BVI and Cayman agree information exchange with UK

13 April 2016

Volume 39, Number 14

The British Government has said most of Britain’s overseas territories, including the British Virgin Islands, the Cayman Islands, and its Crown Dependencies have agreed to provide British law enforcement and tax agencies full access to information on beneficial ownership of companies registered locally so as to offer greater transparency and address criminality.

Speaking in the UK Parliament on April 11 a week after the publication globally of 11.5m files taken from the database of the Panama-based offshore law firm, Mossack Fonseca & Co, the British Prime Minister, David Cameron, also said the UK would be introducing legislation to make it a criminal offence for companies, if they fail to stop employees from instructing clients on ways of evading tax. It was not clear whether the UK would seek to encourage similar legislation to be passed by its overseas territories and crown dependencies.

The British Prime Minister’s announcement and earlier statements by the Cayman Islands, the Bahamas and the British Virgin Islands (BVI) seeking to distance themselves from the suggestion that they were in some way complicit in facilitating tax evasion and criminality, followed a week of revelations in the international media.

These detailed how the Panamanian law firm Mossack Fonseca had acted as an intermediary for a wide range of national leaders, politicians, their families, close associates, leading business people, individuals subject to UN sanctions, global figures in sports and entertainment, narcotics traffickers and other criminals, to help them establish companies and legal vehicles in low or no tax offshore financial centres including the BVI, the Cayman Islands, the Bahamas and Bermuda.

The documents on which the stories were based came from the law firm’s database which was sent in 2014 in digitised form on an unsolicited basis from an anonymous source to the German newspaper, the Süddeutsche Zeitung. They were subsequently shared with the International Consortium of Investigative Journalists (ICIJ) in Washington and then researched by about 100 newspapers and broadcasters worldwide.

In part they indicated how the global elite and the world’s wealthy have used Caribbean and other jurisdictions to reduce or obviate their tax liability, hide or launder money, or to obscure the origin or ownership of their assets.

Speaking on April 9 to the media, the Premier of the British Virgin Islands, Dr Orlando Smith, said that the BVI Government took seriously the allegations about the alleged abuse or misuse of BVI structures. He said that the island’s authorities would investigate and take action against any issues of non-compliance.

He noted that after several rounds of technical discussions and exchanges between the BVI and UK law enforcement agencies, agreement had been reached to enhance cooperation and the “timely, safe and secure” exchange of information between the two countries’ law enforcement authorities.

Dr Smith said that a just signed exchange of notes with Britain on beneficial ownership would enable daily exchanges between BVI and UK law enforcement authorities, and support the BVI’s international co- operation with other jurisdictions around the world, “particularly fellow members of the Egmont Group of Financial Intelligence Units.” He said that the country continued to meet its international commitments on tax, transparency and anti-corruption under Foreign Account Tax Compliance Act (FATCA), Organisation for Economic Co-operation and Development (OECD), the Financial Action Task Force (FATF) and the United Nations (UN).

Separately, the Cayman Islands Ministry of Financial Services issued a statement saying that the disclosures contained in the Panama papers amplified the need for global co-operation.

The ministry said the Cayman government was developing two programmes to more effectively co- operate on a global basis with law enforcement and tax authorities against serious crime.

It said that a series of changes would begin to be enacted in June this year that would include legislation relating to beneficial ownership provisions, the elimination of bearer shares, and amendments to the Confidential Relationships and Preservation Law.

The changes were recommended by a working group of representatives from a cross section of Cayman’s financial services industry led by the Ministry of Financial Services which had been examining existing legislation since the summer 2015.

“These amendments are in keeping with our action plan, which was publicised in June 2013 immediately following the UK’s chairing of the G8 Summit, to prevent the misuse of companies and legal arrangements,” the Minister of Financial Services, Wayne Panton, said in the statement.

The legislative changes also expected to build on Cayman’s existing mechanisms for sharing information for tax purposes, including the sharing of beneficial ownership information. “Beneficial ownership is a major initiative for the UK Prime Minister, and we support him in the efforts to combat serious crime,” Minister Panton said.

In February a delegation from UK law enforcement agencies visited Cayman and the BVI to discuss the islands system of sharing beneficial ownership information with law enforcement (details in Caribbean Insight March 2, 2016).

The measures agreed by the BVI and Cayman, which were originally expected to be announced at the UK government’s international conference on corruption next month, follow their resistance last year to the UK’s wish to establish publicly accessible registers showing who owned companies in its overseas territories. They had also said that they would not agree to UK and domestic law enforcement and tax authorities being given unrestricted access to such information,

 

This is an extract from the Caribbean Council’s leading weekly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.

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