When the British Virgin Islands signed its first Tax Information Exchange Agreement (TIEA) with the United States in 2002, it began a long process that involved taking a long, hard look at how its financial institutions dealt with potential fraudsters and tax evaders.
With the Organization for Economic and Co-operation Development’s drive for a cleaner, safer and fairer world economy, the small group of islands realised which way the wind was blowing – and changed its behaviour accordingly. The British Virgin Islands quickly realised being whiter than white, and being seen to be whiter than white, were essential characteristics for any modern international financial centre.
The British Virgin Islands now have 17 TIEAs in place, and are at least in talks with every OECD member country about bringing new agreements into force.
A TIEA involves giving the tax authorities of another country the authority to access information about an individual or corporation, if they have reasonable grounds to suspect foul play. However, rather than authorising general “fishing trips” to see whether any information about criminals can be unearthed, the foreign tax authorities must have genuine grounds about specific individuals in order to gain access to their information. Such checks and balances go some way towards preserving individuals’ privacy.
Now that the TIEA programme is well under way, the OECD has rolled out a Peer Review system, in which the British Virgin Islands is now participating, which means that it passes comments and judgements about the effectiveness of other states’ tax exchange measures.
From the point of view of the individual investor, very little will change on a day to day basis. Given that banks and insurance companies are already au fait with money laundering “know your customer” requirements, anyone whose investments are above board should not notice any different in how their bank or investment house will treat them.
