Last week, the United Kingdom’s House of Lords narrowly voted down a clause in an anti-money laundering bill that would have required the overseas territories to establish public registers of beneficial ownership.
Opponents of offshore finance regimes practised in jurisdictions like the Virgin Islands, Bermuda and the Cayman Islands have long called for public registers listing the true owners of each company incorporated on their respective shores.
Baroness Vivian Stern introduced the clause last week, noting that “the case for ending secrecy becomes stronger as more information emerges about how illicitly obtained money is protected from discovery by anonymity.”
She referenced recent leak investigations like the Panama Papers and Paradise Papers as evidence that offshore shell companies can facilitate criminal activity.
Her amendment to the bill would have required Anguilla, Bermuda, Cayman, Montserrat, the Turks and Caicos Islands and the VI to establish public registers by Jan. 1, 2020.
Opposition
Some of the baroness’s colleagues, however, spoke out against the clause.
Charles Hay, the Earl of Kinnoull, noted that if the House of Lords tried to legislate for Scotland without consulting the Scottish Parliament first, it would create a massive “hullabaloo.”
“I have to say that the six countries named in the amendment are proud and sophisticated places. Money laundering is rightly a devolved matter for them,” he said, adding, “Therefore, were we to legislate without even consulting these parliaments, let alone asking their consent, it would be deeply wrong. Just as with Scotland and Wales, our overseas territories would feel angry.”
Lord Tariq Ahmad, the minister for the Commonwealth and United Nations, also spoke out against the clause, arguing that the OTs were early adopters of the Organisation for Economic Co-Operation and Development’s Common Reporting Standard and were already working to provide beneficial ownership information to UK law enforcement in a timely manner.
While speaking to the media last Thursday, Premier Dr. Orlando Smith thanked Mr. Ahmad for his support.
“The minister’s supportive words are very welcomed,” Dr. Smith said. “His robust defence of the standards set by the BVI reinforces the sound financial footing on which our business and financial services rest.”
The House of Lords ultimately ruled against the clause by a vote of 211-201. If the Lords had passed the clause, the overall bill still would have required approval and amendment by members of parliament in the House of Commons.
Background
In attempts to increase the transparency of business entities in its overseas territories, the UK spent years pressuring the VI and other OTs to adopt publicly searchable registries.
Supporters of the effort say public registers would help prevent the offshore finance industry from being used for international money laundering, terrorist financing and tax evasion. Financial services stakeholders, however, argue that such a requirement would violate their clients’ rights to privacy, which in turn could cripple the industry.
Due to both public and backroom pushback from the VI and other OTs, the VI government instead signed an exchange-of-notes agreement with the UK in April 2016, creating the Beneficial Ownership Secure Search System.
The cloud-based platform requires each of the territory’s registered agents to digitise and upload current ownership information for companies they have incorporated, and it theoretically equips government investigators with the ability to rapidly provide that information to UK law enforcement upon request.
However, the system is not public and can be accessed only by a designated person working for the territory’s Financial Investigation Agency.
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