Earlier this month, global professional association STEP reported that Britain’s Overseas Territories will not be forced to establish public registries of company beneficial ownership until 2023, a postponement from the original 2020 deadline demanded by UK Members of Parliament.
Recap: The journey to public registries
In 2015 many Britain’s Overseas Territories, including the British Virgin Islands (BVI) and Cayman Islands, committed to keeping registers of company beneficial ownership as part of the global effort toward curbing fraud and tax evasion. The BVI implemented its Beneficial Ownership Secure Search (BOSS) – an electronic search engine that provides details on company beneficial ownership – while the Cayman Islands committed to setting up its General Registry by August 2017.
Both territories agreed that this information will be exchanged with the competent authorities, including government agencies and persons that have been given legal authority and power. This also meant UK law enforcement could access the information within an hour in urgent cases. The public, however, would not have access to this information which sparked the introduction of a new transparency measure by way of an amendment to the UK’s Sanctions and Anti-Money Laundering Bill (now SAMLA).
The SAMLA amendment: concerns and timelines
In May last year, a cross-party group of MPs forced this amendment to the bill which allowed the government to enforce public registers on the 14 Overseas Territories by the end of 2020. In a nutshell, this public register policy will force the BVI and other Overseas Territories to publicise the names of ‘secret’ owners of offshore companies registered in those jurisdictions, making this information available to the public. Even though the Foreign and Commonwealth Office (FCO) held the view the amendment would damage the autonomy of the Overseas Territories, it still accepted it.
Unsurprisingly, the amendment caused outrage among the territories (especially those with significant financial centres like the BVI and Cayman Islands). According to STEP they “…described the move as colonialist, undemocratic and a breach of previous agreements.” Most of the other British Overseas Territories have already given commitments to introduce public beneficial ownership registers, granted they became a viable global standard, and they were concerned that the 2020 deadline would lead to a flight of business to other, less-regulated jurisdictions where UK law enforcement authorities would not have the same level of access to beneficial ownership information.
According to STEP, the legislation enacted in May last year requires the government to begin issuing the relevant Orders in Council in December 2020 to any OTs that have not implemented public registers by that date. Last month, Foreign and Commonwealth Minister of State Lord Ahmad told the House of Commons Foreign Affairs Committee that instant compliance was not the expectation, although some of the OTs, notably Gibraltar, are expected to have complied voluntarily by 2020.
Postponing the registry timetable
Lord Ahmad explained the new 2023 deadline was chosen because the former UK Prime Minister, David Cameron, had originally set that the date as the target for ensuring worldwide adherence. He added, though, that the obligation for public registers would remain for Overseas Territories whether or not they were adopted worldwide: an outcome which he admits is unlikely.
According to STEP’s report, Lord Ahmad indicated that “…SAMLA is quite specific on the obligation on the Government to produce an Order in Council on those Territories that don’t have a public register by 2020”. What SAMLA doesn’t specify, however, is the date when public registers must be operational, but Lord Ahmad confirmed it’s been made clear to the Overseas Territories that they will be obligated to produce an operational public register by 2023. He is in the process of confirming this new timetable to the territories.
Impact on companies incorporated in the BVI and Cayman
Despite the potential impact of the establishment of public registries of company beneficial ownership this has not resulted in the flight of assets or the downturn in the numbers of companies being incorporated in the BVI and Cayman Islands.