Last week, another wave of United Kingdom lawmakers called for the British government to impose public beneficial ownership registers in the Virgin Islands and other overseas territories.
Opponents of offshore finance regimes practised in jurisdictions like the VI, Bermuda and the Cayman Islands have long called for public registers listing the true owners of each company incorporated on their respective shores.
Members of Parliament from both the Conservative and Labour parties made such suggestions during a Feb. 20 House of Commons debate on a new anti-money laundering bill.
“Simply to say that we will not insist on these changes because their economies would be damaged by the ensuing reduction in criminal activity would be akin to arguing that there would be no point in the police arresting a major drugs dealer in the UK because another drugs dealer might sell drugs in his place,” said Nick Herbert, a Conservative MP for Arundel and South Downs. “That argument cannot be sustained. If we believe that a wrong is being done to developed and developing countries — as it is — by the absence of transparency enabling tax evasion and worse, it is our responsibility to tackle that wrong by any means we can.”
Mr. Herbert also argued that publicising beneficial ownership information — as opposed to simply making it available for law enforcement upon request — is the best way of exposing criminal activity in the offshore world.
Pro-register MPs expressed varying degrees of reluctance to mandate something for the largely self-governing overseas territories, though even hesitant ones like Mr. Herbert maintained that the seriousness of the situation merited such an action.
Gov’t unlikely to support
It appears unlikely, however, that the Conservative government will support those arguments.
Alan Duncan, the minister of state for Europe and the Americas, spoke out against imposing public registers.
“The UK respects the constitutional relationship with the overseas territories and Crown dependencies,” said Mr. Duncan, the MP for Rutland and Melton. “It is entirely right to work consensually with them, rather than to impose legislation. The UK has only legislated directly without the overseas territories’ consent in the most exceptional of circumstances, such as on capital punishment.”
The bill passed its second reading and is now up for consideration by the Public Bill Committee.
In January, the House of Lords narrowly voted down a clause in the bill that would have required the overseas territories to establish public registers by 2020.
Background
In attempts to increase the transparency of business entities in its overseas territories, the UK spent years pressuring the VI and other OTs to adopt publicly searchable registries.
Supporters of the effort say public registers would help prevent the offshore finance industry from being used for international money laundering, terrorist financing and tax evasion. Financial services stakeholders, however, argue that such a requirement would violate their clients’ rights to privacy, which in turn could cripple the industry. They also argue other jurisdictions around the world — including certain areas within the United States — are not held to the same standards.
Due to both public and backroom pushback from the VI and other OTs, the VI government instead signed an exchange-of-notes agreement with the UK in April 2016, creating the Beneficial Ownership Secure Search System.
The cloud-based platform requires each of the territory’s registered agents to digitise and upload current ownership information for companies they have incorporated, and it theoretically equips government investigators with the ability to rapidly provide that information to UK law enforcement upon request.
However, the system is not public and can be accessed only by a designated person working for the territory’s Financial Investigation Agency.