The message for licensed entities is straightforward: expect more inspections, deeper testing of how your controls work in practice, and continued focus on AML/CFT/CPF effectiveness, alongside prudential resilience where relevant.

A bigger inspection programme (and a sharper risk focus)

The BVI FSC’s Compliance Inspection Unit will run a mix of thematic, focussed, follow-up, and full-scope inspections. Building on 40 inspections in 2025, the BVI FSC expects to initially target 50 licensees in 2026, a 25 per cent increase.

The initial focus will be on higher-risk areas, particularly:

• Trust and Corporate Service Providers (TCSPs)
• Investment Business (IB)
• Virtual Asset Service Providers (VASPs)

All 50 inspections will include an AML/CFT/CPF component. In addition:

• 17 of the 50 will undergo a full-scope AML/CFT/CPF review, reflecting elevated risk.
• 18 inspections will include prudential assessments (for sectors with elevated operational/prudential risk), including Banking, Investment Business, Money Services Business, and Financing Business.

The BVI FSC has also flagged that 10 or more additional licensees may be added during the cycle if new or evolving risks emerge, particularly in light of insights from the Revised TCSP Annual Return, which has helped identify additional elevated-risk areas.

Who will the BVI FSC choose to inspect?

The BVI FSC will continue to apply a risk-based supervisory approach. In practical terms, that means inspection selection and intensity will be driven by the risk profile of the licensee and sector, informed by a broad set of considerations including:

• the licensee’s inherent ML/TF/PF and prudential risks
• compliance history, including outcomes from desk-based reviews and past inspections
• sector risk identified through jurisdictional risk assessments
• published typologies (including those affecting legal persons and legal arrangements)
• the BVI FSC’s Risk-Based Approach to Supervision Framework (including inspection frequency expectations)
• concerns arising from ongoing monitoring and engagement, including post-inspection monitoring
• prior enforcement history and financial crime-related investigations involving relevant individuals
• the BVI FSC’s and the jurisdiction’s AML/CFT/CPF policies and strategies (including the FSC’s 2025 to 2027 strategy and the jurisdictional 2024 to 2026 strategy)
• relevant reports from other competent authorities and law enforcement agencies

In short: inspections are not random, and prior issues, especially repeated weaknesses, are likely to elevate supervisory attention.

What inspectors will test in 2026: design and  effectiveness

A key theme in the BVI FSC’s 2026 messaging is that it is not enough to have policies “on paper”.

The BVI FSC will assess both:

1. the design of internal controls and governance arrangements; and
2. their effectiveness in real operational conditions.

The BVI FSC highlights several core areas of assessment:

1) Internal controls (AML/CFT/CPF frameworks)

Expect scrutiny of whether you have comprehensive AML/CFT/CPF policies and procedures aligned with current legislative requirements and the AMLTF Code, including whether controls are tailored to the size, nature, and complexity of the business. Particular attention will be on:

• sanctions screening
• suspicious activity reporting mechanisms
• risk-based controls that actually operate as intended

2) Internal audit and independent review

The BVI FSC will examine whether you run regular, sufficiently independent reviews of your frameworks, including whether:

• controls are tested for effectiveness
• deficiencies are identified promptly
• remedial actions are implemented and tracked through to completion
• senior management and the board provide meaningful oversight

3) Staff training and competence

Training is not treated as a “tick-box” exercise. The BVI FSC will look for:

• training tailored to staff roles and responsibilities
• adequate training records
• evidence that staff understand policies, procedures, and emerging risks

Sector-specific vulnerabilities the BVI FSC is targeting

The FSC has identified vulnerabilities that it views as the most challenging to compliance, based on monitoring, supervisory engagement, desk-based reviews, and prior inspections.

Trust and Corporate Service Providers (TCSPs)

The FSC notes onboarding frameworks are often strong for collecting CDD information, but highlights recurring gaps in:

• beneficial ownership verification, especially for legal persons and legal arrangements
• applying enhanced CDD where required
• consistency in risk classification frameworks

Expect inspectors to test whether beneficial ownership checks are not only present, but reliable and consistently applied.

Investment Business (IB)

Onboarding is generally described as sound, but the FSC wants improved capability to manage transactional complexity. Inspections will focus on:

• transaction monitoring sophistication and the ability to detect and investigate atypical activity
• the strength of suspicious activity reporting frameworks
• sanctions compliance
• prudential soundness (including governance and capital adequacy)

Banking

Banking is described as systemically important, with sound onboarding practices. Supervisory concerns span both financial crime and prudential risks, including:

• customer risk classification
• enhanced due diligence and transaction monitoring effectiveness
• credit risk management and asset classification
• weaknesses in loan origination and risk modelling that may affect accurate exposure classification and recognition of expected credit losses

Financing Business

Given sector growth, the FSC will focus on prudential soundness, including:

• lending practices
• capital adequacy
• resilience to economic fluctuations and market stress

Money Services Business

Inspections will focus on operational risk controls, including:

• oversight mechanisms
• reconciliation processes
• safeguards for customer funds

Virtual Asset Service Providers (VASPs)

VASPs remain a major supervisory focus due to heightened ML/TF/PF risk. Inspections will assess:

• Travel Rule implementation
• customer due diligence and risk classification
• enhanced due diligence in higher-risk scenarios
• transaction monitoring effectiveness
• investigation and reporting procedures
• sanctions compliance

Insurance

For insurance, the FSC indicates the ML/TF/PF risk is lower, so desk-based reviews will be used, focussing on prudential resilience such as:

• capital adequacy
• liquidity management
• effectiveness of reinsurance arrangements

What “good” compliance will look like: implementation, not just documents

The BVI FSC’s expectations for 2026 center on demonstrating that controls are embedded and operate effectively. Inspections will involve engagement with senior management, system demonstrations, and detailed testing of client files and transactions. Where repeated deficiencies or non-compliance are identified, the FSC states it may take proportionate and dissuasive enforcement action.

The practical takeaway for licensees is that the FSC will be looking for evidence of day-to-day execution: consistent file quality, functioning monitoring and escalation, clear ownership of risk decisions, and governance that can demonstrate oversight rather than formality.

What happens after inspections?

At the end of the inspection cycle, the FSC intends to share aggregate information on findings and recommended actions with industry. This is intended to help the market understand common shortcomings and raise standards across the board.

How Harneys can help

Harneys supports BVI-regulated businesses in preparing for, managing and responding to BVI FSC compliance inspections. This can include conducting pre-inspection “health checks” of AML/CFT/CPF frameworks and governance arrangements, helping remediate gaps (for example around beneficial ownership verification, EDD triggers, sanctions screening, and SAR processes) and assisting with inspection readiness materials such as policies, procedures, training records and file testing evidence.

We also advise on engagement with the BVI FSC during and after an inspection, including responses to findings and implementation of remediation plans, with the aim of demonstrating that controls are not only documented but operating effectively in practice.

BVI FSC’s press release can be found here