The British Virgin Islands has chosen Hong Kong as its headquarters for a new push into the Asian market as it faces a global storm linked to a massive leak of client data and claims of secrecy, tax evasion and hiding assets.
Next month, the leader of the British overseas territory - reckoned to be home to more than 40 per cent of the world's offshore registered companies - will be in Hong Kong to open an official investment arm in the city.
In an exclusive interview with the South China Morning Post, Elise Donovan, the executive director of BVI International Finance Centre - a government body that promotes financial services - confirmed the Caribbean territory's Premier and Finance Minister Orlando Smith would officiate at the opening of an HQ.
"Hong Kong is very important to BVI. It continues to be an important bridge to China and Asia.
"We are very keen to ensure BVI continues to serve the region and the business continues to grow," said Donovan.
Huge numbers of BVI companies catering for Chinese clients are established in Hong Kong, said John Bruce, Macau director of risk consultancy Hill & Associates. "This is worth a lot of money to BVI and Hong Kong," he added. BVI companies are so popular that the territory is the most important transit point - after Hong Kong - for money flowing in and out of the mainland.
It accounted for about US$16 billion of new foreign direct investment in China in 2008, more than the US, Britain, France and Canada combined.
The territory is also the second largest destination for China's overseas direct investment. Hong Kong and BVI entities received over 70 per cent of China's foreign investment.
The use of BVI and Hong Kong as transit points for money going in and out of China is controversial. Critics say it reduces transparency and abets corruption.
The move comes a week after the US-based International Consortium of Investigative Journalists (ICIJ) said it had obtained a treasure trove of data detailing how rich people hide their wealth in "secretive" BVI accounts.
European Union finance ministers are meeting in Dublin and tax havens featured prominently on their agenda, with the focus on Austria.
Austrian Finance Minister Maria Fekter said the country would "stick to" a constitutionally guaranteed protection of privacy for deposit-holders, despite becoming isolated in an EU crackdown on tax evasion.
She added that EU partners would be better served focusing on British-dependent tax havens.
To date, BVI has signed 22 tax information exchange deals, including one with China in 2010, Donovan disclosed.
The agreement gave Beijing the right to obtain information from BVI. Donovan could not say if Beijing had ever requested clients' information from BVI.
She also said the data ICIJ obtained was "a small fraction" of the total number of BVI firms.
"We want to reassure clients in Hong Kong and the region that this is an isolated incident. We remain committed to clients' privacy and confidentiality," she said.