A Q&A with Cherno Jallow, KC, Director, Policy Development and External Relations at BVI Financial Services Commission (FSC) on the success of the FSC since its inception. Prior to his current role, Cherno Jallow served as Attorney General of the British Virgin Islands from 1999 to 2007 and has been lead drafter of a number of financial services and related legislation, including the Financial Services Commission Act, 2001, which formally established the FSC.
Can you share your insights on how the legal framework of the BVI IBC Act has evolved over the past 40 years? What key legal reforms or updates do you consider pivotal in maintaining the BVI’s prominence in the global financial landscape?
The IBC Act was, without a doubt, the pacesetter for the BVI’s companies regime. It introduced a flexible and business friendly company incorporation mechanism that was attractive to investment. It lasted 20 years and would have lasted for another 20 years, but for fundamental reforms necessitated by evolving global standards – that is the EU Directive on the Taxation of Savings Income – which meant we had to create a single companies regime, essentially comprising the IBC Act and the Companies Act. That gave birth to the current BVIBCA.
Initially, the idea of amalgamating the IBC Act and the Companies Act into a single uniform enactment was not thought of by some as a good one. There was fear about the Virgin Islands losing a lot of business. In 2002, the Government commissioned a study on the implications of the EU Directive on the Territory’s companies regime and subsequently decided to proceed with the enactment of the BVI Business Companies Act (BVIBCA), as the study showed minimal potential loss of business while at the same time ensuring compliance with the EU Directive to avoid negative consequences – and the study was right!
One of the realities of modern-day business is the recognition that the financial services landscape is not static; it is always evolving and, with it, the need for constant reform if one is to remain relevant, attractive and competitive. The key factor to remain attractive and competitive is compliance with established international standards and adopting international best practices. It is in this context that we carry out regular reviews of the BVIBCA to determine areas that require reform, including updating specific subject matters to remain relevant and continue to have an edge. We also embrace ideas from practitioners where we see opportunities for relevant reform.
Since its inception, what have the key milestones for the FSC been?
The FSC was established at a time of increasing global emphasis on the need for regulatory independence in financial services. The FSC Act, 2001, provided the appropriate legal framework for the BVI to meet this challenge. It established the FSC with a strong mission, while at the same time ensuring a fluid and respectful relationship between the FSC and the Government. It is in these contexts that the FSC commenced the process of key legislative reforms to transform the institution into a much more effective regulatory and supervisory body.
The FSC has been instrumental in championing compliance with established international standards and being a key ally in the development and execution of those standards. Testament to this is the impressive number of international organisations the FSC has joined. It was able to gain membership in the International Organization of Securities Commissions (IOSCO) thanks to the strength of its legislative reforms. The FSC also initiated and encouraged the enactment of the Financial Investigation Act in 2003 which established the Financial Investigation Agency (FIA) – this was considered crucial in protecting the Territory’s financial services perimeter.
Within my own capacity as a Director of the FSC, I played an active role in the Caribbean Financial Action Task Force (CFATF), having acted as Chair on behalf of the BVI twice.
The FSC also sets milestones thanks to its nimbleness in adapting itself to meet the evolving needs of financial services. It carried out reforms to the BVI’s primary financial services product – company incorporation – which transformed the then IBC Act and Companies Act into the single statute of the BVI Business Companies Act. In addition, it led the modernisation of the Mutual Funds Act into what is now the Securities and Investment Business Act thereby embracing the key principles governing securities regulation.
All that said, many believe the biggest milestone on the company registry side is the development of the VIRRGIN (Virtual Integrated Registry and Regulatory General Information Network) electronic platform to support company transactions, with the BVIBCA serving as its legal foundation.
What have been the key benefits of the December 2001 Financial Services Commission Act which established the BVI FSC as an autonomous regulatory authority?
The FSC Act fundamentally created the desired confidence in the FSC’s ability to function and take decisions independently as a financial services regulator without interference. This did not mean that the FSC did not previously operate in this regard independently, but this was not reflected in any particular legal instrument. The FSC is able to determine and operate on a Cabinet-approved budget which gives it great flexibility to channel resources to critical areas. These include regulation, supervision, compliance, international cooperation and modernisation of the Registry of Corporate Affairs, all with an automated system to facilitate company transactions. But perhaps the key benefit is the ability to take regulatory decisions, such as the approval of licences, much quicker compared to when those decisions had to be taken by the Executive Council, before the Cabinet system was established in 2007.
As someone who played a central role in drafting much of the financial services legislation, how did you ensure that the BVI BC Act remained flexible enough to adapt to evolving global standards while still maintaining the jurisdiction’s competitive edge?
Balancing compliance under current and evolving global standards and ensuring business flexibility is not always the easiest thing to do. In some instances, it can be a nightmare trying to achieve that balance.
Therefore, it takes teamwork to flesh out the issues and develop policies before getting to the drafting stage. I hold internal consultations with colleagues (from whom drafting instructions emanate sometimes) to discuss potential areas of difficulty, map out issues, and develop policies to put before the Company Law Review Advisory Committee (CLRAC1) to seek direction. We set out the options available and how best we can maintain both the flexibility of the BVIBCA and the Territory’s competitive edge. In many instances, those discussions lead to the agreed policies being publicly consulted on to garner opinions from practitioners in the financial services industry.
The interest of clients of our industry is always paramount. It is the combination of all these processes that enable the FSC to come to a decision on the appropriate way forward, which is the steer for drafting the necessary reforms to the BVIBCA. Consulting on the draft legislation provides another significant layer to the process whereby the results of the consultation feed into the final draft legislation.
Ultimately, it is our ability to adapt to current and emerging standards through forward-looking legislative reforms founded on consultation that enables us to maintain the required balance between compliance with international standards and maintaining a competitive edge.
In your view, how has the evolution of corporate governance requirements and compliance standards impacted the types of companies registered in the BVI?
Good corporate governance, compliance with established standards and international best practices, coupled with a stable political and judicial system, provide an environment to attract good investment. The ever changing of established standards, in some measure, can have an impact on business. Some evolving standards may be viewed as being unduly intrusive or increasing the cost of doing business. While some business may be lost in the process, those that stay adapt to new rules and obligations that make them strong and resilient; this leads to the growth of business.
How have you approached updating these standards to align with global expectations?
At the FSC, we engage in regular reviews of existing financial services legislation, which is one of the primary functions of the FSC, to ensure they align with emerging trends and practices. Where we see new opportunities and the need to develop appropriate legislation, we proceed accordingly. We have established liaison committees in each sector that we regulate or administer – banking, investment business, insurance, AML/ CFT, trusts, companies, trademarks, etc. – which assist the Commission in its efforts to keep financial services policies and legislation in sync with current and emerging standards relative to or affecting the conduct of financial services business.
Following your time as Attorney General, how has the legal education and training landscape in the BVI developed to ensure the availability of top-tier talent that can continue to uphold and innovate within the financial services industry?
In the last 15 years, I have seen tremendous improvement in the efforts to train personnel within the financial services industry to develop their learning and understanding of the nature of financial services business. Private companies are increasingly providing funding to train their staff in various fields of financial services. The FSC has been instrumental in the establishment of the H. Lavity Stoutt Community College Financial Services Institute, now renamed the Dr. Robert Mathavious Financial Services Institute in honour of the great services Dr. Mathavious (former CEO and Managing Director of the BVIFSC) has rendered to financial services in the Virgin Islands, which now serves as a training hub for persons beyond the shores of the Virgin Islands.
What’s more, the FSC has also been engaging in the continual training of its staff to develop them into top-tier regulators, legal practitioners, accountants, AML/CFT experts, etc. These efforts are truly promising with regard to the continued viability of the financial services industry today and into the future.
What key innovations in financial services have taken place since the inception of the FSC?
Since its establishment in 2001, the FSC has been keeping updated with current and emerging developments within the local and global financial services ector. Perhaps the most crucial initiative undertaken has been the development of the VIRRGIN automated system to facilitate company transactions. This electronic platform is currently undergoing reform to provide better and enhanced service to companies and practitioners within the financial services industry. On the legislative front, we have witnessed the development and attractiveness of the investment business managers regime; This was following the enactment of the Virgin Islands Special Trust Act, Securities and Investment Business Act, a new Limited Partnership Act regime being introduced and the implementation of the Virtual Assets Service Providers Act.
What do you think are the biggest opportunities and challenges for the FSC looking ahead to the next 40 years?
Looking to the next 40 years, a key area the FSC would be looking at is the emerging developments in information technology, especially AI. Modern technology is forever evolving and, while it comes with its own risks, its value in facilitating modern day trade and commerce is beyond doubt. The FSC will continue monitoring this particular area to establish its strength and usefulness in driving financial services to maintain the Territory’s competitive edge.
In terms of the challenges ahead, these will likely relate more to the forever changing standards of regulation and fighting crime, especially in the area of money laundering, terrorist financing and proliferation financing, which will require reforms. There is, of course, the added dimension relative to tax issues. The evolving standards, which are likely to affect financial services business, may require adjustments in existing regimes. But as always, the FSC will continue its monitoring process and aim to achieve the appropriate balance between compliance and doing business in and from within the BVI.