Q&A: MPs on verge of backing “historic” crackdown on corporate secrecy
Parliament will tomorrow debate a dramatic amendment to a bill which could force Britains overseas territories to open up businesses to an unprecedented level of public scrutiny.
Proponents of the bill believe the UK is on the cusp of an historic step in the battle against global corruption – but authorities in jurisdictions like the Cayman Islands, British Virgin Islands (BVI) and Bermuda are up in arms.
The amendment would force them to implement a public register of beneficial ownership by New Years Day 2021.
Why is this happening now?
Backbenchers and opposition politicians have jumped on the sanctions and anti-money laundering (AML) bill, which will go through its report and third reading stages tomorrow. The bills main purpose is to replace the current regime, which is set by the European Communities Act – the foundation stone of the UKs membership of the EU. After Brexit this will no longer apply, meaning legislation is necessary to carry on upholding the UKs commitments to the United Nations.
So why is this important?
The big change contained in the bill is the public register of beneficial owners of firms contained in an amendment with cross-party backing. Firms registered in the UK overseas territories would be forced to give the name of the ultimate owner of the business, in a move which would radically increase transparency and, proponents of the bill say, help clamp down on the shell companies used by criminals to avoid tax.
Who opposes the bill?
Britains overseas territories are furious.
In a statement, the government of the British Virgin Islands (BVI) said: “We vehemently reject the idea that our democratically elected government should be superseded by the UK Parliament, especially in an area which has been entrusted to the people of the BVI.”
Public registers of beneficial ownership should only be adopted once there is broad agreement across the developed world – which has historically been difficult to come by – according to the Caribbean Community, a group representing multiple affected countries.
What is the argument in favour of the amendment?
Critics say that jurisdictions like Jersey, the Cayman Islands, the British Virgin Islands (BVI) and Bermuda are tax havens which combine low or non-existent tax rates to draw firms with lax regulations which allow opaque companies to hide the ill-gotten gains of crime.
High-profile leaks from law firms such as the Panama Papers and Paradise Papers have highlighted a large body of both morally questionable and outright criminal activity using Britains overseas territories.
The arguments for transparency have already played out before, and been won by those backing public registers on the European stage, said Jasper Helder, a partner focusing on sanctions and AML issues at law firm Akin Gump. "I think at this moment the transparency trend will prevail,” he said.
A private register "can also provide a shield for people who have acquired their money in illegal ways to hide it," Helder said. Meanwhile, people fearing extortion or kidnap can already apply to be exempted from the UKs version of the register.
Who will win?
Big-name figures from Labour, including Margaret Hodge and Ed Miliband, have put their name to it, while Liberal Democrat bigwigs Vince Cable and Jo Swinson have also signed up.
But politicians backing the amendment are quietly confident it will pass because the number of Conservatives who have put their names down – 18 before the weekend – is enough to pass the change even if the rest of the governing party votes against. Nicky Morgan, Anna Soubry, Ken Clarke and Tom Tugendhat are among the MPs who could give the government a bloody nose if it doesnt support the amendment.
Andrew Mitchell, a former international development secretary who is backing the move, said he is “confident” the government will want to support it. He said: “This amendment reflects a thoroughly good Conservative principle: supporting transparency and openness – bearing down on illicit money flows, money laundering, corruption and tax evasion.”
What happens if the bill passes?
The register could pose an “existential problem” for the economies of jurisdictions such as the BVI, while putting crown dependencies like Jersey on notice, according to John Christensen, a director at the Tax Justice Network campaign group. The BVI governments own analysis says it would undermine the territory's "long-term economic sustainability”.
“If it goes through it will be a really crucial step in Britain taking the lead in tackling global corruption,” Christensen said. “It is potentially a very historic moment”.