Over the weekend the opposition Labour party announced plans to force the UK’s offshore financial centres to end anonymous company ownership if it forms a government in May. In an interview with the Guardian, Labour leader Ed Miliband said: “We are going to give six months to these tax havens to agree to publish a register of beneficial ownership”.
This would be a major step forward for the UK, which is already a leader in the battle for transparency in company ownership. The current UK government led by Conservative Prime Minister David Cameron is in the process of creating such a register for UK companies. Although Cameron has pushed for this to be extended to companies registered in the British Overseas Territories (OTs) and Crown Dependencies (CDs), progress has been slow as a joint Christian Aid and Global Witness briefing showed.
There are a few points worth making about Labour’s promise:
First, the UK’s tax havens are a major conduit for dirty money. Global Witness’ Great Rip Off map documents how anonymous companies are abused for purposes which range from human trafficking to terrorism, and the UK territories feature heavily. For example, companies in the British Virgin Islands (BVI) were at the heart of secretive sale of Congolese mines that lost citizens $1.3 billion.
Next, the UK has exerted power over its OTs and CDs in the past to prevent human rights abuses, among other things. For example, in 2000 the UK government forced its Caribbean territories to decriminalise homosexuality.
Finally, such a position is not anti-business. A group of prominent business leaders, including Richard Branson (Virgin’s founder and CEO) and Jochen Zeitz (former CEO of Puma), together known as The B-Team , argue in thisreport that ending anonymous company ownership actually increases competitiveness, reduces risk, and helps firms manage financial exposure.
In ending anonymous company ownership in the British tax havens, the UK would maintain its position at the forefront of the movement towards much greater transparency of who really owns and controls companies. The EU has agreed to create national-level registers of the ultimate owners of companies, with the public guaranteed some access.
This move by Labour should serve as a rallying call to other major financial centres, including the U.S., which is one of the worst offenders. On Sunday, the New York Times published the first in a series of five high profile exposés of how secretive companies facilitate high end real estate transactions by wealthy foreigners. The Times claims that the individuals they have investigated: “have been able to make these multimillion-dollar purchases with few questions asked because of United States laws that foster the movement of largely untraceable money through shell companies”.
Global Witness’ 2014 report The Great Rip Off,highlights 22 cases in which anonymous companies from 27 U.S. states have been used by fraudsters, mobsters, money-launderers, tax-evaders and corrupt politicians to cover their tracks and evade the authorities.
Ending anonymous company ownership is crucial if we’re going to crack down on corruption, money laundering and tax dodging. As Global Witness’ Director Charmian Gooch said when she accepted the 2014 TED prize: “This isn’t just a dry policy issue. This is a human issue which affects us all”.