no clear indications that accounting information was or was not available, or that monitoring and enforcement on the existing obligations on the relevant entities to keep accounting records was being carried out. With the new procedures in place, the Virgin Islands should closely monitor whether accounting information is in practice available.

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Determination and factors underlying recommendations
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations There are no consistent obligations for general partnerships and trusts to keep reliable accounting records, including underlying documentation, for a period of at least five years. The requirements on companies and limited partnerships to keep underlying documentation do not specify the type of underlying documentation to be kept, which could result in an uneven application of the obligation to keep underlying documentation. Recommendations The Virgin Islands should ensure that reliable accounting records, including underlying documentation, are required to be kept by general partnerships and trusts for a period of at least five years in all cases. The Virgin Islands should clarify its requirements that underlying documentation must be kept in respect of companies and limited partnerships.

Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed. Factors underlying Recommendations Accounting information was not provided to requesting jurisdictions in many cases. It is not clear whether this was due to the fact that the information was unavailable. However, it is the case that, except for records to be kept by entities that are subject to licensing with the FSC, no system of monitoring of compliance with accounting record keeping requirements is in place, which may cause the legal obligations to keep accounting records to be difficult to enforce. In addition, a number of accounting record keeping obligations have only been introduced recently and are therefore untested in practice. Recommendations The Virgin Islands should ensure that its monitoring and enforcement powers are sufficiently exercised in practice to support the legal requirements which ensure the availability of accounting information in all cases.

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A.3. Banking information
Banking information should be available for all account-holders.

167. Persons are only allowed to carry on banking business in or from within the Virgin Islands if they hold a valid license for that purpose issued by the FSC under the Banks and Trust Companies Act. There are currently 7 banks operating in or from within the Virgin Islands under a license. Five of these banks are branches of overseas banks, while there is also a local retail bank and a bank operating under a Restricted Class I Banking License conducting inter-company banking. The total assets held in these banks are around USD 2.5 billion and their liabilities are around USD 2 billion.

Record-keeping requirements (ToR A.3.1)
168. There are no record-keeping requirements specifically designed for banks and the accounts and transactions of its customers. As a licensee, banks do have the obligation to keep adequate and orderly records which must include all services provided to and transactions undertaken for customers pursuant to section 38(1)(b) Regulatory Code. These records must be maintained for a period of at least five years (s. 39(2) Regulatory Code) and they should be sufficient to enable the FSC to monitor the compliance of the bank with its regulatory and AML/CFT obligations. 169. Banks are also subject to AML/CFT legislation and under section 44 CoP they are required to take necessary measures to ensure that the following records are maintained: (a) the name and address of the customer; (b) in the case of a monetary transaction, the kind of currency and amount involved; (c) the beneficiary of the monetary transaction or product, including his name and address; (d) where the transaction involves a customer’s account, the number, name or other identifier with respect to the account; (e) the date of the transaction; (f) the nature of the transaction and, where the transaction involves securities and investment, the form in which funds are offered and paid out; (g) in the case of a transaction involving an electronic transfer of funds, sufficient detail to enable the establishment of the identity of the customer remitting the funds and compliance with paragraph (c);

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(h) account files and business correspondence with respect to a transaction; and (i) sufficient details of the transaction for it to be properly understood. 170. Banks are required to maintain this information for a period of at least five years (s. 45 CoP) and in case of non-compliance they are liable to a fine not exceeding USD 25 000 or to imprisonment for a term not exceeding two years, or both (s. 45(9) CoP). 171. The level of specificity of the requirements under the AML/CFT legislation is much higher than under the Regulatory Code and they appear to be sufficient to ensure availability of banking information (financial and transactional information and account files) in the Virgin Islands.

Availability of banking information in practice
172. The Compliance Inspections Unit of the FSC has put in place a programme of on-site inspections to monitor the compliance of licensed banks with their obligations under regulatory and AML/CFT legislation. During these inspections, the FSC takes samples of customer files to verify whether sufficient information is being kept. To facilitate the inspections of the banks that are branches of overseas banks, the FSC has annual meetings with the foreign regulators of the jurisdictions where the head offices of these banks are located. Banks are subject to an on-site inspection at least every two years. In 2012, all banks were subjected to an on-site inspection. The FSC reported that the compliance rate is generally high, and where deficiencies were detected these were resolved immediately. Deficiencies detected did not relate to the non-keeping of information on their client’s accounts, but to other requirements. During 2010-12, it was only necessary to take one enforcement action. 173. Because most of the banks are branches of overseas banks which have parent companies located outside of the Virgin Islands, these branches typically utilise data storage facilities of that parent company. Therefore, data which is required to be maintained by the branches are usually stored through these facilities. However, the obligation is still on the Virgin Islands branch to keep the information and where a branch would like to keep this information outside of the Virgin Islands they must seek prior approval of the FSC. Such approval will only be granted if the FSC is satisfied that the information will be kept in a place where it can be easily accessed and is not subject to any restrictions that will hinder the production of the information to the Virgin Islands Competent Authority. 174. One peer noted that during the three-year period under review, the provision of banking information was sometimes delayed, although this was

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not considered to be an undue delay nor did other peers report undue delays. Banking information was generally provided in all 40 cases where it was requested, except in the cases described under C.1.9. The delays experienced in some cases were mostly related to the information being kept overseas, which may cause monitoring of the record keeping obligations and enforcement for non-compliance to be more difficult. The Virgin Islands should continue to monitor that no undue delays occur in the provision of banking information when such information is kept overseas.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

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B. Access to Information

Overview
175. A variety of information may be needed in respect of the administration and enforcement of relevant tax laws and jurisdictions should have the authority to access all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities. This section of the report examines whether the Virgin Islands legal and regulatory framework gives to its competent authority access powers that cover all relevant persons and information, and whether the rights and safeguards that are in place would be compatible with effective exchange of information. 176. Since July 2011, the Virgin Islands competent authority (the Financial Secretary or a person or authority designated by him) has a broad power to obtain any information held by any person believed to be in possession or control of that information, without any further conditions. Previously, access to information other than ownership information (and most notably accounting information) was not guaranteed. 177. The access powers of the competent authority are exercised by the issue of a notice to provide the information, and penalties are in place in case of non-compliance. In addition, a search warrant can be obtained from a Magistrate, both in the case of non-compliance and in cases where the competent authority is of the opinion that the information is endangered. The Virgin Islands competent authority has so far not applied any penalties to persons that were under an obligation to produce the information but failed to do so, nor did it seek to obtain a search warrant. This includes a number of cases where the person who was served the Notice was under a legal obligation to have the requested information available. It is therefore recommended that the Virgin Islands ensures that compulsory powers are applied where appropriate. 178. The powers of the competent authority do not apply to items subject to legal privilege. The information covered by legal privilege in the Virgin Islands is in accordance with the standards. There are also no other secrecy

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provisions which would prevent information from being obtained. Finally, no notification rights or similar procedures exist in the Virgin Islands which could unduly prevent or delay the exchange of information. Whilst a decision to issue a notice to produce information may be subject to judicial review, no applications for judicial review were made during the three-year period under review. 179. In practice, in order to obtain the information requested by its information exchange partners, the Virgin Islands competent authority first approaches the Inland Revenue Department (which is accommodated in the same building) and performs a search on the public database of the Registry of Corporate Affairs, part of the FSC, to verify whether the information is already available in this database. Although the information held by these authorities is usually not sufficient to fully comply with an EOI request, the database of the Registry of Corporate Affairs does identify the service provider to whom a Notice to Produce Information may be served. The service provider is often in possession or control of the relevant information, and should as a minimum be able to provide the contact details of a person within the entity (director or partners) who can subsequently be served a Notice. 180. However, during the three-year review period it was the practice to only serve a Notice on the registered agent of the company or limited partnership, regardless of whether the registered agent was obliged to keep the information sought. As a result, not all information was obtained in all cases, particularly where it concerned accounting information. The Virgin Islands have indicated that the ITA established in July 2012 has changed this practice of the limited use of the available access powers, and now serves Notices on companies and limited partnerships in addition to the registered agent where the information is expected to be in the possession or control of the company or limited partnership. The Virgin Islands should ensure that the access powers of its competent authority continue to be used effectively to obtain all information included in an EOI request.

B.1. Competent Authority’s ability to obtain and provide information
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).

181. The Financial Secretary or a person or authority designated by him is the competent authority of the Virgin Islands. Until July 2012, the execution of requests for information was delegated to the Commissioner of Inland Revenue. Since 9 July 2012, the day-to-day responsibility for exchange of

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information lies with the newly established International Tax Authority (ITA), which reports directly to the Financial Secretary. The powers to obtain and provide information that is the subject of a request under an exchange of information arrangement are derived from the Mutual Legal Assistance (Tax Matters) Act (MLAA). Initially enacted to establish the competent authority’s powers under the TIEA between the Virgin Islands and the United States, it provides for the same powers under any similar agreement as has been provided for by Order of the Minister of Finance. So far, such Order has been provided for in respect of each TIEA that is in force.

Ownership and identity information (ToR B.1.1)
182. Until July 2011, the power of the Virgin Islands competent authority to obtain information for exchange of information purposes could only be used to obtain (a) information held by a bank or other financial institution, or any person acting in an agency or fiduciary capacity, including a nominee or trustee, or (b) information that relates to the beneficial ownership of a company, partnership or other person. This resulted in the fact that access to any information other than ownership information (most notably accounting information) was not guaranteed in all cases. The provision providing the authorities with access powers, section 5(1) of the MLAA, was however amended with effect from 13 July 2011 and now reads as follows: “The Authority may, for the purposes of complying with a request under the Agreement, by notice in writing, require any person to provide such information as may be specified in the notice, provided that (a) the person is reasonably believed to be in possession or control of the information to which the notice relates; and (b) the information requested is (i) information held by a bank or other financial institution, or any person acting in an agency or fiduciary capacity, including a nominee and trustee, or any other person or entity; or (ii) information regarding the beneficial ownership of a company, partnership or other person.” 183. The current provision ensures that the Virgin Islands competent authority has access powers in respect of any information held by any person believed to be in possession or control of that information, without any further conditions. 184. Together with the amendment of section 5(1) of the MLAA, a new provision was added, section 3(4) MLAA, which reads as follows:

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“For the avoidance of any doubt and notwithstanding anything to the contrary contained in this Part, anything required of the Authority [= the competent authority] pursuant to a request made under or in accordance with a provision of an Agreement [= any information exchange agreement to which the MLAA applies] shall be dealt with in such manner as would be consistent with and satisfy the requirements of the Agreement, and the doing of such thing by the Authority shall be treated as a power the Authority has by virtue of this Act to exercise.” 185. The quoted provision clearly indicates that the MLAA is meant to provide access powers to the Virgin Islands competent authority that are sufficient to comply with a request for information under an information exchange agreement. In fact, it is stated that any action taken by the Virgin Islands competent authority pursuant to an information exchange request is in itself sufficient (in combination with the quoted provision) to be treated as such powers, within the boundaries of the information exchange agreement and the requirement to comply with a request. However, it can be expected that the authorities will have to follow the procedures specifically described in the MLAA. Because section 5(1) MLAA provides access powers in respect of any information from any person believed to be in possession or control of that information, this is sufficient to comply with a request for information under an information exchange agreement. Section 3(4) MLAA is therefore expected to serve primarily for the avoidance of any possible interpretational issues, although no such issues are apparent. 186. Section 5(1)(b)(ii) of the MLAA, relating to ownership and identity information, is similar to the first part of Article 5(4)(b) of the OECD Model TIEA, but it does not explicitly mention trusts or other arrangements. The Virgin Islands confirmed that according to their interpretation information regarding the beneficial ownership of trusts or other arrangements is covered by this provision through the reference to “other person”. 187. The Virgin Islands has no laws on bank secrecy, but the common law principle of confidentiality is recognised and applied. However, for the purposes of complying with a request for information under a TIEA, all information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees can be obtained on the basis of section 5(1)(b)(i) MLAA. This provision is consistent with the standard. 188. There is no variation of the powers between instances where the information is required to be kept pursuant to an explicit legal obligation, or not. Also, the power of the competent authority to obtain the information covered by section 5 MLAA extends to any person. The Virgin Islands confirmed that this also comprises other government bodies and statutory bodies.

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In practice, where information would be required from other government authorities this is expected to be provided without the need to serve a notice on them. No such situations have occurred in the three-year review period. 189. In respect of the FSC, which is the regulatory body that monitors all financial services businesses, section 33C(1)(b) of the Financial Services Commission Act (FSCA) states that the FSC has a duty to cooperate with a competent authority acting pursuant to an enactment. Although section 33C(3) FSCA provides for an exception in matters of taxation, this exception does not apply in cases where information is lawfully required by a competent authority acting pursuant to an enactment. A competent authority would include the Virgin Islands competent authority for exchange of tax information purposes. 190. In July 2011, section 32 FSCA was amended to extend the powers of the FSC to obtain information for cases where this is required to ensure compliance with a request from a competent authority acting pursuant to an enactment. This means that if the Virgin Islands competent authority issued a notice for information under the MLAA to the FSC, the FSC can also use its own powers to obtain that information if the FSC itself does not hold the information. The powers of the FSC include the issuance of a notice to any person reasonably believed to have the information and applying for a search warrant in certain circumstances. It should be noted that information in the Virgin Islands is generally available from sources other than the FSC and that sole reliance on the FSC in respect of information that is foreseeably relevant for tax purposes is unlikely to occur. In practice, the Virgin Islands competent authority has so far not needed to request the FSC to use its own access powers to gather information for EOI purposes.

Gathering information in practice
191. For each valid information exchange request received by the competent authority, the authorised officer first checks whether information is in the possession of either the Inland Revenue Department or the Registry of Corporate Affairs within the FSC. In no cases so far has the subject of the request been known to the Inland Revenue Department. In the register held by the Registry of Corporate Affairs, the identity of members of a company may be available in some cases. However, in the vast majority of cases the requested information will be in the hands of a third party. 192. Nevertheless, the Virgin Islands competent authority will be able to retrieve the identity of the registered agent of a company or limited partnership as well as the registered office of such entity from the Registry of Corporate Affairs. Where information must be obtained in respect of companies or limited partnerships, a Notice to Produce Information is served

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on either the registered agent or the entity, or, most often in practice, both. Although the Notice on the entity could be served on the address of its registered office, the competent authority usually asks the registered agent to provide the contact details of the most senior director and then sends the Notice to that address by courier. Notices served on the registered agent are hand-delivered, as they are located in the Virgin Islands. 193. A number of peers have indicated that the information received with respect to companies and limited partnerships was not adequate (either inaccurate or incomplete) to fulfil their request for assistance. The Virgin Islands authorities explained that this was mainly caused by the practice during the three-year review period to only serve a Notice on the registered agent of the company or limited partnership, regardless of whether the registered agent was obliged to keep the information sought. This resulted in the Virgin Islands competent authority not always obtaining all information in the first instance, and in many of those cases no further attempts were made to obtain the remainder of the information. 194. The Virgin Islands have indicated that the ITA established in July 2012 has changed this practice of the limited use of the available access powers, and that it now serves Notices on companies and limited partnerships in addition to the registered agent where the information is expected to be in the possession or control of the company or limited partnership. As this new practice was established after the three-year review period, its effectiveness in practice could not be assessed. It is recommended that the Virgin Islands ensures that the access powers of its competent authority continue to be used effectively to obtain all information included in an EOI request. 195. In relation to banking information, the competent authority sends the Notice directly to the bank. In other cases, such as where information regarding trusts is requested, the Notice is served on the person believed to be in possession or control of the information, which is usually indicated in the EOI request, and is a service provider in the majority of the cases. 196. To further ensure that a Notice is being fully complied with, it is standard practice to ask for an affidavit to accompany the information being provided to the Virgin Islands competent authority. Through this affidavit the person states under oath that, to the best of his/her knowledge, the information provided to the Virgin Islands competent authority is true and/or factually correct. The Notice indicates a deadline of ten working days within which the information is to be provided to the competent authority. The person served the Notice may ask for an extension if it has a valid reason, such as where the information must be brought to the Virgin Islands from abroad. Currently, an extension is requested in approximately 30% of the cases, generally in cases where the information is sought from a person other than a service provider. During the three-year review period, an extension was requested less often,

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as at that time the information was always asked from a service provider. The competent authority has always granted the request for an extension; the maximum extension granted has been two months. In no case during the three-year review period have these extensions caused information to be exchanged to a requesting jurisdiction beyond 180 days, and only in a few of these cases information was exchanged after 90 days or more.

Accounting records (ToR B.1.2)
197. As explained in the previous subsection (Ownership and identity information), access to accounting information was previously not guaranteed under the legislation. However, since July 2011 the powers available to the Virgin Islands competent authority to obtain information for exchange purposes apply equally to all cases where accounting information must be obtained. 198. Accounting information is usually kept by the entity itself as opposed to a service provider, except in the cases identified under A.2 of this report. Because of the practice during the three-year review period to only send a Notice to Produce Information to the registered agent of a company or limited partnership, accounting information was not obtained in a number of cases where this was requested. It is recommended that the Virgin Islands ensures that the access powers of its competent authority continue to be used effectively to obtain all information included in an EOI request.

Use of information gathering measures absent domestic tax interest (ToR B.1.3)
199. The information gathering powers under the MLAA are not subject to the Virgin Islands requiring such information for its own tax purposes. It is noted that under the PTA (s. 17I) and the ITO (s. 58A), the Commissioner of Inland Revenue has additional powers, including compulsory powers to require any person to furnish information for the purposes of administering these taxes.

Compulsory powers (ToR B.1.4)
200. According to section 5(3) MLAA the authorities may require the requested information: (a) to be provided within such time as is specified in the notice; (b) to be provided in such form as the authorities may require; and (c) to be verified and authenticated in such manner as the authorities may reasonably require.

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201. This provides the authorities with the flexibility to comply with a request for information in the manner which is most fit for the specific request and as requested by the requesting party. As explained under B.1.1 above, the standard time given to a person who is served a Notice to Produce Information is ten working days. It is also standard practice to request an affidavit to accompany the information that is provided to the Virgin Islands competent authority. 202. If a person fails to comply with a notice to provide information without lawful or reasonable excuse, they are liable on summary conviction to a fine not exceeding USD 100 000 or to imprisonment for a term not exceeding five years, or both (s. 5(6) MLAA). It will be decided by the Court whether a person indeed does have a lawful or reasonable excuse. The same penalty applies where a person fails to comply with any request made by the competent authority in exercise of any power pursuant to section 3(4) MLAA, although it is not expected that other procedures/powers will be used than specifically provided for (see also B.1.1). 203. In addition to the penalties described above, the authorities may apply to a Magistrate for a search warrant if a person fails to comply with a notice to provide information or only partially complies. For a search warrant to be issued without further inquiry, it shall be sufficient that the competent authority give a certificate that the issue of a search warrant is required for the purposes of complying with a request (s. 6(1) MLAA). The Magistrate may authorise a named representative of the competent authority, together with a police officer and any other person named in the search warrant: (a) to enter the premises specified in the warrant at any time within one month from the date of the warrant; (b) to search the premises and take possession of any information appearing to be information of a type in respect of which the warrant was issued or to take, in relation to such information, any other steps which appear to be necessary for preserving or preventing interference with them; (c) to take copies of, or extracts from, any information appearing to be information of a type in respect of which the warrant was issued; (d) to require any person on the premises to provide an explanation of any information appearing to be information of a type of which the warrant was issued or to state where such information may be found; and (e) to use such force as may be reasonably necessary to execute the warrant.

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204. The procedure to obtain a search warrant seems to be such that it is automatically issued where the competent authority gives a certificate that a search warrant is necessary. Although the competent authority has so far never applied for a search warrant, the Virgin Islands authorities confirmed that the Magistrate is expected to issue a search warrant upon the submission of a certificate by the competent authority. The certificate would be prepared by the Virgin Islands competent authority and subsequently vetted by the Attorney General who would approach the Magistrate’s Court on behalf of the competent authority. In combination with the penalties which apply for failing to comply with a notice to provide information, the Virgin Islands has sufficiently strong compulsory powers to compel the production of information.

Use of compulsory powers in practice
205. The Notice to Produce Information indicates the penalties that apply under the MLAA. Where a person does not produce the information, the ITA would normally first contact the person again to explain that the information should be produced. Where the person still does not comply, the matter will be referred to the Attorney General, who will then make a decision on whether to invoke the relevant sections of the MLAA. 206. In the three-year review period, the Virgin Islands has not applied any penalties for failure to produce information or any other compulsory power. However, in a number of cases information was not produced by the person who was served the Notice, which included information that should have been in the possession of this person (most notably ownership information, see A.1). In at least one case, it was made clear to the Virgin Islands competent authority that the information was in fact in the possession of the person who was served the Notice. This person claimed that the domestic privacy laws of another jurisdiction would prevent him from providing the requested information to the Virgin Islands competent authority. The person also noted that he would be able to provide the information to the authorities in the other jurisdiction. The Virgin Islands access powers do not refer to secrecy provisions in foreign jurisdictions. Nevertheless, the Virgin Islands competent Authority did not use their compulsory powers to obtain the information. Rather, the Virgin Islands competent authority explained this argument to the requesting jurisdiction. This case is a clear example of a situation where the holder of the information did not comply with legislation in the Virgin Islands, namely the MLAA, and the Virgin Islands should have used their compulsory powers to enforce the obligation on the holder of the information to provide this information to its competent authority. 207. Although it is noted that the failure to (wholly) comply with the Notice may not have been detected in all cases due to the fact that the information was not properly verified before it was sent to the requesting

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jurisdiction (see C.5.2), it is recommended that the Virgin Islands ensures that compulsory powers are applied where appropriate.

Secrecy provisions (ToR B.1.5)
208. The common law principle of confidentiality is recognised and applied in the Virgin Islands. However, this principle is overridden by the powers of the competent authority to obtain information pursuant to the MLAA. Section 8 MLAA specifically provides that where a person discloses information for the purposes of a request (being a request received by the Virgin Islands), this person shall be deemed not to commit an offence. 209. Section 5(2) MLAA specifically provides that the competent authority’s powers to obtain information do not apply to “items subject to legal privilege”. A definition of “legal privilege” can be found in the Evidence Act and applies to information that may or may not be qualified as evidence in a court case. Section 22 reads: “(1)   Subject to this Act, a legal practitioner or his client shall not be compelled to disclose any confidential communication, oral or written, which passed between them directly or indirectly through an agent of either, if such communication was made for the purpose of obtaining or giving legal advice. (2)   Subsection (1) does not apply unless the communication was made to or by the legal practitioner in his professional capacity or by the client while the relationship of client and legal practitioner subsisted, whether or not litigation was pending or contemplated. (3)   No claim of privilege shall be allowed if the communication between a client and his legal practitioner was made for the purpose of committing a fraud, crime or other wrongful act.” 210. This definition is in accordance with the standards. Although there may not be a formal direct application of this definition to the MLAA, it can be expected that where a person would rely on legal privilege in order not to have to provide information under the MLAA, this definition will be used to determine the validity of his or her claim in a court of law. The general application of legal privilege (beyond evidence being admissible in court), is based on the common law principle of legal privilege, which is also applied in the Virgin Islands. Decisions of the House of Lords in the United Kingdom apply also in the Virgin Islands. 211. In practice, no person has ever invoked legal privilege to refuse the production of information for EOI purposes. Also, no issues were raised by peers in this regard.

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Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed. Factors underlying Recommendations In the three-year review period, the Virgin Islands competent authority’s practice was to serve a Notice to Produce Information only on the registered agent of the company or limited partnership, regardless of whether the registered agent was obliged to keep the information sought. This resulted in the Virgin Islands competent authority not always obtaining all information. The Virgin Islands has not applied any compulsory powers in the three-year review period, even where information that should have been in the possession of the person who was served the Notice to Produce Information was in fact not produced in some cases. Recommendations The Virgin Islands should ensure that the access powers of its competent authority are used effectively to obtain all information included in an EOI request.

The Virgin Islands should ensure that compulsory powers are applied where appropriate in cases where information is not produced.

B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

212. There is no requirement in the Virgin Islands domestic legislation that the taxpayer under investigation or examination must be notified of a request. The regular procedure to obtain information is described under B.1 and includes the issue of a notice to provide the information to the person reasonably believed to have the information.

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Not unduly prevent or delay exchange of information (ToR B.2.1)
213. The person who is issued a notice to provide the information has no formal right of appeal, although section 5(6) MLAA provides for a penalty for non-compliance only where that person does not have a lawful or reasonable excuse, for example if this person can demonstrate that he neither has the information nor is he required to have it. Where the person does not comply with a notice, such person can be brought to Court and be charged with failure to provide information as required to by notice. Alternatively, the authorities may apply to a Magistrate for a search warrant as described under B.1.4 in this report. 214. A template Notice to Produce Information has been developed. This template mentions the domestic legal basis for the ITA to issue the notice (i.e. s. 5 MLAA), and that the person who is served the notice is reasonably believed to be in possession or control of the information sought. The information that needs to be produced is set out in a schedule attached to the notice. As explained above, the person who is served the notice will be given 10 working days to produce the information, which must be accompanied by an affidavit. The penalties for non-compliance are also set out in the notice. Finally, it is emphasised that the particulars of the notice must be kept confidential. Any person breaching such confidentiality is subject on summary conviction to a fine not exceeding USD 100 000 or to imprisonment for a term not exceeding five years, or both (s. 9(2) MLAA). 215. A decision to issue a Notice to Produce Information may be subject to judicial review. No applications for judicial review were made during the three year period under review. However, there have been instances where the person who was served the notice refused to provide the information. In these cases, the Virgin Islands authorities had to determine whether the refusal was based on a lawful or reasonable excuse under section 5(6) MLAA, mainly determined by whether there was a legal obligation for the person who was served the Notice to have the information in its possession and/or to provide the information to the authorities. Such determination is usually made by the Virgin Islands competent authority and the Attorney General’s office together, as the Attorney General ultimately decides whether or not to initiate legal measures for non-compliance. 216. The cases where a clear refusal to provide the information was indicated, related almost all to requests for information where the service provider (who was served the notice) was asked to produce information predating the entry into force of the applicable Tax Information Exchange Agreement (TIEA), and the service provider argued that it was not obliged to provide this information. In these cases the view of the Virgin Islands authorities was that this was in fact a lawful excuse, whilst its TIEA partners held a different view. However, following an amendment to the MLAA in

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May 2013, these cases have now been re-opened and the Virgin Islands is in the process of obtaining and exchanging the information (see C.1.9 for a more detailed description of this issue). 217. An exception to the issue of a notice to provide the information is provided for in cases where the competent authority is of the opinion that if a notice would be issued, it would not be complied with or the documents or information to which the notice relates may be removed, tampered with or destroyed (s. 6(1)(b) MLAA). In such cases, the competent authority may apply to the Magistrate for a search warrant under the same procedures as described under B.1.4 in this report. In practice, the Virgin Islands competent authority has not yet felt the need to apply for a search warrant instead of issuing a notice.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

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C. Exchanging Information

Overview
218. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. In the Virgin Islands, the legal authority to exchange information derives from its exchange of information agreements, as soon as an Order by the Minister of Finance has been provided for which gives effect to the MLAA for the specified agreement. This section of the report examines whether the Virgin Islands has a network of information exchange that would allow it to achieve effective exchange of information in practice. 219. The Virgin Islands has concluded 20 TIEAs since May 2009, and has more than 10 agreements under negotiation. A list of all signed agreements (24 in total) can be found in Annex 2, and cover a range of relevant partners. The TIEAs contain all provisions which allow the Virgin Islands to exchange all foreseeably relevant information. Currently, 15 of the TIEAs are in force, and the Virgin Islands has recently taken the final step for almost all of the other TIEAs for them to enter into force. Under most of these TIEAs, requests have been received by the Virgin Islands. Since January 2012, the Virgin Islands also automatically exchanges information with European Union countries pursuant to the EU Savings Directive, which is implemented in domestic law by the Mutual Legal Assistance (Tax Matters) (Automatic Exchange Information) Order 2011. 220. The confidentiality of information exchanged with the Virgin Islands is protected by obligations implemented in the agreements, supplemented by domestic legislation which provides for an oath of secrecy taken and observed by all public officers and specific provisions to protect confidentiality of information contained in a request for information received by the Virgin Islands. This domestic legislation is supported by penalties for non-compliance. These penalties are highlighted in the Notice to Produce Information as well. In practice, information related to EOI requests is only accessible by staff of the Virgin Islands competent authority.

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221. Under all of the Virgin Islands TIEAs the contracting parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy. There are also no legal restrictions on the ability of the Virgin Islands competent authority to respond to requests within 90 days of receipt by providing the information requested or by providing an update on the status of the request. 222. During the three-year period under review (1 July 2009-30 June 2012), the Virgin Islands received 123 requests for information from nine partners. The organisational process in place at that time was not adequate, as the information obtained was generally not verified before forwarding it to the requesting jurisdiction. As a result, the Virgin Islands has exchanged incomplete and, in some cases, inaccurate information. In terms of timeliness, a final response was provided within 90 days in 64% of cases, and within 180 days in 80% of the cases. However, it was not standard practice to send a status update where the information could not be provided within 90 days. 223. In July 2012 the Government of the Virgin Islands created the International Tax Authority (ITA), which was designated by the Financial Secretary as the new authority dealing with EOI requests on a daily basis. The ITA has set up procedures and an organisational process that appear to be sufficient to handle incoming requests in a timely manner, although these could not be properly assessed as the peer review period ended on 30 June 2012. 224. Finally, information has not been exchanged in eleven cases as a result of a divergence of interpretation between the Virgin Islands and a number of its TIEA partners in respect of the application period of the TIEAs to criminal tax matters. This issue has been resolved in May 2013, and the Virgin Islands is now in the process of obtaining the outstanding information.

C.1. Exchange of information mechanisms
Exchange of information mechanisms should allow for effective exchange of information.

225. The Virgin Islands is signatory to TIEAs with 23 jurisdictions (see Annex 2). Also, a DTC applies between the Virgin Islands and Switzerland, which is an extension of a former DTC (1954) between the United Kingdom and Switzerland. This DTC contains a number of restrictions, of which the most important ones are as follows. The DTC limits the exchange of information to information as is necessary for carrying out the provisions of the Convention, as opposed to for the administration of the domestic tax laws. In addition, it does not contain a provision corresponding with Article 26(5)

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of the OECD Model Tax Convention regarding bank information. Although the Virgin Islands is able to exchange bank information on a reciprocal basis in the absence of such provision, Switzerland is not. Because of these restrictions, the DTC with Switzerland does not allow the Virgin Islands to exchange information in accordance with the international standard. The current DTC with Switzerland is not further considered in this section, which will focus on whether the Virgin Islands TIEAs allow it to effectively exchange information. 226. The responsibility for negotiating international tax agreements lies with the Ministry of Finance, and more specifically with the International Tax Authority (ITA). The ITA sometimes uses the services of an external consultant, and reports directly to the Financial Secretary. The Virgin Islands concludes agreements within the scope of the letter of entrustment from the United Kingdom. 227. The treaty network of the Virgin Islands has expanded over the past years. Typically, the Virgin Islands is approached by other jurisdictions to negotiate agreements. Before negotiations begin, the ITA notifies relevant stakeholders, such as the financial services industry, of a jurisdiction’s interest in negotiating a treaty with the Virgin Islands. This may lead to input from these stakeholders, but the decision making and negotiation processes are solely the responsibility of the Government. The Virgin Islands currently has a draft model TIEA which is shared with the interested jurisdiction for their comments and review. As this model TIEA generally follows the wording of the OECD Model TIEA, these negotiations usually take place via email correspondence. 228. Certain practical arrangements regarding the exchange of information are agreed between the Virgin Islands and the majority of its TIEA partners in a Protocol or Memorandum of Understanding to these TIEAs. Commonly, such arrangements cover cost issues, in which language the communication should be conducted and in which form the EOI requests should be provided. 229. As the Virgin Islands does not levy any income tax, to date the ITA has not sent any requests itself. The Virgin Islands authorities anticipate incoming requests to increase in coming years with an increased number of bilateral relationships coming into force.

Other forms of exchange
230. In addition to exchanging information on request, the Virgin Islands exchanges information automatically under the Mutual Legal Assistance (Tax Matters) Act 2003, as amended in 2005, which has given effect to EU Savings Tax Directives (2003/48/EC). By means of this mechanism the Virgin Islands

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has bilateral agreements with each of the 27 European Union Member States which, since the Virgin Islands started to exchange information automatically, contain the same measures as are applicable to all European Union Member States under the European Union Savings Directive. Until 2011, the Virgin Islands opted for the withholding tax, under which a percentage of the income due was withheld at the source and transferred to the relevant European tax authority. Since 1 January 2012, with the entry into effect of the Mutual Legal Assistance (Tax Matters) (Automatic Exchange Information) Order 2011, the Virgin Islands opted for exchange of information automatically. Savings income information is now provided annually and automatically by the competent authority (now the ITA) to counterpart competent authorities in each European Union Member State. The minimum prescribed information includes the name and address of the account holder and other identifying information, the name and address of the agent making the payment, the account number the amount of the payment and the nature of the payment.

Foreseeably relevant standard (ToR C.1.1)
231. The international standard for exchange of information envisages information exchange to the widest possible extent. Nevertheless it does not allow “fishing expeditions”, i.e. speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in the standard of “foreseeable relevance” which is included in Article 1 of the OECD Model TIEA, set out below: “The competent authorities of the Contracting Parties shall provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by this Agreement. Such information shall include information that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters.” 232. One variation which appears in most of the Virgin Islands TIEAs 11 (generally found in Article 5(5)(c) of the TIEAs) is that there is no obligation “to obtain or provide information in the possession or control of a person other than the taxpayer that does not directly relate to the taxpayer”. The Virgin Islands advises that this language is meant to prevent fishing expeditions. Notwithstanding this variation, all of the Virgin Islands TIEAs are considered to meet the “foreseeably relevant” standard. In practice, the Virgin Islands did not seek clarifications regarding the foreseeable relevance
11. Only the TIEAs with Australia, France, New Zealand, Portugal and the United States do not contain this variation.

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of the request in relation to whether the information relates directly to the taxpayer, and so the interpretation of the language contained in most of the TIEAs has not represented an obstacle to exchange of information. 233. As explained under section C.5.2 below, the ITA uses a checklist to verify that all information to establish the foreseeable relevance of the request has been provided by the requesting jurisdiction. In case the information is not sufficient for the ITA to determine the foreseeable relevance of the request, the ITA will contact the requesting jurisdiction to ensure that this information is provided. A template request form was recently sent to all treaty partners of the Virgin Islands to facilitate this process. The checklist has also only been developed recently and has not been in use during the three-year review period. The Virgin Islands indicated that in the three-year review period, it has never asked the requesting jurisdiction for clarifications regarding the foreseeable relevance, mainly because before the establishment of the ITA in July 2012 the organisational process did not provide for a verification of the foreseeable relevance of an incoming request. In addition, the Virgin Islands has not declined any request for information on the basis that the requested information was not foreseeably relevant, which is confirmed by feedback received from peers.

In respect of all persons (ToR C.1.2)
234. For EOI to be effective it is necessary that a jurisdiction’s obligations to provide information are not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason the international standard for EOI envisages that EOI mechanisms will provide for exchange of information in respect of all persons. 235. All TIEAs concluded by the Virgin Islands allow for exchange of information in respect of all persons. In practice, the Virgin Islands authorities advised that no issues have arisen regarding the jurisdictional scope in relation to an EOI request.

Obligation to exchange all types of information (ToR C.1.3)
236. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity. Both the OECD Model Convention and the OECD Model TIEA, which are primary authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest.

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237. All TIEAs concluded by the Virgin Islands contain a provision similar to Article 5(4) of the OECD Model TIEA, which ensures that the requested jurisdiction shall not decline to supply the information requested solely because it is held by a financial institution, nominee or person acting in an agency or a fiduciary capacity, or because it relates to ownership interests in a person. In practice, no request for information has been declined solely because it was held by a bank or other financial institution.

Absence of domestic tax interest (ToR C.1.4)
238. The concept of “domestic tax interest” describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. A refusal to provide information based on a domestic tax interest requirement is not consistent with the international standard. Jurisdictions must be able to use their information gathering measures even though invoked solely to obtain and provide information to the requesting jurisdiction. 239. All TIEAs concluded by the Virgin Islands contain a provision similar to Article 5(2) of the OECD Model TIEA, which allows information to be obtained and exchanged notwithstanding it is not required for a Virgin Islands domestic tax purpose. In practice, no situation of domestic tax interest has occurred in relation to the ability of the Virgin Islands to exchange information, as the Virgin Islands access powers are specifically designed for international exchange of information.

Absence of dual criminality principles (ToR C.1.5)
240. The principle of dual criminality provides that assistance can only be provided if the conduct being investigated (and giving rise to the information request) would constitute a crime under the laws of the requested country if it had occurred in the requested country. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. 241. None of the TIEAs concluded by the Virgin Islands applies the dual criminality principle to restrict the exchange of information, and in practice no issue linked to dual criminality has arisen.

Exchange of information in both civil and criminal tax matters (ToR C.1.6)
242. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to

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information requested for tax administration purposes (also referred to as “civil tax matters”). 243. All of the TIEAs concluded by the Virgin Islands cover both civil and criminal tax matters. In practice, during the three year review period, 21 requests related to criminal tax matters and 102 requests related to civil tax matters. The Virgin Islands has provided information in response to EOI requests for both civil and criminal tax matters. An issue that arose during the three-year review period regarding the application period of TIEAs to requests concerning criminal tax matters is described under section C.1.9 below. It is noted that this issue has been resolved and that the Virgin Islands is currently in the process of obtaining and exchanging the requested information.

Provide information in specific form requested (C.1.7)
244. In some cases, a Contracting State may need to receive information in a particular form to satisfy its evidentiary or other legal requirements. Such forms may include depositions of witnesses and authenticated copies of original records. Contracting States should endeavour as far as possible to accommodate such requests. The requested State may decline to provide the information in the specific form requested if, for instance, the requested form is not known or permitted under its law or administrative practice. A refusal to provide the information in the form requested does not affect the obligation to provide the information. 245. All of the TIEAs concluded by the Virgin Islands allow for information to be provided in the specific form requested. In addition, section 5(3) (b) MLAA provides the Virgin Islands authorities with the power to ask any information to be provided in such form as may be required. 246. In practice, the Virgin Islands has usually provided information accompanied by an affidavit. Peer input confirms that information has been provided in the appropriate form.

In force (ToR C.1.8)
247. Exchange of information cannot take place unless a jurisdiction has exchange of information arrangements in force. Where such arrangements have been signed, the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 248. The ITA is the authority charged with the negotiations of TIEAs. Once the text of the agreement has been initialled, the agreement must be approved by the Cabinet, which takes approximately two to three weeks. Subsequently, the agreement is sent to the Foreign and Commonwealth

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Office (FCO) in London for review and approval. The FCO generally needs six weeks to two months to complete this process. Following its approval, the FCO would notify the Virgin Islands authorities that the signing can take place. The Virgin Islands indicated that in some recent cases, the FCO provided comments on the agreements which resulted in the Virgin Islands having to go back to its TIEA partners to amend the text of the agreements. 249. When a TIEA has been signed by the Virgin Islands, the procedure of bringing it into force encompasses the publication of the text in the official Gazette. In order for the TIEA to be published in the Gazette, the Attorney General’s Chambers produces the Order for publication which is signed by the Minister of Finance. The TIEA is placed into legislation once seven original copies of the Order signed by the Minister have been received and executed by the Gazette Office. This ratification procedure takes on average one month to six weeks. The Virgin Islands always sends a letter to the TIEA partner notifying them that the ratification procedure in the Virgin Islands has been finalised after publication in the official Gazette. 250. Until mid-2011, the Virgin Islands had not taken all necessary steps to bring all of its TIEAs into force. The steps that needed to be taken by the Virgin Islands encompassed the publication of the text in the official Gazette and notifying its treaty partners. However, the Virgin Islands has now taken all necessary steps to bring the TIEAs with all but one jurisdiction into force. This is the TIEA with Guernsey, which has only been signed very recently in mid-April 2013. The two other TIEAs which are not yet in force are in fact one agreement applicable to two jurisdictions (the agreement with the former Netherlands Antilles, now applicable to Curaçao and Sint Maarten, see footnote 17). A clarifying addendum to this agreement was signed and the Virgin Islands and Curaçao and Sint Maarten have exchanged instruments of ratification. The TIEAs will enter into force on 1 July 2013.

Be given effect through domestic law (ToR C.1.9)
251. For information exchange to be effective, the parties to an exchange of information arrangement need to enact any legislation necessary to comply with the terms of the arrangement. 252. The MLAA was enacted to allow the Virgin Islands to comply with its exchange of information agreements. An Order of the Minister of Finance has to be provided for in order for this Act to be effective in respect of an agreement as specified in such Order. Orders have been provided for in respect of all TIEAs currently in force, and also for most of the TIEAs signed. In addition, the Virgin Islands legal and regulatory framework ensures that the authorities can access and provide information under its information exchange agreements.

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253. A number of peers have commented that the Virgin Islands had not provided information following requests that related to a period before the entry into force of the TIEA under which the requests were made. The requests concerned criminal tax matters, and a divergence of interpretation regarding the entry into force provision in the concerned TIEAs arose between these peers and the Virgin Islands. The following positions were taken: the peers argued that the entry into force provision in the TIEAs obliges the Virgin Islands to exchange information with respect to criminal tax matters in all cases, whether they relate to a taxable period after or before the entry into force of the TIEA. The Virgin Islands’ position was that such an application of the entry into force provision was not clearly provided for in the relevant TIEAs. 254. The international standard provides for exchange of past information which relates to a taxable period following the effective date 12, but the Terms of Reference do not require that information must be provided that relates to a taxable period before the entry into force of an information exchange agreement. Accordingly, what applies in a particular case depends on the wording of the relevant provisions of the agreement. Nevertheless, the Virgin Islands has made an amendment to the MLAA in May 2013 to enable it to obtain and exchange information in criminal tax matters that relates to a period before the entry into force of the relevant exchange of information agreement. By passing this amendment, the Virgin Islands has resolved the divergence of interpretation as described in the previous paragraph. 255. With respect to the requests affected by the divergence of interpretation, the Virgin Islands competent authority has confirmed that it already has exchanged information where possible, and that it is in the process of obtaining further information and providing this information to the respective TIEA partners.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

12. Information that came into existence before the entry into force of the agreement may be relevant for taxable periods that post-date the coming into force of the agreement and this information should be exchanged in accordance with the international standard.

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C.2. Exchange of information mechanisms with all relevant partners
The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.

256. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 257. As at 17 May 2013, the Virgin Islands has signed 23 TIEAs to the standard. The Virgin Islands first TIEA was signed in 2002 (in force since 2006) with one of its main trading partners, the United States. The treaty partners of the Virgin Islands include: • • • • 3 of its main trading partners; 15 OECD member economies; 7 jurisdictions which are members of the G20; and 21 Global Forum member jurisdictions.

258. The Virgin Islands authority to negotiate and conclude agreements is based on the constitutional mandate of the United Kingdom. The current mandate is laid down in a letter of entrustment and it comprises the negotiation of TIEAs with members of the G20, OECD and EU, as well as all jurisdictions which are on the OECD’s white list of jurisdictions which have substantially implemented the international standard. There is also a possibility to grant ad hoc entrustments where another jurisdiction has requested to negotiate an agreement with the Virgin Islands. 259. Comments were sought from the jurisdictions participating in the Global Forum in the course of the preparation of this report, and no jurisdiction advised the assessment team that the Virgin Islands had refused to negotiate or conclude an EOI agreement with it. 260. In summary, the Virgin Islands network of information exchange agreements covers all relevant partners.

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Determination and factors underlying recommendations
Determination The element is in place. Factors underlying recommendations Recommendations The Virgin Islands should continue to develop its EOI network with all relevant partners. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.3. Confidentiality
The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.

Information received: disclosure, use, and safeguards (ToR C.3.1)
261. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments, jurisdictions with tax systems generally impose strict confidentiality requirements on information collected for tax purposes. 262. All of the exchange of information agreements concluded by the Virgin Islands contain a provision ensuring the confidentiality of information exchanged and limiting the disclosure and use of information received, which has to be respected by the Virgin Islands as a party to these agreements. In addition, all public officers in the Virgin Islands are required to take and observe an oath of secrecy as part of their contract of service with the Government. A breach of the oath is a misconduct for which a person may be disciplined under the General Orders for the Public Service of the Virgin Islands.

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All other information exchanged (ToR C.3.2)
263. Confidentiality rules should apply to all types of information exchanged, including information provided in a request, background documents to such requests, and any other documents or communications reflecting such information. 264. Besides the general secrecy provisions for public officers (see C.3.1), section 9(1) MLAA secures the confidentiality of information provided in a request for information received by the Virgin Islands and precludes that such information will be supplied to any other persons except in case it is in accordance with the agreement under which the request has been received. Any person in violation of this provision is liable to a fine not exceeding USD 100 000 or to imprisonment for a term not exceeding five years, or both. 265. To comply with a request for information, confidential information will usually have to be disclosed to relevant authorities or other persons. As a provision supplementing section 9(1), section 8 MLAA specifically provides that in case a person discloses such information for the purposes of a request (being a request received by the Virgin Islands), this person shall be deemed not to commit an offence.

Ensuring confidentiality in practice
266. The offices of the competent authority are located within the Inland Revenue Department, in the Central Administration Complex which hosts several branches of the Government. The office of the Director of the ITA is in a separate room, while the other staff member has an open space office. The ITA currently shares a space with the Inland Revenue Department because the acting competent authority was the Commissioner for Inland Revenue until July 2012. The Virgin Islands authorities have indicated that the offices of the ITA would be moved to a dedicated area in the second half of 2013. 267. The requests for information sent via registered mail are delivered to the generic PO Box of the Inland Revenue Department. Requests for information are also received electronically and via fax at a fax machine in the Director’s office. 268. Incoming requests are entered onto the database maintained by the ITA. A file is created for each request on the network drive which is only accessible by ITA staff. Paper copies of the requests are kept and filed in a secure filing cabinet in the office of the Director of the ITA. The filing cabinet is locked and only the members of the ITA have access. As the ITA shares a space with another department, staff members operate with a clean

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desk policy, which ensures that at the end of each day of work the desks are free and clear from all information pertaining to a request for information. 269. The Notice to Produce Information issued by the ITA explicitly states that the particulars and all matters relating to the Notice are to be treated as confidential in accordance with section 9 of the MLAA. The receiver may not disclose the fact of the receipt of the Notice, or any of the particulars required or documents produced or information supplied to any other person, except its attorney-at-law, without the express written consent of the ITA. The attorney-at-law is also bound by the provisions established in section 9 of the MLAA. In practice, no breach of confidentiality in relation to the unlawful disclosure of information concerning a request for assistance has occurred. 270. The Notice to Produce Information is always hand-delivered where the person who is served the notice is physically present in the Virgin Islands. In other cases, the notice is sent to the person(s) believed to be in possession or control of the information via courier. The receiver is asked to deliver the information to the ITA office. When neither of the two representatives of the ITA is in office, the post received is kept by the Inland Revenue Department, with whom the ITA shares its office space, until they return. The Virgin Islands has indicated that no one in the Inland Revenue Department is authorised to open the post for the ITA. The ITA will have a reserved mail box when it moves to the new offices. 271. In the three-year review period, before the establishment of the ITA, no template notice existed and details from the EOI request may have been disclosed to the perceived information holder which were not necessary for him/her to locate the information. However, in the absence of a template notice and/or written policy, the adherence to the international standard in respect of confidentiality towards the holder of the information could not be assessed. No peers have reported any practical difficulties in this respect. 272. Since July 2012, the information disclosed in the Notice is basic, as described under B.2 above. It is noted that the template schedule to the Notice contains a space for the identity of the person or entity specified in the EOI request. Although this information may in some cases form part of the minimum information that needs to be disclosed in order to enable the person who is served the notice to locate and produce the information sought, it is important to note that the amount of information that needs to be provided may vary depending on the circumstances of each case. The ITA has indicated that the identity of the person or entity specified in the EOI request, as well as any other information contained in the EOI request, is now only included in the Notice where necessary, which is determined on a case-by-case basis. The current template Notice was only introduced in July 2012 and its practical consequences could therefore not be fully assessed. The Virgin Islands should ensure that no unnecessary information is disclosed in the Notices.

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273. When requested information is provided to EOI partners, all information produced and an accompanying letter of production are sent via courier to the named contact in the requesting competent authority, mostly the contact point identified in the request for assistance. In a number of cases, information is transmitted through encrypted emails (using PKZip). In all emails containing information pertaining to a request names are not used, but rather only unique file numbers. Files are kept indefinitely, currently in the secured cabinets of the ITA, but these will be moved to the government’s archives when the cabinets of the ITA are full. 274. One peer noted that in at least one case, the Virgin Islands has transmitted information that did not relate to the taxpayer under inquiry. The Virgin Islands authorities have explained that the information provided did in fact refer to the person who was the subject of the request, but that a reference was mistakenly made to another person in the accompanying affidavit. This case occurred at a time when the process of handling EOI requests did not always include the vetting of the content of the information transmitted (see Section C.5.2 below). This case arose, therefore, as a consequence of a deficiency in the handling of EOI requests. The Virgin Islands authorities have indicated that since the establishment of the ITA, the Director of the ITA vets the requests against the information produced before transmitting it to the requesting jurisdiction.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.

Exceptions to requirement to provide information (ToR C.4.1)
275. The international standard allows requested parties not to supply information in response to a request in certain identified situations. In line with the standard, under all of the Virgin Islands TIEAs the contracting parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or

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information the disclosure of which would be contrary to public policy. The DTC with Switzerland does not cover commercial secrets and includes a reservation for the contracting parties’ sovereignty and security in addition to their public policy. 276. Most of the Virgin Islands TIEAs 13 contain an addition to Article 7(6) of the OECD Model TIEA. The Virgin Islands TIEAs do not only allow for declining a request for information where the information would be used to administer or enforce a provision of the requesting jurisdiction’s tax law which discriminates against a national of the requested party, but also where a provision of the tax law discriminates against a resident of the requested party if it is in the same circumstances as a resident of the requesting party. This means that no obligation to exchange information would exist, for example, where the requesting party intends to use this information to administer a withholding tax on a Virgin Islands resident, while such withholding tax does not exist for residents of the requesting party. For international tax purposes, tax rules that differ only on the basis of residency are universally accepted (see for example Article 24(1) of the OECD Model Tax Convention and its Commentary, and the Commentary on Article 7(6) of the OECD Model TIEA). 277. The reason for introducing this provision is to make it absolutely clear that persons holding a certificate of residence of the Virgin Islands are covered by this provision, as they are also covered by the definition of “national” in the Virgin Islands TIEAs. The Virgin Islands confirmed that it has no intention to apply the provision differently from the international standard. Nevertheless, the provision has the potential to impede the effective exchange of information in certain cases (see the example above) and it is recommended that the Virgin Islands clarifies its position in any future agreements. The Virgin Islands indicated that they explain the issue during the negotiations. In practice, the Virgin Islands has never declined an information exchange request because the information would be used to administer or enforce a provision of the requesting jurisdiction’s tax law which discriminates against a resident of the requested party. 278. An information request can be declined where the requested information would reveal confidential communications protected by attorney-client privilege. However, limitations generally apply to this privilege. This is reflected in Article 7(3) of the OECD Model TIEA, which can be found in many of the Virgin Islands TIEAs. Three of the Virgin Islands TIEAs (with France, Germany and Portugal) only contain a provision stating that there
13. Only the TIEAs with Australia, China (People’s Rep.), the Czech Republic, France, Guernsey, Ireland, New Zealand, Portugal and the United States do not contain this addition.

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is no obligation to provide items or information “subject to legal privilege”, but do not define this phrase. The TIEA with Portugal contains in addition a provision equivalent to Article 7(3) of the OECD Model TIEA. Without a definition, the Virgin Islands will rely on domestic law. Reference is made to section B.1.5 of this report for an analysis of the Virgin Islands domestic law on this issue. 279. Under the TIEAs with Australia and New Zealand the phrase “information subject to legal privilege” is defined as follows: (i) communications between a professional legal advisor and a client made in connection with the giving of legal advice to the client; (ii) communications between a professional legal advisor and a client or any person representing the client or between such an advisor or the client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and (iii) information enclosed with or referred to in such communications and made: (A) in connection with the giving of legal advice; or (B) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings, when the information is in the possession of a person who is entitled to possession of it. Information held with the intention of furthering a criminal purpose is not subject to legal privilege, and nothing in this Article shall prevent a professional legal advisor from providing the name and address of a client where doing so would not constitute a breach of legal privilege; 280. The TIEA with the United States contains a similar provision. This definition appears to include information enclosed within a communication between an attorney or client and any other person (who is not an attorneyat-law), which would be beyond the exemption for attorney client privilege under the international standard. As the Virgin Islands domestic legislation contains a definition of the term “legal privilege” which is in accordance with the international standard (see section B.1.5), it is likely that information can be provided in all cases prescribed by the international standard in this respect. 281. In practice, the attorney client privilege was not invoked during the three-year period under review. More broadly, no issues in relation to the

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rights and safeguards of taxpayers and third parties have been encountered in practice, nor have they been raised by any of the Virgin Islands exchange of information partners.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements in a timely manner.

Responses within 90 days (ToR C.5.1)
282. In order for exchange of information to be effective it needs to be provided in a timeframe which allows the tax authorities to apply the information to the relevant cases. If a response is provided but only after a significant lapse of time the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. 283. There are no specific legal or regulatory requirements in place which would prevent the Virgin Islands responding to a request for information by providing the information requested or providing a status update within 90 days of receipt of the request, which is the standard and the rule laid down in almost all of the Virgin Islands exchange of information agreements 14. 284. In the three years ending 30 June 2012, the Virgin Islands received a total of 123 requests for information from nine partners. A request is regarded as a single request irrespective of the number of subjects involved for which information is requested. Where a supplementary request for information was received in connection with the original request (i.e. where the original request was not fully satisfied, or where other elements have arisen
14. The TIEAs with Portugal and the United States and the DTC with Switzerland do not provide for a specific time period within which a(n initial) response to an information request is required.

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based on the information that was sent to the requesting jurisdiction), this is viewed as part of the original request. 285. The eleven requests which were initially declined due to the divergence of interpretation described under C.1.9 are not included in the statistics on timeliness. It is noted that the Virgin Islands has quickly conveyed its view to its treaty partners in these cases. Following dialogue between the Virgin Islands and its treaty partners, the ITA re-opened eight of these requests in the second half of 2012 (in respect of the three other requests the requesting jurisdiction has indicated that the information is no longer needed). 286. The Virgin Islands indicated that it was in a position to provide a final response within 90 days in 64% of the cases, and within 180 days in 80% of the cases. About 11% of the requests were processed in more than 180 days. The remaining requests were outstanding at the end of the review period (30 June 2012). The Virgin Islands authorities have indicated that they are actively engaging the relevant persons to ensure that an appropriate response is provided.
Response times for requests received during the three-year review period
Jul-Dec 2009 Total number of requests received* 2 (a+b+c) Full response:** ≤90 days ≤180 days (cumulative) ≤1 year (cumulative) (a) 1 year+ Requests still pending at the end of the review period (c) 2010 8 2011 53 Jan-Jun 2012 Total Average % nr. 112 72 90 98 4 10 64 80 87.5 3.5 9 71 20 % 49

nr. % nr. % nr. % nr.

7 87.5 38 72 27 55 48 91 35 2 10 52 98 39 80 -

(b) 2 100 1 12.5 1

* A request is regarded as a single request irrespective of the number of subjects involved for which information is requested. ** The time periods in this table are counted from the date of receipt of the request to the date on which the final response was issued.

287. In cases where requests had not been completely fulfilled within 90 days, this was due to various reasons, including the holder of the information requesting more time within which to access or collate the relevant information. The statistics show requests as answered which were, in fact, only partially answered as a result of the processes used by the Virgin Islands in

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the three-year review period, i.e. only requesting information from registered agents and not always vetting the obtained information before exchanging it (see sections B.1 and C.5.2). The effect of the new procedures on the completeness and timeliness of the responses could not be assessed. Although no exact figures are available, it has been clear from the input from peers that a significant proportion of the requests were answered unsatisfactorily, in the sense that the responses were incomplete and no explanations were given as to why this was the case. In this respect it should be noted that where the requesting jurisdiction provided feedback that the information received was not satisfactory, a dialogue took place between the Virgin Islands and the requesting jurisdiction which generally led to further information being obtained and exchanged. It is nevertheless recommended that the Virgin Islands ensure that its responses to EOI requests are complete and made in a timely manner. 288. During the three-year review period, it was not standard practice to send an acknowledgment of receipt to the requesting jurisdiction. Moreover, where the information could not be provided within 90 days, a status update was generally only sent when solicited by the requesting jurisdiction. While during the three-year review period an excel spreadsheet was used to manage the requests, the ITA now uses a database system which provides for automatic alerts when an update is due. According to the Virgin Islands authorities, it is now standard practice of the ITA to send an acknowledgment of receipt to the requesting jurisdiction and to provide systematic updates when the information cannot be provided within 90 days. As this system has been in place since July 2012, which is outside the scope of the review period preventing its effect from being properly assessed, it is recommended that the Virgin Islands monitor that its competent authority sends status updates to the requesting jurisdiction in case a response takes more than 90 days.

Organisational process and resources (ToR C.5.2)
289. The Virgin Islands Ministry of Finance is responsible for all matters regarding tax, including the exchange of information in tax matters. The competent authority with respect to the exchange of information under the Virgin Islands TIEAs is the Financial Secretary or a person or authority designated by him. During the three-year review period, the designated competent authority was the Commissioner for Inland Revenue. Since 9 July 2012, the newly established International Tax Authority (ITA), which reports directly to the Financial Secretary, has been created to deal with all EOI cases. The ITA has notified all treaty partners of this change, which is also reflected in the competent authority database of the Global Forum.

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Organisational process
290. The current (since July 2012) organisational process, templates used and guidelines to be followed to obtain and provide information following a request from an information exchange partner is described in the Operation’s Manual developed by the ITA. The ITA has also developed a checklist for processing incoming requests, as well as standard Notices to Produce Information which are used in the execution of requests. These tools, put in place since the formation of the ITA, are based on the provisions of the agreements signed by the Virgin Islands and the MLAA. 291. When an information request is received, the authorised officer within the ITA checks whether each request is based on a TIEA that is in force and that the request is sent from the competent authority of the requesting jurisdiction. Subsequently, the request is given a unique reference number and is then logged onto a database which is used to enable the ITA to monitor the progress and timelines of all incoming requests. At the same time, an acknowledgment of receipt is sent to the requesting competent authority by email (using only the reference number of the requesting jurisdiction) and courier. The request and any attachments to it are scanned and stored in electronic format on a secure separate server which is only accessible by the ITA personnel. 292. After the initial check, the authorised officer, together with the director, examines whether the required information conforms with the provisions of the MLAA as well as of the treaty forming the basis of the request. If it does, the director of the ITA validates the request, Where there are doubts whether a request is valid, the case will be referred to the Attorney-General for a final determination. Where the request is found not to be in conformity with the relevant treaty and the MLAA, the ITA will notify the requesting competent authority, outlining the information the requesting competent authority must provide in order for the ITA to process their request. 293. Once it is established that the request is valid, the authorised officer of the ITA decides how to best access the information. The information relevant to the exchange of information is generally not held by the tax authorities, nor by the FSC. Nevertheless, the Registrar of Companies within the FSC maintains a database which contains the details as supplied at registration (see section A1.1 Ownership and Identity Information), such as the name and registered address of the entity and of the service provider. The authorised officer of the ITA will usually commence its investigation by examining the public database maintained by the Registrar to determine the person to whom the Notification to Produce Information should be sent. The Virgin Islands authorities indicated that a Memorandum of Understanding will be signed soon between the ITA and the FSC to formalise their cooperation throughout the process of gathering the information.

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294. Where the Notice to Produce Information is sent to the person who is also the subject of the investigation or examination in the requesting jurisdiction, the ITA will notify the competent authority of the requesting jurisdiction in order to verify whether it objects to the notice being sent to this person. 295. The notices are hand-delivered where the person who is served the notice is located in the Virgin Islands. The ITA utilises delivery receipts which indicate the name of the person receiving the Notice, and date and time of delivery. In other cases, the notice is sent by courier. A copy of the delivery receipt or the receipt of the courier is placed on the manual file for the request held in the ITA offices. The person or entity served with the notice is generally given ten working days to comply. An extension to this period may be requested. In practice, extensions up to two months have been granted, where this was considered to be justified. 296. The requested information is usually delivered to the ITA by hand where the person who has received the Notice is located within the Virgin Islands. If the person is located outside the Virgin Islands, the information is mostly delivered in an encrypted electronic version followed by a hard copy sent by courier. The authorised officer will then check whether all elements requested have been provided. Where the information is insufficient to meet the requirements of the request, the notice to produce information is returned to the entity setting out what additional information is needed. After securing that the information obtained meets the requirements of the request, a cover letter is signed by the director of the ITA and, along with the information produced, is sent via courier to the requesting competent authority. The response is also sent to the competent authority by encrypted email. 297. Every three months, the ITA officer reports to the director of the ITA on the status of the requests. The report should include the number of requests received for the relevant period and a description of the status of the requests, as well as any issues or problems identified in dealing with these requests. The director of the ITA will report to the Financial Secretary on an annual basis.

Organisational process prior to the establishment of the ITA
298. The ITA was only formally established on 9 July 2012. As indicated above, the Commissioner for Inland Revenue was the designated competent authority before that date, which includes the three-year period under review. No clear organisational process was in place during the review period, and the main issue arising out of this was that the competent authority did not check whether the information obtained fully and accurately fulfilled the request. This was an issue in particular where information was only obtained from the registered agent while there was no obligation on the agent to have

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this information (see B.1). Even where the registered agent indicated that it did not have the information in its possession or that it did not agree to provide all of the information, the affidavit produced by the registered agent seems to have been forwarded to the requesting jurisdiction without a further attempt to obtain the information. This resulted in the Virgin Islands on occasion exchanging incomplete and, in some cases, inaccurate information. 299. This issue was raised by a number of peers, which have indicated that the information received was not adequate (either inaccurate or incomplete) to fulfil their request for assistance. In addition, no explanation was provided by the Virgin Islands as to why the information was incomplete. It is noted that where the requesting jurisdiction followed the matter up with the Virgin Islands, additional information was obtained and exchanged by the Virgin Islands in most cases. 300. The practice of not vetting the information obtained, together with the lack of explanation as to why some information was missing, prevented the effective exchange of information in a number of cases. The Virgin Islands authorities have indicated that the procedures established by the ITA since July 2012 ensure that all information is now obtained and is vetted against the details of the EOI request before exchanging it. Nevertheless, as the processes that the ITA has put in place are only recent and could not be fully assessed during the on site visit, it is recommended that the Virgin Islands ensure that its procedures provide for effective exchange of information.

Resources
301. The ITA is responsible for exchange of information on request and since July 2012 also in relation to the European Savings Directive. In addition. the ITA is directly involved in treaty negotiations. The ITA is currently composed of two full time personnel, i.e. the Director and a Research Analyst, who handle the requests. The work of the ITA is supported by an external consultant, in particular in respect of treaty negotiations. The Virgin Islands has indicated that the current resource levels are at an appropriate level to deal with the information exchange requests received. 302. Nevertheless, the workload is likely to increase significantly in the near future. The statistics show that the number of EOI requests received by the Virgin Islands has rapidly increased over the last three years, growing from 8 requests in 2010 to 52 requests in the first six months of 2012. This trend is caused by a number of TIEAs entering into force in 2010 or 2011, which means that the Virgin Islands’ EOI partners have been able to request information only for the last two years or less. Another TIEA entered into force in 2012, and others are likely to enter into force in the near future. It is

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therefore expected that the number of EOI requests received by the Virgin Islands will increase even more in the future. The workload of the ITA now also includes the responsibility for the automatic exchange of information within the framework of the European Savings Directive. The Virgin Islands has indicated that the recruitment of one Senior Research Analyst is envisaged in view of the increased workload due to the commencement of exchange of information in relation to the European Savings Directive, and that further resources will be allocated to the ITA as required. The Virgin Islands should monitor that the resources allocated to its competent authority remain sufficient to deal with the increasing workload. 303. Training is currently undertaken on the job. The Director of the ITA holds a graduate degree in legislative drafting and is a member of the Virgin Islands Barristers’ Association. The Research Analyst was assigned to the Virgin Islands competent authority in January 2011 and had previously worked at the Inland Revenue Department for nine years. ITA staff also attend Global Forum and Peer Review Group meetings. 304. Prior to the establishment of the ITA, the Commissioner dealt with exchange of information. She was assisted by an analyst, who carried on the day-to-day tasks of handling a request.

Conclusion
305. The execution of the competent authority’s responsibilities was delegated by the Financial Secretary to the ITA in July 2012. The procedures established by the ITA, which are included in an Operation’s Manual, appear to be sufficient to handle incoming requests in a timely manner. The resources currently allocated to the ITA may be sufficient to deal with the present workload, but the Virgin Islands should monitor that sufficient resources remain dedicated to its competent authority to deal with the rapidly increasing number of requests. 306. Prior to the establishment of the ITA, the Commissioner for Inland Revenue was the designated competent authority. The organisational process in place at that time was not adequate, resulting in the Virgin Islands exchanging incomplete information. It is therefore recommended that the Virgin Islands ensure that its newly established procedures continue to provide for effective exchange of information. 307. In terms of timeliness, the statistics show that a final response was provided within 90 days in 64% of cases, and within 180 days in 80% of the cases. However, during the three-year review period, it was not standard practice to send a status update where the information could not be provided within 90 days. Such updates were generally only sent when solicited by the requesting jurisdiction. Although the newly established procedures should

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ensure that status updates are sent systematically, it is recommended that the Virgin Islands monitor that its competent authority sends status updates to the requesting jurisdiction in cases where a response takes more than 90 days.

Unreasonable, disproportionate or unduly restrictive conditions for exchange for information (ToR C.5.3)
308. There are no specific legal and practical requirements in place which impose restrictive conditions on the Virgin Islands exchange of information practice.
Determination and factors underlying recommendations
Phase 1 determination The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review. Phase 2 rating To be finalised as soon as a representative subset of Phase 2 reviews is completed. Factors underlying recommendations During the three-year review period, the Virgin Islands practices in accessing and exchanging information have resulted in sending incomplete responses in a significant proportion of the cases according to the input from peers. The Virgin Islands did not provide status updates where a request could not be answered within 90 days unless requested to do so. The procedures put in place by the new authority competent for exchange of information (the ITA) could not be assessed. Recommendations The Virgin Islands should ensure that the responses it provides to EOI requests are sufficiently complete and provided in a timely manner.

The Virgin Islands should monitor that status updates are provided to the requesting jurisdictions where relevant.

Prior to the establishment of the ITA, The Virgin Islands should ensure that no formal verification as to the content its organisational processes provide of the information transmitted to the for effective exchange of information. requesting jurisdictions was made.

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Summary of Determinations and Factors Underlying Recommendations

Determination

Factors underlying recommendations

Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. During the three-year review period (1 July 2009 until 30 June 2012), ownership information in respect of the shareholders of companies was not exchanged in some cases, while the person (the registered agent) who was requested to produce the information was required by law to have this information. The obligation on the registered agent of a company that has issued bearer shares to keep full ownership information on the owners of these bearer shares has been recently introduced. The Virgin Islands should ensure that ownership information in respect of companies is available in all cases in practice.

The Virgin Islands should closely monitor whether registered agents keep full ownership information on the owners of bearer shares where their client is a company that has issued such shares.

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Factors underlying recommendations

Determination

Recommendations

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. There are no consistent obligations for general partnerships and trusts to keep reliable accounting records, including underlying documentation, for a period of at least five years. The requirements on companies and limited partnerships to keep underlying documentation do not specify the type of underlying documentation to be kept, which could result in an uneven application of the obligation to keep underlying documentation. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. Accounting information was not provided to requesting jurisdictions in many cases. It is not clear whether this was due to the fact that the information was unavailable. However, it is the case that, except for records to be kept by entities that are subject to licensing with the FSC, no system of monitoring of compliance with accounting record keeping requirements is in place, which may cause the legal obligations to keep accounting records to be difficult to enforce. In addition, a number of accounting record keeping obligations have only been introduced recently and are therefore untested in practice. The Virgin Islands should ensure that reliable accounting records, including underlying documentation, are required to be kept by general partnerships and trusts for a period of at least five years in all cases. The Virgin Islands should clarify its requirements that underlying documentation must be kept in respect of companies and limited partnerships.

The Virgin Islands should ensure that its monitoring and enforcement powers are sufficiently exercised in practice to support the legal requirements which ensure the availability of accounting information in all cases.

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Determination The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.

Factors underlying recommendations

Recommendations

Banking information should be available for all account-holders (ToR A.3)

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. In the three-year review period, the Virgin Islands competent authority’s practice was to serve a Notice to Produce Information only on the registered agent of the company or limited partnership, regardless of whether the registered agent was obliged to keep the information sought. This resulted in the Virgin Islands competent authority not always obtaining all information. The Virgin Islands has not applied any compulsory powers in the three-year review period, even where information that should have been in the possession of the person who was served the Notice to Produce Information was in fact not produced in some cases. The Virgin Islands should ensure that the access powers of its competent authority are used effectively to obtain all information included in an EOI request.

The Virgin Islands should ensure that compulsory powers are applied where appropriate in cases where information is not produced.

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) The element is in place.

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Factors underlying recommendations

Determination Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.

Recommendations

Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The jurisdictions’ network of information exchange mechanisms should cover all relevant partners (ToR C.2) The element is in place. The Virgin Islands should continue to develop its EOI network with all relevant partners.

Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.

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Determination

Factors underlying recommendations

Recommendations

The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. During the three-year review period, the Virgin Islands practices in accessing and exchanging information have resulted in sending incomplete responses in a significant proportion of the cases according to the input from peers. The Virgin Islands did not provide status updates where a request could not be answered within 90 days unless requested to do so. The procedures put in place by the new authority competent for exchange of information (the ITA) could not be assessed. Prior to the establishment of the ITA, no formal verification as to the content of the information transmitted to the requesting jurisdictions was made. The Virgin Islands should ensure that the responses it provides to EOI requests are sufficiently complete and provided in a timely manner.

The Virgin Islands should monitor that status updates are provided to the requesting jurisdictions where relevant.

The Virgin Islands should ensure that its organisational processes provide for effective exchange of information.

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ANNEXES – 105

Annex 1: Jurisdiction’s Response to the Review Report 15
The Virgin Islands is grateful to the Assessors and the Secretariat for the work they have done to prepare the Report to date. The Virgin Islands continues to be committed to the standards and to make changes within its Competent Authority to ensure effective exchange of Information. As of July, 2012 the International Tax Authority (“ITA”) was established with clear procedures and processes that should eliminate the observations of the assessment team during the three year review period of 1st July, 2009 – 30 June, 2012. The Virgin Islands is resolved to submit a prompt follow-up report in order for a Supplementary Report to be considered by the PRG as soon as possible.

A.1
The Virgin Islands continues to monitor its companies and registered agents to ensure that full ownership information is available in respect of all companies. The requirement to keep full ownership information in relation to bearer shares will be closely monitor by the Virgin Islands to ensure that information is kept in all cases.

A.2
The ITA has introduced new processes and procedures to ensure that the person who has the legal obligation to keep accounting information is now served with a notice to produce information. The Virgin Islands will continue to closely monitor record keeping obligations to ensure the availability of accounting information.

B.1
The new processes and procedures within the ITA, along with training and continued monitoring of the staff, will ensure that the compulsory powers of the Virgin Islands are exercised and applied where necessary. The

15. This Annex presents the Jurisdiction’s response to the review report and shall not be deemed to respresent the Global Forum’s views.

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checks and balances within the ITA will also ensure that the person who has the legal obligation to hold required information is the person who will be served with the Notice to produce the said information.

C.2
The Virgin Islands has continued to develop its EOI network with all relevant partners and has recently signed Tax Information Exchange Agreements (“TIEAs”) with Guernsey and Canada. We continue to negotiate treaties in an effort to develop our EOI network.

C.5
The processes and procedures within the ITA were implemented to ensure that responses are checked to ensure completeness and accuracy and sent to our treaty partners within a timely manner. The ITA also provides status updates to its Treaty partners. There are now routine verification processes which provide for the effective exchange of information. Finally, the Virgin Islands pledges its continued support to the Global Forum and its work in promoting a level playing field in tax transparency and ensuring that its members all meet the global standard.

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ANNEXES – 107

Annex 2: List of All Exchange-Of-Information Mechanisms

Bilateral agreements
Exchange of information agreements signed by the Virgin Islands as at May 2013, in alphabetical order:
Jurisdiction 1 2 3 4 5 6 7 8 9 10 11 12 13 Aruba Australia China (People’s Rep.) Curacao 16 Czech Republic Denmark Faroe Islands Finland France Germany Greenland Guernsey Iceland Type of EoI arrangement TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA Date signed 11 September 2009 27 October 2008 7 December 2009 11 September 2009 13 June 2011 18 May 2009 18 May 2009 18 May 2009 17 June 2009 5 October 2010 18 May 2009 17 April 2013 18 May 2009 28 February 2011 15 April 2010 18 November 2010 4 December 2011 19 December 2012 15 April 2010 19 April 2010 30 December 2010 Date entered into force

16.

Following the dissolution of the Netherlands Antilles on 10 October 2010, two separate jurisdictions were formed (Curacao and Sint Maarten) with the remaining three islands (Bonaire, Sint Eustatius and Saba) joining the Netherlands as special municipalities. The TIEA concluded with the Kingdom of the Netherlands, on behalf of the Netherlands Antilles, will continue to apply to Curacao, Sint Maarten and the Caribbean part of the Netherlands (Bonaire, Sint Eustatius and Saba) and will be administered by Curacao and Sint Maarten for their respective territories and by the Netherlands for Bonaire, Sint Eustatius and Saba.

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Type of EoI arrangement TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA DTC TIEA TIEA Date entered into force 22 August 2011 28 February 2011

Jurisdiction 14 15 16 17 18 19 21 India Ireland Netherlands New Zealand Norway Portugal Sweden

Date signed 9 February 2011 7 December 2009 11 September 2009 13 August 2009 18 May 2009 5 October 2010 11 September 2009 18 May 2009 August 1963 29 October 2008 3 April 2002

15 April 2010

20 Sint Maarten 17 22 Switzerland 23 United Kingdom 24 United States

16 May 2010 1 January 1961 12 April 2010 10 March 2006

17.

See note 16.

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ANNEXES – 109

Annex 3: List of All Laws, Regulations and Other Material Consulted

Commercial laws
BVI Business Companies Act, 2004 Segregated Portfolio Companies Regulations, 2005 Partnership Act, 1996 Trustee Ordinance, Cap. 303, as amended by the Trustee (Amendment) Act, 2003 Virgin Islands Special Trust Act, 2003

Regulatory laws
Financial Services Commission Act, 2001 Financial Services Commission (Amendment) Act, 2011 Financial Services (Administrative Penalties) Regulations, 2006 Financial Services (Exemptions) Regulations, 2007 Regulatory Code, 2009 Company Management Act, 1990 Banks and Trust Companies Act, 1990 Insurance Act, 2008 Financing and Money Services Act, 2009 Securities and Investment Business Act, 2010 Public Funds Code, 2010 Mutual Funds Regulations, 2010 Anti-money Laundering Regulations, 2008 Anti-Money Laundering and Terrorist Financing Code of Practice, 2008

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Taxation and international cooperation laws
Income Tax Ordinance, Cap. 206 Payroll Taxes Act, 2004 Mutual Legal Assistance (Tax Matters) Act, 2003 Mutual Legal Assistance (Tax Matters) (Amendment) Act, 2011 Mutual Legal Assistance (Tax Matters) Order, 2011 Handbook on International Co-operation and Information Exchange: a guide for law enforcement officials and regulators, April 2007

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Annex 4: Persons Interviewed During On-Site Visit
Officials from the International Tax Authority Officials from the Inland Revenue Department (including the previous Virgin Islands competent authority) Officials from the Ministry of Finance Officials from the BVI Financial Services Commission (including the Registry of Corporate Affairs) The Attorney General of the Virgin Islands Representatives of the BVI Association of Compliance Officers

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