The international press dedicated a huge amount of column inches this week to the decision by the U.K. parliament to force its overseas territories to make public the owners of companies registered in their jurisdiction, if necessary through an order in council.
Most news organizations in the U.K. celebrated the move as a victory for transparency campaigners and a major push against offshore secrecy.
The constitutional concerns expressed by the majority of overseas territories’ leaders about British MPs legislating the affairs of largely autonomous territories thousands of miles away received in contrast very little attention.
Cracking open ‘offshore secrecy’
British newspaper The Guardian, which featured offshore transparency as part of its news agenda perhaps more than any other news organization in the U.K., acknowledged that there may be legitimate reasons to use offshore jurisdictions.
“But kleptocracy – egregious and globalized grand corruption – is enabled by anonymous companies, which strip the fingerprints off stolen money and, having done so, hide it under the cover of supposedly respectable corporations. Once all traces of the money’s origin have been removed, the thieves can spend it on New York property, European passports or western politicians, and they do it in vast quantities,” The Guardian wrote in an article about the movement of NGOs that “crack open offshore secrecy.”
It quoted a 2013 estimate by advocacy group Global Financial Integrity that puts illicit financial flows at well over $1.1 trillion, adding that the total was “growing fast.”
“Many of these companies came from the British Virgin Islands, Gibraltar, Anguilla and the other pink dots left on the map of the world, which is why Tuesday’s vote in parliament was so celebrated,” the article said.
The Guardian also connected Tuesday’s decision directly to the Panama and Paradise Papers.
It quoted Conservative MP Andrew Mitchell who brought the public registry amendment telling MPs that the justification for disclosure was made “elegantly but passively” by the leaking of the Panama and Paradise Papers, which revealed the true owners of thousands of offshore companies.
“It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do it,” he said in the House of Commons.
Gerard Ryle, the director of the International Consortium of Investigative Journalists, which coordinated the Panama and Paradise Papers coverage around the world, said he was “incredibly proud” of the legislative action by the U.K. parliament which showed “how our work makes a difference.”
Ultimately, the move means that owners of companies in the BVI and the Cayman Islands will be revealed. “As you may remember from our reporting at the time, the BVI was one of the most frequently used tax havens by Mossack Fonseca, the firm at the heart of the Panama Papers,” Mr. Ryle said on the ICIJ website.
Attacking the defenders
British tabloid The Daily Mirror meanwhile attacked one of the few politicians who spoke up on behalf of the overseas territories.
The left-wing tabloid focused on Conservative MP Geoffrey Cox who “defended tax havens in Parliament after a GBP40,000 Cayman Islands payday” stating the “millionaire MP” had failed to mention in Tuesday’s House of Commons debate that he once represented former Cayman Islands Premier “McKeeva Bush in a corruption trial over his use of government credit cards in casinos.” Mr. Bush was found not guilty in the trial.
The Mirror said Mr. Cox later admitted “he should have come clean” to MPs about his interest before attacking the amendment.
Business news organizations were equally in favor of the move to force public registers.
News agency Bloomberg welcomed the U.K. move in a commentary stating it would “let the sunshine in on tax havens” but cautioned that the new transparency would have to be backed by enforcement.
Corporate anonymity, wrote columnist Lionel Laurent, had made the British Overseas Territories a magnet for overseas money. Open registers “should sow seeds of panic in the offshore financial ecosystem, which has played a central role in recent money laundering and tax evasion scandals.”
However, he pointed to problems with the U.K.’s public registry which employs only six out of the 1,000 staff at Companies House to detect breaches of its rules and inaccurate information. Still today, 13 percent of firms at Companies House have failed to name their controlling shareholders.
The Financial Times analyzed why British Overseas Territories “fear” that the transparency push could “undermine their positions as leading offshore financial centers.”
Simon Airey, partner at law firm Paul Hastings, said in the FT that high levels of privacy had been a significant draw for offshore centers.
“We will see … money on the move, some will be black, some will be grey, and some will be white,” said Mr. Airey. “There will be a shake-up but I wouldn’t be too worried about the overseas territories. It won’t be a massive exodus.”
The paper also addressed the potential for legal action by Cayman and Bermuda against an order in council. However, Tory MP Mr. Mitchell said this was unlikely to be successful.
“Parliament has spoken,” he said. “They have to do this by 2020. It will be a waste of their money [to challenge this in the courts], but they can try.”