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Trouble in paradise

Trouble in paradise

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The British Virgin Islands has been beset by scandals. The premier was arrested on charges of drug trafficking and money laundering, and a separate inquiry found evidence of state corruption. How did it come to this?

Hello, I’m Claudia and this is the Sensemaker from Tortoise.

One story every day to make sense of the world.

Today, the British Virgin Islands is in turmoil after its leader was arrested in the United States on drug smuggling charges… and a report found evidence of state corruption.

How did one tiny country become the centre of such a scandal?

“The premier and port director of the British Virgin islands were arrested in Miami in a cocaine smuggling scheme.”

CBS News

At the end of April two senior government officials from the British Virgin Islands were arrested in Florida after being caught in a sting operation by United States federal agents posing as members of a Mexican drug cartel. 

One of them was Andrew Fahie, the premier of the British Virgin Islands, who stands accused of drug smuggling and money laundering.

“According to charges filed in the US he’d agreed ports in the British overseas territory could store cocaine. In exchange he’d get a cut of the profits.”

Sky News

Andrew Fahie has now been replaced as premier after a no-confidence vote was backed by the BVI’s assembly.

A few days after his arrest, a separate report was published about corruption on the islands.

An inquiry had been commissioned in 2021 after police discovered a massive haul of cocaine at the house of a serving officer

“A further search of the actual location uncovered a large quantity of illegal drugs, a total of 2,353 kilos of cocaine to be exact. I’m told that’s 2.3 metric tonnes.” 

Michael Matthews, Police Commissioner of the Royal Virgin Islands Police Force

After that raid, allegations swirled about state corruption and mismanagement including reports that 5 million pounds of public money was spent on an airline that didn’t exist.

So a judge was charged with finding out exactly how far up the government it went.

***

The arrests and the separate report on corruption show that dodgy dealings might have been going on amongst some of the most powerful people in the British Virgin Islands. 

And that’s a problem for the UK government too… because the Virgin Islands are a British Overseas Territory. 

They have their own elected officials but they also have a governor who is appointed in London. 

And it was a British judge, Sir Gary Hickinbottom, who looked into the corruption allegations. 

He found evidence of widespread mismanagement and recommended that the locally elected government should be suspended for two years. 

So now, the government in London has to decide whether to dissolve the BVI’s parliament and impose direct rule on the island.

A move that would be unpopular there and in other British Overseas Territories in the Caribbean.

 “Knowing the people of the BVI I don’t think they will so easily give up representation. I think that it’s very important to them. It really matters. Like you said it would feel like a huge step back.”

Zarin Ahmed, CaribUpdate

Self-determination is incredibly important for any country – and especially meaningful for ones that used to be under British colonial rule. 

The BVI’s new premier, Natalio Wheatley, said: “’direct rule would undermine all the progress that our people have made over generations”.

But why has corruption thrived on the islands?

The British Virgin Islands is one of the world’s top tax havens.

“Every year about $70 billion that the US could be using for infrastructure, law enforcement, healthcare and education is missing. It’s hidden deep within shell companies and anonymous entities in places like the British Virgin Islands.” 

Business Insider

It’s incredibly easy and cheap to set up a shell company in the BVI, and having one of those helps wealthy individuals avoid paying taxes in their home country. 

Tax havens are used by legitimate companies and people. But criminals, gangs and corrupt politicians also use them to hide their ill-gotten gains. 

In 2016, leaked documents from a Panama law firm called Mossack Fonseca – known as the “Panama Papers” – revealed that Vladimir Putin was hiding billions of dollars using a frontman and offshore companies registered in the British Virgin Islands. 

“This is about the corruption of markets, this is about crime, this is about democracy. You know tax havens are undermining democracy, they are increasing criminality.”

Nicholas Shaxson, Economist

A foreign office minister from the UK government has visited the BVI to discuss the findings of the report, but no decision was made about whether direct rule will be imposed to clean up the mess of mismanagement and corruption.

The BVI proposed an alternative: it suggested it could form a temporary “national unity government” with a remit to reform the way the country is run. 

When new premier Natalio Wheatley was sworn in he said it represented an “important and necessary step in renewing our cherished democracy” and reforming the BVI’s institutions.

That may be enough to avoid direct rule for now.

Today’s story was written by Ella Hill and mixed by Imy Harper.