Exchange of Notes on Beneficial Ownership: Six-month Review

Tuesday 1st May 2018 Written Statements

[The Minister for Security and Economic Crime (Mr Ben Wallace)]

I, along with the Minister for Europe and the Americas, my right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan), wish to make a statement on the six-month review of the implementation of the exchange of notes on beneficial ownership between the United Kingdom, Crown dependencies and relevant overseas territories.

In 2016 a commitment was made between the UK, six of the overseas territories (OTs), and all of the Crown dependencies (CDs), to enhance the effectiveness of long-standing law enforcement co-operation with respect to the sharing of beneficial ownership information for corporate and legal entities incorporated in the respective jurisdictions. The arrangements for this are set out in the “exchange of notes” (EoNs) and technical protocol, which includes a commitment that:

“The Participants will review together the operation of these arrangements in consultation with law enforcement agencies six months after the coming into force of these arrangements, and thereafter annually”.

Officials from the Home Office and Foreign and Commonwealth Office, and representatives from Guernsey and Alderney, Jersey and the Isle of Man; and the British Virgin Islands, Cayman Islands, Bermuda, Gibraltar, Anguilla and Turks and Caicos Islands have carried out this first review of the EoN arrangements.

During the course of this review, the CDs and OTs have reiterated to the UK authorities their commitment to the EoNs, as demonstrated by their positive and proactive approach to implementation and engagement in the review process.

The Government committed to complete this review by the end of March. Sir Alan Duncan (for the overseas territories) and I (for the Crown dependencies) are pleased to provide the following key findings of the review and recommendations for the future of these arrangements.

The findings and recommendations of this review are based on material supplied by, and discussions with, all of the jurisdictions involved in the review process. The position varies across these different jurisdictions, and not all of the findings and recommendations of this review apply to all jurisdictions. Of course, where a jurisdiction already complies with the points covered by a particular finding or recommendation, it should continue to do so.

Key findings

The EoN arrangements have, since their coming into effect in July 2017, provided law enforcement officers with enhanced access to company beneficial ownership information, as originally envisaged in 2016, and are supporting ongoing criminal investigations.

Under the terms of the arrangements, this information is available to UK law enforcement within 24 hours, one hour if the request for information is notified as “urgent”, or such other time period as may be agreed. Information is available on a 24/7 basis.

As of 9 February 2018, the EoN arrangements have been used over 70 times to provide enhanced law enforcement access to beneficial ownership data. This information has been used to enhance intelligence leads and investigations on illicit finance.

The CDs, Bermuda, Gibraltar and the Turks and Caicos Islands (TCI) all have central registers to hold the required information. Jersey’s is already fully populated (it has had a private register since 1989), as are the Guernsey and Alderney registers. The Isle of Man’s register is nearing completion (81%), in accordance with the agreed timeframe for full population by 30 June 2018.

Bermuda has had a central register for over 70 years, and its new database is nearly 100% populated. Gibraltar expects its register to be fully populated by 30 June 2018, following a transition period. TCI, which was severely affected by hurricanes Maria and Irma, brought its enabling legislation into force on 1 February 2018. It anticipates that its register will be fully populated by December 2018, following a transition period.

“Similarly effective arrangements” (as permitted by the EoNs) are in place in British Virgin Islands (BVI) and the Cayman Islands. BVI, which was also severely affected by the hurricanes, has now attained around 80% population of its system. The Cayman Islands expect their beneficial ownership system to be fully populated by 30 June 2018, following a transition period provided for by their legislation. The UK is finalising with Anguilla a memorandum of understanding on the terms for provision of UK support for the establishment of Anguilla’s beneficial ownership system. This was delayed due to the impact of Hurricane Irma. The UK has already provided drafting assistance for underpinning legislation, which will be introduced at the Anguilla House of Assembly in due course.

The majority of requests thus far have been made by the National Crime Agency (NCA) and Serious Fraud Office (SFO). Other UK law enforcement authorities have also used the EoNs.

As could be expected of new arrangements and systems, teething issues arose initially. This review makes a number of recommendations, building upon efforts already made to address these issues, which will be taken forward where appropriate and reported on at the next review.

Recommendations

This review has made a number of recommendations that have been agreed by all parties concerned, including that:

All participants should continue to participate in these reviews, maintaining a focus on enhancing law enforcement co-operation.

Jurisdictions should continue to monitor their systems with a view to enhancing the accuracy of the data they hold.

All participants to the EoNs should update their contact details as soon as practically possible, including out of hours contact details when these change, so that these can be disseminated appropriately.

All jurisdictions should consider whether they may be able to adopt best practice on intelligence sharing e.g. request form templates.

The standardised request form should be amended to include a tick box to indicate 1 hour or 24 hour timeframes.

Participants should ensure that their registers are fully populated by the agreed timeframes, where this is not already the case.

Next Steps

Participants to the EoNs will take forward the recommendations of this six-month review, and will take responsibility for tracking progress. The Home Office and Foreign and Commonwealth Office will produce a report on their implementation for the next review.

It should be noted that this review is in addition to ongoing monitoring of the practical application of the commitment by all participants, and a UK statutory review required by the Criminal Finances Act to take place before 1 July 2019 covering the period to the end of 2018.

This summary is also available on gov.uk.

[HCWS661]