BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Chris Duncan and Katrina Lindsay, Carey Olsen
12. Fraud 12.1 Elements of Fraud
10.11Virtual Currencies Digital representations of value are expressly excluded from the definition of “virtual assets” under the VASP Act. 10.12Non-Fungible Tokens (NFTs) The issuance of NFTs by a BVI company is an activity that falls outside the scope of the BVI regulatory regime. See 10.4 Regulation of “Issu- ers” of Blockchain Assets . The question as to whether any income received on the sale of any NFTs constitutes income from IP assets ‒ there - fore potentially bringing the company within scope of the BVI economic substance regime – is something that would need to be considered on a case by case basis. There is currently no express prohibition on open banking activity under the BVI legal regime, provided that the entity conducting any bank - ing activities from within the BVI is regulated (as required) under the BTCA or the FMSA. Bank of Asia, through the incorporation of Appli - cation Programming Interface (API)-enabled architecture into its core banking functions, has positioned itself to be able to extend its service offerings through the open banking initiative. 11.2 Concerns Raised by Open Banking To date, the concept of open banking has not been prevalent with banks operating in the BVI. However, it is anticipated that data privacy con - cerns will be alleviated by relying on the con - sensual nature of open banking arrangements, which are created at the instigation and with the consent of the data subject. 11. Open Banking 11.1 Regulation of Open Banking
Many of the elements of fraud as it relates to finan - cial services in the BVI will be the same elements of fraud experienced in jurisdictions around the world, given the inherently decentralised nature of the technologies and the borderless nature of their application. A specific body of law setting out the elements of fraud as it relates to the BVI financial services regime has not been developed. The general common law position would apply should this be considered by the BVI courts. From a regulatory perspective, the FSC focus - es on safeguarding client assets by seeking to prevent or minimise the potential for fraud and misappropriation. 12.2 Areas of Regulatory Focus In the fallout from the FTX collapse, regulators are keenly focused on the protection of client assets (including policies and procedures in place for the segregation and safeguarding of client assets, as well as minimum capital requirements). Data pro - tection and data security vulnerabilities will also be a focus for regulators, given the capabilities of The extent to and the circumstances in which a fintech service provider would be held respon - sible for losses suffered by a customer are mat - ters determined by the liability provisions set out in the agreement between the service provider and the customer. It is not possible for the ser - vice provider to exclude liability for its own fraud (including a fraud perpetrated by its employees or agents). It is possible, in certain circumstanc - es, for the service provider to exclude liability for losses suffered by a customer that were caused by a fraud perpetrated by an external party. increasingly sophisticated hackers. 12.3 Responsibility for Losses
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