The Virgin Islands saw a slight increase in company incorporations over the second three months of 2017 compared to the same period last year, representing one of the first optimistic financial services data points since the April 2016 Panama Papers scandal.

Incorporations are often viewed as a bellwether metric for the health the territory’s financial services industry, which typically rakes in about 60 percent of government’s yearly revenue.

Registered agents incorporated 7,621 companies across April, May and June of this year, according to data provided by the Financial Services Commission.

That number compares favourably to the same period in 2016, when the territory only incorporated 6,767 companies in what ended up being the VI’s weakest quarter since at least 2003, when the FSC began issuing statistical bulletins.

That low mark came on the heels of the release of the Panama Papers, a trove of 11.5 million leaked documents that alleged Panama-based law firm Mossack Fonseca used VI companies on a massive scale to help clients around the world hide their money from regulators and authorities.

The downtick continued through the final three quarters of 2016 and the first of 2017, each of which saw incorporation numbers far lower than their respective time periods in previous years. 

Both government officials and industry stakeholders attributed the decline in part to the Panama Papers, as well as to international banks practising “de-risking” by limiting their Caribbean operations due to fears of high-risk customers who might be engaging in money laundering and other criminal activity.

Still lower than 2015

Though 2017’s Q2 had higher numbers than the same quarter in 2016, it still was a long way from pre-Panama Papers levels. The second quarter of 2015 had 11,059 incorporations and the second quarter of 2014 had 11,471.

Still, the increase was the first year-to-year boost since 2014’s Q4 had more company incorporations than 2013’s Q4. It also brought 2017 slightly ahead of 2016’s pace, with 16,316 companies incorporated through six months compared to 16,223 last year.

Premier Dr. Orlando Smith (R-at large) seemed pleased with that point.

“Positive news is coming in from the financial services industry,” Dr. Smith said at Governor Gus Jaspert’s swearing-in ceremony on Aug. 22. “Although overall numbers have dropped some, recent reports indicate that company incorporations are up in the first two quarters of 2017.”

Marketing efforts

In his speech, the premier also mentioned BVI Finance’s recent efforts to market the territory’s financial services industry.

“I hope this trend holds for the remainder of the year,” Dr. Smith said. “It would be a strong indication that our continued efforts to defend and promote the industry are paying off.”

By “efforts,” he was likely referring to a report released earlier this year by the London-based firm Capital Economics, which argued that the VI’s financial services industry is highly valuable to the global economy.

The report claimed that VI-registered companies hold $1.5 million in assets; help support roughly 2.2 million jobs; and contribute some $15 billion per year to the coffers of governments around the world.

The report was funded by BVI Finance, the largely government-funded private corporation tasked with promoting the territory’s financial services industry, though BVIF officials maintain it was conducted independently. 

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