Growing trend! Financial services outsourcing can affect the economy
The growing trend of outsourcing in the BVI’s financial services sector is raising fresh concerns about its long-term impact on jobs, economic activity, and the territory’s overall stability.
Speaking on the Talking Points radio programme recently, Managing Director and CEO of the Financial Services Commission (FSC), Kenneth Baker acknowledged that outsourcing has become a normal feature of global business, but warned that it carries real risks for the BVI.
Baker’s comments come against the backdrop of a major structural shift that began after the devastating Hurricane Irma and Hurricane Maria in 2017. In the aftermath of those storms, many financial services firms turned to outsourcing as a survival strategy, allowing operations to continue despite widespread local disruption. That move, stakeholders say, played a critical role in preventing the industry from collapsing during one of the territory’s most difficult periods.
However, what began as a temporary solution has increasingly become a permanent business model.
Economic ripple effects
According to Baker, one of the major concerns is that increased outsourcing reduces the need for a physical presence in the BVI — something that could have a knock-on effect across the economy.
“If you allow for increased outsourcing, then there is less need for boots on the ground in the BVI… that would have a ripple effect on the local economy,” he said.
That ripple effect extends beyond direct employment. When companies scale back their local footprint, fewer expatriate workers are recruited — cutting into government revenue streams such as work permits, as well as private sector income from housing rentals, transportation, and other services tied to expatriate living. Conversely, when firms maintain or expand local staffing, the territory benefits from those additional economic injections.
Balancing competitiveness and local impact
Host Elvin Grant raised concerns that companies are increasingly outsourcing functions traditionally performed within the territory to lower-cost jurisdictions, a move driven largely by profit maximization. Baker agreed that regulators are closely monitoring the trend and have already implemented safeguards.
“We have put a prohibition in the regulatory code to say outsourcing is not permitted unless approved by the commission,” he revealed. While many outsourcing arrangement — particularly in banking — have been approved, the FSC is now reviewing whether to tighten or relax those rules. At the same time, Baker cautioned against overregulation.
“We don’t want to make the jurisdiction less attractive,” he said, noting that restricting outsourcing too heavily could drive businesses elsewhere.
Concerns over governance and “mind and management”
Another issue highlighted during the discussion is the extent to which decision-making is shifting outside of the territory. The FSC has found instances where companies technically licensed in the BVI are being directed from overseas.
“Sometimes we see that the mind and management is not what we expect it to be,” Baker said.
In such cases, the commission requires corrective action, including increasing the number of local directors or senior officers to ensure compliance with governance standards. The FSC also examines board minutes and operational records to determine where real control lies, emphasizing that companies must maintain genuine substance within the jurisdiction.
Baker indicated that legislative reforms are on the horizon, including plans to modernise laws governing banks and trust companies to better align with international standards. Still, the broader question remains unresolved: how to strike the right balance between maintaining the BVI’s competitiveness as a global financial centre while safeguarding local jobs and economic benefits.
As outsourcing continues to expand, policymakers and regulators face increasing pressure to ensure that the territory does not lose the very economic advantages that built its financial services industry in the first place.
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It will only get worse with the stupid Immigration and Labour policies that are designed to be a hinderence rather than a help to the Territory.
Ask yourself why…. “Jokes” comment is one of the main reasons..
The BVI must change with the times. If companies are hiring remote workers then make regulations around that. Require permits for those virtual workers, it’s a way to make money.
It’s not just financial services that uses this virtual model. There are other industries that are hiring certain talent virtually, it’s cheaper for these struggling businesses. Just saying it might be time to look at the laws.
When will BVI wake up to the fact that we are no longer in the 90s when things could be forced upon businesses? A business exists for profit, which relies on proper operations. If a business is unable to operate at what they deem to be peak levels they will make adjustments. Global businesses have a global mindset and while there are local rules to be followed, BVI needs to pay attention and make the necessary adjustments or face being left behind. As an earlier poster stated, the labour laws are a big part of the problem where the system is so cumbersome and inconsistent, businesses simply do their best to avoid it. Potential employees are not uprooting their families from abroad to come to the BVI where there’s uncertainty after just 12 months of work. COVID showed us that we are a global online world and that will not change, automation, outsourcing etc. will become the norm more and more. Why BVI thinks it’s special in the grand scheme of things while making zero adjustments to the relevant systems is beyond me. The 200mil + from financial services will not be forever. We need forward thinking people who understand the value of managing immigration/labour in order to build a sustainable economy.
Immigration and Labour policies are indeed stupid and should be reviewed
Our banking system is decades behind the rest of the world. We still use cheques, transfers between local banks are charged as wire transfers, etc
Our Communication (Telephone, Internet) is not reliable, slow and very expensive
Just to mention the tip of the iceberg…
Outsourcing is a world wide practice and any moves to control that will see an immediate departure of relevant business. This writer can attest from experience that the three major incentives to such a practice is cost savings, lack of jurisdictional ease of doing business, and, difficulties in obtaining and retaining qualified staff.
To that end, overregulation and overburdening bureaucracy can be the kiss of death.
The FSC have ignored that VIRRGIN is accessed from abroad for decades. This gives a huge cost advantage to those playing it straight, so they’ve given up, recently a major trust company that had over 100 local staff effectively relocated to Panama. The horse has bolted, may as well open VIRRGIN lite in these jurisdictions to authorized persons and shore up company incorporations if not local employment
FSC pockets are being lined and BVI landers are selling out their own. Pitchfork trust outsourced to Panama and now regrets it as they are constantly hiring and begging employees who left to return.
The FSC itself is opening offices in other locations, including Panama. It is encouraging firms from other countries to obtain their licenses in the BVI, even knowing that they will only have a small desk in the BVI and the entire operation will be conducted in other countries.
Irma opened the eyes of many that had been there for years, to how expensive and restrictive doing business could be on Tortola. Modernisiation is very much needed to encourage growth in the financial services industry, but you are starting from well behind.