How Offshore Tax Havens Are Thwarting the UK’s Transparency Push

The UK government’s efforts to increase corporate transparency in its overseas territories have been slow to materialize. The introduction of Legitimate Interest Access Registers (LIARs) in jurisdictions like the Cayman Islands and British Virgin Islands is meant to shed light on company ownership, but the system has several flaws.

To access LIARs, individuals must demonstrate a legitimate interest in the information they seek. This can be a daunting task, as the definition of “legitimate interest” is vague and open to interpretation. Applicants must provide detailed explanations for their request and make promises about how they will use the information once obtained. The system invites abuse and misinterpretation.

The cost of accessing LIARs is significant – at least $75 per application – and the process can be lengthy and cumbersome. This is not what transparency looks like when it takes months to receive a response from officials. Furthermore, companies have the option to protect their owners’ identities from scrutiny, which undermines the purpose of the registers.

The British Virgin Islands’ approach to LIARs is particularly egregious. When someone inquires about ownership information, they are given the name of the organization making the request but not the individuals involved. This tactic stifles investigation and keeps potential whistleblowers in the dark. Transparency International’s Steve Goodrich noted that it took his team three months to receive a response to their inquiry about a sanctioned Russian oligarch.

The UK government’s rhetoric on transparency has been promising, but its actions have fallen short of expectations. The new registers are touted as an interim step towards fully public corporate registers, but progress has been slow. Margaret Hodge, a veteran anti-corruption campaigner, summed up the situation aptly: “The sclerotic and unpredictable nature of these corporate registries makes a mockery of their purpose.”

This issue is not limited to the UK; it has far-reaching implications for global financial stability. The Pandora Papers leak exposed how easily money can be laundered through offshore havens, while the 1MDB scandal highlighted the role that Cayman Islands entities played in one of the largest corruption cases in history. It’s clear that greater transparency is needed – not just in the UK but worldwide.

The future of corporate registers hangs in the balance. Will governments and corporations prioritize transparency, or will these systems continue to stifle investigation and keep secrets safe? Phil Brickell MP put it succinctly: “The only way to shine a light on dirty money flowing through British overseas territories like the BVI is to have full transparency over who owns the companies registered there.”

As the UK prepares to host a summit on countering illicit finance in December, the world will be watching. It’s time for the government to put its words into action and push for real change – not just in the UK but around the globe. Anything less would be a betrayal of its agreement with the British public.

Ultimately, transparency is about creating an environment where information flows freely and easily. Until that happens, the dance of transparency will continue – one step forward, two steps back.