John Christensen ■ The UK tax havens and broken promises

4
Here be pirates

Here be thieves and fraudsters

By Rosie Sharpe, Money Laundering Campaigner at Global Witness.

There’s been much progress recently in requiring companies to put the names of the people who own and control them – their so-called beneficial owners – into the public domain.  This is really important to tackle the devastation caused by anonymous company ownership – for more information on the problem read the GW briefing.

The UK, Ukraine and Denmark have all announced their intention to create public registers of beneficial ownership, and discussions are currently underway in the European Council on this topic too.  The UK’s tax havens, alas, are not among them.

At last year’s G8 Summit, all of the UK’s tax havens promised to produce ‘beneficial ownership action plans’ stating what they would do to improve company ownership transparency.  (These tax havens are the Crown Dependencies just off the coast of the UK as well as the seven Overseas Territories that have significant financial centres). Later in 2013, the same tax havens also promised to consult on putting the names of the beneficial owners of companies into the public domain.   We at Global Witness cheered loudly: the UK’s tax havens are some of the biggest peddlers of the company ownership secrecy that’s so useful to tax evaders and others crooks.

A year ago, at least some of the tax havens had started to make progress – see the report GW did together with Christian Aid for more details.

But now the havens have had some time to carry out their consultations and announce the results, how have they been doing?  Global Witness and Christian Aid have just put out a short report looking at this.

The answer to that question is pretty depressing.

  • One of the Overseas Territories, Bermuda, has not even held a consultation, despite having promised to do so.  Indeed the Finance Minister has already announced that the country will not be adopting a public register until the UK, USA and Canada have all adopted them.
  • One of the Crown Dependencies, Guernsey, has yet to hold a consultation on beneficial ownership.
  • Of all the havens that have held consultations, none have yet published the submissions made, or published the government’s response to the consultation.  Six of the eight consultations held have been closed for more than three months without the government having issued any response.  In the case of the British Virgin Islands and the Cayman Islands, more than 300 days have lapsed since their consultations closed without the governments saying anything about the results.

In other words, the UK’s tax havens promised to do something, then (maybe) did it but kept so quiet about the results so that nothing on the ground actually changed at all.  It is still just as easy as ever for a wannabe tax evader or corrupt politician to set up a secretive offshore company that will enable them to disguise the ownership of their dirty money.  And that’s despite the fact that the British Virgin Islands, Cayman Islands, Bermuda, Jersey and the Isle of Man all feature in the top 20 list of places most favoured by the world’s corrupt.

The UK’s tax havens need to stop peddling secrecy.  There’s no justifiable reason for a company to hide the names of the people who own and control it.  Only by making that information public will we stop companies being abused by criminals who want to hide dirty money.

 

 

Related articles

Comments • 4

  • Dave Thomas
    December 5, 2014 - 12:43 pm

    Guernsey already has beneficial ownership retained and available inspection at the company’s registered office. Should read the applicable legislation

  • ivan
    December 5, 2014 - 2:55 pm

    It’s interesting that you refer to the Puppet Masters as an example of all the bad being done by the UK’s CDs and OTs, but completely fail to refer to the report’s positive comments in respect of the Jersey model, including:

    “a Jersey Court of Appeal ruled in favor of the attorney general that a single provable instance in which a TCSP fails to adhere to due diligence standards meets the criteria for prosecution under the AML laws of the jurisdiction.”

    “Cases in which service providers have been penalized for failing to follow through on their due diligence obligations have certainly been infrequent, but they are effective in encouraging compliance. We believe that it makes sense to have a registry collect beneficial ownership information on incorporated entities only if it is sufficiently expert, well-resourced, and proactive, coupled with a credible enforcement policy (see box 4.1 for an example from Jersey).” This goes on to explain the expertise of the Regulator’s staff.

    “Of the 40 jurisdictions reviewed, only one—Jersey—requires the beneficial owner to be identified and recorded by a government body, the Companies Registry within the Financial Services Commission”

    The cases of grand corruption referred to in the Puppet Masters, to which I assume you are trying to refer, predominantly occurred before rigorous AML legislation was introduced. It appears unfair to judge a jurisdiction based on old legislation (or lack thereof) rather than the existing ones.

    You state “the UK’s tax havens are some of the biggest peddlers of the company ownership secrecy that’s so useful to tax evaders and others crooks.” This didn’t appear to be the conclusion reached by Sharman.

    You state “ It is still just as easy as ever for a wannabe tax evader or corrupt politician to set up a secretive offshore company that will enable them to disguise the ownership of their dirty money.” This implies that a ‘corrupt politician’ could simply set up a company in a CD or OT and launder all their riches. You may be aware, but trust and company service providers are regulated in many of these jurisdictions (which is more than can be said for the UK, US and other big economies) and, as noted in the second quote above, action is taken by the regulator where a TCSP fails to identify clients properly. Furthermore, Money Laundering and tax evasion are illegal in all the CDs and OTs and any TCSP which knowingly permitted clients to undertake such illegal acts would be dealt with by the Regulator, again, much more oversight than we see in the UK.

    In summary, the usual peddling of rubbish from yourselves.

    • Nick Shaxson
      December 8, 2014 - 2:13 pm

      On the one side, we have the theatre of probity from the CDs and OTs: we are all clean, well regulated, cooperative and so on. They are well resourced, highly motivated and sophisticated and get their message out. On the other side, people like TJN pointing out that this theatre of probity is a smokescreen for an awful lot of bad stuff going on. Just because others are worse (and many if not most of them including the UK and US certainly are: there’s no argument about that) doesn’t mean we are going to stop pointing out abuses that are occurring, or legislation that doesn’t pass the test of civilised society.

      If you could perhaps point out where we at TJN and members of the world’s media and civil society groups, anti-corruption bodies, shareholder groups, or anyone else can find out the warm-blooded genuine beneficial ownership records of Jersey companies, or BVI companies, or Cayman companies, we’d be most grateful for your help. And then, of course, there is the matter of trusts; companies held by trusts, and so on. And . . .

    • Nick Shaxson
      December 8, 2014 - 2:17 pm

      Today’s TJN commenter isn’t up to speed with Guernsey legislation, but as far as I can tell from a cursory look, the legislation requires:
      “A resident agent may be required to disclose information regarding beneficial ownership to Her Majesty’s Procureur, the Guernsey Financial Services Commission, a police officer, or a customs officer on receipt of a certificate stating:
      • what information is required;
      • that the information is required for a purpose specified in the Law (essentially actual or potential criminal or regulatory investigations or proceedings); and
      • that disclosure is proportionate to what is sought to be achieved.”

      I am not sure that this means that the information is “available for inspection” at least for those (such as journalists etc.) who need it. Or perhaps I am wrong about this?

  • Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.