The Cayman Islands and other U.K. Overseas Territories have agreed to implement centralized registers of beneficial owners of companies or “similarly effective systems” at the Overseas Territories Joint Ministerial Council Meeting this week.
However, the registers will not be accessible by the public and the media as originally demanded by the U.K.
Premier Alden McLaughlin said, “Our position on beneficial ownership, and our zero tolerance position on corruption and illicit activity, remains unchanged.”
The U.K. started to call for the implementation of centralized registers in its Overseas Territories in 2013. The registers should detail the individuals who control or benefit from companies registered in Cayman to prevent the abuse of anonymity for financial crime, corruption and tax evasion.
Britain will launch its own register at the beginning of next year. It will identify people who control at least 25 percent of a U.K.-registered company’s shares or voting rights.
The Cayman Islands government has rejected the proposal, arguing that its existing system, whereby beneficial ownership information is collected and maintained by corporate service providers, was working well and a centralized register would cause security and privacy issues. The Joint Ministerial Council communiqué, which followed the meetings between U.K. ministers and Overseas Territories leaders this week, said: “We agreed to hold beneficial ownership information in our respective jurisdictions via central registers or similarly effective systems.”
At the meeting, the Overseas Territories and U.K. law enforcement authorities discussed the technical details of developing a timely, safe and secure information exchange process.
However, the details and, in particular, what constitutes a “similarly effective system” remain unclear.
In a statement, Mr. McLaughlin claimed the communiqué recognizes the appropriateness of Cayman’s regime to tackle the global issue of serious crime, including corruption and serious fraud. The statement also noted there was “no agreement to public registries” and “no agreement to direct access to information by foreign law enforcement, tax or regulatory authorities.”
However, Overseas Territories Minister James Duddridge, who was pressed on the issue in the U.K. Parliament on Thursday, said progress had been made. “Often there are quite extensive discussions and sometimes quite robust discussions, but late last night we got there and we have a shared understanding and it moves us further forward.”
Quoting the Joint Ministerial Council statement, the minister told members of parliament, “We agree that addressing this issue will be given the highest priority and that progress on implementation will be kept under continuous and close review.”
The complex process of obtaining beneficial ownership information through tax information exchange agreements, as well as legal challenges to information requests in Cayman and other jurisdictions in the past three years, have raised questions whether the U.K. would consider Cayman’s existing systems as effective as a centralized registry for law enforcement purposes.
Cayman’s system requires in civil proceedings that taxpayers are notified and given the opportunity to challenge a request. In criminal proceedings, the Tax Information Authority, which ensures that a request complies with the underlying tax information exchange agreement and Cayman Law, has to obtain a court order before a service provider can be compelled to disclose the identities of beneficial owners of a registered company.
Minister for Financial Services Wayne Panton said, “The significance of this [Joint Ministerial Council], and the mark of its success, is that we have advanced a mutual understanding with relevant U.K. agencies.”
“The core issue, for the U.K. and its territories, is to further enhance our cooperation on investigations related to serious crime,” he added.
Cayman had therefore invited representatives from the U.K.’s National Crime Agency and the Serious Fraud Office to engage with its Attorney General’s Chambers and Financial Intelligence Unit in order to improve effective and efficient collaboration.
Last week, Premier McLaughlin refused to give U.K. law enforcement agencies direct access to beneficial ownership information. He said no country in the world allowed unrestricted access to beneficial ownership information by law enforcement agencies of another country and doing so would put Cayman at a competitive disadvantage.
On Thursday, U.K. parliamentarians criticized the British government for its “lack of ambition” and progress on beneficial ownership transparency in the Overseas Territories.
The Labour Party’s shadow foreign minister Catherine West said the U.K. government had to ensure good governance in its overseas territories, not just minimum standards. The U.K. territories should have world-leading standards rather than being “world leaders in enabling corruption and tax evasion,” she said.
Conservative MP Nigel Mills said the territories should take the lead in preventing the flow of corrupt, criminal and terrorist money, “rather than waiting for everybody else to do it at the same time.”
Anti-corruption campaigners criticized the fact that beneficial ownership information would not be made public.
“The U.K.’s Overseas Territories lie at the heart of the global secrecy industry; companies registered here are the most abused in the world,” said Rosie Sharpe, a campaigner at Global Witness, citing a report on beneficial ownership transparency by the World Bank.
Creating centralized registries of company ownership was only a small step forward that falls short of what is needed, she said.
“This measure may help the U.K. track down tax evaders and the corrupt, but what about the rest of the world? The only way for tax inspectors and law enforcement to easily know that someone is hiding money in a bank account that belongs to a company is for information on the people who own and control companies to be public,” Ms. Sharpe said in a press statement.