Britain tries to clean up its dirtiest secret.

By Eleanor Myers | Politico

Summary

The British Virgin Islands (BVI) has long been known as a popular destination for both tourists and illicit financial activities, particularly money laundering.

The BVI’s role in facilitating illicit finance was highlighted by the arrest of Andrew Fahie, the former premier, by the U.S. Drugs Enforcement Agency in Miami on cocaine smuggling and money laundering charges. Two years earlier he had boasted to the U.K. government that the BVI’s transparency in its financial services industry was of a calibre competitors “may envy.”

This case underscored the extent to which the BVI has become a haven for criminal activities, enabled by its opaque systems and lack of robust regulation.

The territory’s history as a British colony and its current status as a British Overseas Territory mean that the U.K. has a responsibility to address these issues. The BVI’s economy is heavily reliant on its financial services industry, with company registrations accounting for a significant portion of its government revenues. This reliance on potentially illicit financial activities poses a challenge for the U.K. government, which must balance the need for economic stability in the BVI with the imperative to combat money laundering and other financial crimes.

The new Labour government, led by Foreign Secretary David Lammy, has pledged to take action against illicit finance, recognizing the security and credibility issues it poses for the U.K.

Critics like Andrew Mitchell argue that the BVI’s dependence on dirty money is unacceptable and that the U.K. must take a firm stance to uphold its values and international obligations. The U.K. government’s approach to this issue will be closely watched, as it has implications not only for the BVI but also for the broader fight against illicit finance and the integrity of the international financial system. [See: “A Paradise for Corruption: Britain Tries to Clean up Its Dirtiest Secret“]

In a 2016 commentary for Foreign Policy magazine, Alina Mungiu-Pippidi, a Romanian and European expert in anti-corruption, looked at the successful strategies of countries that have curbed the menace of corruption. Institutions are not the answer, she concluded:

“… many corrupt countries can today boast of tough anti-corruption legislation, but it rarely seems to be doing much good.” What has worked? A “reduction in opportunities for rent-seeking (less red tape or barriers to trade, more fiscal transparency) combined with effective public scrutiny and collective action to sanction corrupt behavior.” The kicker: “Without active citizens, free journalists, and independent judges, control of corruption is impossible.”

“Without rule of law,” asserted Mungiu-Pippidi, “attempts to reign in corruption through legal mechanisms will only be captured by the corrupt system in place.” [See: “Some Countries Really Are More Corrupt Than Others“]