The British Virgin Islands financial services sector is switching tack to focus on the Arabian Gulf, as tax havens come under renewed pressure from the United States.
The UAE presents numerous opportunities for the Caribbean destination to develop its financial industry, said Lorna Smith, the chairman of the BVI financial services business development committee and wife of the islands' premier, who led a delegation that last week met government officials in the Emirates.
"We're certainly very impressed with the leadership in financial services that the UAE has shown," she said. "We're excited at the prospect that later this year Abu Dhabi will have opened its own financial zone."
The BVI is seeking to attract firms looking towards cross-border financing, private banking, asset management and estate planning. It is also developing its capabilities in Islamic finance and Sharia-compliant estate planning.
Offshore tax havens have always drawn criticism for funnelling hundreds of millions of dollars out of the reach of tax authorities in developed and developing countries alike.
However, as deficits have mounted in western nations and taxpayers have been forced to shoulder the costs of bailing out insolvent lenders, cash-strapped governments have attempted to reclaim income lost to tax havens to which they had previously turned a blind eye.
In the depths of the financial crisis, the US congress passed the foreign account tax compliance act (Fatca) in an effort to locate assets stashed overseas by US citizens. The measures come into effect next year.
The law levies a 30 per cent withholding penalty on transactions by foreign financial firms that do not establish an agreement with US tax authorities to disclose any American citizens' accounts. Other countries, such as the United Kingdom, could follow suit.
Many offshore tax havens, the BVI and Cayman Islands included, had already conceded the battle with the US tax authorities had been lost, said William McRae, a partner at Cleary Gottlieb Steen & Hamilton, the international law firm.
"A lot are in negotiations to enter into intergovernmental agreements [with the US]," he said. "They're not taking up that battle."
The island was not seeking to evade Fatca but was looking towards other aspects of commerce instead, said Elise Donovan, an executive director of the British Virgin Islands International Finance Centre.
"We've been in conversation with the US regulations with regard to becoming Fatca-compliant," Ms Donovan said. "Like the rest of the world, we're going to be preparing ourselves."
The rule will be "universally and globally applied" and because it levels the playing field with other tax havens, it should mean "no disadvantage" for the BVI, she added.
The BVI is seeking to convince more sellers of debts in emerging and frontier markets to use the island as a domicile, with sukuk issuance also in vogue, said Fawaz Elmalki, who accompanied the delegation as a director at Conyers Dill & Pearman, a Dubai-based firm specialising in BVI law.
"BVI companies are used across the Mena [Middle East and North Africa] region, not only in the UAE," he said. During the past decade, the island has also become the second-most popular domicile for foreign direct investment in China, he added.
But such is the reach of Fatca that even non-US individuals may still find themselves feeling the heat if they have any links with the financial sector of the world's biggest economy, Mr McRae added.
The US Treasury department has "zero sympathy" for arguments such as protection of privacy, he said. "The only real way to get out of reach of Fatca is to not invest in US assets."