A thriving financial services industry that evolved over the last 30 years in the British Virgin Islands made it one of the most popular places in the world to form a corporation, turning a sleepy cluster of Caribbean islands into a global hub of finance.

Now the British Virgin Islands has come under scrutiny like never before thanks to the leak of confidential documents from a Panama-based law firm that specializes in offshore finance.

More than half the 200,000 offshore companies set up by the Mossack Fonseca law firm, including ones owned by the father of British Prime Minister David Cameron and relatives of Chinese leader Xi Jinping, were registered in the BVI, according to reports coordinated by the International Consortium of Investigative Journalists.

BVI officials have sought in recent days to address the reports while defending financial oversight in a territory where incorporated entities outnumber residents by a ratio of more than 10-to-1 and blue-suited lawyers and bankers on the streets of Tortola often outnumber tourists.

"If you see articles that say jurisdictions like the BVI are facilitators of illegitimate activity, that is incorrect," Financial Secretary Neil Smith said Friday. "Yes, it occurs, but it also occurs in jurisdictions that are not seen as offshore financial centers."

The British Virgin Islands, an overseas British territory of about 30,000 people near Puerto Rico, is the world's leading center for company incorporation, according to the Tax Justice Network. More than 1 million enterprises have been incorporated since 1984. There were 450,000 active ones at the end of last year, according to the Financial Services Commission.

The problem, as critics of offshore financial secrecy see it, is that the BVI and other jurisdictions enable the hiding of the true owners of companies in ways that allow corruption and criminality to flourish. "We're not saying that shell companies or tax shelters need to be done away with, we're saying that more of this needs to be out in the open," said Mark Hays, a senior adviser with Global Witness.

The Tax Justice Network says the BVI has a "lax, flexible, ask-no-questions, see-no-evil company incorporation," system. "The BVI has long been linked to wave after wave of scandals," the organization said in a report that ranked the BVI at number 21 on its financial secrecy index. The U.S. was No. 3 and Switzerland No. 1.

But the Tax Justice Network also notes that the British Virgin Islands has made significant improvements.

An amendment to the territory's Business Companies Act that went into effect Jan. 1 requires companies to keep their beneficial ownership information within the BVI. There is also a new requirement for companies to file a list of their registered directors with the Financial Services Commission. The changes are expected to help curtail money laundering and other criminal activities.

Defenders of the offshore industry say that the BVI is no different than other places that offer anonymous corporate registries, including Delaware, but that some people would prefer to do business in an established, stable, low or no tax jurisdiction outside the United States. The BVI had traditionally attracted Asian and European clients, which may be one reason so few U.S. citizens have been named in the reports on the leaked documents.

Even people who have criticized the offshore industry in the past for weak regulation say there are legitimate reasons to set up a corporation or trust in a place like the BVI. Some businesses need offshore entities to run subsidiaries and people who live in dangerous places may have legitimate reasons to disguise their assets.

"The mere fact that a foreign national has an offshore account is not evidence of illegality," said David Marchant, the editor of the OffshoreAlert newsletter and conference, scheduled for Miami early next month. "It's certainly suspicious, but you need some kind of corroborating evidence."

Reports based on the leaked files have so far revealed assets held by trusts and companies registered overseas by a large number of foreign leaders and global celebrities.

No one at the Mossack Fonseca branch in the BVI would comment but a former administrator, Byron Hodge, said employees were instructed not to proceed with a registry without confirming the identity of the true owner of the entity being incorporated while he worked there from 2008-2015.

"The checks and balances to ensure this were enforced," he said. "With that being said, if there was any wrong doing that occurred, it wasn't in the (BVI) office."

The BVI government said in a statement after the first accounts began to emerge that it would conduct a "thorough investigation" to detect and prosecute any illegal activities.

Premier Orlando Smith said an investigation, which was being conducted by the Financial Services Commission, had already begun. It wasn't his only concern, though. He also wanted to make sure the revelations don't damage an industry that supplies more than 60 percent of his government's revenue, surpassing tourism as the most important industry for the BVI.

"We have to mount a robust response, and we have done that," Smith said. "More and more people are now coming out in support of the BVI."

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Fox reported from Miami.