Tuesday May 22, 2018
Tuesday May 22, 2018
An amendment to the Sanctions and Anti Money Laundering Bill was approved by the British government in May. The headline news from the amendment was that from 2020 British Overseas Territories (BOT) will be obliged to publish the beneficial owner(s) of all registered companies.
The bill will require companies registered in BOTs to sign up to a public register that will reveal the beneficial owner of the company. It has the potential to cause embarrassment for firms that have deliberately organised their affairs so as to obscure the beneficial owner. On the other hand, it will attempt to prevent money laundering and terrorist financing, and expose those who use BOTs to avoid paying tax.
The bill is due to undergo the protocol of seeking royal approval but after this formality it will be stamped into UK law. There has been quite significant opposition from the territories, perhaps understandably, as a substantial chunk of the islands’ business is garnered via their status as tax havens. Exempt from the law will be Britain’s crown dependencies Jersey, Guernsey and the Isle of Man.
Transparency International UK, Global Witness and the International Consortium of Investigative Journalists (ICIJ) all welcomed the surprise news (TI UK calling it an end to ‘the UK’s role as a safe haven for dirty money’) but support for the bill has not been all one way, and the most vociferous opponents have come from the regions affected. Some in the BOTs have questioned whether it is in Britain’s interest to demand greater transparency from the territories in the wake of the UK’s decision to leave the European Union and the attendant economic concerns that Brexit poses.
Similarly, the Caribbean Community (CARICOM) – whose members include Jamaica, Trinidad and Tobago and the Bahamas, along with five associate-member crown dependencies that will be affected by the law – released a statement before the debate in Parliament stressing that the crown dependencies’ economies would be damaged by such a law. More strongly worded were the comments from Cayman Islands Premier Alden McLaughlin who described the bill as ‘colonial despotism’. McLaughlin confirmed the Islands are considering legally contesting the bill.
McLaughlin’s point is one that on the face of it needs no further evaluation: the argument goes that a transparency law will put off those potentially willing to arrange their tax affairs overseas in these territories. Probe a little deeper, however, and other questions emerge: in this age of increasing transparency is it not unrealistic to expect that BOTs are exempt? Will the damage to BOT economies be as harsh as feared? Will it not encourage the BOTs to explore new ways of attracting investment?
The reality is that the Panama and Paradise Papers leaks, on top of laundromats, Russian and Azerbaijani, have raised the public demand for more transparency when it comes to companies and individuals putting money into overseas territories, something to which the British government is responding. There is certainly a general feeling that the pre-financial crisis secrecy when arranging tax overseas has been consigned to history.
Yet it would be foolish to assume that this is the end of offshore tax affairs. MP James Duddridge acknowledged this by suggesting that companies currently based in the BOTs for tax purposes would simply up sticks to Delaware. Realistically, what could the British government do to stop that? Despite this flaw the announcement of the bill is a positive step in the right direction to stem financial crime.
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