US bill would establish beneficial ownership registry

The United States could soon have a central registry containing the beneficial ownership information of U.S.-registered companies.

Right now, companies in the U.S. are formed at the state level. Some states, such as Delaware, require no beneficial ownership information to be submitted by anyone who wants to incorporate a company there.

A bill before Congress would change that, giving federal oversight over company formation issues. According to the Wall Street Journal, the legislation would establish a beneficial ownership database maintained by the U.S. Treasury, which could be accessed by law enforcement.

The proposed change bears resemblance to the United Kingdom’s recent decision to force its British Overseas Territories to implement public beneficial owner registries, but there are several key differences between what happened in the U.K. parliament and what’s being mulled in the U.S.

First, the U.S. registry will only be accessed by U.S. investigators, while the registries the U.K. is forcing its territories to implement will be public, according to Robert Briant, the chairman of BVI Finance – the British Virgin Islands’ version of Cayman Finance.

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Another difference is that the U.S. is seemingly working toward its change in conjunction with the states, said Mr. Briant. The secretary of state of Delaware – which has roughly 1.3 million entities registered in the state, more than Cayman, the BVI, and the rest of the British Overseas Territories combined – has reportedly endorsed the legislation in Congress.

Mr. Briant said that states have been loathe to implement reforms because if a state such as Delaware, for example, implements stricter know-your-client information, then it would give other states a competitive advantage. But because the rules would apply uniformly across the U.S., states are likely more willing to come on board, he said.

In contrast, the recent U.K. legislation has been met with great resistance by British Overseas Territories. Along with not having a say in the matter, the colonies are aggrieved that the U.K. legislation does not apply to U.K. Crown dependencies such as Jersey and Guernsey.

Mr. Briant also said that the systems proposed by the U.S. and the U.K. both fall short of what are already in place in Cayman and the BVI. That is because regulators in Cayman and the BVI regularly audit financial services firms to make sure their beneficial ownership information is accurate – unlike in the U.K. and what’s being proposed in the U.S., he said.

The BVI Finance chairman added that the U.S. legislation will not have much direct impact on offshore centers, because companies are typically incorporated in the U.S. and offshore for entirely different reasons.

However, he said the U.S. reforms could significantly impact the global debate on the issue.

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