In a landmark decision, the UK government announced that all UK overseas territories will have to create a public beneficial ownership register by December 31, 2020, disclosing who owns companies registered in their jurisdiction.
A coalition of Labour Party and several conservative MPs pushed through this regulation, which ultimately had to be accepted by Theresa May’s government despite efforts to introduce a more lenient proposal.
Foreign Officer Minister Alan Duncan said about the ruling, “We have listened to the strength of feeling in this house on this issue and accept that it is without a doubt the majority view of this house that the overseas territories should have public registers.”
However, Duncan did mention that passing laws for the overseas territories “without their consent effectively disenfranchises their elected representatives,” and that parliament “would have preferred to work consensually.”
One thing to keep in mind is that this ruling will not extend to the UK’s crown dependencies of Jersey, Guernsey and Isle of Man.
Additionally, this regulation includes a clause known as the Magnitsky amendment, which allows the UK government to impose sanctions on individuals accused of human rights abuses, and another, which according to The Guardian’s Editorial Board, “tightens the rules on hundreds of shady Scottish limited partnerships, which have been exploited for money laundering by Russian oligarchs.”
Plenty of Opposition to UK Beneficial Ownership Ruling
As expected, plenty of UK overseas territories criticized this decision, claiming it would hinder the local economies.
The British Virgin Islands (BVI), for instance, said this ruling would “undermine the constitutional relationship” between the UK and its territories.
More specifically, BVI Premier Orlando Smith said, “It is not only a breach of trust but calls into question our very relationship with the UK and the constitutional rights of the people of the BVI.”
Smith vowed to fight the move, stating, “in cooperation with our partners across the Caribbean and beyond, we will ensure that this constitutional overreach does not set a precedent and that the rights of the people whom I represent are respected.”
Lorna Smith, Head of BVI Finance, went so far as to say the decision “smacks of colonialism.”
Cayman Islands Premier Alden McLaughlin also complained that the “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.”
Timothy Ridley, who served as chairman of the Cayman Islands Monetary Authority, agreed and told Cayman Compass, “Failure to find a solution that protects legitimate privacy will lead to a great outflow of quality business to jurisdictions that still respect data privacy – and there are many.”
“It is ironic that, at the time when the EU, including the U.K., and offshore financial centers are implementing data protection laws, basic privacy rights risk being thrown out of the window,” Ridley added.
At a UK parliamentary level, conservative MP James Duddridge believes this move will lead to businesses fleeing the territories for more secretive places such as Delaware in the USA.
Geoffrey Cox, another Conservative MP, agreed with his colleague, arguing that this move would result in a “a one-hit wonder” with funds moving “to where it is darkest.”
Tax Justice Activists Rejoice with Beneficial Ownership Register Announcement
On the other hand, tax justice activists celebrated this decision, one that marks a huge victory in their battle against financial secrecy.
Global Witness’ Naomi Hirst said this “announcement is a huge win in the fight against the corruption, tax dodging and money laundering.”
“The UK’s tax havens have featured in countless corruption and money laundering cases – ending their corporate secrecy will throw a huge spanner in the works of corrupt dictators, tax evaders and organised criminals.”
“This now raises the stakes for the remaining jurisdictions which are happy to sell secrecy – it is now only a matter of time until anonymous companies are a thing of the past,” Hirst concluded.
Furthermore, Rebecca Gowland, Oxfam’s head of inequality, said, “Ending secrecy in UK-linked tax havens will help developing countries to recoup billions of lost revenue that could pay for much-needed schools and hospitals.”
Note: The above reference link was live on May 2018, but it has since been taken down.