Britain’s overseas territories will be compelled to adopt tougher business registration standards under new rules intended to end the secrecy and anonymity of offshore finance. Regulators argue that such offshore practices have allowed criminal enterprises to hide and enjoy the spoils of ill-gotten wealth.
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Under an amendment passed by parliament on May 1, the Sanctions and Anti-Money Laundering Bill extends the requirement for regulators in Britain’s overseas territories to create a register of beneficial ownership for all companies.
Anti-corruption campaigners, such as London-based NGO Global Witness, welcomed the news, having spent years calling for greater transparency in Britain’s offshore territories. According to research by these groups and investigative journalists, complex arrangements, sometimes involving strings of shell companies anonymously registered in different jurisdictions allow criminals to hide the gains of their crimes.
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Research group Global Financial Integrity estimates that in 2013, $1.1 trillion was corruptly siphoned out of developing countries through such offshore networks.
The system was brought under greater scrutiny after major leaks to the media known as the Panama Papers (2015) and Paradise Papers (2017), the latter of which came from documents leaked from a Bermuda-based law firm with offices in several British territories.
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Some questions we’d like to answer:
- How enforceable is the new regulation?
- Existing company ownership registration requirements are often under-enforced. Is it likely this one will be enforced, particularly if the governments in question are reluctant to comply?
- The register is supposed to establish “beneficial ownership.” How easy might it be for the real beneficial owner to employ someone to register the company in their own name?
- Will some offenders simply move their money to other jurisdictions?
- Would they be sacrificing stronger legal/regulatory frameworks to do so?
- Would this create a “red flag”? For example, if a company moves to a jurisdiction known to not comply by the standards the UK is moving toward, will it be harder for that company to do business internationally?
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