British Overseas Territories commit to 'effective systems' for beneficial ownership transparency

Out-Law News | 07 Dec 2015 | 3:21 pm | 2 min. read

Governments in the British Overseas Territories (BOTs) will not be required to implement central registers of who really owns and controls the companies registered there, provided that they put "similarly effective" systems in place.

All BOTs committed to the measures as part of a joint communiqué, signed after a two-day meeting of the Overseas Territories Joint Ministerial Council (JMC) in London. No timetable for the implementation of effective transparency measures has been agreed, but council members have committed to giving them "the highest priority" and keeping progress on implementation under "continuous and close review".

The announcement followed reports in the press that the Cayman Islands had "flatly refused" to implement a central beneficial ownership register, but that Montserrat had agreed to do so.

Speaking in the House of Commons after the meeting, Foreign Office minister James Duddridge said that some of the "technical detail" behind the announcement was "quite tricky", given the different financial systems operating in the different territories. There were also concerns that if the BOTs "went beyond what is required by the G20", the corrupt activity that the measures intended to tackle would merely transfer to less well-regulated jurisdictions.

"Effectively, there is an arbitrage problem, in that the business will carry on being done, be it corrupt business or the movement of terrorist moneys, but will simply be done in a different jurisdiction," he told MPs. "We do not want to move corrupt moneys, corrupt practices and tax evasion and avoidance; we want to eliminate them and to do so everywhere. It is therefore important that all international partners move forward at the same pace."

"One of the reasons why it was easy for Montserrat to comply with some of our earlier requests was the lack, sadly of a financial services industry, which is still developing there. There is much more of a challenge for the British Virgin Islands, the Cayman Islands and Bermuda, where we are focusing our attention," he said.

He said that the BOTs and UK law enforcement authorities, including the National Crime Agency, had agreed to develop "a timely, safe and secure information exchange process to increase our collective effectiveness for the purposes of law enforcement".

The UK plans to introduce a register of who really owns and controls its companies in June 2016, in line with a commitment made by members of the G8 leading global economies in June 2013. However, the UK is the only country to have announced that it will make this register publicly accessible.

EU countries are due to introduce central registers of corporate beneficial owners by 2017 as part of their implementation of the EU's Anti-Money Laundering Directive, but these registers need only be accessible to 'competent authorities' and other limited categories of people with a legitimate interest in accessing the information. 'Beneficial ownership' of companies refers to those that hold more than 25% of shares or voting rights.

According to the communiqué, all BOTs with financial services industries "confirmed their full commitment to international co-operating in tax matters, and to the fight against money laundering, tax evasion, illicit finances and corruption" as part of the meeting.

BOTs with large financial centres, including the Cayman Islands and the British Virgin Islands, have agreed to become early adopters of the new OECD global standard on tax transparency. Those territories will begin automatically exchanging certain financial information with other participants from 2017 in respect of data collected as of 31 December 2015.