CFATF Mutual Evaluation of Virgin Islands (British) 1st Follow-Up Report PDF

CARIBBEAN FINANCIAL ACTION TASK FORCE MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT CFATF’s 59th Plenary and Working Group Meeting December 1st – 6th, 2024 Jamaica © 20...

CARIBBEAN FINANCIAL ACTION TASK FORCE MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT CFATF’s 59th Plenary and Working Group Meeting December 1st – 6th, 2024 Jamaica © 2024 CFATF. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Requests for permission to further disseminate reproduce or translate all or part of this publication should be obtained from the CFATF Secretariat at [email protected]  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 I. INTRODUCTION 1. The Fourth Round Mutual Evaluation Report (MER) of Virgin Islands was adopted on November 30, 2023, during the 57th Caribbean Financial Action Task Force (CFATF) Plenary and published on February 26th, 2024. 2. Based on the results of the MER, Virgin Islands was placed under the enhanced follow-up1 process since it has a low or moderate level of effectiveness for seven (7) or more of the 11 effectiveness outcomes, as shown in the tables below. 3. This is the 1st Follow-up Report (FUR) for Virgin Islands. Virgin Islands’ detailed input for this report can be found in Annex 1 (Overview), Annex 2 (Effectiveness information) and Annex 3 (Technical Compliance information) Findings of the MER. 4. The ratings from the 2024 Mutual Evaluation Report of the Virgin Islands are highlighted below for ease of reference: Effectiveness IO 1 IO 2 IO 3 IO 4 IO 5 IO 6 IO 7 IO 8 IO 9 IO 10 IO 11 ME ME LE LE ME LE LE LE ME LE LE High level of effectiveness - The Immediate Outcome is achieved to a very large extent. Minor HE improvements needed. Substantial level of effectiveness - The Immediate Outcome is achieved to a large extent. SE Moderate improvements needed. Moderate level of effectiveness - The Immediate Outcome is achieved to some extent. Major ME improvements needed. Low level of effectiveness - The Immediate Outcome is not achieved or achieved to a negligible LE extent. Fundamental improvements needed. Technical Compliance R1 R2 R3 R4 R5 R6 R7 R8 R9 R 10 LC C C LC C LC LC NC C LC R 11 R 12 R 13 R 14 R 15 R 16 R 17 R 18 R 19 R 20 LC LC LC LC LC LC LC LC LC C R 21 R 22 R 23 R 24 R 25 R 26 R 27 R 28 R 29 R 30 C LC C PC LC PC C PC C C R 31 R 32 R 33 R 34 R 35 R 36 R 37 R 38 R 39 R 40 LC LC LC LC LC LC LC LC C LC 1 In accordance with paragraph 84 of the CFATF Procedures for the Fourth Round of AML/CFT Mutual Evaluations. Caribbean Financial Action Task Force Page 2 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 C Compliant LC Largely compliant - There are only minor shortcomings. PC Partially compliant - There are moderate shortcomings. NC Non-compliant - There are major shortcomings. II. GENERAL INFORMATION ON THE CFATF FOLLOW-UP PROCESS 5. The follow-up process according to paragraph 80 of the CFATF Procedures for the Fourth Round of AML/CFT Mutual Evaluations (CFATF Procedures) is intended to: (i) encourage members’ implementation of the FATF Standards; (ii) provide regular monitoring and up-to- date information on countries’ compliance with the FATF Standards (including the effectiveness of their AML/CFT systems); (iii) apply sufficient peer pressure and accountability; and (iv) better align the CFATF and FSAP assessment cycle. 6. Following the discussion and adoption of a MER, the country could be placed in either regular or enhanced follow-up. 7. Regular follow-up is the default monitoring mechanism to ensure a continuous and on-going system of monitoring. Countries subject to regular follow-up will report back to Plenary after two and a half (5 Plenaries) from the adoption of the country’s MER. 8. Enhanced follow-up is based on the CFATF traditional policy that deals with members with significant deficiencies (for technical compliance or effectiveness) in their AML/CFT systems and involves a more intensive process of follow-up. Countries subject to enhanced follow-up would first report back three (3) Plenary meetings after the adoption of the country’s MER, and subsequently report twice more at intervals of two (2) Plenary meetings. 9. All FURs will be considered by Plenary, either as a discussion or information item. Requests for re-ratings are analysed by a group of experts and will require Plenary’s approval. Reports without re-ratings will be on the Plenary agenda for information only, unless the delegation raises an issue with the draft report, or the Secretariat identifies a process or progress issue that requires Plenary discussion. III. VIRGIN ISLANDS’ SUBMISSION 10. The purpose of this 1st FUR is to provide an update on the Virgin Islands’ strategy to address the issues identified in the country’s MER and subsequent FURs with technical compliance re-ratings and for exiting enhanced follow-up, as well as the compliance enhancing steps taken to date. 11. Virgin Islands is a jurisdiction under enhanced follow up, and therefore is required to present its 1st follow up report at this time in accordance with the CFATF Follow-up procedures, which mandates that countries in enhanced follow-up would first report back two (2) Plenary meetings after the adoption of the country’s MER, and subsequently report twice more at intervals of two (2) Plenary meetings. 12. Virgin Islands is not seeking re-ratings at this time. The FUR is therefore presented for information purposes only, however, subsequent FURs under enhanced follow-up may involve technical compliance re-ratings. Caribbean Financial Action Task Force Page 3 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 13. A current overview of the technical compliance shortcomings and current measures/plans to address these can be found in Annex 3. Overview of progress reported to date 14. Since the adoption of the MER in 2024, Virgin Islands has prioritized its remediation efforts towards addressing findings and recommendations identified in the MER. This report provides an update on the measures taken by Virgin Islands. Detailed status updates are included in Annexes 2 and 3, with the following being some highlights. 15. Immediate Outcome 1: A targeted risk assessment of LPs and LAs began in March 2024 and is scheduled to be completed by October 2024. The assessment of risks follows a methodology bespoke to the VI and the assessment considers the ML, TF and PF risks of legal persons and legal arrangements formed in the VI. Further, the Virgin Islands has updated their policy and strategy documents which specifically address AML, CFT and CPF policy issues and the identified strategies to address them. These documents were approved by the Virgin Islands’ National AML/CFT Coordinating Council (NAMLCC) on 27 June 2024. The 2024-2026 Strategy is a three-year roadmap designed around the Policy framework which further details the identified actions that should be used to implement the Policy. A key focus of the Strategy is on the mitigation of the ML, TF and PF risk posed by legal persons and legal arrangements through proper detection, regulation, investigation and sanctioning given the importance of proper identification and mitigation of such risk to the Territory’s ability to demonstrate effectiveness of its AML/CFT/CPF regime. The various coordinating bodies have been meeting regularly since the onsite CFATF assessment and have carried out activities to better understand the VI’s ML/TF/PF Risks. Moreover, some committees have been expanded to ensure that there is cooperation at the policy level as well as at the operational level. The previous ad-hoc AML supervisory group was formalized as a sub-committee of the CCA in January 2024 and held its first meeting as the Joint Supervisory Committee in March 2024. The authorities in the Virgin Islands have disseminated the findings of the 2022 ML risk assessment through outreach sessions and the provision of guidance. 16. Immediate Outcome 2: The Virgin Islands has demonstrated a commitment at the national level via the National AML/CFT/CPF Policy of 2024 approved by NAMLCC to enhance international cooperation. The AGC-IC staff has prepared a Reference Guide to assist LEAs in effectively processing these outgoing requests. The Guide provides guidance for preparing outgoing MLA requests and complements the newly implemented Standard Operating Procedural (SOP) for outgoing requests. It provides a step-by-step overview to the procedure for preparing a request for an outgoing MLA request to be sent and submitted to the AGC. Further, the FIA-AIU Senior Intelligence Officer utilises various avenues including OTRCIS and Interpol to conduct background checks and forward to the Supervisory Authorities to determine fitness and propriety, with the FIA-AIU increasing its use of outgoing requests to counterpart FIUs. The FIA- Supervision has engaged multiple foreign supervisory authorities to implement enhanced fit and proper measures and is in the process of entering into MOUs with foreign entities. Additionally, the FCU, in collaboration with the AGC, has developed and circulated a policy and procedure document titled "International Cooperation and Information/Intelligence Exchange." The policy and procedure are aligned with the Virgin Islands National ML & TF Risk Profile and was implemented to ensure that all RVIPF are aware of the use of international cooperation, the importance of it and the route by which it may be utilised. The Virgin Islands also demonstrated an increase in staff allocation at the AGC and the RVIPF-FCU, in addition to an increase in technical resources. As it relates to the sharing of adequate and accurate beneficial ownership information with foreign Caribbean Financial Action Task Force Page 4 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 counterparts, the FSC-Registry is in the process of expanding the VIRRGIN system to collect beneficial ownership information. 17. Immediate Outcome 3: The FSC in May 2023 undertook an assessment of the measures to ensure that its procedures adequately covered the carrying out of foreign criminal background checks in the identification and verification of directors, senior officers and BOs, including the full range of persons who may exercise control. The assessment resulted in the amendments to the internal procedures to include the changes made to the definition of BO in relation to certain sectors and amendments to forms. The FSC is also seeking to establish MOUs with relevant AML specific regulators where no current agreement exists. In relation to the FIA-Supervision, a more robust system was adopted to aid in the detection of foreign criminals. As it relates to proactively identifying unregistered VASPs, the FSC routinely monitors the perimeter to identify entities and persons who may be carrying on financial services business which requires licensing but are carrying on these activities without a license and utilises multiple sources. The FSC continues to prioritise capacity building in relation to supervision of VASPs. The FSC amended its risk framework to separately identify and assess prudential and AML risk (including TF and PF). Work on the development of the online BO registry platform continues. In terms of beneficial ownership, the amendments proposed to the current VIRRGIN system, which would implement the BO register, will include the ability to capture additional beneficial ownership information and interrogate the BO data. As it relates to the FIA-Supervision, Registered DNFBPs were required to complete and submit the Annual Risk Assessment Questionnaire in January 2024, which is a mechanism used by the FIA- Supervision to periodically update the institutional risk rating of each entity and ensure that the annual supervisory activities undertaken are on a risk sensitive basis. The FIA Act is being amended to grant the FIA-Supervision a broader range of enforcement powers. This Act is expected to be passed by the House of Assembly in Q4 2024. The FSC-Supervision and the FIA-Supervision have provided more guidance to reporting entities either through the issuance of guidance documents or presentations. 18. Immediate Outcome 4: FSC-Supervision conducted various types of outreaches to its reporting entities on the findings of the 2022 ML risk assessment, including a webinar, a video interview and a newspaper article. The FSC has identified emerging AML/CFT risks relating to VASPs as facilitators and gatekeepers and the use of VA for illicit activities. The FSC issued guidance to TCSPs and VASPs in January 2023 and provided further outreach and guidance through articles published in March 2024. In addition, the FSC is conducting a desk-based review of 30 TCSPs who provide trustee services only to focus on determining the adequacy of their institutional risk assessments and the implementation of policies and controls to mitigate against the identified risk found in these institutional risk assessments. Supervisory Engagements were held by the FIA-Supervision in October 2023 and focused on the conduct of an institutional risk assessment and was presented to the legal Sector, which is deemed high risk by the 2022 MLRA. Between 2023 and January 2024, FSC-Supervision completed six inspections relating to third party reliance. Those inspections considered the implementation of controls in place to mitigate the inherent risks with conducting business with third parties. The FIA-Supervision commenced the desk-based review of 27 high risk DNFBPs based on the preliminary inherent risk rating generated by the updated Risk Assessment Tool. The objective of the desk-based review is to assess the implementation of AML/CFT/CPF compliance programme of the DNFBP. Based on the finding of the offsite examination thus far, the areas for focus for Outreach include Targeted financial sanctions, Trends, typologies and Red Flags relating to the DNFBP Sector and Suspicious Activity Reporting, Institutional Risk Assessment, the application of Customer Due Diligence, Enhanced Due Diligence and Caribbean Financial Action Task Force Page 5 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 Simplified Due Diligence measures etc. and the identification and verification of Beneficial Ownership. 19. Immediate Outcome 5: VI is in the process of updating the VIRRGIN system to collect BO information in accordance with international standards and in alignment with relevant legislative provisions outlined in the AMLTFCOP, BVIBCA and BO Regulations. Further, the BVIBCA and Limited Partnership Act have been amended to introduce a requirement that companies and Limited Partnerships must keep and file adequate, accurate and up-to-date beneficial ownership information with the Registrar, requirements for verification of beneficial owners by the registered agents and the Registrar and timeframes for filing changes. Amendments to the VI Business Companies Act now require companies to appoint the first directors within 15 days of incorporation and file their Register of Directors with the Registrar within 15 days of appointment of first directors, with penalties for late filing. Further, the VI Business Companies Act was amended to require companies to file, in addition to its register of members, information on the nominator of a member that acts as a nominee shareholder. The FIA Act is being amended to grant the FIA-Supervision a broader range of enforcement powers and the BVIBCA Amendment was amended to allow for the levy of administrative penalties against companies for breaching provisions of the BVIBCA. The FIA-AIU between March 2023 to August 2024 has imposed 10 administrative penalties against LPs and RAs for breach of its section 4 Requests. 20. Immediate Outcome 6: The FIA-AIU and the FCU entered into an agreement June 2024 to enhance collaboration between both Authorities as it relates to disseminations from the FIA to the FCU for investigation, this includes timelines, feedback and updates on progress, as well as having monthly meetings to discuss operational matters. Following the implementation of the MOU and the enhancement of the feedback process, between May and August 2024 the FCU submitted 44 feedback forms in relation to 44 disclosures. As it relates to outreach, the FIA-AIU planned targeted outreach sessions regarding SAR filings for two high risk sectors based on the 2022 VI Money Laundering Risk Assessment and the FIA-AIU’s analysis of the SAR findings of the sector and took part in a joint outreach initiative in June 2024. The previous ad-hoc AML supervisory group was formalised as a sub-committee of the CCA in January 2024 and held its first meeting as the Joint Supervisory Committee in March 2024. The JSC considers matters that impact on the supervision of both FI and DNFBP sectors and has begun to collaborate on supervisory matters relative to both FSC and FIA. Further, an MOU between the FCU and the FIA-AIU which includes a mechanism for the provision of feedback and an assessment of disseminated intelligence to the FCU was agreed in June 2024 to enhance the process of dissemination, feedback and the ongoing progression of intelligence to investigation and prosecution. 21. Immediate Outcome 7: There are proposed amendments to the Police Act and the Computer Misuse Act to allow for the use of controlled deliveries, undercover operations, electronic surveillance techniques and the examination of seized electronic materials and devices. Additionally, further human resources were provided to the Second Criminal High Court, the Magistrates Court and the DPP. The FCU has created and published, a Legal Persons and Legal Arrangements Investigation Policy to establish clear guidelines and procedures for the investigation of legal persons such as companies, associations and other corporate entities and legal arrangements such as trusts. The objective is to effectively detect, investigate and prosecute financial crimes, including money laundering, terrorist financing, proliferation financing, fraud and other illicit activities. Further, the ODPP Confiscation Policy, which has been circulated and is applicable to all LEAs and Counsel, specifically states that investigative techniques must be employed in cases of possession of criminal property to determine whether Caribbean Financial Action Task Force Page 6 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 the person arrested is part of a broader scheme involving criminal organisations, professionals, facilitators or gatekeepers. The RVIPF Asset (Property) & Seizure Policy provides the SOP to support the Asset Seizure and Forfeiture Act. This policy provides guidance to all officers in the identification seizure of assets. The VI provided multiple case studies to demonstrate its achievement of this immediate outcome. 22. Immediate Outcome 8: In the VI, confiscation has been included as a key objective in the national AML / CFT strategy and policy which was approved by NAMLCC in June 2024. The National Policy calls for prioritizing, at a national level, the tracing and recovery of proceeds of crime identified at the domestic level and internationally where there is a cross-border element, including ensuring adequate cooperation and coordination in recovery efforts. Further, the ODPP Confiscation Policy, applicable to all LEAs, makes clear that the recovery of the proceeds of crime is a crucial objective of the ODPP and law enforcement. The policy sets key objectives and provides guidance to all LEAs. The FCU also implemented a policy in relation to International Cooperation and Information & Intelligence Sharing 2024. This policy highlights the requirement to use the processes outlined in the police for gathering evidence, tracing assets and working in cooperation with other jurisdictions to share intelligence. The FCU is also giving greater focus to pursuing criminal offences when cash is seized at the VI border. The AGC-IC, the DPP, the FIA-AIU and the RVIPF-FCU have all taken steps to increase human resources. Lastly, the ASFM Subcommittee was formed by Cabinet Decision and commenced meetings in 2023. 23. Immediate Outcome 9: The Virgin Islands 2024 National AML/CFT/CPF Policy has prioritised investigation and prosecution of TF cases and were built out in the 2024-2026 AML/CFT/CFP Strategy. The ODPP Terrorism and Terrorism Financing Policy applicable to all LEAs outlines the role of the ODPP and the RVIPF in investigating and prosecuting TF offences. Further, the FCU recognises the importance of coordination and collaboration at the operational level. To this end, the FCU has utilised CLEA to operationalise the collection of trends and techniques used to gather, move, or use funds for terrorism or terrorist financing more broadly. Moreover, a written agreement between the FIA-AIU and the RVIPF-FCU was implemented to increase cooperation between the two agencies to support the prioritisation of investigations involving potential TF offences derived from SARs or information disseminated from international counterpart FIUs. Since entering into the MOU, new processes were added regarding TF SARs, such as a process to enhanced effectiveness regarding the review and verification of files. As it related to trends and typologies, the FIA- AIU appointed an analyst to monitor TF trends and techniques, which allowed for the FIA- AIU to formulate a TF typologies report in September 2024. In relation to training, the FIA- AIU developed a training plan with RSS-ARU. The first series of training took place in July 2024. Further, a 5-day training was held for the Judiciary, the Magistrates and the ODPP in September 2024. 24. Immediate Outcome 10: Amendments to the Counter-Terrorism Act and the Proliferation Financing (Prohibition) Act have been drafted to remediate the findings made in respect of Recommendation 6. The amendments to the Proliferation Financing (Prohibition) Act were passed by the House of Assembly in September 2024 and the amendments to the CTA are expected to be passed in Q4 2024. Once the CTA is complete, training and outreach sessions will be delivered by the Sanctions Unit to the public and private sectors. The formal delegation of powers from the Governor to the FIA to investigate was completed and issued on 18 May 2023 and with the establishment of the Sanctions Unit, the Governor’s powers relative to receipt, processing and granting of licences and receipt of compliance reporting forms have been transferred to the Sanctions Unit. The Sanctions Unit is in the process of enhancing staff. Caribbean Financial Action Task Force Page 7 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 In addition to the Sanctions Unit, the Sanctions Committee expanded its membership and held its first meeting in June 2024. The Sanctions Committee also arranged a tabletop exercise to bring all entities involved together and included discussions on scenarios, sanctions implementation and VI’s risks. The Sanctions Guidelines were also updated in June 2024. As it relates to the NPO sector, the VI recently concluded a risk assessment identifying the subset of NPOs that are most at risk for TF abuse. The FIA-Supervision was identified as the agency for supervisor of the NPO sector and is in the process of drafting SOPs and the necessary supervisory plans. 25. Immediate Outcome 11: The Sanctions Committee, as subcommittee of the CCA, is being utilised to enhance coordination among authorities on PF, TF and other sanctions matters generally as it pertains to the involvement of legal persons in sanctions related activity. In addition, in July 2024, the SC and GO held a series of meetings with all relevant agencies that touch on sanctions to assess the level of the agencies’ understanding of their role in sanctions implementation, including identifying what processes and procedures are in place to enable them to discharge their duties effectively and efficiently, with a view of developing an interagency standard operating procedure to enhance collaboration and cooperation between agencies and departments. Additionally, the SC is partnering with OFSI to deliver further training sessions and plans to have a session on TF and PF type sanction matters and typologies are already underway. As it relates to monitoring the implementation of TFS for PF, the FIA- Supervision commenced a desk-based review of 27 high-risk DNFBPs, with one of the objectives being to assess the policies and procedures in place. The FSC-Supervision have commenced assessments to review entities’ TFS policies and procedures for ongoing monitoring and sanctions identification and screening. With regards to outreach, the Sanctions Committee conducted an outreach session and training in June 2024. Continuous outreach and training to both industry and relevant government agencies and departments is envisaged to take place both directly by the Sanctions Unit but also in conjunction with other agencies. Required actions still under review 26. Virgin Islands is yet to address the technical compliance deficiencies highlighted in the mutual evaluation report as it relates to recommendation 32 and aspects of recommendation 40. IV. CONCLUSION 27. Since the adoption of the MER, Virgin Islands has taken steps to address the deficiencies identified in the country’s AML/CFT system. 28. The Secretariat will continue to support Virgin Islands in the follow-up process and will assist experts and the competent authorities in achieving consistency in the application of the FATF Standards and Methodology. CFATF Secretariat November 18, 2024 Caribbean Financial Action Task Force Page 8 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 ANNEX 1 VIRGIN ISLANDS (BRITISH) 1st FOLLOW-UP REPORT (FUR) UPDATE BY VIRGIN ISLANDS (BRITISH) OVERVIEW 1st FUR INTRODUCTION 1. The Virgin Islands (VI) is fully committed to ensuring compliance with the Financial Action Task Force (FATF) Standards and immediately after approval of its Mutual Evaluation Report took steps to implement the recommended actions. Primarily commencing with the National Anti-Money Laundering / Counter Terrorist Financing Coordinating Council (NAMLCC), chaired by the Hon. Premier, approving a National Action Plan for implementation of the recommended actions emanating from the Virgin Islands Mutual Evaluation Report. This National Action Plan was considered by the Cabinet of the VI and laid in the House of Assembly demonstrating strong political commitment to rectifying the identified deficiencies within a timely manner. 2. Additionally, the VI established a dedicated unit within the Attorney General Chambers to lead on monitoring and implementation of the National Action Plan. Each relevant competent authority and law enforcement agency reports monthly to this Unit who then reports directly to NAMLCC on progress made and issues encountered. The VI publishes ongoing updates on implementation of the Action Plan. The VI has commenced extensive work in relation to each of the Recommended Actions. 3. The following steps have already been progressed ensuring the VI has improved its understanding of risk and implemented mitigating measures: a. A national AML CFT CPF Policy and Strategy has been developed and endorsed by the National Anti-Money Laundering / Counter Terrorist Financing Coordinating Council and Cabinet of the VI. These new documents reflect the risk assessments carried out in 2022 and also the findings of the Mutual Evaluation Report. b. Additional funding has been allocated to agencies including the Financial Services Commission (FSC), the Financial Investigation Agency (FIA), Attorney General Chambers (AGC), Royal Virgin Islands Police Force Financial Crimes Unit (RVIPF- FCU) and the Office of director of Public Prosecutions (ODPP). The funding has allowed for the creation of new post and purchase of technological resources. A review of resources will also be undertaken to determine whether additional funding would be required as a results of risk assessments once completed. c. Extensive policy work has been undertaken and policies implemented to address matters related to the investigation and prosecution of legal persons and legal arrangements for ML, TF and PF, increase use of international cooperation and intelligence sharing and asset recovery both domestic and cross border. Caribbean Financial Action Task Force Page 9 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 d. Legislation has been amended to require legal persons and legal arrangements to maintain accurate and up to date beneficial ownership information and outreach undertaken and guidance issued to FIs and DNFBPs on beneficial ownership and control. e. Training has been undertaken by law enforcement agencies including in relation to financial analysis, investigative techniques, terrorist financing and asset recovery. Additionally, specialised training has been provided to the Judiciary (Judges and Magistrates) and ODPP in relation to AML, CFT and the confiscation of assets. f. Collaboration between the FIU (The FIA-AIU) and the police (the RVIPF-FCU) has been significantly enhanced by the implementation of an MOU and the formalisation of monthly operational meetings as well as quarterly strategic meetings, which enables a targeted review of the progress of disseminations. Increase in disseminations and investigations demonstrates the value of this collaboration. g. AML/CFT Supervisory agencies have revised their risk assessment methodology to better reflect the ML/TF/PF risks of their regulated entities. The agencies have re-rated their regulated entities in accordance with their new methodologies and are now carrying out inspections on a risk sensitive basis with focus on higher risk sectors such as trust and cooperate service providers (TCSPs), investment business (IB), virtual assets service providers (VASP), legal practitioners and real estate agents. h. AML/CFT Supervisors provided guidance and conducted outreach on the VI's Money Laundering Risk Assessment, targeted financial sanctions, institutional risk assessment, VASP travel rule, third party introductions, SAR reporting, ML/TF/PF risk for IB Sector and beneficial ownership and control. i. AML/CFT Supervisor for VASP has implemented a supervisory regime for VASP and taken steps to identify those VASP which may be operating without approval. Caribbean Financial Action Task Force Page 10 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 BACKGROUND, RISK, AND CONTEXT Legislative Changes 4. Since the VI mutual evaluation in November 2023, a number of legislative amendments have been enacted to enhance its AML/CFT framework. The Technical Compliance Update and its annex provide a detailed list of the legislative amendments made by the VI since the on-site visit in March 2023. The primary amendments relate to the requirements for legal persons and legal arrangements to hold accurate and up to data beneficial ownership information and for legal persons to provide that information to a central authority (i.e. the Registrar). Among the more significant legislative developments thus far are the following: Banks and Trust Companies Act 5. The amendment expands the definition of “trust business” to include acting or arranging for another person to act as the equivalent of a professional trustee, administrator or administrator for a legal arrangement other than a trust or settlement. BVIBC Act 6. The BVIBC Act has been amended to require all companies in the VI to submit their beneficial ownership information to a central registry and to require that this information be kept updated. Moreover, companies are also now required to submit and keep updated the names of their directors, and to disclose the nominator of any nominee shareholder. The amendment also requires directors to be appointed within 15 days and for increase penalties for noncompliance with various provisions thereby making the penalties proportionate and dissuasive. Insolvency Act 7. Amendments to the Insolvency Act in section 162 and 163 to expand the scope and circumstances under which the Commission may apply to the High Court to appoint a liquidator to include a company: a. that is, or has been involved in or convicted of an offence related to money laundering, terrorist financing or proliferation financing; b. that breaches or contravenes any enactment related to sanctions or embargoes; or c. is otherwise engaged in an activity which the Commission considers not to be in the best interest of the Territory’s financial services industry or generally in the public interest. d. The measure provides an authority with the power to take civil action against a company that has been misused for AML/CFT purposes. Insurance Act 8. Requires foreign insurers to seek the approval of the FSC, before effecting any change in the significant interest or controlling interest of the foreign insurer. This will allow the FSC to undertake relevant fit and proper checks to ensure that no criminal or criminal’s associate can have a significant interest or controlling interest in a foreign insurer. Caribbean Financial Action Task Force Page 11 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 9. In addition, a provision has been made whereby a foreign insurer must notify the FSC of any other change in the interest holding of the insurer which does not qualify as a significant interest or controlling interest. Proliferation Financing (Prohibition) Act 10. Section 15 of the Proliferation Financing (Prohibition) Act make the obligation to freeze assets and funds of a designated person or entity a strict liability office (i.e. an outright offence), by removing the threshold of knowing or being reckless as to whether the assets are related to a designated person or entity. 11. Section 16 of the Proliferation Financing (Prohibition) Act make the obligation to prevent funds or other assets from being made available to or for the benefit of designated persons, a strict liability office (i.e. an outright offence), by removing the threshold of knowing or reckless as to whether the funds and assets are to be made available to or for the benefit of designated persons. 12. Section 49A inserted in the Proliferation Financing (Prohibition) Act, assigns the FIA powers to issue guidance on all obligations under the said Act and to all persons that are subject to obligations under the Act. 13. Section 37(1)(a) and (c) to remove the financial threshold (of $10,000) with respect to the compulsory reporting of financial transactions involving a designated country person or entity, effectively makes it a requirement to report any transaction involving any amount concerning a designated country person or entity. In addition, an obligation is placed on a person who knows of any dealing or attempted dealing in an asset or the making available of an asset to make a report to the FIA. Trustee Act 14. Section 92B ensures that all trustees (including nonprofessional trustees) are required to keep accurate and up to date beneficial ownership information. The section requires all trustees to collect, keep and maintain beneficial ownership information in relation to trusts, which is adequate, accurate and up to date. In addition, trustees are required to take reasonable steps to verify the identities of beneficial owners and their beneficial ownership information to ensure that they are adequate, accurate and up to date. Where any change occurs in the beneficial owner or the information relative to a beneficial owner or a beneficial owner’s interest in a trust, the trustee is required to update that information in a timely manner. 15. Section 92B imposes a requirement for trustees to cooperate with competent authorities and law enforcement agencies, which may include disclosing information within its knowledge, producing documents in its possession or control or providing any other material to which the trustee has access to and authority to produce. Failure to cooperate with a competent authority or law enforcement exposes the perpetrator to criminal sanction on conviction of up to $75,000. Financial Services Commission Act 16. The amendment now mandates that the FSC undertake supervision on a risk-based approach in its supervisory responsibilities and extends existing provisions regarding cooperation with foreign regulatory authorities to permit the indirect exchange of Caribbean Financial Action Task Force Page 12 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 information with foreign non-regulatory authorities (referred to as foreign non- counterparts by the FATF), with the aim of complying with the requirements of FATF Methodology criteria 26.5 and 40.20 respectively. Limited Partnership Act 17. The LP Act has been amended to require all LPs in the Virgin Islands to submit their beneficial ownership information to a central registry and to require that this information be kept updated. Moreover, LPs are also now required to submit and keep updated the names of their partners, and to disclose the nominator of any nominee partner. The amendment also provides for increased penalties for noncompliance with various provisions thereby making the penalties proportionate and dissuasive. Securities Investment Business Order 18. The Securities and Investment Business (Amendment of Schedule 1) Order, 2024 (“the Order”) address a deficiency identified in the MER in complying with FATF Recommendation criterion 26.1. This deficiency also caused cascading effects for ratings under Recommendations 1, 10, 11, 12, 17, 18 and 19 in the MER. This amendment requires persons dealing, arranging deals in, managing, advising, administering contracts to exchange a currency for another, or acting as custodian for such contracts, to be subject to licensing and supervision by the FSC and to be required to comply with AML/CFT requirements. New coordination arrangements and significant reallocation of responsibility 19. The Registrar of Corporate Affairs has been designated the central authority for collection and verification of beneficial ownership information for legal persons. 20. An assessment of the ML/TF/PF risks of legal persons and legal arrangements in the VI is in progress and to be completed by end of November 2024. 21. An update to the VI National TF Risk assessment is in progress and to be completed by end of October 2024. 22. The Assessment of TF Risks in the Non-Profit Organization sector has been finalised and published. Outreach has commenced on its findings. 23. A new Sanctions Committee was formed to maximise collaboration on all sanctions issue and to monitor developments relating to targeted financial sanctions. 24. The Joint Supervisory Committee under the CCA was strengthened by adding collaboration with the RVIPF FCU and FIA-AIU to enhance operational collaboration. 25. Responsibility for the administration of the targeted financial sanctions regime was delegated from the Governor's Office to a newly formed Sanctions Unit, which is part of the Attorney General Chambers (AGC). 26. A unit dedicated to the national coordination and support of AML / CFT / CPF within the AGC has been established with the appointment of National Coordinator. Additional positions have been funded and recruitment is ongoing. Caribbean Financial Action Task Force Page 13 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 ANNEX 2 EFFECTIVENESS UPDATE (FOR INFORMATION) Immediate Outcome 1 Recommended Action a)- While the authorities have reasonably identified VI legal persons and legal arrangements as carrying the highest risks, the overall understanding of risks should be deepened, through comprehensive analysis of the potential for misuse of VI entities (including assessment of country risks of professional business introducers and typologies of complex corporate formation practices and their misuse in the VI context) and design mitigating measures appropriate to its profile as a corporate and financial centre. A targeted risk assessment of LPs and LAs began in March 2024 and is scheduled to be completed by October 2024. The assessment of risks follows a methodology bespoke to the VI. The risk assessment considers the ML, TF and PF risks of legal persons and legal arrangements formed in the VI. A working group consisting of the FSC, FIA, AGC, RVIPF-FCU, NPO Board, SC, and MFSLT was constituted, and terms of reference agreed upon. Specific data from each agency required for the proper assessment of risk was identified and received from all relevant agencies. In addition, the FSC extracted and analysed relevant data from the annual AML and prudential returns required to be submitted by TCSPs in order to gain a better understanding of how, where and for what purposes LPs and LAs are used, to be able to better identify the risks posed by these entities. Open source typologies were gathered and typology research forms were circulated to the private sector to gather input on ML, TF and PF typologies to feed into the overall assessment of risk. Additionally, focus group sessions were held with the private sector to discuss VI existing and emerging risks relating to legal persons and arrangements. Once the risk assessment is completed the FSC will design and track the implementation of appropriate measures to mitigate the identified threats and risks. Recommended Action b)- The National AML/CFT Policy and Strategy (including the AML/CFT policies in the operational levels) should be updated to reflect the findings of the 2022 MLRA (specifically targeting the identified risks from misuse of VI legal persons and legal arrangements) and their efforts on monitoring and publishing progress on the identified action items should continue. The Updated National AML/CFT/CPF Policy 2024 (the Policy) and National AML/CFT/CPF Strategy 2024 - 2026 (the Strategy) documents, which have separate chapters that specifically address AML, CFT and CPF policy issues and identified strategies to address them were approved by the Virgin Islands’ National AML/CFT Coordinating Council (NAMLCC) on 27 June 2024. The revised documents take into account the findings of the 2020 TF RA the 2022 ML and PF RAs, as well as the findings of the 2023 MER. An action plan will be developed in September 2024 by the AGC to operationalise the strategy taking into account the actions identified in the existing National Action Plan to address the Recommended Actions coming out of the MER and the AGC will be responsible for providing updates to NAMLCC on the progress made towards implementation of the Strategy. An updated TF RA is currently being conducted. The results of this RA, along with the results of the targeted LP/LA RA will be incorporated into the Policy and Strategy in early 2025. The Policy outlines the Territory’s current position on the ML, TF and PF threats, vulnerabilities and risks. It also, importantly, clarifies the VI’s position on its jurisdiction over the investigation and prosecution of legal persons and legal arrangements formed in the VI, which was a key concern Caribbean Financial Action Task Force Page 14 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 raised during the Mutual Evaluation. The Policy has retained the existing focus on six key areas of prevention, detection, investigation and sanction, regulation, articulation, and promotion of co- operation, but has identified specific strategic policy objectives under each of these six areas that independently address ML, TF and PF. The Policy also outlines the institutions charged with combatting ML/TF/PF, and documents the legislation in place to address ML, TF and PF matters. The 2024-2026 Strategy is a three-year roadmap designed around the Policy framework which further details the identified actions that should be used to implement the Policy. A key focus of the Strategy is on the mitigation of the ML, TF and PF risk posed by legal persons and legal arrangements through proper detection, regulation, investigation and sanctioning given the importance of proper identification and mitigation of such risk to the Territory’s ability to demonstrate effectiveness of its AML/CFT/CPF regime. In addition, a specific feature of the Strategy is highlighting the importance of cooperation among all the competent authorities and law enforcement agencies. Recommended Action c)- The authorities should enhance the collection and analysis of quantitative data obtained from supervisory activities (especially on beneficial ownership information) and obtain adequate qualitative inputs from private sector stakeholders (specifically from the TCSP and other gatekeeper sectors) through periodic engagements in an efficient manner to inform their risk assessments, including through the provision of sufficient resources and seeking additional expertise. FIA-SUPERVISION The FIA-Supervision made several amendments to its forms and framework to enhance the collection and analysis of quantitative data obtained from DNFBPs. Amendments were made to the Annual Risk Assessment Questionnaire Form to incorporate more risk factors and broaden the scope to enhance the collection and analysis of qualitative data obtained from DNFBPs. The DNBFPs are required to resubmit directors, senior managers and beneficial ownership information to update fit and proper assessments and provide two forms of identification instead of one as an additional verification measure. Further, directors, senior managers and beneficial owners are required to submit a police certificate from all jurisdictions of interest (ties) as a part of the fit and proper process. To ensure that the identification and verification process is more robust as to detect foreign criminal background of directors, senior officers, and beneficial owners at licensing/registration stage and on an ongoing basis, the FIA-Supervision revamped the Fit and Proper templates to incorporate verification from World Check, VIRRGIN, Beneficial Ownership Secure Search (BOSS) System, Overseas Territories Crime Intelligence System (OTRCIS), and INTERPOL. Additionally, the FIA-Supervision contacted the foreign supervisory authorities of the Cayman Islands, United Kingdom, Jersey and Guernsey in June 2024 as part of its effort to enhance the collection of data in relation to beneficial ownership information related to existing DNFBPs such as legal practitioners as it was determined that a number of legal practitioners were part of a group which had head offices in those jurisdictions. This process was in keeping with IO2 RA (a) and IO3 RA(a) which involves seeking international cooperation and implementing measures to adequately identify and verify potential foreign criminal background of directors, senior officers, and beneficial owners at licensing/registration stage and on an ongoing basis. Subsequent to this outreach, a virtual meeting was held in July 2024, with the representatives from Guernsey Financial Crime Division, to discuss entering into an MoU for the purpose of facilitating Caribbean Financial Action Task Force Page 15 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 the exchange of information, cooperation and consultation between both Authorities in relation to beneficial ownership information. The FIA-Supervision is currently finalising the MOU with Guernsey’s Financial Crime Division. Further, the FIA-Supervision will be meeting with the Jersey Financial Services Commission in October 2024, to discuss establishing a similar collaborative relationship for information sharing purposes. FSC-SUPERVISION The FSC allocated additional resources, through the reassignment of staff and the onboarding of a consultant with over 20 years of experience working closely with the FSC, to carry out an assessment of the annual prudential and AML returns that must be filed by its licensees. This assessment included specifically targeting data from TSCPs in relation to introduced business and beneficial ownership information overall to gain a better understanding of the extent of the use of third-party introducers as well as the general location and concentration of BOs within identified high risk jurisdictions. In addition, an external third party with specific experience in data analytics was engaged to extract the data from the prudential returns and provide reports which allowed for clearer and more timely analysis. In terms of identifying any additional data needs as it relates to BO and introduced business, the FSC has completed a gap analysis of the data currently collected from the Annual Returns, including TCSP prudential returns and AML Returns. Coming out of this assessment the FSC has identified the following data points: # of BO of legal persons and legal arrangements # of BO of legal persons and legal arrangements who are PEPs # of BO of legal persons and legal arrangements with nationalities or residing in high- risk jurisdictions for ML, TF or PF # of Settlors of legal arrangements # of Settlors of legal persons and legal arrangements with nationalities or residing in high-risk jurisdiction for ML, TF or PF Jurisdictions where introduced business emanates # of clients of each TCSP subject to introduced business A list of additional required data points is currently being compiled and will be used to facilitate any necessary changes to the returns. Further, the FSC is in the process of expanding its VIRRGIN system to collect beneficial ownership information which will positively impact its ability to collate and analyse such data as information on BO would be searchable. Likewise, within this project the FSC is taking steps to collect additional information to assess the risk of each entity incorporated or registered in the VI. In addition, an external consultant has been engaged to lead the conduct of the Territory’s TF and LP/LA risk assessment exercises. As part of the LP/LA risk assessment a focus group meeting was held with representatives of the TCSP sector to gather qualitative data on, inter alia, their understanding of BO and control, collection and verification practices in relation to BO information, CDD and ECDD practices, level of use of third party introducers, emerging markets and the reason for such shift in focus, and emerging risks (the biggest of which was identified as VAs). This information has been fed into the LP/LA risk assessment. As part of the TF risk assessment, surveys were sent to licensees to gather data with regard to their understanding of TF risk, level of implemented controls and training, and exposure to cash and Caribbean Financial Action Task Force Page 16 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 VAs and other payment methods in order to supplement data gathered through supervisory engagements JALTFAC A standing item focused on emerging risks and trends was placed on JALTFAC’s agenda in Q1 2024. The expectation of Members and the impact of such discussions was communicated to members during that meeting and further discussed during its second quarter meeting to make them aware of the importance of identifying emerging ML, TF and PF trends and discussing such observations to allow for a deeper understanding of the risks faced in each of the sectors represented in the Committee. A typologies template was also developed and shared with members in an effort to develop a typologies bank. Members of JALTFAC also participated in the TF Risk Assessment survey seeking further quantitative and qualitative data to assess TF risk Recommended Action d)- The multiple and overlapping coordinating bodies should be further leveraged to improve consistency and overall understanding of ML/TF/PF risks (especially with the private sector through the JALTFAC), including updating and monitoring progress on the National AML/CFT Policy and Strategy. To build trust among agencies, the existing legal foundations for coordination and collaboration at the operational levels should be maximized through joint operations. The coordinating bodies identified below (CCA, CLEA, IGC, JALTFAC, NAMLCC) have been meeting regularly since the onsite CFATF assessment and have carried out activities to better understand the VI’s ML/TF/PF Risks. Moreover, some committees have been expanded to ensure that there is cooperation at the policy level well as at the operational level. CCA The CCA has held discussions on the National Action Plan and its role within that plan. The CCA also discussed updates to legislative amendments. Two new committees were spun out of the CCA: The Joint Supervisory Committee and the expanded Sanctions Committee. These are discussed below. In addition to working on improving the work of the CCA, a standing item focused on emerging risks and trends was placed on CCA’s agenda in 2024. The expectation of members and the impact of such discussions was communicated to members to make them aware of the importance of identifying emerging ML, TF and PF risks and trends and discussing such observations to allow for a deeper understanding of the risks faced within the jurisdiction. At its June 2024 meeting, the FSC delivered a presentation on the risks presented by legal persons established to provide VASP services. CLEA Updated terms of reference as well as a standing agenda were approved for CLEA. There have been improvements in the sharing of information between the AIU of the FIA and FCU of the RVIPF with the formal agreement between the two agencies signed on 12 June 2024. The FIA-AIU and FCU have enhanced their cooperation and coordination by way of MOU and monthly operational and quarterly strategic meetings. There they dealt with the sharing of intelligence and analysis of such intelligence. Quarterly updates on TF risks and trends will be discussed at CLEA meetings and each member of CLEA will contribute to the input of the data on a monthly basis. The ODPP has drafted a suite of policies geared at ML/TF/PF, restraint, confiscation, cryptocurrency and the investigation and prosecution of legal persons, which are applicable to ODPP and LEAs and have been circulated to all LEAs. Caribbean Financial Action Task Force Page 17 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 A sub-group of CLEA, namely the LEAs, meet to discuss greater cooperation between the LEAs and to report back to CLEA. The introductory meeting of LEA’s took place on the 28th of May 2024, during which the purposes of the sub-group were outlined. Meetings will take place quarterly unless there is an urgent need to meet earlier. An improvement in collaboration was agreed by all agencies, which will include sanitized case reviews. The standing agenda for case reviews is as follows: case overview, agencies involved, key issues, challenges, updates. The Policy on the Prosecution of Money Laundering, Terrorist Financing, Restraint, Forfeiture and Confiscation, which applies to all LEAs, was circulated to all CLEA members and Counsel in the ODPP and assists in ensuring that all relevant LEAs as well as all the prosecutors are aware of the exercise of criminal jurisdiction over legal persons in the VI as well as the importance of exercising this jurisdiction as well as providing a streamlined and unified approach to such matters. The ODPP has also provided training in these areas to improve the quality of investigations received. In April 2024, there was a training for the inspectors and senior officers of all the LEAs with great emphasis on ML/TF restraint and confiscation. A second training session is planned for October 2024. In relation to the focus on the recovery of assets, the DPP has worked with other agencies to make recommendations to improve the restraint and asset recovery regimes. These recommendations are now being considered by the AGC. IGC IGC meetings are held quarterly. Agenda items included updates on members statistical submissions, status of the MER, the National Action Plan and IGC’s expected role within the NAP, which includes outreach, member participation in risk assessments and ongoing discussion on ML, TF and PF risks and emerging trends. During meetings members are encouraged to raise any issues they may be experiencing within their agencies with respect to their individual AML/CFT mandates, discuss any observed trends or highlight any inter-agency collaboration or obstacles to such, in an effort to ensure all members are made aware of potential risks and that discussion on possible solutions or enhanced collaboration is facilitated. JALTFAC JALTFAC meetings are held quarterly. Agenda items include status of the MER and the National Action Plan and JALTFAC’s expected role within the NAP, which includes outreach, member participation in the ongoing risk assessments, ongoing discussions on improving compliance, ML, TF and PF risks and emerging trends and facilitating the gathering of relevant industry data. A standing item focused on emerging risks and trends was placed on JALTFAC’s agenda in 2024. The expectation of Members and the impact of such discussions was communicated to members during its second quarter meeting to make them aware of the importance of identifying emerging ML, TF and PF trends especially with regard to legal persons and legal arrangements and discussing such observations to allow for a deeper understanding of the risks faced in each of the sectors represented in the Committee. A typologies template was also developed and shared with members in an effort to develop a typologies bank. Development of these typologies will aid in informing FSC and FIA supervisory practices and develop both supervisors’ understanding of existing and emerging ML/TF risk, including what features of VI legal entities make them susceptible to such risk. The development of the typology bank and ongoing open dialogue on what is being seen across the sectors represented on JALTFAC will also aid in broadening sector understanding as well as the law enforcement agencies represented on the committee’s (RVIPF, ODPP and HMC) understanding of ML, TF and PF risks. NAMLCC Caribbean Financial Action Task Force Page 18 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 NAMLCC, as the main national coordinating committee, meets monthly. The NAMLCC was strategic in the development and implementation of the National Action Plan, which sets out the plan for the VI to implement the Recommended Actions of the Mutual Evaluation Report. NAMLCC is also integral in overseeing the approval of the National Action Policy and Strategy and will be involved in monitoring implementation. NAMLCC also discussed the Virgin Islands’ position on the Gaming and Betting Control Act. Committees represented on NAMLCC (IGC, CCA, JALTFAC, CLEA) are now also required to update NAMLCC of their activities on a quarterly basis. FCU & FIA-AIU MOU The MOU entered into between the FIA-AIU and the FCU assist in strengthening collaboration and improve coordination and information sharing amongst both Authorities and reduce trust deficits. For example, the FIA-AIU and FCU through monthly meetings have been able to work alongside each other and discuss issues regarding files that were disseminated to the RVIPF-FCU, particularly from SARs. One of the focuses in this regard has been disseminations relating to BVIBCs. This arrangement has assisted in strengthening collaboration between both Agencies. Joint Supervisory Committee The previous ad-hoc AML supervisory group was formalized as a sub-committee of the CCA in January 2024 and held its first meeting as the Joint Supervisory Committee in March 2024. The JSC consists of the FSC, FIA-Supervision and FIA-AIU. The FCU is also invited to meetings when deemed necessary. The JSC has held three meetings between March and July 2024 and has agreed to collaborate on enforcement issues. The FSC and FIA have already shared enforcement manuals, policies and guides. During the meetings held, the JSC, as part of its mandate, also discussed various matters that could impact FI’s and DNFBP’s compliance levels and the range of enforcement actions that may need to be taken. Other matters discussed also include: sharing of the FSC’s Risk Framework; carrying out joint outreach on matters relating to SARs filing, Institutional Risk Assessments, Beneficial Ownership and Control, and Risk Understanding; enhancing information sharing with regard to Requests for Information and dissemination of intelligence; issuing joint typologies; the identification of a potential ponzi scheme targeting VI residents and appropriate action to be taken; and an update on the FSC’s VASP Supervision and associated risk. FSC-Supervision The FSC has recently reconstituted its external advisory committee which includes industry practitioners with varying expertise. The committee’s mandate includes assessing regulatory developments relating to the Virtual Assets space, implications of said developments and formulating appropriate recommendations thereof. Sanctions Committee The Sanctions Committee is a subcommittee of the CCA, which replaces the previous ad-hoc sanctions sub-committee. The Sanctions Committee was formally established on 26 June 2024 with terms of reference. Core members of the Sanctions Committee are the AGC, SC (as Chair), FIA, FSC, RVIPF (FCU). Associate membership extends to Virgin Islands Shipping Registry, DOI, HMC, International Tax Authority, VI Ports Authority, VI Airports Authority, Ministry of Finance, Civil Aviation Authority and ODPP. There is also a provision in the Terms of Reference for ex- officio members to attend meetings as necessary. The Sanctions Committee forms an avenue for collaboration and cooperation where sanction matters that require high level cooperation and Caribbean Financial Action Task Force Page 19 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 coordination can be discussed, reporting and updates on suspected sanctions breaches, media and other inquiries, as well as discussions on drafting and amendment of policy and procedural documents which would allow for greater efficiency and effectiveness with sanctions implementation, through shared understanding and input in the process by key agencies and/or departments. The Sanctions Committee continues to meet, in person and virtually to discuss sanction matters, and also provide comments on documents through email exchange. The Sanctions Committee is working on an MOU between all agencies and departments whose remit touches and concerns sanctions implementation. This MOU once signed will serve to bolster the level of collaboration and cooperation between agencies and departments through the facilitation of information sharing. The Sanctions Committee is also utilized to share broader policy and procedural documents and has shared a draft cross agency guideline regarding domestic designations and is also considering updates to the Sanctions Guidelines to address the recommendations. A Sanctions Tabletop Exercise, which was arranged by members of the Sanctions Committee in collaboration with the FCDO Sanctions Directorate and facilitated by Sanctions SOS, was held in March 2024. This exercise brought all the relevant agencies and departments that are involved in sanctions in the room for an immersive 2-day training on Sanctions which included discussions on scenarios, sanctions implementation and the VI’s risks, inclusive of ML, TF and PF, which would have been identified from the scenarios and from general discussions. Recommended Action e)- The authorities should disseminate the findings of the latest 2022 MLRA with the private sector and proceed with conducting awareness-raising activities (similar to what has been done for the 2016 NRA and subsequent SRAs) and issue typologies and guidance on key and emerging risks (e.g., misuse of VI legal persons and legal arrangements). FIA-SUPERVISION FIA-Supervision made a presentation on 3 November 2023, relating to the 2022 Money Laundering Risk Assessment, with a focus on DNFBPs. Supervisory engagement also took place with 20 legal practitioners, 40 high value good dealers, DPMS and real estate agents and 13 accountants in October 2023 relating to the fundings of the 2022 Money Laundering Risk Assessment. See below: Date Sector No. of Participants 24th October Legal Practitioners 20 25th October Real Estates Agents (am) 19 High Value Dealers (pm) Car Dealers Jewelers Yacht brokers Other high value dealers) 21 27th October Accountants 13 Total 73 Additionally, on the 3 November 2023, the Deputy Director of the FIA-Supervision was a guest speaker at the Sterling AML Conference 2023 and presented the findings of the 2022 ML Risk Assessment with focus on the DNFBP Sector. All presentations were disseminated to the DNFBPs thereafter. Caribbean Financial Action Task Force Page 20 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 The FIA-Supervision plans on developing guidance on emerging risks in the DNFBP Sector based on the findings of the offsite/onsite examinations, independent audit reports, Mutual Evaluation Report, trends and typologies from the CFATF and FATF and strategic analysis from the FIA-AIU. FSC-SUPERVISION A webinar was held by FSC on 27 July 2023 to present the findings of the 2022 ML Risk Assessment to industry participants. The webinar was attended by 240 persons. After the webinar, the presentation was recorded and placed on the FSC's website for additional viewing and was accessed by 186 additional viewers. Presentation slides were also posted to the website. The presentation covered the domestic and foreign threats identified, national operational vulnerabilities, identified financial sector and product/service risks, sector and product/service findings, and expectations of FIs. After the webinar, a survey was sent to participants to garner feedback on the considered usefulness of the event. An ‘FSC Direct’ video interview was also recorded and published on the FSC’s YouTube channel featuring representatives from the FSC and FIA who provided insights into the findings of the risk assessment, particularly in relation to the higher risk sectors. This video was viewed 257 times. A follow up article was published in the October 2023 Newsletter highlighting the 2022 Risk Assessment and reminding industry participants to be attentive to ML risk and the potential systemic effects. In addition, an article was published in the March 2024 issue of the FSC’s newsletter focused on the findings of the 2022 MLRA relative to the higher-risk TCSP, VASP and Investment Business sectors. The FSC has identified emerging AML/CFT risks relating to VASPs as facilitators and gatekeepers and the use of VA for illicit activities. The FSC issued AML/CFT guidance to TCSPs and VASPs in January 2023 covering, inter alia, areas of risk, transaction monitoring, CDD/ECDD, sanctions screening, SAR filing and concealment of beneficial ownership, and provided further outreach and guidance through articles published in March 2024. FSC is currently working on further guidance and outreach related to these emerging risks as well as developing reports on identified typologies. IGC AND JALTFAC Outcomes of the 2022 MLRA were discussed with IGC and JALTFAC members on 26 and 27 September 2023, respectively, and members were informed as to where they could access the report and the recording from the webinar. Immediate Outcome 2 Recommended Action a)- Actively seek international cooperation from other jurisdictions in keeping with the VI’s ML and TF risk profile. Increasing investigations of transnational crime should result in increasing requests for assistance. There has been a commitment at the national level via the National AML CFT CPF Policy of 2024 approved by NAMLCC to enhance international cooperation. There has also been much policy work to ensure outgoing requests are understood and utilized. There has been an increase in requests for international assistance both formally and informally. AGC-IC There has been an increase in outgoing requests from the VI. There were no outgoing requests during the periods of 2021 and 2022. In contrast, there were nine outgoing requests made between 2023 and 2024 – four in 2023 and five in 2024. These requests were related to offences such as theft, obtaining property by deception, handling stolen goods, imposition of curfew, official corruption, false accounting, and the acquisition, possession, or use of proceeds from criminal Caribbean Financial Action Task Force Page 21 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 conduct. The information requested included company invoices, banking details and employment history. Law Enforcement Agencies (LEA) have been invited to an outreach relating to outgoing mutual legal assistance requests on 27 September 2024. This training will ensure a streamlined and effective procedure between investigators and the Competent Authority for outgoing requests. The AGC-IC staff has prepared a Reference Guide to assist LEAs in effectively processing these outgoing requests. The Guide provides guidance for preparing outgoing MLA requests and complements the newly implemented Standard Operating Procedural (SOP) for outgoing requests. It provides a step-by-step overview to the procedure for preparing a request for an outgoing MLA request to be sent and submitted to the AGC. Additionally, it also includes key information, such as including who the request should be sent to, the turnaround time at AGC and the requirements for what the request should contain. The SOP contains the procedure and framework for outgoing requests to ensure consistency and to streamline the process. CLEA The importance of international outgoing requests particularly in the sphere of recovering assets has also been emphasized at CLEA meetings. The AGC has completed an outgoing requests policy that has been circulated to all CLEA members and Counsel. The International Affairs Counsel from the AGC now attends CLEA to engage in matters concerning requests for international cooperation. Furthermore, the importance of international outgoing requests is emphasised in the CLEA TOR (as amended) as well as the use of international requests to recover assets. Indeed examining and encouraging the implementation of strategies for enhanced international cooperation is now specified as a core function of CLEA (CLEA TOR, Function, 13). DPP The ODPP is cognizant of the need for international cooperation and this has now been formalized as a mandatory consideration which must be undertaken by Crown Counsel when vetting case files, circulated to all Crown Counsel as well as by oral direction from the DPP (ODPP Guidance Manual on Preparation of Vetting’s and Advice for Incoming Files from All LEA Enforcement Agencies (1 September 2024)). It is now required that Crown Counsel indicate, in the vetting of case files, when such assistance should be requested by investigative law enforcement agencies during investigations, the need for such consideration in ML, TF and PF matters is underscored (Guidance Manual at K). The DPP’s newly implemented confiscation policy (circulated to all Crown Counsel and CLEA members) emphasizes the use of international cooperation at an early stage via both formal and informal international cooperation to identify, locate and seize illicit proceeds in other jurisdictions. The emphasis on international cooperation in the confiscation investigations, including the use of informal channels such as Arin Carib as well as formal international requests for evidence is stressed. The ODPP’s newly implemented Money Laundering Prosecution Policy (circulated to all members of CLEA and all Counsel) also emphasises the need for international cooperation (8.14). Prosecutors and Law enforcement officials are reminded that in light of the international nature of the corporation and financial services sectors in the VI, very early consideration should be given to obtaining evidence and assistance from overseas through formal mutual legal assistance requests and informal requests such as Arin Carib, to obtain a profile of the accused and gather information to support the investigation and prosecution of such entities. Reference is also made to the International Cooperation and information / intelligence exchange policy of the Royal Virgin Islands Police Force as a guide. FIU-AIU Caribbean Financial Action Task Force Page 22 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 Case Study 1: International Cooperation sought by FCU through FIA-AIU A SAR was filed with the FIA-AIU by a VI bank in relation to a customer whose amassed savings exceeded their salary and was not in line with their transaction parameters. These transactions were made to accounts controlled by the suspect with the same bank but in separate jurisdiction. The FIA-AIU conducted an investigation and solicited additional intelligence from its local counterparts on the suspect. Having concluded the analysis in relation to the suspected proceeds of a crime, the FIA-AIU made a dissemination to the FCU, who in turn made a request to obtain financial information on the suspect via the Egmont portal from the foreign jurisdictions, in pursuit of the money laundering investigation. The FIA-AIU sought the information through the EGMONT portal. Permission was granted by the foreign FIU to disseminate, and the FIA-AIU proceeded with making the dissemination to the FCU. Feedback received from FCU in August 2024 confirmed that the information obtained via the Egmont portal proved to be vital. The FCU further indicated that the investigation was complete, and the file has since been submitted to the ODPP. Case Study 2: Outgoing International Cooperation Requests through FIA-AIU The FIA-AIU received a spontaneous disclosure from the Governor’s Office of the Virgin Islands in August 2023. The disclosure concerned a BVIBC who received six Crypto transactions into its sub account held at a registered company in Jurisdiction A. The six transactions in question originated from an address belonging to a registered company in Jurisdiction B but was conducted by a BVIBC. It was suspected that the funds were associated either directly or indirectly with sanctioned exchanges. The FIA-AIU utilised blockchain analytics which suggested that funds were transferred from a virtual currency address hosted in Jurisdiction B to virtual currency addresses associated with Jurisdiction A’s business company on behalf of the BVIBC. Egmont Request were sent to both jurisdictions. Responses were subsequently received from jurisdiction B who indicated that checks of the address were made and concluded that the connection to a sanctioned exchange was very indirect, namely third-party transactions. Also, the response from Jurisdiction A indicated that their database yielded negative results for all digital wallets, and that the transactions were unknown to that FIU. Further analysis led the FIA-AIU to establish that the alleged sanctioned exchanges were identified to be foreign wallets which were not sanctioned by any regime that currently was applicable to the VI. The FIA-AIU utilised a crypto analytical tool, blockchain analytics and all available tools as well as the use of outgoing requests to confirm whether the exchanges mentioned in the report were subject to any sanctions regime applicable to the VI. Throughout 2023 and during Q1 and Q2 and into Q3 2024 the FIA-AIU has made outgoing requests involving legal persons / legal arrangements as demonstrated by the below table: Caribbean Financial Action Task Force Page 23 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 Case Study 3: FIA-AIU Legal Arrangements: The FIA-AIU received a SAR concerning a VI trust. The beneficiary of the trust was a foreign company. The UBO of the foreign company was arrested on suspicion of embezzling funds. The FIA-AIU made a request following the Egmont Group’s Principles, including providing a description of the case being analysed. The FIA-AIU requested, from the foreign FIU, bank records on the natural and legal persons, any records that showed the transfer of funds between the legal and natural persons in the VI, any SARs on the natural and legal persons, details of any active investigations concerning the natural and legal persons, information concerning whether the VI trust was implicated in any of the referenced crimes and any other information that may be useful. The information provided by the foreign FIU was helpful to the FIA-AIU. Particularly, the foreign FIU provided information regarding overseas transfers, which demonstrated the financial flows between jurisdictions. Increase use of international requests to assist with ‘fit and proper’ tests The FIA-AIU Senior Intelligence Officer (SIO) utilises various avenues including OTRCIS and Interpol to conduct background checks and forward to the Supervisory Authorities to determine fitness and propriety. So far, the SIO received and completed 34 requests from FSC with 129 subjects for background checks for the year 2024. Additionally, the SIO receives requests from the FIA Supervision for background checks on subjects. Caribbean Financial Action Task Force Page 24 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 The FIA-AIU has also increased its use of outgoing requests to counterpart FIUs. In 2021 there were just 4 such requests, in 2022 there were 21 and this number increased significantly to 97 in 2023 and had already reached 49 by August 2024. The below diagram shows that there has been a steady increase from 2021 to August 2024: FIA-SUPERVISION The FIA-Supervision has contacted the foreign supervisory authorities of the Cayman Islands, United Kingdom, Jersey and Guernsey to implement enhanced fit and proper measures to identify and verify the potential foreign criminal background of directors, senior officers and beneficial owners. The FIA-Supervision is in the process of entering into an MOU with the Guernsey Financial Services Commission. FSC- supervision The FSC maintains statistics to track requests for supervisor-to-supervisor international cooperation information. In addition to incoming regulatory IC requests that are managed and responded to by the Legal Division, there has been a conscious effort to increase outgoing IC requests by supervisory staff in support of new applications for licensing or requests for approval of BOs, and proposed directors and senior officers of applicants for business as demonstrated in the chart below: No. of Outgoing Requests Submitted 30 27 28 25 20 15 9 10 6 5 2 0 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Of the 72 requests for information made between Q1 2023 and Q1 2024, 28 (39%) were made in Q1 2024, demonstrating a growth of over 400% from Q1 2023. Those 72 requests were in support of 18 applications for licensing within the TCSP, Investment Business and Insolvency sectors and included enquiries made in relation to 163 individuals to assist in ascertaining whether applicants for business including directors, shareholders and beneficial owners met the FSC’s fit and proper criteria. This included requests for information and verification of criminal checks of 163 persons Caribbean Financial Action Task Force Page 25 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 (senior officers, directors, shareholders and beneficial owners). These 72 requests also included 257 separate enquiries to establish whether the applicants were licensed by the regulatory body to which the request was being made; whether directors, senior officers, parent company, shareholders or ultimate beneficial owners of the applicants were known to the regulatory body; whether any complaints had been lodged or there were any ongoing/imminent matters or regulatory/supervisory concerns; and whether the regulatory body held any information on any known associates of the applicant for business that the FSC should be made aware of. Eight (8) enquiries were made specifically in relation to BO and 25 specifically sought basic information relating to the applicants for business. The majority of requests were made to the Cayman Islands Monetary Authority, the Swiss Financial Market Supervisory Authority, the Washington Securities and Exchange Commission and the UK Financial Conduct Authority. The main jurisdictions to which requests were made and the sectors for which applications were received, which prompted such requests are fairly consistent with the VI’s current ML/TF risk exposure within activities regulated by the FSC. SC GO and SU work closely with the FIA and the FCU as well as CLEA in relation to sanctions matters. GO/SU attends UK/OTs monthly Sanctions catch up, where there is opportunity to discuss and share best practice and share any cross-jurisdictional matters. Where there is a nexus to another country this is shared appropriately. For example, in June 2024 the FIA reached out to GO and FCDO to highlight an urgent SAR from a VI registered entity allegedly concerning a UK company and suspicious transactions relating to potential sanctions breaches. The VI entity had frozen the funds and prevented the ultimate transfer. The FIA-AIU and FCU are working closely on the matter. RVIPF The FCU, in collaboration with the AGC, has developed and circulated a policy and procedure document titled "International Cooperation and Information/Intelligence Exchange." The policy and procedure are aligned with the Virgin Islands National ML & TF Risk Profile. This policy was implemented to ensure that all RVIPF are aware of the use of international cooperation, the importance of it and the route by which it may be utilised. The document establishes a comprehensive framework for both domestic and international cooperation, ensuring that information exchange is conducted legally, securely, and efficiently to support all law enforcement activities. It offers guidance on both formal and informal international requests for information and intelligence exchange, clearly outlining the roles, responsibilities, and procedures for RVIPF officers. The policy serves as the legal gateway for making cooperation requests, setting forth the minimum standards that must be adhered to. It highlights the considerations necessary when making requests and emphasises the importance of fostering a culture of reciprocity and mutual trust among information and intelligence-sharing partners. This, in turn, promotes collaboration and enhances both effectiveness and efficiency. Furthermore, the policy provides guidance on converting intelligence into evidence and details the process for requesting Mutual Legal Assistance through the AGC. The FCU is undertaking 18 money laundering investigations and 11 Terrorist financing cases. Some such investigations pertain to BVIBCs where the criminal activity occurred outside the VI. A number of FIA-AIU disseminations have revealed that there are investigations that have a cross- border element and as a result, there will be an increase in Egmont requests, police-to-police exchanges, domestic requests, and cooperation through Mutual Legal Assistance. A methodology has been created for the ongoing capture of data since March 2023. This capture combines all statistics from each department and can be easily interpreted for internal reporting Caribbean Financial Action Task Force Page 26 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 purposes this applies to the whole of the RVIPF not just the FCU. It enables outgoing requests to be monitored and tracked. The number of requests for International Cooperation sent from all RVIPF Units has seen an increase from 2023 to 2024. RVIPF International Cooperation Outgoing requests April to January to Total For April December 2023 August 2024 2023 to August 2024 Number of MLATS sent to AGC 3 8 11 Informal International Requests 16 21 37 TOTAL 19 29 48 Recommended Action b) The AGC should increase its staff allocation, which would facilitate the continuation of operations in the face of disruptive events such as the resignation of limited key personnel. Similarly, the VI should further enhance the capacity of the RVIPF-FCU to provide other forms of international cooperation by providing it with additional human and technological resources. There has been an increase in the staff allocation at AGC in relation to the team dealing with international requests. Furthermore, there has been a request for funding for additional resources at the RVIPF-FCU, which has been granted and for which additional resources are currently being recruited. AGC-IC As of March 2023, the AGC International Cooperation team consisted of only one (1) dedicated Crown Counsel, another Crown Counsel, and an administrative assistant to handle the processing of requests. The staff has since increased to now include an assigned Case Manager, and a Legal Cadet to manage the MLA processing along with another Crown Counsel and an administrative assistant to further support the processing of requests. This is a significant increase in the resources for this team. As a result, the average turnaround time for responding to requests decreased significantly, as shown in the table below, from a high of 78 days in 2022. Timeframe Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Turnaround time 90 62 48 38 27 52 (days) Additionally, the Mutual Legal Assistance webpage has been updated to assist in providing guidance to Requesting jurisdictions, in order to assist in meeting the required stipulations: https://www.bvi.gov.vg/services/mutual-legal-assistance-request. Furthermore, a guide providing an overview in pamphlet form ‘Mutual Legal Assistance Requests to the Virgin Islands, 2024’ has been finalised and will be attached to confirmation emails to provide information on what is required when submitting an International Request to the VI. RVIPF-FCU The FCU has secured funding for additional resources in order to carry out domestic and transnational investigations namely specialist trained Financial Investigators and a financial analyst Caribbean Financial Action Task Force Page 27 of 160  MUTUAL EVALUATION OF VIRGIN ISLANDS (BRITISH): 1st FOLLOW-UP REPORT cfatf-4mer-1fur-virgin-islands November 18, 2024 as well as the technical resources needed to carry out effective financial investigations. A thorough analysis was undertaken and a business case was submitted for additional resources. It was identified that there was a need for an uplift of five Financial Investigators and one Financial Crime Analyst. The uplift in investigators meant that an additional Detective Sergeant was also required. The posts for five Financial Investigators and a financial analyst were advertised on the local Virgin Islands website, Caribbean Jobs, Virgin Islands Government website and CFATF website. One candidate who was interviewed and has a high level of experience capable of addressing the need of the FCU is in the advanced stages of the recruitment process. A number of other applicants have applied for roles and their skills and suitability to perform the role are being assessed. Interviews have been conducted. Once all these posts, have been filled, the total strength of the FCU will be: Nine Detective Constable Financial Investigators One Financial Analyst Two Detective Sergeant (Supervisors) One Detective Inspector (Supervisor) A need for training in conducting financial investigations including investigative orders, restraint and confiscation was also identified. It has been identified that all investigators should be trained by the same organisation, to the same foundation standard, to have the tools to effectively carry out their role as a Financial Investigator within the FCU. The NCA financial Investigation suite will ensure uniformity of skills in relation to their role. The National Crime Agency Courses which have been confirmed to be delivered: i. The Financial Intelligence Officers course ii. The Financial Investigatio