The planned creation of a registry of beneficial ownership information in the U.K. will be detrimental to business activity if it is not adopted universally, according to the International Financial Centres Forum, an organization representing offshore law and accounting firms.
Grant Stein, chairman of the IFC Forum, said the British government’s commitment to be the first country to establish a central public register of ultimate beneficial ownership data “will damage the U.K. business environment.”
Commenting on the publication of the U.K. government’s consultation response to its Transparency and Trust discussion paper, he said it was unlikely that Asian and U.S. financial markets will not adopt the proposals as quickly and to the same extent.
“There is a real danger that significant investment to the U.K. will be at risk. This will ultimately undermine the government’s efforts to support investment and growth,” Mr. Stein said.
The U.K.’s G8 Action Plan set out the government’s commitment to implement a registry to make it easier to identify and tackle the misuse of companies. In October 2013, Prime Minister David Cameron and Secretary of State for Business, Innovation and Skills Vince Cable announced that the register should be public.
In the government’s response to its public consultation on the issue, Mr. Cable said that transparency and accountability are needed to restore trust in business transactions and help create an environment for growth.
The plans will require companies to identify beneficial owners of blocks of shares or voting rights which would give the holder an interest in more than 25 percent of the company. Companies will need to obtain and hold the information on record and provide it to Companies House which functions as the central registry.
Current proposals would prohibit the use of one company as the director of another company with certain “exemptions where the use of corporate directors is of higher value and lower risk.”
The U.K. further aims to tackle the use of “nominee” directors and plans to update the director disqualification regime. Mr. Stein said the IFC Forum remains concerned about the government’s proposed reliance on self-reporting.
“We do not believe that this can produce a credible system. Without an effective mechanism for systematic verification, the accuracy of the data collected cannot be relied upon and overall transparency efforts will be thwarted.”
In turn, the priority should be on an information tracking and verification mechanism that does not harm the economy, he said.
Mr. Stein suggested government should consider the licensing and supervision of corporate service providers.
He further advocated that the implementation of the register should be staged “to ensure that data is only made publicly available once it is clear that such a step will neither endanger British business nor breach the fundamental human right to privacy.”
In addition, adequate safeguards must be imposed to ensure that publicly available data cannot be misused, Mr. Stein said.
The Cayman Islands launched its own public consultation on the proposal of a centralized public register of beneficial ownership information last year, but no decision on its implementation has been made yet.
The Chamber of Commerce and the Law Society in Cayman have been critical of the proposals, stating that to be effective they would need to be universally applied and they should not infringe legitimate privacy concerns.
Alasdair Robertson, chairman of the Law Society, echoed the views of the IFC Forum on the potentially harmful impact of the plans. “The proposal for a publicly accessible register will ultimately undermine competition and innovation, and will likely have disastrous consequences on global capital markets and the ability to secure financing,” he said in March.