Beneficial Ownership Registers: Overseas Territories and Crown Dependencies

Matthew Offord Excerpts

Thursday 7th December 2023 Commons Chamber

[Dame Margaret Hodge]

Indeed. I would love for us to be able to do this in a consensual way; that would obviously be the best way to proceed. Sadly, we have been waiting for 10 years, and my patience has worn a little thin. Given the implications both for national security and for the economy, the time has come to say, “Enough is enough.” We should use the powers that we have.

[Dr Matthew Offord (Hendon) (Con)]

The right hon. Member is being generous with her time. The 2022 ruling of the Court of Justice of the European Union stated that unrestricted public access to beneficial ownership information was incompatible with the right to life. Will she cover that?

[Dame Margaret Hodge]

I will. The hon. Member will know as well as I do that we are no longer a member of the European Union, so we are not bound by that finding.

Why does all this matter? The epidemic of tax avoidance, tax evasion and economic crime flourishes in an environment of secrecy, and our overseas territories and Crown dependencies facilitate that secrecy. We know from the ever-growing number of leaks of data on financial misdemeanours that their role is central to enabling economic crime. Half the shell companies exposed in the 2016 Panama papers were incorporated in the British Virgin Islands. In 2017, the Paradise papers—a massive tranche of documents leaked from the offshore law firm Appleby—showed that a frightening number of frontline politicians held secret accounts, with the overseas territories appearing prominently as destinations of choice for hiding money. Those included people such as Justin Trudeau’s chief fundraiser, Donald Trump’s Commerce Secretary, Brazil’s Finance Minister, Uganda’s Foreign Minister, and our own Lord Ashcroft, who had—and probably still has—a Bermuda-based trust where he hides some of his wealth.

Some 20% of the files in the FinCEN—Financial Crimes Enforcement Network—leak of 2020 contained clients that listed an address in the British Virgin Islands. The leak also revealed, because it was a leak of documents from an American agency, that the Americans viewed Britain as a higher-risk jurisdiction for its role in money laundering and financial crime. The Pandora papers leak of 2021 involved 12 million files, with data from 14 different law firms and company services providers. Over two thirds of the companies analysed in that batch of leaked documents were registered in the BVI. A World Bank review of 213 corruption cases that were investigated over the 30-year period to 2010 found that 70% involved anonymous shell companies. The UK, its overseas territories and Crown dependencies accounted for the second jurisdiction in terms of the number of corruption cases associated with it.

--- Later in debate ---

[Dr Matthew Offord (Hendon) (Con)]

I thank the Backbench Business Committee for granting time for the debate and I congratulate the right hon. Member for Barking (Dame Margaret Hodge) on securing it.

As Members will know, there are many functions of beneficial ownership, both licit and illicit. Regardless of the legality of the arrangements, it goes without saying that a public register of these beneficial ownerships would play a vital role in combating tax evasion and other such unlawful activities—we can all agree with that. It is the desire of everyone in this House and of the Governments of the overseas territories that we work towards better transparency, to ensure these islands and territories are no longer associated with being tax havens and hotbeds of illegal financial activity. Places, including the overseas territories, do not want to be considered as such. When people from those places travel, their experience is clouded by comments they receive from others about how they harbour terrorist money or are all money launderers. That is simply unfair.

Many of the territories have already demonstrated progress in the fight against money laundering and tax evasion, none more so than the Cayman Islands. People may know that I have some links with the Cayman Islands. I do not have a bank account there, but I have many friends there and I have been involved in environmental matters in the country. The Cayman Government take the fight against illicit finance very seriously. In 2019, they were among eight territories committed to introducing a publicly accessible register by the end of the year. Progress has been made: draft proposals were initially published in 2021 and a consultation began shortly after.

Aside from the implementation of the register, the Cayman Islands have made great strides in navigating the complex intersections of transparency, governance and international standards, and it is worth bringing those to light so that they may serve as an example for other oversea territories and Crown dependencies, and provide Members with some hope that they are playing their part. For example, the Cayman Islands operates tax co-operation agreements with over 100 countries, including participation in the US Foreign Account Tax Compliance Act.

The Cayman Islands follow the common reporting standards—a global standard set by the OECD and advocated by the G20 nations. The progress made by the Cayman Islands has been recognised by the financial action taskforce, which confirmed that its anti-money laundering regime effectively deters and prosecutes financial crimes in the territory, and by His Majesty’s Government for effective implementation of its Russian sanctions taskforce, Operation Hektor. I know that Russian finance is of particular concern to many Members. It is worth noting that Operation Hektor has so involved the deregistration of more than 50 vessels and aircraft and the freezing of accounts worth approximately $8.32 billion and €230.1 million. That goes to show that there are many effective ways in which the overseas territories can tackle illicit finance operating in their jurisdictions.

Back in 2020, Ministers were clear that the introduction of comprehensive public registers would be a considerable ask for many overseas territories, particularly those that do not possess any existing company beneficial ownership register. It is worth pointing out that the Cayman Islands has, since 2017, maintained an electronic register of beneficial ownership information for all corporate and legal entities. Any such arrangement in the islands is verified and updated by authorised corporate service providers, which then pass on the information to UK law enforcement within 24 hours, under the exchange-of-notes agreement established in 2017.

That said, complexities arise with the proviso that public accessibility be at an accepted international standard, particularly among EU member states. As Members are aware, and as my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) mentioned, the 2022 ruling of the Court of Justice of the European Union stated that unrestricted public access to beneficial ownership information is incompatible with the right to private life. We may not be in the European Union any more, but the sentiment of many of those rulings remains. I know that, following that ruling, many territories sought legal and constitutional advice on the impact. Perhaps the Minister could provide his own assessment of the ruling, and tell us how he is working with territories to counteract it and ensure the smooth transition to public registers.

I know that Governments of the overseas territories and dependencies will be listening closely to this debate. I have no doubt of their commitment to providing the transparency needed. I also trust that many Members present, and the Government, will appreciate the work that has already been undertaken.