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A Small Step for Anti-Corruption? Beneficial Ownership in the Overseas Territories

Written by Jameela Raymond on Thursday, 20 July 2017

In 2016 the UK’s Overseas Territories (OTs) and Crown Dependencies (CDs) committed to introduce central registers of beneficial ownership information or ‘similarly effective systems’ by 30 June 2017. Governments have made public statements acknowledging that verified information on company beneficial ownership can be used effectively to detect and fight corruption, but these registers and systems do not meet the gold standard of public registers that then Prime Minister David Cameron called for. Even for those OTs and CDs that have fulfilled their commitments, there is still a lot of work to be done.

What is the problem?

There is growing evidence that the UK’s Overseas Territories’ (OTs) and Crown Dependencies’ (CDs) financial systems are widely used in money laundering and grand corruption cases. More than 70% of corruption cases surveyed by the World Bank between 1980 and 2010 relied on anonymously-owned companies help to obscure what they were doing, and the UK’s OTs were the most popular destination for the corrupt to hide their illicit wealth. 75% of UK properties under investigation for corruption in a recent 10 year period were registered with offshore companies. The opacity in these secrecy jurisdictions has been cited as a strategic risk to the UK, and for too long there has been resistance to increasing transparency over corporate entities registered within them.

Who met the deadline?

The larger territories and dependencies stuck to the deadline and have now taken important steps in the right direction for increasing transparency over company ownership.

The BVI implemented its Beneficial Ownership Secure Search (BOSS), an electronic search engine which contains information on company beneficial ownership. The Cayman Islands will set up its General Registry by August 2017, and by September 2017 Turks and Caicos will be requiring beneficial ownership information to be provided as part of all company registration processes. In all three cases, the information in the databases will only be exchanged with ‘competent authorities’ – government agencies and persons that have been given legal authority and power – in the host jurisdictions and in the UK.

Curiously, Guernsey has cited the snap general election and the change in Privy Council leadership as principal reasons for being unable to establish their register by the end of June.

The below table captures the progress made across a selection of OTs and CDs, as well as the UK itself. At present, there is no clear information differentiating whether the jurisdictions have implemented central registers or similarly effective systems. We will need to consider the results of the effectiveness reviews before we can assess the strength of either system.

 

Key:
Green: Implemented
Amber: Committed, not implemented
Red: No commitment

Is it good enough?

We now know that setting timelines for establishing registers does work. Although a handful of the smaller jurisdictions did not meet the 30 June deadline, at least they used it as a target. Along with organisations like Christian Aid, Action Aid and Global Witness, Transparency International UK has been calling for the OTs and CDs to draw up timelines for establishing public registers of beneficial ownership. A public, central register is still the most effective and practical way to record information on beneficial ownership and facilitate access to all who can make good use of it.

But the process of developing timelines is simply a means to an end. Whether timelines are set, met or ignored entirely, what matters most is that we end up with a system robust enough to curb money laundering through these jurisdictions. In the 2016 Panama Papers leak, which exposed 11.5 million documents from company service provider Mossack Fonseca, over half of the 200,000+ companies were registered in the BVI alone. In the wake of the leak UK investigations are ongoing, but we know that nine potential professional enablers of crime have been identified; 43 high net worth individuals have been placed under special review, and; 26 offshore companies have been identified as suspicious.

So when it comes to considering the effectiveness of central registers in highlighting suspicious activity and preventing corruption, the real proof of the pudding will be in the eating. There will be two government reviews – in December 2017 and January 2019 – which will consider the effectiveness of these new systems. The Financial Action Task Force’s (FATF) Recommendation 33 states that maintaining comprehensive statistics is essential to assessing whether a country’s anti-money laundering system is effective. It is crucial that the findings of these reviews are published in full, so that there can be proper scrutiny over the capabilities of these registers to crack down on illicit activity.

What now?

The National Crime Agency should adhere to FATF recommendations and publish anti-money laundering statistics. This includes data on the number of queries from UK law enforcement into the central registers, as well as the number of responses received and the number of convictions deriving from investigations utilising information held in these central systems. When statistics and data around anti-money laundering are properly published, we will have a far better understanding of how effective these systems are.

Most importantly, however, to be credible in the fight against corruption, the gold standard of public beneficial ownership registers should be the end goal for all OTs and CDs. Setting up central registers was a big step on the journey to transparency, but it must not be seen as a resting point. Timelines should be set and published for a transition to full transparency and accessibility of that beneficial ownership information.

image:iStock.com/apomares

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Read 398 times Last modified on Thursday, 20 July 2017 11:13
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Jameela Raymond

Jameela is Transparency International UK's Senior Policy Officer. You can follow her on Twitter @jameelaraymond

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