This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Transparency on beneficial ownership remains opaque
Jessica Medus
05 February 2015

Transparency on beneficial ownership remains opaque

The G20 Finance Ministers and Central Bank Governors meet in Istanbul next week where they are expected to share their plans to implement the 'G20 High-Level Principles on Beneficial Ownership Transparency', as agreed at the Brisbane summit in November 2014. The principles are intended to improve the transparency of beneficial ownership of companies and trusts, thereby reducing crimes such as money laundering, tax evasion and illicit finance and corruption. However, the UK government has yet to convince the British Overseas Territories and Crown Dependencies to implement its plans for a centralised, public register of beneficial ownership.

The UK government has committed to implementing a central registry containing information on individuals with an interest in more than 25% of a company's shares or voting rights, or who otherwise control the way in which it is run. The EU is expected to legislate for such central registers in its Fourth Anti Money Laundering Directive and will also require trustees of "taxable trusts", governed by a member state's jurisdiction, to maintain information on the beneficial ownership of the trust (including the identity of the settlor, trustees, protector, beneficiaries or class of beneficiaries and any person exercising effective control over the trust). There will, however, be no requirement for that information to be made public. The phrase "taxable trusts" is as yet undefined but appears deliberately to have been framed in wide terms.

However, when the Overseas Territories Joint Ministerial Council (JMC) met in December 2014, the UK's request for its Overseas Territories to commit to the registry plan was unanimously rejected by its Caribbean dependencies, in a move led by the Cayman Islands. Concerns were raised over the security of a central register, the cost of implementing one and, crucially, the potentially disastrous impact upon the territories' financial services industry, often the locations of choice for the privacy that it offers companies and high net worth individuals.

Cayman Islands’ Premier, Alden McLaughlin, has said that before it or any other Overseas Territory or Crown Dependency would consider committing to any public registry plans, such registers must first become the global standard and be applied by all major players, including the UK; they will not have their "economies experimented with and potentially damaged". In the meantime, the Cayman Islands are confident that their current system, whereby companies must record information regarding their beneficial ownership and make it available to the relevant authorities, provides effective and efficient protection against corruption.

The JMC was due to meet again ahead of this month's G20 summit and it remains to be seen what measures, if any, the Overseas Territories will agree to before any of the G20 countries, other than the UK, have first created public registers.