British Virgin Islands: BVI Anti-Money Laundering Regime: Significant Increases To Penalties And Fines

Last Updated: 21 September 2012
Article by Ross Munro and Aki Corsoni-Husain

Fines and penalties for breaches of the BVI's anti-money laundering ("AML") regime have been significantly increased through recent amendments to the Proceeds of Criminal Conduct Act, 1997 (the "PCCA")1, the Anti-money Laundering Regulations, 2008 (the "Regulations")2 and the Anti-money Laundering and Terrorist Financing Code of Practice, 2008 (the "Code")3.  The amendments are effective immediately. 

Background to changes

The changes have been made in response to a recommendation of the follow up report dated January 2011 of the Caribbean Financial Action Task Force ("CFATF")4.    The CFATF, of which the BVI is a member, is itself an associate member of the Financial Action Task Force and, amongst other functions, monitors the implementation by its members of the FATF 40 + 9 Recommendations.  The January 2011 report was largely favourable5 and found that the BVI had made substantial progress but did make a small number of recommendations.  In particular, the CFATF noted that while penalties under the BVI's AML regime were increased in 2010, they were still not considered dissuasive when compared with jurisdictions of similar development6.  This round of amendments to the PCCA, Regulations and Code seeks to address that concern.

Summary of changes and commentary

The increases in penalties impact in two ways.  First, the maximum penalties for breaches of the core money laundering offences under the PCCA and the Regulations which form the backbone of the AML regime have increased, very broadly speaking, by a factor of ten.  The maximum penalty for most offences now ranges between $250,000 and $500,000 (rather than $25,000 to $40,000).  This includes the offences of failure to report suspicious activity and tipping off which are most likely to be of direct concern to professional advisers and fiduciaries. In addition, the maximum penalty for contravention of a provision of the Code has been increased from $25,000 to $150,000.  This applies if action is taken through the courts.

The second aspect amounts to a fundamental change in the scale of the administrative penalties which may be issued for contraventions of the Code.  The Code applies to all persons carrying on relevant business (as defined in the Regulations and includes banks, trust companies, regulated funds and others).  In addition, the Code provides that contravention of certain provisions may be enforced by the Financial Services Commission (the "Commission") through the imposition of administrative penalties. The amendments to the Code increase the maximum penalty for breaches of specific provisions from between $200 and $3,500 to between $50,000 and $75,000. 

The amendments to the PCCA, the Regulations and the Code are given a cautious welcome.  On the one hand, it is important that the BVI responds to the recommendations made in the CFATF report.  The quantum of the maximum penalties would now appear to be dissuasive to the vast majority especially if one considers that most of the penalties for contravention of the Code could be imposed for each and every breach.  For a financial service provider which, for example, showed complete disregard for its obligations to collect customer due diligence this could potentially result in almost limitless financial penalties. 

The power of the Commission to impose administrative penalties up to $100,000 will concern some industry participants due to the lack of a Court led judicial process in determining a penalty of this quantum. The Enforcement Committee of the Commission will be responsible for both investigating whether a breach of the Code has occurred and determining the appropriate administrative penalty. The Code does not prescribe a procedure to be followed when an administrative penalty is to be imposed in contrast to an administrative penalty issued under the Financial Services (Administrative Penalties) Regulations, 2006 (as amended)7. The Commission is, however, required to follow its own Enforcement Committee Guidelines8. An appeal of any administrative penalty decision may be made to the Commission's Appeals Board.   

When are the changes effective?

The changes are already effective.  The amendments to the PCCA received the Governor's assent on 9 August 2012 and were published in the BVI Gazette on 30 August 2012.  The amendments to the Regulations and the Code were published in the Gazette a week earlier but only came into force on the date that the Proceeds of Criminal Conduct (Amendment) Act, 2012 came into effect. 

On the face of it, any breach or offence committed prior to the amendments coming into effect but proceeded against after the effective date would be liable to sanctioning under the new increased penalties.

Detail of the increased penalties

The maximum penalties which may be imposed for the following money laundering offences under the PCCA have been increased as follows:

  • Assisting another to retain benefit of criminal conduct9: maximum fine increased from $25,000 to $250,000 for a summary offence and from $40,000 to $500,000 on indictment.  The maximum term of imprisonment on summary conviction increased from 6 months to 2 years. The maximum term of imprisonment on indictment remains fourteen years.
  • Acquisition, possession or use of proceeds of criminal conduct10: maximum fine increased from $25,000 to $250,000 for a summary offence and from $40,000 to $500,000 on indictment. The maximum term of imprisonment on summary conviction has increased from 6 months to 2 years. The maximum term of imprisonment on indictment remains fourteen years.
  • Concealing or transferring proceeds of criminal conduct11: maximum fine increased from $25,000 to $250,000 for a summary offence and from $40,000 to $500,000 on indictment. The maximum term of imprisonment on summary conviction has increased from 6 months to 2 years. The maximum term of imprisonment on indictment remains fourteen years.
  • Mandatory reporting of suspicious transactions12: maximum fine increased from $25,000 to $150,000 for a summary offence and from $40,000 to $500,000 on indictment. The maximum term of imprisonment on summary conviction remains three years and five years on indictment.  The maximum fine for failing to comply with a direction given by the Financial Investigation Agency13 is increased from $20,000 to $150,000 while the maximum term of imprisonment remains three years.
  • Tipping off14: maximum fine increased from $25,000 to $250,000 for a summary offence and from $40,000 to $500,000 on indictment. The maximum term of imprisonment on summary conviction has increased from 6 months to 2 years.  The maximum term of imprisonment on indictment remains fourteen years.

The following are examples of the increased maximum administrative penalties under the Code (all of which are set out in a revised Schedule 4 to the Code):

  • Failure to carry out customer due diligence and record keeping measures: maximum penalty increased from $3,000 to $75,000.
  • Failure to carry out money laundering and terrorist financing risk assessments: maximum penalty increased from $3,000 to $75,000.
  • Failure by an employee to report a suspicious activity or transaction: maximum penalty increased from $3,000 to $70,000 – imposed on the individual in this case.
  • Failure to engage in enhanced customer due diligence: maximum penalty increased from $3,500 to $75,000.
  • Failure to review and keep up-to-date customer due diligence information in the required manner: maximum penalty increased from $2,500 to $65,000.
  • Failure to ensure proper certification of document, or accepting certified document contrary to the section: maximum penalty increased from $3,000 to $75,000.
  • Failure to verify existence of certifier of document: maximum penalty increased from $2,500 to $65,000.

Footnotes

1.By the Proceeds of Criminal Conduct (Amendment) Act, 2012.

2.By the Anti-money Laundering (Amendment) Regulations, 2012.

3.By the Anti-money Laundering and Terrorist Financing (Amendment) (No. 2) Code of Practice, 2012.

4.Third Follow-Up Report dated 18 January 2011 on the action taken to implement the recommended actions listed in the mutual evaluation report adopted on 23 November 2008.

5.The Report concluded that given the progress made by the BVI in the period leading up to January 2011, the BVI would move to biannual reporting.

6.See R.17 (Deficiency 1) on page 14 of the report.

7.For example, regulation 5 of the Financial Services (Administrative Penalties) Regulations, 2006 provide that the Commission take into account several specified matters before determining a penalty and the Commission must also give notice of an intention to impose a penalty (other than a late payment penalty).

8.Guidelines and Operating Procedures of the Enforcement Committee of the Financial Services Commission of the British Virgin Islands effective 10 April 2008 (see para 5.2 for specific mention of the Code).

9.Section 28(8) of the PCCA

10.Section 29(11)

11.Section 30(4)

12.Section 30A (10)

13.Section 30A(11)

14.Section 31(9)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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