BOTs express shock and anger over new ownership transparency regs

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A number of Britain’s 14 Overseas Territories have responded with a mixture of shock and anger to yesterday’s news that the UK is to require them to adopt public beneficial ownership registers by 2020 – and in some cases, disbelief as well that the three Crown Dependencies have been told they would not have to comply. 

The Crown Dependencies – Jersey, Guernsey and the Isle of Man – have ties with the UK  that are similar to those of the Overseas Territories, but they are not officially classified as BOTs.

On the BBC’s Radio 4 show this morning, the Cayman Islands representative to the UK, Eric Bush, declined to say whether Parliament’s decision to force the registers on the BOTs was itself enough to potentially cause Cayman to seek to cut its constitutional ties with Britain, but he admitted that “the actions taken yesterday” were “certainly a blow to the relationship”.

“It [the decision, following a debate in the House of Commons] shows a lack of trust, it shows a lack of respect, and disregard to the constitution and the agreements and the long-standing, mutual respect between the Cayman Islands and the UK,” Bush said, after noting that Cayman had been “British for more than 360 years”, and had been looking forward next year to celebrating its 60th year of a “direct constitutional relationship” with Britain.

The Cayman Islands government also issued a statement last night, saying that it was “deeply aggrieved” by the news of the UK  Parliament’s decision to adopt the controversial amendment to its Sanctions and Anti Money Laundering Bill, now making its way into law.

It quoted the jurisdiction’s premier, Alden McLaughlin, as saying: “Imposition of legislation, through powers that date back to the colonial era, over and above the wishes of the democratically elected legislative bodies of the Overseas Territories, represents a gross affront to the constitutional relationship we currently have with the United Kingdom.”

“Further, imposing such an obligation on the Overseas Territories while exempting the Crown Dependencies discriminates unfairly against the Overseas Territories,” McLaughlin added.

“This amendment is based solely on prejudice and a wilful misunderstanding of our current regulatory framework.”

‘Significant backwards step’

Bermuda’s premier and finance minister, E David Burt, pictured left, called the vote “a significant backwards step in the relations between the United Kingdom and the Overseas Territories” and “a return to base colonialism [ that] has no place in 2018”.

“It is especially telling that the Crown Dependencies are not included in this amendment, which is restricted to the Caribbean OTs and Bermuda,” he added.

“Bermuda sets the standard in this area, and our reputation for sound regulation is well established, internationally recognized and will be vigorously defended.”

As reported yesterday,  beginning in 2020, most of the UK’s Overseas Territories will have to make public the identities of the beneficial owners of all their registered companies. The idea of mandatory beneficial ownership registers had been discussed for years, but it was seen to have been given fresh urgency by the recent Panama Papers and Paradise Papers exposés.

Yesterday’s approval followed a debate in the House of Commons, and was hailed as a major victory  by anti-tax haven and financial transparency campaigners.

Nevertheless, it’s expected to be vigorously opposed by the governments of many of the affected jurisdictions.

In addition to their constitutional concerns – which in some cases are apparently significant – there are worries that the measure could drive business out of the Overseas Territories and into rival jurisdictions that will see agreeing not to make their own beneficial ownership records public as being a small price to pay for the added revenue such business could bring.

‘Unacceptable act of modern colonialism’

Ahead of yesterday’s action, the chief minister of Gibraltar, Fabian Picardo, addressed the constitutional issues he saw as being at stake in the plan to force public beneficial ownership registers on the territory, in a five-page letter to Conservative MP and chief whip Andrew Mitchell, which he said he was copying to the other members of Parliament as well.

“There has been a convention in place for some time now between Her Majesty’s governments in London and in Gibraltar that Orders in Council are not used to make laws in Gibraltar,” Picardo wrote.

“Indeed, my government considers that the use of unilateral Orders in Council imposed without the consent of the government of the relevant territory (or any analogous mechanism) to legislate directly for an Overseas Territory would amount to an unacceptable act of modern colonialism, which would in effect overturn democracy in the relevant territory.

“I cannot emphasise enough to you how unacceptable this is, and how contrary to the direction of travel of the constitutional development of Gibraltar such a step would be.

“It would be more than retrograde, and would call into question the very nature of the relationship of consent and mutual respect which exists today between Gibraltar and the United Kingdom, which I am forever comitted to.”

Picardo added that he had “no doubt” that his fellow chief ministers and the premiers of the other Overseas Territories would “express similar sentiments”.

Blondell Cluff, the UK-based respresentative for the Caribbean island of Anguilla, told BBC Radio 4 presenter John Humprys this morning that though there were concerns about the extent to which Britain respected “the political forum within the Overseas Territories” and the devolved powers some of the jurisdictions – but not Anguilla – enjoyed.

On the other hand, she said, “I think it’s commendable that Britain wants to lead the world in transparency and good governance.” And she said that because of Anguilla’s less-devolved relationship with the UK, it has a “constitutional duty…[to do] everything that they [the UK] require us to do in terms of financial services”.

The hard part for Anguilla, she went on, is because of Hurricane Irma last year “wiping out virtually all of our infrastructure and virtually our entire economy, it’s going to be a struggle to come up with this [public beneficial ownership register].

“But I’m grateful we’ve got until 2020 to put this into place.”

To read and download the Sanctions and Anti-Money Laundering Bill on the Houses of Parliament’s website, click here.

As reported here in January, the UK government unveiled plans for a new public register that, beginning in 2021, would require overseas companies that own or buy property in the UK to provide details of their ultimate owners, as part of an effort to crack down on criminals who make use of such properties to launder “dirty” money.

As with the amendment to the Sanctions and Anti Money Laundering Bill that Parliament approved yesterday, the idea of a public register of UK property owners had been under discussion for years but found traction amid publicity over the growing number of wealthy foreigners who have been buying UK property in recent years, but whose identities was often hidden by corporate structures.

Draft legislation is due to be published this summer, with “pre-legislative scrutiny” set to take place thereafter.

Questions about the need for public registers

In a comment piece last year, Jersey Finance chief executive Geoff Cook questioned “both the efficacy of public registers” as well as the cost to individuals’ privacy they came with.

“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,” he wrote.

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

Cook noted that in October of the previous the French Supreme Court had published a decision that challenged the legality of that 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.”