How do you solve a problem like the BVI?
Apparently, the word “deadline” was first coined in a notoriously brutal Confederacy-run prison during the American Civil War: any prisoners that crossed the line got killed. The point of a deadline is that, if you don’t stick to it, there are severe consequences. So what do you call a line that, should you cross it, brings zero consequences? A shrug-line? A meh-line? A British-Overseas-Territories-line?
“Anguilla, Bermuda, the British Virgin Islands (BVI), the Cayman Islands and the Turks and Caicos Islands will have legislation on registers of beneficial ownership approved through their respective legislatures by April 2025, with implementation by June 2025 or earlier,” was the unequivocal deadline in a joint communiqué agreed by the British government and the leaders of these five of its Overseas Territories (OTs) in November last year.
It’s now May and, well, that has not come to pass. The deadline has been crossed. So what will happen now that all of them (except the Cayman Islands) have failed to approve laws to open up their corporate registries? Will someone get shot? Or will everyone just shuffle about a bit and hope no one’s noticed?
These five jurisdictions are leftover bits of the British Empire which, for various reasons, never became independent. London wasn’t particularly keen on keeping them, mainly because doing so was expensive, so back in the 1960s, ‘70s and ‘80s, they were encouraged to find ways to fund themselves, with no one particularly caring how they went about it.
Each of these territories, to varying extents, discovered that there was profit to be made from helping foreigners to move money, and not asking too many questions about where the money came from. As a result, these places are often referred to as tax havens, but that’s misleading since they offer far more than just tax advantages to their clients.
Shell companies, particularly those of the BVI, became notorious for hiding money for gangsters, tax dodgers, cartels, kleptocrats and other crooks, and the British government struggled to do anything about it. Then, in 2018, a group of backbench MPs seized on the post-Brexit collapse in political coherence and passed a law forcing the OTs to open up their corporate registries so everyone could see who actually owned their companies.
The law came with a deadline: the end of 2020. But no one obeyed it, so it was extended by the British government to 2023. No one obeyed that deadline either, so it was extended again to April 2025. And now? It’s all just a bit embarrassing.
“We must stop the dither and delay of recent years and pierce the veil of anonymity that protects criminals and kleptocrats,” said Margaret Hodge and Andrew Mitchell, architects of the 2018 legislation, back in November last year. But dither and delay persist.
The debate gets caught up in allegations of ignorance, colonialism, arrogance and so on, but it really comes down to one important point: no one in power in Britain cares enough about stopping corruption to take the political and financial hit of overruling the OTs’ own politicians and paying their bills. More than half of the BVI’s budget comes directly from company incorporation fees. What money do you replace that with, if you change the rules so that no one wants to set up shell companies there anymore?
In the case of Anguilla, a surprising amount of money – around $50 million this year, apparently, which is about a third of all its revenues – comes from its domain name, which is the fortuitous .ai. But that’s not an option open to the other OTs, and if they ask too many questions about who’s doing business with them, that business will go elsewhere.
TETHERED TO EL SALVADOR
One business that already has gone elsewhere is Tether, the crypto company that runs the world’s most popular stablecoin USDT, which has almost $150 billion worth in circulation, and incidentally has a domain name — .io – derived from yet another random imperial fragment, the British Indian Ocean Territory. Previously registered in the BVI, Tether relocated to El Salvador earlier this year after it obtained a license from President Nayib Bukele’s government.
Bukele, whose in his X bio currently describes himself as a “philosopher king”, is much caressed by the American right, who love him for his willingness to indefinitely lock up not just Salvadorans but anyone the U.S. wants to imprison without bothering first to check if they’re guilty or not. Bukele’s methods, the American right says, has made El Salvador safer. But, thanks to journalists from El Faro, we have yet more evidence that the decline in crime that he boasts of may be at least as much to do with secret negotiations with gangsters as it is to do with arresting them.
“Gangs turned Bukele into a relevant politician,” said El Faro’s editor-in-chief Óscar Martínez. “It is impossible to understand Bukele’s rise to total power without his association with gangs.”
So how does a man who’s previously called himself the “world’s coolest dictator” respond to press reports like these? By threatening to lock up the journalists involved of course, allegedly with investigations under criminal statutes often used against gangsters.
“Treating journalism as a criminal act deprives Salvadorans of essential information,” said Cristina Zahar, Latin America programme coordinator at the Committee to Protect Journalists. “Prosecutors should abandon these cases now and ensure ‘El Faro’ journalists can safely report on matters of public interest.”
Tether has no problems with El Salvador’s political atmosphere and complexities. It plans to build a 70-storey tower in the capital, San Salvador, which will serve both as its headquarters and as a location for other finance companies. “It is the country of the future,” says Tether CEO Paolo Ardoino.
The fact that the stablecoin issuer is bedding so comfortably into a place like El Salvador is bad news for people who worry about Tether’s outsized role in enabling global money laundering, but potentially good news for Bukele, who has made crypto a key part of his development plan for his chronically-indebted nation. It’s too early to say whether this has worked – although it’s also too early, no matter what “The Economist” might think, to say that it hasn’t — but it’s an interesting echo of the British OTs’ twentieth-century model: undercut everyone else’s regulations, enable crime overseas, and make a good living out of it.
It’s too much to hope that, as a civilisation, we’d have learned from our mistake sufficiently not to repeat it, but I do hope we’re not still going to be arguing about how to solve the resulting problems in 50 years time.
A version of this story was published in this week’s Oligarchy newsletter. Sign up here.