Transparency is being forced on Britain’s overseas territories

Blue-skies regulationAS BRITAIN’S prime minister between 2010 and 2016, David Cameron championed financial transparency, targeting anonymous shell companies as the getaway cars of tax-evaders and money-launderers. On his watch Britain became the first G20 country to commit to a publicly accessible register of company owners. Mr Cameron tried to make British territories with big offshore financial centres do likewise. The arm-twisting stopped when he stepped down in 2016. But campaigners, led in Parliament by Labour’s Margaret Hodge, vowed to keep going. This week their persistence paid off.Ms Hodge and Andrew Mitchell, a Conservative MP, had tabled an amendment to an anti-money-laundering bill, which was designed to force “overseas territories” in the Caribbean and Atlantic, among them the British Virgin Islands (BVI), Bermuda and the Cayman Islands, to set up public registers, if they had not already done so, by the end of 2020. Faced with defeat in...Continue reading The Salisbury effectTransparency is being forced on Britain’s overseas territories Tax havens will have to publish more information about company ownership print-edition icon Print edition | Finance and economics May 3rd 2018 twitter icon facebook icon linkedin icon mail icon print icon AS BRITAIN’S prime minister between 2010 and 2016, David Cameron championed financial transparency, targeting anonymous shell companies as the getaway cars of tax-evaders and money-launderers. On his watch Britain became the first G20 country to commit to a publicly accessible register of company owners. Mr Cameron tried to make British territories with big offshore financial centres do likewise. The arm-twisting stopped when he stepped down in 2016. But campaigners, led in Parliament by Labour’s Margaret Hodge, vowed to keep going. This week their persistence paid off. Ms Hodge and Andrew Mitchell, a Conservative MP, had tabled an amendment to an anti-money-laundering bill, which was designed to force “overseas territories” in the Caribbean and Atlantic, among them the British Virgin Islands (BVI), Bermuda and the Cayman Islands, to set up public registers, if they had not already done so, by the end of 2020. Faced with defeat in the House of Commons, the government dropped its opposition to the amendment, clearing the way for it to be shoehorned into the legislation. The House of Lords, which rejected it in January, is not expected to do so again. Get our daily newsletterUpgrade your inbox and get our Daily Dispatch and Editor's Picks. Latest stories Why has Qatar Airways just launched flights to Wales? 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They say it breaks a long-standing constitutional arrangement, under which they have been left to shape their own policies on finance and much else. Orlando Smith, the BVI’s premier, called it a “ breach of trust” that “calls into question our very relationship with the UK”. His wife, who runs the agency that promotes the islands’ financial sector, described it as “smacking of colonialism”. In fact, such intervention is not unprecedented. Britain’s government has laid down the law in its territories on capital punishment and the criminalisation of homosexuality. In 2009 it imposed direct rule on the Turks & Caicos Islands after an inquiry uncovered government corruption. In February, however, it declined to block legislation in Bermuda that revoked a law allowing same-sex marriage. A minister said that such powers “can only be used where there is a legal or constitutional basis for doing so, and even then, only in exceptional circumstances”. Do the activities of tax havens amount to such circumstances? The territories point out that they have improved their tax-transparency and anti-money-laundering regimes to the point where they are judged as good as or better than those of several OECD countries, including America. They have central ownership registers that can be accessed quickly by British and other law-enforcement agencies. They also argue that public registers are no panacea. Britain’s is in effect an honour system. The only person prosecuted for providing false information so far has been a campaigner who sought to highlight the lack of checks on submissions by registering a firm called after Vince Cable, a former British minister, and naming him as a director. The anti-money-laundering standards set by the Financial Action Task Force, an intergovernmental body, do not require registers to be public. Anti-corruption activists insist that the rampant use of havens by financial ne’er-do-wells warrants extraordinary action. BVI-registered shell companies, in particular, crop up frequently in tax-evasion and corruption cases. Mr Mitchell argues that public access to registers is important because resource-constrained law enforcement needs help from NGOs and investigative journalists to “join up the dots”. With the bit now firmly between their teeth, anti-corruption types will want more. Pressure could grow for similar treatment of Britain’s closer-to-home crown dependencies of Jersey, Guernsey and the Isle of Man, though their relationship with Britain is different. They are not former colonies, which makes it harder for Parliament to legislate for them. Geoff Cook of Jersey Finance, which is part-funded by the island’s government and promotes its financial centre, says Jersey will fight to keep its system of “compliant confidentiality”, until global standards dictate otherwise. Another battle looms. This article appeared in the Finance and economics section of the print edition under the headline "The Salisbury effect" print-edition icon Print edition | Finance and economics May 3rd 2018 twitter icon facebook icon linkedin icon mail icon print icon Reuse this contentAbout The Economist

 

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