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Is the sun setting on offshore secrecy?

The move by MPs to require British Overseas Territories to introduce a register of companies’ beneficial ownership is probably inevitable and will — in the short term at least — benefit Channel Islands jurisdictions, writes Alec Marsh

The dramatic climbdown by the government, announced in the Commons yesterday, to force British overseas territories — notably Cayman Islands, British Virgin Islands and Bermuda — to publicly identify those benefiting from assets held in their jurisdictions is being hailed as a victory for transparency.

And so it is… up to a point.  It will certainly be interesting to see if this amendment to the Sanctions and Money Laundering Bill will deliver on cracking down on corruption, as intended. Furthermore, bringing these territories into line with UK by 31 December 2020, and will do much to spike the guns of those longstanding critics for whom the word ‘offshore’ is inexorably tarnished. If the secrecy is gone, what will there be left to complain about?

That said Orlando Smith, the premier of BVI, was among those who decried the decision, describing it as a ‘deeply flawed policy’ which represents  a ‘breach of trust’ between Westminster and his jurisdiction and called into question ‘our very relationship with the UK’. Sir Henry Bellingham, former foreign office minister and chair of the all party parliamentary group on the BVI, predicted a ‘serious stand-off’ over the issue, and that he feared for the economies of these overseas territories.

It is certainly a reversal of the government’s previous, more consensual approach to the financial regulation of the overseas territories, but in the face of the clear majority of the Commons.

John Riley, head of tax at Grant Thornton UK, was speaking good sense today when he told City AM that the change would ‘crack down on practices that destroy trust in financial markets’ and ‘rebuild integrity’. ‘Any decent taxpayer will have nothing to fear from this change,’ he told the newspaper. ‘And any jurisdiction or commercial enterprise that relies on secrecy as a unique selling point should reconsider what its offer to potential clients needs to be.’

Indefatigable to the last, James Quarmby,  partner at Stephenson Harwood, tells Spear’s that the decision is ‘grim news indeed’ for Cayman, BVI and Bermuda. ‘I would expect the BOTs [British Overseas Territories] in question to resist the interference and refuse to comply,’ he says. And asking if the UK can actually force these territories to do so, Quarmby adds: ‘This needs to be resolved quickly as otherwise business will dry up in those territories and move elsewhere. I would expect the Channel Islands and the Isle of Man to be immediate beneficiaries.’

There is a justified anxiety in the HNW community about the new order turning into a witch hunt for tax evaders, with law-abiding bystanders caught in the furore. Private client advisers like Quarmby have whispered in the past about dubious methods HMRC has used to obtain information from HNWs. However, we can only hope that the process involved in creating the register will be more respectful of the human right to privacy. If the privacy of HNWs can be protected in tandem with the new rules, to offset the increased security threats on wealthy individuals and their family members, Spear's is of course, ideologically aligned with the government and those who want to create a more transparent system. In the mean time secrecy should not be confused for privacy.

Alec Marsh is editor of Spear's

 

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