Last Thursday during a back- bench business debate in the United Kingdom House of Commons, some UK parliamentarians criticised overseas territories for not establishing public registers of beneficial ownership this year as they had previously promised.
But the UKOT minister came to the territories’ defence, and the Virgin Islands government said the next day that it still plans to design and build a register that is consistent with international law and European Union standards of anti-money laundering practices.
2020 agreement
Under UK pressure, the VI government grudgingly agreed in September 2020 to sign on to a UK plan for the OTs and crown dependencies to implement public registers by the end of 2023.
The VI government subsequently began laying the groundwork for the move, but last November the European Union Court of Justice issued a ruling that threw the plan into question.
In a case involving Luxembourg’s then-public registry, the court ruled that a key provision of the EU’s own anti-money-laundering directive — which required beneficial ownership information to be available to the public— was invalid.
Since then, countries including Luxembourg, Austria and the Netherlands have taken their public registers offline, and VI leaders have avoided taking a firm position on the way forward for this territory. Meanwhile, only one UK territory — Gibraltar — has established a public register of beneficial ownership.
UK debate
In the backbench business debate last Thursday in the House of Commons, some members of parliament expressed their disappointment at OTs and crown dependencies for not “voluntarily” establishing public registers within the five-year timeframe set out by the UK’s Sanctions and Anti-Money Laundering Act 2018.
“The UK and its overseas territories are collectively responsible through its permissiveness for costing the rest of the world nearly $90 billion in lost tax each year,” Scottish National Party Parliamentarian Richard Thompson said during the debate led by Labour Party member Dame Margaret Hodge. “The impact of clamping down on this could have not just the public good of the UK but also many other countries
around the world.”
UKOT Minister David Rutley, however, defended the OTs during the debate, delivering a three-minute statement where he commended the VI for passing “appropriate legislation in 2022.”
He also spoke about the ECJ judgment and said that the VI “continues to have concerns” over the court ruling.
“We have been in intense discussion since the spring with the territories and dependencies,” he said. “It’s been a huge priority for me since being appointed as the overseas territories minister in recent months setting out the rationale for our view that these registers can indeed be fully implemented in line with the privacy rights that apply to each of them. We’re working together to find ways to make positive progress. This includes discussing an interim step that would make significant progress towards these commitments to improve corporate transparency.”
The interim step is expected to be implemented next year, he explained.
VI response
The Friday statement from the VI government did not directly reference the UK debate, but it outlined the VI government’s position on the matter.
“All of the OTs and crown dependencies have previously committed to the implementation of publicly accessible registers of beneficial ownership, commonly referred to as PARBOs, on the basis of EU member states’ implementation of the EU Fifth Anti-Money Laundering Directive,” the statement noted. “However, the decision late last year by the European Court of Justice changed the international context, affirming privacy and data protection as fundamental human rights which must be respected and appropriately weighed when providing such access.”
The government has determined that the VI doesn’t fall within the ECJ’s ambit, according to the statement.
However, it added, “in light of legal opinions received on the ECJ judgment and the constitutionality of creating a PARBO in the [VI, the government] con-
siders that its approach must take into account the ECJ judgment to help minimise the risk of legal challenges on human rights grounds.”
‘Legitimate interest test’?
Deputy Premier Lorna Smith suggested in the statement that protecting such human rights might mean restricting access to any register established in the future.
“The safeguarding of these fundamental human rights necessitates the application of a ‘legitimate interest test’ to determine access for those parties whose request for beneficial ownership information is genuinely aimed at preventing or combatting money laundering and terrorist financing,” said Ms. Smith, who is the minister of financial services, labour and trade.
Standards
She also pledged an “unwavering” commitment to international standards, citing the territory’s exchange-of-information agreement with the UK that helped freeze over $400 million in assets under a Russian sanctions regime after the start of the conflict in Ukraine.
“The Virgin Islands have, for many years, played a proactive and significant role in the international arena, battling against the misuse of its financial sector for money laundering, terrorist financing and other illicit purposes,” Ms. Smith said. “Transparency is key to this, but so is respect for international law.”