Deputy Premier Lorna Smith pushed back this week after the Virgin Islands and other overseas territories were accused of deliberately defying the British parliament’s attempts to crack down on “dirty money.”
Dame Margaret Hodge, a veteran Labour member of parliament and frequent critic of the OTs, accused the VI on Monday of being “one of the worst offenders” and “dragging its feet” when it comes to launching a public register of beneficial ownership that she said would help expose financial wrongdoing.
The remarks by the former chair of the Commons Public Accounts Committee came as Labour looks poised to sweep back to power at Westminster for the first time in 14 years in an election expected by October. Dame Margaret — who announced in late 2021 that she did not intend to run in the next election — wrote in a letter to The Times of London that the OTs should be “forced” to open public company registers.
But Ms. Smith, the VI’s minister of financial services, told the Beacon Tuesday that the VI government is determined to set up a public register by mid-2025 under a system that complies with international law.
“The Virgin Islands government has strongly committed to the implementation of a publicly accessible register of beneficial ownership in accordance with international standards,” Ms. Smith stated. “We are undertaking the technical work of designing and building a system to deliver on this commitment, consulting with stakeholders and actively collaborating with our financial services regulator to develop the relevant legislation.”
Though the VI has already established the Beneficial Ownership Secure Search System, which is accessible to law enforcers abroad on request, it also ceded to United Kingdom pressure in 2020 and committed to establishing a public ownership register by the end of 2023.
It then began laying the groundwork for the move before a November 2022 ruling by the European Court of Justice threw the plan into question.
After that ruling, which provided greater protection for individuals’ data in Europe, countries including Austria, Luxembourg and the Netherlands quickly began restricting public access to their registers.
Meanwhile, the VI’s plan to implement a public register in 2023 was delayed.
In the wake of Dame Margaret’s comments this week, Ms. Smith thanked the United Kingdom Foreign, Commonwealth and Development Office for its technical assistance in the matter.
“Given the progress made to date, we are confident that the appropriate framework will be in place by the end of 2024, latest mid-2025,” she stated.
In the Monday letter, however, Dame Margaret claimed that “offshore tax havens” like the VI have not moved fast enough, and have become hubs for “crime, tax evasion and illicit wealth.”
She added that the more than 360,000 firms registered in the territory — the backbone of an industry that employs more than 2,000 people here and brings in more than half of the VI government’s revenue — do not offer wealth or opportunity for most of the territory’s people.
The companies, she alleged, are attracted by “lax regulations, low taxes and few questions.”
“Why does this all matter? The clue is in the name. The British Virgin Islands is a British overseas territory,” she wrote. “Russian oligarchs, terrorist supporters and tax evaders are covertly stashing their wealth and breaking the law in jurisdictions linked to the UK.
“Consider Kassim Tajideen, who was put on America’s ‘global terrorist’ list when law enforcement agencies discovered that he was using businesses throughout Africa and shell companies registered in the BVI to finance Hezbollah.”
Dame Margaret said that the Conservative UK government had failed to implement anti-money laundering measures agreed in 2018.
“Public registers have a simple purpose: to throw open the books, identify the true owner of a company and follow the money,” she wrote. “Gibraltar is the only jurisdiction to have delivered a public register. The others have missed multiple deadlines and have used every trick in the book to escape their obligations.”
Dame Margaret cited the VI as a major obstacle to reform.
“The very worst offenders, namely the BVI and Bermuda, have not even provided a proper timeframe for delivering on their promises,” she said. “They seem determined to simply ignore the will of parliament.”
She suggested that London move to force the OTs into action.
“Six years is too long and the government should now consider using its legislative powers to compel the tax havens to act,” she wrote. “It will have cross-party backing if it does so. This really matters. Britain has become the jurisdiction of choice for dirty money. In part, that is due to our relationship with our tax havens. If we want to stamp out money laundering, fraud and tax evasion, we must close down the use of UK tax havens.”
Professor’s perspective
Dr. Peter Clegg, a professor at the University of the West of England who specialises in London’s relationship with the OTs, said a Labour government may well bring in new laws to force the VI to act — but only after trying to use persuasion first.
“I would say any Labour government will not act immediately and will prefer consensus to enact the changes,” he said. “However, if there are delays after that point, then the UK may well legislate to ensure the required reforms are implemented. But it likely does give the OTs some breathing space to enact the changes themselves.”