Government backs down on amendment to Sanctions and Money Laundering bill to make offshore tax havens more transparent
The government has agreed to force Britain’s overseas territories to be more transparent, after more than 20 Tory rebels threatened to embarrass Theresa May in another parliamentary defeat.
A cross-party amendment to the Sanctions and Money Laundering Bill – proposed by veteran Labour MP Margaret Hodge, but backed by numerous high-profile Tories including Tom Tugendhat, Ken Clarke and Andrew Mitchell – will force British overseas territories such as the Cayman Islands, the British Virgin Islands (BVI) and Bermuda to set up “registers of beneficial ownership”.
This will create a public trail showing who ultimately owns companies based there, making it more difficult for “crooks, kleptocrats and corrupt individuals who engage in financial skulduggery”, Hodge said.
The premier of the BVI, Orlando Smith, said the “deeply flawed policy” represents a “breach of trust” and suggested overriding the local legislatures could spark a constitutional crisis. Westminster has unlimited power to intervene in overseas territories’ affairs, but customarily refrains from doing so.
However, facing a potential defeat, Foreign Office minister Alan Duncan yesterday conceded that a majority of MPs believed overseas territories should have public registers, ahead of it becoming international standard practice.
MPs, campaign groups and business leaders have welcomed the historic change, which must now be put in place no later than 31 December 2020.
Jonathan Riley, head of tax at Grant Thornton UK , said: “This change makes it easier to crack down on practices that destroy trust in financial markets. It helps to rebuild integrity.
“Any decent taxpayer will have nothing to fear from this change. And any jurisdiction or commercial enterprise that relies on secrecy as a unique selling point should reconsider what its offer to potential clients needs to be.”
Nick Herbert, a former Tory minister who backed the amendment, said the government now has “a duty to ensure that those economic consequences are addressed and that we help to mitigate them.”
Henry Bellingham, chair of the All Party Parliamentary Group on the BVI, said there will be a “short-term disruption” to their business models and called for Foreign and Commonwealth Office to support the territories during a transition.
The overseas territories’ qualms were acknowledged by Duncan today telling MPs that overseas territories were democratic bodies and “not represented in this parliament”.
He noted that the government would have preferred to work “consensually” with those territories, noting that “legislating for them without their consent effectively disenfranchises their elected representatives” and may “risk damaging our long-standing constitutional arrangements, which respect their autonomy”.
“However, we’ve listened to the strength of feeling in this House on this issue, and accept that it is without a doubt the majority view of this House that the overseas territories should have public registers, ahead of it becoming international standard,” Duncan added. “We will accordingly respect the will of the House and will not vote against [Hodge’s amendment].
“Unless she seeks the leave of the House to withdraw it, we accept that this amendment will become part of the bill.”
Hodge thanked cross-party MPs for their support, particularly former chief whip Andrew Mitchell who had co-signed it.
“When it is passed, this simple measure of requiring British overseas territories, our tax havens, to publish public registers of beneficial ownership will transform the landscape,” Hodge said. “It will stop [criminals] exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes.”
Mitchell told MPs: “This is evidence in a hung parliament that power moves from the Cabinet room to the floor of the House of Commons.”