Jersey Finance's Cook: A beneficial ownership update

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Just how much information governments – and more controversially, the public – should be entitled to have about the ultimate owners of companies, properties, trusts, bank accounts and other entities of value has been a topic of much debate in recent months. Here, Geoff Cook provides an update on the matter, from the perspective of Jersey Finance, of which he is chief executive. 

The first of July marked a number of things – 21 days until the school summer holidays; 42 days until the Premier League kicks off again; and 176 days until Christmas. For those in the cut and thrust of international company administration, it was also another milestone in the evolving debate around beneficial ownership.

Midnight on 30 June was the time by which all Crown Dependencies and Overseas Territories (CDOTs) were aiming to have an equivalent and reciprocal mechanism in place with the UK to enhance the exchange of beneficial ownership information with law enforcement authorities – something they’d signed up to last year, following the introduction of the UK’s “Register of People with Significant Control”.

It’s worth noting that the CDOTs have in place varying models of collecting and verifying information on the beneficial owners of companies registered in their jurisdiction. As far as Jersey is concerned, it’s well placed in all this.

Entities registered in Jersey have for some time been required to provide details of beneficial ownership on incorporation. A central register has been in place in Jersey since 1989, with trust and company service providers being required by law to retain full details of beneficial ownership and control, and to make such information available to the Companies Registry or the Jersey’s regulator, the Jersey Financial Services Commission, on request.

It’s a model that has been endorsed by such authorities as the OECD, World Bank, and MONEYVAL.

Nevertheless, Jersey took the deadline as an opportunity to refresh and verify the beneficial ownership held, and go one step further.

Following an agreement signed with the UK last year, Jersey, as from 1 July, will go beyond the minimum standard, and respond to requests from the UK’s authorities for beneficial ownership information even faster – within an hour if urgent, and within 24 hours if non-urgent.

We think this puts Jersey years ahead of most other jurisdictions – onshore and offshore.

These moves are important in their own right, but 1 July is also significant for another reason – because it marked the formal beginning of an 18-month review by the UK government of the arrangements between it and each territory for the sharing of beneficial ownership information, with a view to a report being published in the first half of 2019. It’s a review that was put in action following April’s Criminal Finances Act.

A review might seem a daunting prospect, but our view is that actually it provides an opportunity to demonstrate Jersey’s high standards and to engage directly with the UK Government on the critically important longer-term issue of public registers.

It is high time a sensible debate was had on whether they really are the most effective means of combatting financial crime. Our consistent view has been that they are not, and this review provides a window for public registers to be scrutinised properly.

Indeed, the indications are that there are real questions both over the efficacy of public registers and their intrusion into personal privacy. In particular, it is significant that so far only a handful of jurisdictions worldwide have signed up to a public register model, with some major economies showing little interest in adopting it, notably the US, Hong Kong and Singapore.

It’s also increasingly unclear whether public registers could be made obligatory across the EU, with the privacy issue proving absolutely fundamental.

It was interesting that in October 2016, the French Supreme Court published a decision that challenged the legality of the government’s public register of trusts. In December, the same court declared the public aspect of country-by-country reporting as unconstitutional.

We believe strongly that Jersey’s model of collecting, verifying, managing, and sharing beneficial ownership provides a credible, balanced and pragmatic alternative to public registers, and it’s an approach that is being increasingly backed up by authorities and academics.

Earlier this year, for instance, a working paper entitled ‘Beneficial Openness: weighing the costs and benefits of financial transparency’ (M Forstater, March 2017) concluded that “universal central public registers of beneficial ownership are neither the only nor the best solution” (p30).

In addition, speaking at this year’s Jersey Finance London Private Wealth Conference, Jason Sharman, Professor of International Relations at Cambridge University, suggested there was a mismatch between the expense of solutions being proposed to counter financial crime, such as public registers, and the effect they are having. He encouraged policy makers to pause, stop introducing new rules and spend more time finding out whether current ones are working.

So, while 1 July marked an important moment in time in terms of practical steps being taken to enhance beneficial ownership mechanisms, the review the UK government has now embarked on might just be the pause for breath the regulatory world needs to remember what our shared goal here is – to effectively fight financial crime.