The British overseas territories are under threat from recently-passed UK legislation that could result in the establishment of new publicly-accessible registers of beneficial ownership. This, in particular, poses a threat to the transparency of details about wealthy asset ownership such as superyachts.
The overseas territories include jurisdictions such as the Cayman Islands, British Virgin Islands, Bermuda, Gibraltar, the Turks & Caicos Islands, Anguilla and Montserrat. Under these jurisdictions – especially Cayman, the BVI and Bermuda – the ownership of a large number of superyachts is held through offshore structures. A number of these jurisdictions are strongly resisting the new rules.
The plan for the new beneficial ownership registers to be set up by 2020 is opened up by section 51 of the Sanctions and Anti-Money Laundering Act 2018, which was passed by the UK Parliament towards the end of last month.
Superyacht legal practice Ince & Co has issued a statement which says: “At present, all Crown Dependencies and British Overseas Territories [except Montserrat] have registers of beneficial ownership which can be accessed by UK law enforcement agencies under bilateral arrangements called Exchange of Notes (published 21 April 2016).”
It added: “The Crown Dependencies [the Isle of Man and the Channel Islands] are not affected by the Act though it seems likely that pressure will be brought on these jurisdictions to introduce similar requirements in time. The Act provides that if such public registers are not set up by 31 December 2020, the UK Secretary of State shall prepare a draft Order in Council requiring the relevant government to do so.
“The beneficial ownership registers must, in the opinion of the Secretary of State, provide information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 [information about people with significant control],” the statement outlined.
Ince explained that Part 21A and Schedules 1A and 1B of the Companies Act 2006 (introduced in response to the requirements of Article 30 of the Fourth Money Laundering Directive (EU) 2015/849 as amended by the Fifth Money Laundering Directive (EU) 2018) require every legal entity within scope to create and maintain a register (PSC Register) of ‘persons’ with significant influence or control (PSCs) and ‘relevant legal entities’ with significant interest or control (RLEs). The legislation (and connected guidance) has been drafted so as to ensure that all methods of holding significant control over an entity are potentially registrable and, therefore, publicly accessible.
The stated aim of the Act is to increase corporate transparency, the lack of which is considered a factor in enabling corruption and money laundering. However, there is concern amongst some politicians and commentators in certain British Overseas Territories that: (i) the corporate and financial services on which they depend (along with tourism) will simply move to other jurisdictions that do not have a public beneficial ownership register; and (ii) the cost of implementation may be prohibitive. The BVI and Cayman governments have each recently announced their intention to bring independent legal challenges in the British or local courts.
Like many other companies in the UK and across all jurisdictions where superyachts are registered, Ince says they will be monitoring developments during 2018/19 to see whether or when beneficial owners of companies registered in the British Overseas Territories will have their controlling interest made public and will be able to advise on any action to take.