Public beneficial ownership registers coming to Caymans, BVI and Bermuda

British Overseas Territories (BOTs) will have to create public beneficial ownership registers for companies registered in their jurisdiction by 31 December 2020.  BOTs are being mandated to introduce public beneficial ownership registers by a cross-party amendment to the Sanctions and Anti-Money Laundering Bill which is currently going through parliament in the UK. The UK government conceded the amendment this week after it was clear that the majority of UK parliamentarians were in favour of it.  The Bill will now move to Royal Assent and be added to the UK's statute book.

The move has been met with dismay by the governments of those territories as an unwarranted interference in their affairs: David Cameron, the former UK Prime Minister who had championed public beneficial ownership registers, had previously sought to come to a behind-the-scenes agreement with BOTs and it had been reported that Theresa May, the current UK Prime Minister, had quietly dropped the policy of public ownership registers for BOTs altogether. But sustained pressure by campaigning groups such as Global Witness and Transparency International to bring greater transparency to corporate structures in offshore jurisdictions have borne fruit. That the UK government had to give ground on this issue speaks to the relative strength of the legislature versus the executive in UK politics at the moment.

A similar provision was proposed for Crown Dependencies – the Channel Islands and the Isle of Man - but was withdrawn because it was felt that agreement would be reached without the need for UK legislation (putting aside constitutional questions of whether the UK can legislate for the Crown Dependencies without their consent). It is likely that the Crown Dependencies will be pushed to comply with the provisions of the Fifth Anti-Money Laundering Directive which will require public beneficial ownership registers to be introduced throughout the EU by December 2019. The Crown Dependencies are currently part of the Customs Union and are essentially within the Single Market for the purposes of trade in goods, but are third countries (i.e. outside the EU) in all other respects and so are not obliged to implement the 5^th AMLD regardless of Brexit. Nevertheless, the Crown Dependencies have close regard to EU legislation and often adopt it on a voluntary basis and it is likely that pressure will be put on them to adopt public registers as will be required throughout the EU.

The BOTs' registers will need to show information broadly equivalent to that available on the people with significant control (PSC) register of UK companies. Further information on the UK's PSC register regime can be found here.

Somewhat ironically, Global Witness has recently found many flaws in the data held on the UK's PSC register. This is in part because criminals are unlikely to comply with disclosure requirements and UK Companies House, the registrar of company information in the UK, has not had the resources to review the information which is filed with it or enforce compliance. The effects are compounded by the difficulties in applying the PSC register test to complex structures involving multiple layers of companies, trusts, partnerships and overseas entities.

But improvements are on their way. Companies House has recognised the need for better PSC data in its business plan for 2018/2019.  It will be taking steps to pursue companies that have not properly complied with their PSC obligations and will be working with law enforcement where companies are deliberately providing false information or no information at all to cover fraud or money laundering activities. A more proactive approach from Companies House is to be welcomed in advance of the extension of the PSC register regime to foreign companies holding UK property or entering into UK public procurement contracts.