UK House Of Lords Rejects Public Beneficial Ownership Registers For British Overseas Territories

On 17 January 2018, the House of Lords voted against an amendment to the proposed Sanctions and Anti-Money Laundering Bill that sought to create a publicly accessible register of the beneficial ownership of companies registered in six British Overseas Territories1 ("OTs"), by 1 January 2020. The amendment's stated purpose was to "bring transparency to the financial operations in the six British Overseas Territories that have financial centres".

This article considers whether the Lords' vote represents a faltering step in the UK's commitment to combating the use of anonymous offshore shell companies in facilitating international corruption and money laundering.

The UK's Leading Role

The UK government has long been a vocal exponent of increased transparency of company ownership as a tool to combat illicit financial activity. At the 2013 Open Government Partnership summit, then Prime Minister David Cameron announced that an open-to-the-public central register of UK company beneficial ownership would be established, labelling transparency a "vaccine against corruption". The UK register was established in June 2016 (see earlier blog posts here and here) and the EU followed suit in December 2017, amending the Fourth Anti-Money Laundering Directive to require Member States to make publicly available the identity of beneficial owners of companies within the EU.

Whistleblowers Highlight Concerns

In the House of Lords debate, Baroness Stern highlighted how the release of the Panama Papers (in April 2016) and the Paradise Papers (in November 2017) laid bare the potential for offshore companies to be anonymous cloaks that could be used for the storage and transfer of illicit funds: at the end of 2016, Europol reported finding nearly 3,500 probable matches to organised crime, tax fraud and other criminal activities in the Panama Papers. As Baroness Kramer made clear, "It is the disinfectant of transparency and light that is the best protection against the corruption that sits underneath and benefits from secrecy".

Constitutional Questions

Part of the argument put forward against the proposed amendment was the UK Parliament's lack of constitutional competence in legislating directly for OTs, without their consent. Historically, this has occurred only where it pertains to the UK's international human rights obligations (e.g. the abolition of the death penalty and the decriminalisation of homosexuality). The counter argument - that the misery caused by...