The British Virgin Islands (BVI) has begun talks with the United States over improving financial transparency and reporting requirements for accounts held in the territory by US citizens, a move that could also help tackle money laundering in the Caribbean tax haven.
The United States plans to implement stricter tax evasion measures that require US taxpayers with over $50,000 in foreign holdings to give annual reports on their assets held abroad. BVI Premier Orlando Smith said the British territory was negotiating with the United States over complying with the act through providing information on accounts held by US citizens, reported the Associated Press.
The BVI is a popular location for offshore trusts and the "nominal home" to some 500,000 businesses, as the territory's laws allow businesses based in other parts of the world to register as BVI companies and thus avoid taxes in their home countries.
The Cayman Islands, Bermuda and the Bahamas have all announced plans to comply with the US law as well.
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Though the law is aimed at regulating US tax payers, increasing reporting requirements and transparency in the Caribbean could also help crack down on drug traffickers who use the islands for money laundering. Lax financial regulations led the US to designate eight Caribbean countries and territories as areas of primary concern for the laundering of drug proceeds in 2012, according to US officials.
The BVI is a major offshore financial center with a large tourist economy, and the United States called it a "major target for drug traffickers" in the most recent International Narcotics Control Strategy Report (INCSR). According to the United States, the country does not require the filing of information regarding capital ownership, which "poses significant money laundering risks."
Earlier this year, a project by the International Consortium of Investigative Journalists (ICIJ) called the "Offshore Leaks Database" exposed corrupt politicians and businessmen from all over the world who used shadowy companies in the BVI, the Cook Islands, Singapore and other offshore jurisdictions for schemes including tax fraud, bribery and illicit enrichment.