UK territories must reveal beneficial ownership of offshore companies by 2021

Britain’s overseas territories (OTs) in the Caribbean are to be compelled to adopt public registers of company ownership following a vote in the British Parliament to that effect. The decision has been condemned by the territories concerned as ignoring their sovereignty and as disenfranchising locally elected legislatures.

In a statement the British Virgin Islands government said: “we vehemently reject the idea that our democratically elected government should be superseded by the UK Parliament, especially in an area which has been entrusted to the people of the BVI …. This flies in the face of constitutional arrangements made with the UK when our new constitution was approved in 2007 ….”It also begs the question of how the UK parliament can act so casually with a constitution when an entire economy is at stake.”

The Parliamentary amendment agreed on 1 May was introduced into the House of Commons by a cross party group of members and reluctantly accepted by the UK’s minority conservative government. It has the effect of forcing the Cayman Islands, the British Virgin Islands, Bermuda, Anguilla, the Turks and Caicos Islands, Montserrat and eight territories in other regions to establish an open public register of the beneficial owners of all companies registered in their jurisdictions from the end of 2020.

Concerned that the UK government was in danger of losing the whole bill which has much wider security and financial implications for Britain, the UK Government decided to listen to a significant number of parliamentarians who had become concerned that the UK’s Overseas Territories offshore regimes were facilitating criminality, money laundering, and the financing of terrorism.

Speaking in the debate Sir Alan Duncan MP, a Foreign Office Minister, said that the British Government had initially hoped to reach a compromise on the issue. It recognised, he said “that legislating without consent may “risk damaging our long-standing constitutional arrangements, which respect their autonomy”. He however accepted the strength of parliamentary feeling that the overseas territories should have public registers ahead of such measures becoming an international standard requirement.

The Caribbean reaction was swift. OT representatives noted that the decision does not apply to the UK’s crown dependencies of Jersey, Guernsey and the Isle of Man; that the decision put the UK’s OTs at a disadvantage to other offshore financial centres as there was no global standard on reporting beneficial ownership and public registers; and that the actions of the British Parliament undermined the sovereignty of the territories concerned, disenfranchising their elected representatives.

In a subsequent statement issued through Britain’s OT Governors, the UK said that it would ‘use its best endeavours’ to promote with international partners, the G20, FATF and the OECD, public registers of company beneficial ownership as the global standard.

The decision by the British Parliament followed extensive lobbying by the Overseas Territories against the amendment and a strongly worded statement of support from CARICOM.

Prior to the debate, CARICOM had noted that its members and associate members (the OTs) were already participating in multiple global initiatives and international agreements. It had called for members of the FATF and OECD Global Forum to work together to establish new international regulatory standards in areas such as beneficial ownership and tax information exchange.

‘Self-governance and democratic rights should not be disregarded. In that context, we are deeply concerned about the potential impact on (OTs) economies by any impositions that would go against the spirit of democracy and diminish their standard of living’, CARICOM observed.

It is not clear whether the establishment of public registers in Britain’s overseas territories will require full disclosure of named ultimate beneficial owners. In some cases, individuals register companies in more than one global international financial centre, hiding their true ownership in more opaque locations. The names of individuals involved in criminal activity have in recent years largely come to light from leaks of correspondence or the hacking of law firms and agents acting for named clients.

In an indication of the fundamental nature of the issues involved, Orlando Smith, the Premier of the British Virgin Islands, said about the decision by the UK Parliament: “It is not only a breach of trust but calls into question our very relationship with the UK and the constitutional rights of the people of the BVI.”

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.

Photo Credit: ‘Parliament Square’, Foreign and Commonwealth Office, Flickr