Government makes U-turn on tax haven transparency laws

Theresa May accepts public ownership
registers for overseas territories to stave off Commons defeat

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Twenty Conservative MPs backed a cross-party amendment to force
British overseas territories to publish public ownership registers.
They will show how the global super-rich hide their funds in
offshore tax havens, making it easier to uncover corruption,
money laundering and tax dodging, campaigners claim.

The measures will cover major UK tax havens such as the British
Virgin Islands and Cayman Islands, but will not include Britain’s
crown dependencies, Jersey, Guernsey and the Isle of Man.

In an earlier bid to stave off the amendment to the Sanctions
and Anti-Money Laundering Bill, the Foreign Office had pledged to
work internationally to introduce public registers “as the global
standard by 2023”.

However, this was dismissed as too little too late by Andrew
Mitchell, the former Conservative International Development
Secretary leading the revolt. The Government threw in the towel in
the face of a clear majority for the amendment in the House.

Fourteen British overseas territories will now be required to
set up “beneficial ownership” registers by the end of 2020, or have
them imposed from Westminster.

Bloomberg says the Government has faced
“mounting pressure” on the issue, especially after the British
Virgin Islands were caught up in the scandal triggered by a leak of
documents from Panamanian law firm Mossack Fonseca, which came to
be known as the Panama Papers.

It has also been in the spotlight since the poisoning of former
Russian double agent Sergei Skripal in March, an attack blamed on
the Kremlin. The killing led to calls for ministers to do more to
tackle the web of offshore shell companies investing in the UK and
crackdown on illicit Russian assets passing through British
overseas territories.

Labour MP Margaret Hodge, who put forward the amendment along
with Mitchell, told the BBC that with the new measures: “We would
know who owns what and where and we would be able to follow the
money. We would be able to root out corruption and crime.”

Citing an estimated £68bn which has flowed out of Russia into
the overseas territories over the past ten years she said: “This
secrecy allows you to hide your money and then transfer it, if it
is corruptly secured, into the legal system by doing things like
buying properties.”

While the U-turn was welcomed by MPs and transparency
campaigners, British overseas territories which will be affected by
the changes hit back.

Speaking on BBC Radio 4’s Today programme, Lorna Smith, interim
executive director of British Virgin Island Finance, accused
supporters of the legislation of “colonialism”, adding that the
British Virgin Islands had “done nothing wrong” and were deemed
largely compliant on transparency by international bodies.

She went on to say that her major concern was one of
“constitutional infringement”, arguing that: “If this bill
goes through, it’s like Scotland feeling that Westminster is
legislating for Scotland. It’s simply not right.”

The Guardian has also cited representatives of
the territories who have argued that “the disclosure requirement
would be expensive to implement at a time when countries in the
Caribbean were recovering from the impact of Hurricane Irma”.