The Cayman Islands has quite a long, drawn-out process for requesting company records in its jurisdiction.
Transparency campaigners say aspects of the system in the British Virgin Islands are even worse.
Critics say ownership registers are too costly and too complicated, scuppering attempts to expose alleged money laundering Since Britain’s offshore secrecy jurisdictions caved in to pressure from Westminster to embrace corporate transparency, finding out who owns a company in one of these island havens is, in theory at least, a piece of cake.
Take the Cayman Islands.
All you have to do is show that you have a “legitimate interest” in the data by proving that you are a researcher, journalist, member of a civil society group or a business person considering a transaction with the subject of your inquiry.
Next, you must explain how the information will be used for “preventing, detecting, investigating, combating or prosecution money laundering or its predicate offences or terrorist financing”.
Then there is a fee of at least $75 (£55) for each application.
You’ll need to set up an international wire transfer though, rather than a typical online payment.
Now, fill out a lengthy form outlining exactly what information you’re after, cross your fingers and wait.
It isn’t exactly Companies House (for all its faults).
Even when the form has been submitted, the subject of the inquiry can apply for a three-year “protection from disclosure” (at a cost of $1,000) to stop the information being sent on, on the basis that corporate transparency could expose them to harm.
These applications are refused more often than not, a Cayman Islands spokesperson said, but justifications for exemption appear to be drawn quite widely.
Reasons could include revealing any connections to “activity such as testing products on animals, which might lead to them being targeted by activists”, according to guidelines written by the Cayman Islands government.
Transparency campaigners believe aspects of the system in the British Virgin Islands (BVI) are even worse.
There, officials will inform the subject of any inquiry – perhaps a powerful oligarch or a narco-trafficker – of the name of any organisation asking the inconvenient questions, though not the names of individuals.
Don’t expect a quick outcome either.
“Three months ago we asked whether a sanctioned Russian oligarch still owns a company holding millions worth of UK property,” said Steve Goodrich, the head of research and investigations at the anti-corruption campaign group Transparency International.
“We still haven’t had a reply.” Margaret Hodge, the veteran anti-corruption campaigner, said that the sclerotic and unpredictable nature of these corporate registries “makes a mockery of their purpose”.
Legitimate interest access registers of beneficial ownership (or Liarbos for fans of ironic acronyms) have come about after a seven-year campaign by the UK government to bring overseas territories – and crown dependencies such as Jersey and Guernsey – to heel.
The campaign has gathered steam amid mounting real-world examples of how Britain’s offshore havens had been used to launder money, avoid taxes or otherwise flout laws or other norms, such as the financial rules governing football.
Cayman Islands entities played a central role in the 1MDB scandal, one of the largest corruption cases in history.
The Russian oligarch Roman Abramovich secretly funded Chelsea FC with cash funnelled through companies in the BVI, a Guardian investigation revealed last year.
The BVI was the single most-used jurisdiction in the now infamous Pandora papers leak.
By earlier this year, after several missed deadlines, all of the overseas territories had responded to the drive to introduce Liarbos.
But, according to Stephen Abbott Pugh, of the transparency group Open Ownership, the registers are “too costly, too complicated and [it] takes too long to access this crucial information.
“So it remains locked away in most cases out of the reach of users with a legitimate interest in accessing it.” A spokesperson for the Caymans said only 25 applications for information had been received in 19 months, citing this as evidence of lack of demand, rather than difficulty in accessing the system.
The spokesperson rejected criticism that the register was hard to use or costly and defended the islands’ reputation.
“In spite of the public perception created by Hollywood fiction, misguided NGOs, and the politicians whom they have influence over, no credible evidence has ever been presented that Cayman has a problem with illicit finance,” they said. skip past newsletter promotion after newsletter promotion The new registers, according to the UK government’s own rhetoric, are only supposed to be an “interim step” towards fully public corporate registers accessible to all.
Dispute over the pace of progress towards greater transparency has fuelled simmering tension between London and offshore outposts.
Last year, Hodge – the government’s “anti-corruption champion” – was dispatched to the BVI on what was officially called a fact-finding mission but looked more like a shot across the bows.
The British Virgin Islands were criticised by British MPs campaigning against corruption.
Wearing thick boots, they were depicted kicking lumps out of Riley Right – a cartoon parakeet in a suit who serves as the islands’ corporate transparency mascot.
“The only way to shine a light on the dirty money flowing through British overseas territories like the BVI is to have full transparency over who owns the companies registered there,” said Powell.
“It’s completely unacceptable that following the money is still so hard, and it is a flagrant breach of their agreement with the British government.” Brickell said the “eyes of the world” will be on the UK government when it hosts a summit on countering illicit finance this December.
“Failure to get our own house in order by then would be an acute embarrassment,” he said.
Hodge isn’t backing off either.
Earlier this year, she indicated that Westminster could force crown dependencies to improve transparency.
Guernsey’s top politician responded by bemoaning “outdated prejudices” about the island.
Hodge fears that crown dependencies are now “hiding” behind a prolonged EU row over how corporate registers in the 27-nation bloc should look.
She doesn’t want to wait to see how that process plays out.
“With a new government in place under Andy Burnham, I would hope we will be able to review our approach and be effective,” she said.
Spokespeople for the Cayman Islands and the BVI rejected the suggestion that public access to corporate ownership registers were an accepted international standard and pointed out that tax and criminal authorities already had full access.
A BVI spokesperson said: “We are proud of our legitimate interest access (LIA) regime which has significantly strengthened the accuracy, security, and accessibility of beneficial ownership data.
“The regime offers greater transparency alongside appropriate protections for individual privacy, while remaining aligned with international standards, including the EU’s sixth anti-money laundering directive.” Explore more on these topicsTax havens Tax avoidance Cayman Islands British Virgin Islands Americas Caribbean Financial sector features Share Reuse this content
