Extra Teeth for the Criminal Finances Bill?

The Guardian (http://preview.tinyurl.com/zmsf6b3) reports that Margaret Hodge will today table an amendment to the Criminal Finances Bill 2016 requiring British overseas territories to reveal the true owners of locally registered companies.

Good for her. Apparently half the corporate entities exposed in the Panamanian firm Mossack Fonseca’s trove of tax evasion schemes were registered in the British Virgin Islands. Other such overseas territories include Turks and Caicos, Anguilla, and the Cayman Islands.

The Criminal Finances Bill promises stronger controls on tax evasion, giving NCA, HMRC and the SFO extra-territorial reach to deal with British companies and partnerships which facilitate it anywhere in the world.

But the enforcement issues remain a challenge – if companies established as vehicles for tax evasion can shelter in secrecy overseas, the bill lacks teeth. This amendment, if passed, would require these territories to create an open register by 2020 which anyone may consult. Britain has power to issue an Order in Council requiring compliance if voluntary steps are not taken.

The global anti-money laundering organisation, the Financial Action Task Forces (FATF) has been moving on this issue for some time. In September 2016 their director summarised their significant progress in a speech. Even Panama has been moved to introduce beneficial ownership requirements.

But British overseas territories remain foot draggers on this issue. Earlier this year the BVI added a new s 118B to the BVI Business Companies Act, 2004 requiring registration of a company’s register of directors, but not of the register of members. Other overseas territories have done likewise, or less. Compare that with the UK where companies are now required to keep a ‘Register of People with Significant Control’.

This extra measure would therefore have a radical impact on the ability of tax dodgers and their facilitators to avoid scrutiny, both from government and the court of public opinion. So all strength to Margaret Hodge and the cross party group of 80 parliamentarians said to support her.

What are its chances? Probably not great. David Cameron met with significant pushback from the overseas territories in May when he pressed them on this issue. Had the current government wanted to show its teeth on this it had its chance at the drafting stage.

This is likely to become another opportunity lost.