British parliamentarians are urging Premier Natalio “Sowande” Wheatley to allow unrestricted public access to the company-ownership register set to launch by June, but the territory’s top financial regulator warned this week that the move could cost the Virgin Islands more than 30 percent of its lucrative incorporations business.
Financial Services Commission CEO Kenneth Baker said Monday that the VI government should instead stick to its plan to limit register access to people deemed to have a “legitimate interest.”
30% loss possible?
“From the commission’s interaction with our stakeholders in Hong Kong and London, they have said to us public access is not what their clients want,” Mr. Baker said during an appearance on the Talking Points show on ZBVI Radio.
“The impact is likely to be very significant — ‘very significant’ meaning somewhere in the region of 20, 30 or more percentage fall-off in the level of business.”
Mr. Baker claimed that owners of VI-registered companies tend to be more amenable to a register accessible only to people who can demonstrate a “legitimate interest.”
“Legitimate interest is a buffer,” he explained.
“The point is that the access would not be immediate. There will be a mechanism to verify whether or not access should be granted.”
‘Total contempt’
On Tuesday, however, The Guardian newspaper reported that members of the British parliament had written Mr. Wheatley blasting the plans proposed in a draft policy the VI government published last month as part of ongoing public consultations on register access.
Among the letter’s signatories was Tory former deputy foreign secretary Andrew Mitchell, who said the VI’s draft policy shows “total contempt for the British parliament’s declared insistence that open registers of beneficial ownership be implemented” in the overseas territories, according to the UK-based newspaper.
“Furthermore, having led officials at the Foreign Office to believe they needed more time to implement open registers, we now see their intentions were very different,” Mr. Mitchell reportedly stated. “This is nothing other than a shameful bid to continue to manage stolen funds and assist in money laundering from sources close to the sex trade and the drugs trade.”
Exodus of business
VI leaders have long denied such allegations, arguing that the territory is a well-regulated financial services jurisdiction that abides by global standards.
But in part because fully public registers are not yet a global standard, Mr. Baker claimed that international companies will likely leave the VI and incorporate elsewhere if the territory allows unrestricted access to its new register.
“If clients are not happy with it and they don’t want it, they have options, and they can go to other jurisdictions,” he said.
The regulator acknowledged a potential clash with London on the issue.
“The clients are telling us they don’t want public access … and the UK is saying, ‘We want full public access,’” he said, adding that the territory is seeking a compromise through its proposed new policy. “Let’s have access that has to demonstrate legitimate interest.”
Donald Duck
The UK has touted its own public beneficial-ownership register — which launched in 2016 — as an example of the way forward in providing transparency and preventing money crime.
But Mr. Baker said the UK register is flawed in part because it does not sufficiently verify provided information such as the names of company owners.
In that respect, he added, it is different from the VI’s current ownership register, the Beneficial Ownership Secure Search System (BOSSS), which is accessible to law enforcers on request but closed to the public.
“What the UK doesn’t do is they don’t regulate the trust companies in the way that we do,” Mr. Baker said. “So there are a number of stories that have been published telling you that persons have searched through the [UK] Companies House and there are thousands of persons listed as Donald Duck as the beneficial owner of companies. That is because there is no mechanism in place to regulate or verify that Donald Duck is, in fact, a person and not a Disney character.”
Threat to journalists?
In the letter to premier, the UK parliamentarians also expressed concerns that the VI’s proposed “legitimate-interest” test would force journalists to explain why they are seeking information.
Company owners, the letter added, would then be notified of the journalist’s request and given five days to object.
This system, the letter reportedly warned, could expose journalists to “legal or physical intimidation when investigating high-risk stories on drug cartels, kleptocrats or human traffickers.”
It would also serve as an early warning system for “bad actors,” allowing them to liquidate assets before an investigation, according to the letter.
Among the UK parliamentarians who signed the letter are Mr. Mitchell and Labour Party politician Joe Powell, who jointly chair the all-party parliamentary group on anti-corruption and responsible tax, The Guardian reported.
When the Beacon asked Mr. Wheatley at a press conference last month if press freedom could be compromised by the “legitimate-interest” test, he said access requests would be decided on a case-by-case basis.
“You have to balance freedom of the press with a person’s right to privacy,” he added. “The concept would be that you would have someone who will be the guardian of this information and you would have to apply if you meet the criteria and show why you have a legitimate interest to this particular information.”
The access question has provoked tension with London in recent years, with the UK’s new anti-corruption czar, Baroness Margaret Hodge, previously demanding the VI show greater transparency.
As of Beacon press time yesterday afternoon, Mr. Wheatley had not responded to a request for comment on the letter.