Transparency in the territories – public ownership registers in Cayman, Bermuda and the BVI

by White & Case LLP
Contact

White & Case LLP

UK overseas territories – including the offshore financial centres of the Cayman Islands, Bermuda and the BVI – will be required to introduce public registers of local companies' beneficial owners by the end of 2020, after a Government U-turn on the Sanctions and Anti-Money Laundering Bill.

The UK Government and the territories1 have long opposed such measures, citing the territories' constitutional autonomy and the risk of serious damage to economies reliant on financial services. Previous efforts to pass similar measures (including at earlier stages of the Bill) have failed.

But on 1 May, the Government – facing defeat in the Commons – accepted an amendment during the final stages of debate on the Bill. The amendment requires each territory to establish "a publicly accessible register of the beneficial ownership of companies registered in [its] jurisdiction", with "all reasonable assistance" from the UK Government. Any territory that fails to establish a register by 31 December 2020 will have one imposed by the UK Government.

The amendment's primary goal is to combat financial crime in the territories. The UK has already taken steps to do this: in April 2017 it required territories and crown dependencies to establish similar registers accessible to UK authorities. But the amendment goes further: opening the registers to public scrutiny makes it harder to conceal corruption, money laundering, tax evasion and similar activities, and so makes the territories less attractive to criminals.

Nonetheless, the amendment is far from a silver bullet.

It does not apply to the UK's crown dependencies – Guernsey, Jersey and the Isle of Man – which face similar issues, but which Parliament cannot oblige to act (unlike the territories).

It does not extend to other forms of legal arrangement – such as trusts – that may be used to conceal criminal activity, although it will be hard for the Government to resist calls for an extension. The EU's upcoming Fifth Money Laundering Directive (5MLD) will require member states to provide more limited public access to registers of trust ownership, which may indicate where the territories will end up.

It is likely to simply shift the problem elsewhere – criminals can move their operations to other jurisdictions, such as Delaware, that offer similarly high levels of secrecy (and low levels of taxation), and that are harder for UK authorities to access. Cleaning up its territories may improve the UK’s image, but in practical terms hamper its efforts to fight financial crime.

It is also likely to put pressure on those using the territories for lawful tax avoidance, by exposing them to increased public scrutiny and criticism. Some will see this as an ancillary benefit, but it suggests that the territories may be right to fear a loss of legitimate business.

The amendment's long-term benefits are likely to centre on image and influence. The UK has suffered from a perception that it turns a blind eye to issues in its territories and dependencies, which hampers other countries' efforts to fight tax avoidance and financial crime2. The amendment goes some way to redressing this. The Government – despite its initial opposition – is likely to take a pragmatic approach and paint the amendment as the UK leading the fight against 'dirty money'.

This comes at an opportune moment, as the UK's anti-money laundering regime is currently being evaluated by the Financial Action Task Force (FATF)3, which is due to report at the end of 2018. A good result is important for the UK, given the weight attached to FATF's assessments and the desire to maintain the UK's status as a high-quality business destination post-Brexit. Failure to address the perceived issues surrounding the territories could lead to criticism, which the Government will now hope to avoid (or at least reduce).

Finally, the amendment may encourage the developing trend towards transparency around beneficial ownership, kickstarted by the revelations around the Panama Papers and similar leaks. The UK established a public register of ‘persons with significant control' of companies and LLPs in June 2016, and 5MLD will require member states to have public registers of companies' beneficial ownership. By extending these measures to 'traditional' offshore jurisdictions, the amendment could increase the pressure on other offshore jurisdictions to follow suit. This will not happen quickly, but could be the amendment's most significant long-term impact.

The Bill is not yet law, and the timeframe for the territories to implement public registers means that there is unlikely to be any short-term compliance impact for clients. However, clients may wish to consider the potential impact of this move on privacy issues or tax arrangements that involve the territories.

1 See here for the full list of UK overseas territories.
2 For example, around half of the companies referred to in the Panama Papers were incorporated in the BVI.
3 FATF is the international body that sets anti-money laundering (AML) standards and assesses countries' AML regimes.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP
Contact
more
less

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.