The United States is arguably the “worst offender” and has “by far the biggest problem” with its beneficial ownership regulations, according to one of the keynote speakers at a major Jersey Finance conference held today in London.
Prof Jason Sharman, an Australian national who was one of the three co-authors of a 2014 book on the secret world of offshore shell companies called Global Shell Games: Experiments In Transnational Relations, Crime, And Terrorism, singled out the United States as having “by far the biggest problem” in terms of lack of knowledge of the true owners of its companies, as it has neither licensed CSPs (corporate services providers) or registries of beneficial ownership information.
The US is also opting out of the new OECD-promoted effort to introduce a global tax information exchange system known as the Common Reporting Standard, arguing that it doesn’t need to as it has its own scheme, the Foreign Account Tax Compliance Act (FATCA), Prof Sharman, pictured, told his audience, at the annual Jersey Finance Private Wealth Conference.
Prof Sharman’s presentation was based on a seven-page summary of two recent research projects into the role central registries and licenced intermediaries can play in combating financial crime that he has been involved with, both of which totaled some 500 pages in their full version, he told International Investment after his presentation.
(The summary, entitled Solving The Beneficial Ownership Conundrum: Central Registries and Licenced Intermediaries, may be read and downloaded from the Jersey Finance website by clicking here.)
Prof Sharman currently teaches at Griffith University in Brisbane, Australia, but is scheduled to take up the Sir Patrick Sheehy Chair in International Relations at Cambridge University next January. He has previously worked as a consultant with the World Bank, Financial Action Task Force, Asia-Pacific Group on Money Laundering and several private sector groups.
According to Prof Sharman, untraceable US shell companies are routinely used in facilitating serious crime.
“While the US does attract some criticism for its poor performance in this area, it is peculiar that IFCs (international finance centres, a term typically used to describe offshore islands that specialise in financial services, such as the Cayman Islands, Jersey, Guernsey and the Isle of Man) are subject to much more international pressure and negative publicity, even though objectively their performance is much better.”
The expected long-term fall-out from the recent leak of some 11.5 million confidential documents from Panamanian law firm Mossack Fonseca was, as expected, a key topic of discussion at the Jersey Finance conference.
As reported, Jersey and its fellow Crown Dependencies – Guernsey and the Isle of Man – as well as the 14 British Overseas Territories have been put on notice by the UK Government that it will be expecting them to disclose the beneficial owners of all companies registered on their shores.
However, Prof Sharman noted, beneficial ownership registries — of the kind being talked about by the UK and other European governments — “are not the only way, and probably not even the best way” to deal with the problems of financial crime, money-laundering and asset secrecy.
Better, he says, is the licensing and regulating of the corporate services providers (CSPs) who set up the shell companies on behalf of clients, similar to the way banks are required to be licensed and regulated, and to legally keep information about their clients on file. Under such a system, the CSPs would be responsible for maintaining the information on the true owners of the shell companies they set up, and providing that information to the authorities as needed.
IFCs ‘notably better’
Alongside naming the US as having the worst record for keeping track of the beneficial owners of its companies and safeguarding the information, Prof Sharman cited the world’s so-called International Finance Centres, or IFCs, for “on average perform[ing] notably better than OECD (Organisation for Economic Cooperation and Development) countries” in this area.
Prof Sharman, whose research has involved posing as a consultant to “test” the willingness of various jurisdictions to reveal shell company ownership details, said some of the IFCs emerged from such trials particularly well.
“Some IFCs, like Jersey and the Cayman Islands, had a perfect record of compliance, i.e., not one of the CSPs contacted was willing to provide a shell company to our fictitious consultant without first seeing a suite of official identity documents.”
Also participating in today’s conference was Stephanie Flanders, the former BBC economics editor and current chief UK and Europe asset management market strategist at JP Morgan, who moderated two discussion panel sessions.
The conference ended with a brief address by Scottish impressionist and comedian Rory Bremner.