The BVI-based branch of international law firm, Mossack Fonseca & Co has warned of the possible consequences of a recent move by the jurisdiction’s government to impose limitations on bearer shares, in line with international anti-money laundering standards.
The British Virgin Islands’ authorities announced earlier this month that they would be strengthening the regulatory regime with regard to the shares – which have traditionally belonged to whoever holds them – explaining that:
‘The proposed regime will provide the business community with the safeguards it is seeking for the purposes of financial transactions while ensuring that regulators and law enforcement organisations are satisfied that they can pursue those who would use bearer shares for illegal purposes.’
However, in a letter sent to both the BVI Financial Services Commission chairman, Michael Riegels, Q.C., and the BVI Island Sun newspaper, Mossack Fonseca warned of the consequences for their Bahamian business when bearer shares were abolished in the Bahamas.
‘Based on our experience in the offshore industry and in our capacity as long-term service providers in the Bahamas, we want to share with you our knowledge and experience about the economic mishap that occurred there when their government eliminated bearer shares three years ago,’ the letter read.
Announcing that between 2000-2001, its Bahamian business decreased by some 45%, the law firm suggested that the BVI government’s move to restrict the mobilty of the shares by mandating that they must be held by an approved Custodian within a licensed financial institution and subject to anti-laundering and customer due diligence obligations, and its decision to oblige international business companies (IBCs) to hold the particulars of the directors at their registered offices, with a provision allowing law enforcement officers to access said records at any time, may not be particularly popular with BVI businesses.
‘In these circumstances, BVI financial institutions and service providers will most likely lose additional business, rather than seeing increased business,’ the letter seen by the Island Sun warned.
By Amanda Banks, Tax-News.com, London
