At the recently concluded Dec. 1-2, 2015 Joint Ministerial Council (JMC) in London, held with the UK Minister for the Overseas Territories, James Duddridge MP, the British Overseas Territories (BOTS) agreed to “hold beneficial ownership information in our respective jurisdictions via central registers or similarly effective systems.” The communique issued by the BOTS and the UK government, which detailed the discussions and decisions taken during the meeting, stated that the leaders “discussed the details of how these systems should be implemented, including through technical dialogue between the Overseas Territories and UK law enforcement authorities on further developing a timely, safe and secure information exchange process to increase our collective effectiveness for the purposes of law enforcement.” It continued by stating that the leaders “agreed that addressing this issue would be given the highest priority and that progress on implementation would be kept under continuous and close review.”
Earlier in the communique, the leaders commented on issues of tax and transparency by noting that the territories were responsible for their own tax rates and revenue-raising measures which made provision for supposedly essential public services, and that it was not appropriate to refer to them as “tax havens.” Those BOTS with financial services industries confirmed their commitment to international cooperation in tax matters, the fight against money laundering, tax evasion, illicit finances and corruption, as reflected by both their adherence to bilateral and multi-lateral agreements and their implementation and enforcement of the rules and regulations proscribed by the Financial Action Task Force.
The leaders stated that during their discussions they underlined the active participation of Territories with financial services sectors in the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes and welcomed the commitment of those Territories to be early adopters of the new OECD global standard on tax transparency, with first exchange of data taking place in 2017. They also committed to sustaining successful international centers that contribute to the prosperity and development of our societies, recognizing the importance of transparency, effective legal systems and good governance in achieving this and acknowledged the importance of bilateral engagement on matters affecting Territories’ financial services sectors.
Reaction and commentary
To those of us who understand the end game, this came as no surprise, although the timing was unexpected. At one point earlier in the year, it was thought that the issue had been placed on the back-burner and that it was not going to be an agenda item at the JMC.
However, that changed as the meeting approached. According to a report in the Cayman Compass on Nov. 27, it was reported that:
“The United Kingdom is seeking direct access by its law enforcement agencies to information about the beneficial owners of companies and other entities in the Cayman Islands and other Overseas Territories. Speaking in the Legislative Assembly on Thursday, Premier Alden McLaughlin said ‘the U.K.’s position has evolved yet again,’ following a phone call between Overseas Territories Minister James Duddridge and the premiers of Cayman, the British Virgin Islands and Bermuda last week, during which the minister said the U.K.’s law enforcement agencies should have direct access beneficial ownership information. ‘I have advised him that this is not something to which the Cayman Islands can agree,’ Premier McLaughlin said.”
Many of us in the industry in Anguilla were not paying adequate attention to these developments, in part because we have been distracted by our banking crisis and the concomitant political drama, including protests at Parliament and at Government House, which resulted after the government was forced to abandon a sitting of the House of Assembly in early November. These issues, as well as the passage of the Banking Act and the related Eastern Caribbean Asset Management Corporation Agreement, have taken up all of our attention. To be sure, these local and regional pieces of legislation, which affect the entire Eastern Caribbean Currency Union (ECCU), will indeed have an impact on Anguilla’s financial services industry. Readers may remember that in a recent article I explained that the ECCU and the Eastern Caribbean Central Bank (ECCB) were at a cross-roads and thus these are live issues which anyone following financial services in the Caribbean across the board and not just the offshore or, international financial services space, must pay close attention to.
However, while we were caught up in these domestic and regional issues, moves were afoot in London to press ahead with other initiatives that pose additional threats to our industry locally and to the rest of the BOTS.
The net effect is that a less attractive system will be imposed by London, yet for no appropriate reason. According to the Cayman Compass, “Premier McLaughlin said existing systems worked well “and our position is that they should continue to be the means by which the U.K. and other countries obtain information on beneficial ownership of legal entities in the Cayman Islands.”
It is worth noting that since September 2013, when amendments were made to the Proceeds of Crime Act and regulations issued under it, Anguillian service providers have been required to hold beneficial ownership information for its offshore companies, in-house, which is similar to the Cayman Islands, and we in Anguilla also opposed the call for central public registers. It is worth remembering that the law since 2009 has always been for the local registered agent to have access to beneficial ownership information, but clients meeting the definition of a foreign regulated person could hold it abroad and turn it over on demand.
Following the 2013 amendments set out in the anti-money laundering and terrorist financing regulations, this option has been effectively closed.
In Anguilla, domestic companies disclose shareholder information publicly but not necessarily beneficial ownership information. A corporate shareholder can be used, and thus the name of the beneficial owner does not appear on the register in this case and neither where a nominee shareholder is used. This system has always been in place and many international clients use domestic companies for their structures. In addition, outside of the situation of a fund license, whether as a fund or a fund manager/administrator, and a restricted trust license, only domestic companies can be used for a licensed activity in the jurisdiction.
In 2016, the BVI will finally force its eligible introducers or exempted intermediaries, which are similar to Anguilla’s foreign regulated persons, to divulge beneficial ownership information to the local registered agent. In seems, however, that BVI is going one step further than Anguilla by requiring this information to be filed on a private basis with the companies registry.
Anguilla has yet to take this step and the industry locally is opposed to that since, while that may seem a compromised position, once it occurs the demands for opening it up to the public, and not just UK law enforcement, will continue. These are points that I shall return to later in this article.
Despite this compromise position, our permanent critics were quick to condemn the decision as not going far enough. In the House of Lords in London, Baroness Northover posed the following question to Baroness Anelay of St. Johns: “My Lords, following on from my noble friend’s question, can I probe a little further? The Minister mentioned one or two overseas territories which were publishing registers, but could she say whether all overseas territories are participating in the central registers, and what is the timetable for doing this? Obviously the next stage is to make sure that these are public.”
Note implicit in that question, the central crux of what the title of this article states boldly, is that this is but a first stage in a multi-stage process which will inevitably include said registries being made public. Baroness Anelay responded, by saying: “My Lords, discussions are ongoing about whether those registers will be public. Of course, some overseas territories feel that that is not appropriate to them. These discussions are continuing, but we have made great progress. We do not put a deadline on this, because the overseas territories have their own elected Governments; therefore we work in partnership with them. We do not dictate to them but work with them.”
However, even before this exchange in that august body, it was already revealed that the UK government wishes for direct access to these registries. Lord Wallace of Saltaire, agitated by the use of companies to own UK properties, posed the following question to Baroness Anelay: “We were told after the G8 summit that the Prime Minister intended to establish publicly accessible central registers for beneficial ownership of companies in overseas territories and elsewhere. We appear not yet to have achieved central registers, nor even that our law enforcement and security agencies will have access to such central registers.
How slowly does the Minister expect further progress to be made, and when can we at least ensure that the security services and police will have access to central registers in what are British sovereign territories?”
To which the Baroness replied: “My Lords, progress is being made on gaining access for the National Crime Agency to information that is held. It is important that we continue to do that work in co-operation with the overseas territories. We have been making progress.” She then listed some of the changes that have been extracted from various jurisdictions, stating that:
“Gibraltar will implement a central registry of company beneficial ownership in line with the EU fourth money laundering directive. Bermuda already has a central register. The British Virgin Islands have agreed to bring all beneficial ownership onshore, and the Cayman Islands are introducing a centralised platform. Montserrat will implement a central register with the information publicly available—though, I recognise, on the payment of a fee. Fruitful discussions have taken place on developing a timely, safe and secure information exchange process to increase our collective effectiveness for the purpose of law enforcement, in which, whatever our party or none, we all have an interest.”
Not surprisingly, these developments are not enough for some of the left. The Financial Times’ Vanessa Houlder, in an article published on Dec. 3, 2015 with the heading: “UK reaches tax agreement with overseas territories” detailed reaction from critics: “The outcome of a ministerial meeting in London falls short of David Cameron’s call last year for the territories to rip aside the ’cloak of secrecy’ and set new standards for transparency of company ownership. Christian Aid, a charity, attacked what it described as the government’s failure to persuade the territories ’to meet its own low bar for financial reform.’” The FT article also cited Global Witness, which grudgingly stated that the agreement was “a small step towards greater transparency.” But the overall tone from the group was critical since its goal is to eviscerate any form of confidentiality or tax competition. The Global Witness representative specifically groused that the UK would lack credibility at an anti-corruption summit hosted by Mr. Cameron next May “when [his] own back yard remains shrouded in secrecy.”
While there has been no official response from the government of Anguilla up to the time of my writing this article, Bermuda’s Premier Michael Dunkley has not been so reticent. The Royal Gazette, in its edition of Dec. 4, 2015 and written by Adam Zacharias, reported that “Michael Dunkley has hit back at calls for Bermuda to make its beneficial ownership information public, claiming that critics are “attempting to solve a problem that does not exist.” I note with some measure of satisfaction that at least one BOT leader shares my view, expressed in August 2014, that the argument about central registers is a solution in search of a problem. The Premier, according to Zacharias, stated that “Bermuda has had for over 70 years a world-leading, Government-held central register of beneficial ownership that long predates those in most developed countries, including the UK, and has at every opportunity shared the information requested by legitimate international authorities, within 24 hours.”
Mr. Dunkley dismissed the idea that Bermuda may encourage illicit practices by refusing to fully share its data. He stated: “Those who demand Bermuda makes its register public are attempting to solve a problem that does not exist, and demonstrate a lack of respect towards the transparency and regulatory standards Bermuda has upheld, arguably unsurpassed, for many decades.”
While Minister Duddridge, according to Houlder’s report quoted earlier, stated that forcing Britain’s offshore financial centers to move beyond international standards of transparency would push corrupt money elsewhere, the fact remains that critics like Rosie Sharpe from Global Witness will continue their drive to eviscerate any privacy and make all ownership information available to the public, mainly of course so her organization and other left-wing groups like hers, can trawl through these registers to achieve their political ends.
According to the Royal Gazette in Zacharias’s article, Ms. Sharpe claimed the agreement did little to prevent serious corruption. In her view, the UK’s Overseas Territories lie at the heart of the global secrecy industry and companies registered in these jurisdictions are the most abused in the world. She added that a study by the World Bank into more than 200 cases of grand corruption had concluded that companies from Overseas Territories are most popular with the corrupt. She admits that the agreement may help the UK track down tax evaders and the corrupt, but asks what about the rest of the world? True to form, however, her solution is simple: a public register. According to her, “The only way for tax inspectors and law enforcement to easily know that someone is hiding money in a bank account that belongs to a company is for information on the people who own and control companies to be public.”
Global Witness also raised concerns that no timetable has been set out, and does not define what it means by “similarly effective systems.”
This is but the first step in a long march and we can only bemoan this agreement. Until the political tide turns away from these self-destructive measures, the walk down the slippery slope of full publicly available registers has commenced.