UK applies pressure to Overseas Territories

The UK Prime Minister is adding pressure to the leaders of overseas territories to make public their planned registers of company owners domiciled in their jurisdictions. Even though Mark Simmonds, The FCO’s Overseas Territories minister said when he visited Cayman at the end of last year that it was a matter for local government to know how to address the ownership issue, a letter from Prime Minister David Cameron   to the Cayman Island’s last week made it clear that the UK was interested in seeing the Overseas Territories follow the lead from UK in a public access register.

As Cayman continues with its local consultations on the issue, the United Kingdom is now preparing legislation for a full public access register. However, the IFC Forum – a multi-jurisdictional private sector organization, Cameron’s letter said it could damage the UK business environment.

He added, “Trust and confidence in British business is central to the growth of the UK economy,” Richard Hay, Counsel to the IFC Forum, said in a release. “It is unlikely that either the Asian or WE financial markets will adopt these proposals with similar speed or scope. Significant investment into the UK may be accordingly deterred, undermining the Government’s program for investment and economic growth.”

The IFC Forum (that has international law and accounting member firms operating across a number of British Crown Dependencies, Overseas Territories and other IFCs, stated that a recent academic study (Global Shell Games, authored by Findley , Nielson and Sharman) tested criminal access to shell companies . The study came to a conclusion that “in practice corporate service providers afford the only reliable (though not fallible) route to the real owner. The UK’s Crown Dependencies and Overseas Territories have collected high quality beneficial ownership through reliance on this model for a decade.

The UK’s own action plan, tabled by the Prime Minister at the time of the June 2013 UK/G8 summit sensibly proposed a review of corporate service provider supervision in the UK. Oddly, no action has been taken on that commitment. Without including the systematic data verification already conducted in the British offshore centers, UK shareholder information will be poor quality. Exporting this inferior and untested UK model to the British offshore centers would degrade their current compliance with FATF standards on data collection.

A fully public beneficial ownership register is creating deep concern within the financial institutions in Cayman, some of which are IFC Forum’s   members. The financial services ministry of Cayman Islands is today expected to release a statement with the letter and the premier will be responding to Cameron in writing.

In the Prime Minister’s correspondence, that has been publicized on the website of the UK government, Cameron asks OT leaders to make contact with the Treasury to discuss their plans for addressing the questions of the offshore industry will be open on who owns what and who is the real beneficiary .

Cameron is requesting the OT members to push the agenda forward as the UK moves towards legislating its public register shortly.

In his letter, the UK premier while pointing to the establishment of a central registry of company beneficial ownership information that is publicly accessible will form a key pillar of the UK’s G8 legacy. He said, “I believe that beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion.”

He added, “I am firmly of the view that making company beneficial ownership information open to the public is by far the best approach,” he stated. “It will give businesses and individuals a clearer picture of who ultimately owns and controls the companies they are dealing with and make it easier for banks, lawyers and others to conduct due diligence on their customers.”

It will shed light on those who have provided false information, helping to tackle crime where it occurs and deterring people from providing this false information in the first place. And it will help reduce the cost of investigations for tax and law enforcement authorities here and overseas, particularly in developing countries, by making information more easily available to them at the very start of an investigation.

While acknowledging the security issues on personal information, any information that could be used in facilitating fraud and identity theft will not be available on the public register. Instead, it will be held separately and securely so that it is made available to law enforcement and tax authorities.