Later this month, assuming the sudden reshuffle of the United Kingdom government does not intervene, the Virgin Islands will receive a visitor on a mission. Baroness Margaret Hodge has had a long and dedicated political career in both local and national government in the UK. First elected to Parliament as the Labour MP for Barking in East London in 1994, she stepped down in 2024 and took a seat in the House of Lords, from which she now operates as the prime minister’s “anti-corruption champion.”
Many in the VI will be most familiar with her longstanding campaign — along with Conservative MP Andrew Mitchell — to encourage the UK’s family of crown dependencies and overseas territories (CDOTs) to follow the lead of the UK’s own Companies House and open their beneficial-ownership registers to transparent external scrutiny.
Her passion for this topic has been often on display both in the chamber of the House of Commons and in public statements. In short, she has long held the view that “The secrecy provided by these offshore financial centres is often used by those seeking to hide their ownership of assets.”
In a Guardian commentary jointly penned with Mr. Mitchell last November, the headline said it all: “Open registers are [the] only way to stop dirty money that underpins crime.”
The commentary went on to assert, “We know too well that overseas territories and crown dependencies play a pivotal role in helping crooks and tax dodgers.”
At the same time, the Labour government in London has sought to reset the tone of dialogue with the CDOTs, emphasising its desire to work “with” them to tackle illicit finance.
How to prepare?
At the heart of this visit is the tension between Lady Hodge’s unwavering belief in the power of transparency to drive a step-change in the response to illicit finance and the unwillingness — for a range of reasons — of the VI to accommodate such a development.
This author has had the opportunity to visit the VI twice and has heard the repeated arguments in Road Town and BVI House in London against opening the VI’s register to scrutiny by any and all comers. But he has very rarely heard articulated the virtues of the VI’s system as a tool for supporting both domestic investigations and international cooperation against illicit finance.
So this must be the first mission: Demonstrate to Lady Hodge how the VI uses the vast collection of data it has in its register for good — to support investigations and prosecutions both at home and in cooperation with international partners.
UK’s unverified data
Second, Lady Hodge’s perspective on beneficial-ownership registers is rooted in the decision by then-prime minister David Cameron to open up the UK’s Companies House to transparent external scrutiny in 2016. There is no doubt that that act was ground-breaking, but in the case of the UK’s register, a blancmange of unverified data, it was necessary as a way of exposing the need for reform.
Ten years after that decision, the UK’s register is now beginning a massive programme of verifying the identity of the people listed as directors and “persons of significant control” of UK-registered companies — something that might never have happened without the external scrutiny brought by transparency.
But the structure of most CDOTs’ existing registers, including VI’s, is very different given that the data is verified before entry into the register. It is therefore important that VI authorities ensure this difference is clearly communicated and understood and the benefits are clearly articulated with case studies that demonstrate this distinction in action.
VI plan ‘falls far short’
Lastly, the VI needs to recognise that its recent proposal to introduce a “legitimate interest” process for accessing the VI’s company register falls far short and reveals it to be an outlier in comparison to other CDOTs. The inclusion of “purpose” limitations and a form of “tipping off” in the proposal was poorly judged and needs to be reversed.
In this regard, the VI would do well to look across the water to the Cayman Islands, where the legitimate-interest proposal has been warmly welcomed by Lady Hodge’s colleagues in government and Parliament in London, as well as UK-based civil society.
There is no doubting that the VI has an uphill battle on its hands in convincing Lady Hodge to moderate her view. The question is whether she comes to listen and learn, or to cement her long-held views. For her, the VI’s failure to respond positively to her transparency amendment in the UK’s 2018 Sanctions and Anti-Money Laundering Act and the VI’s recent legitimate-interest/purpose proposal may colour her visit from the start. Or, reflecting the more moderate tone of the Labour government, she may arrive with a more open mind.
‘Hurricane Hodge’
Either way, the VI authorities need to plan meticulously for her visit, dispense with any excuses, and ensure that the virtues they claim their system holds are on full and active display.
The VI often finds itself buffeted by strong winds. From Hurricane Irma to the recent grey-listing by the Financial Action Task Force, the global standard-setter on anti-money laundering, the islands have faced their fair share of challenges. But it is not an exaggeration to say that Hurricane Hodge may be the sternest challenge yet.
Mr. Keatinge is the director of the Centre for Finance and Security at the Royal United Services Institute, a non-profit defence and security think tank based in London.
