CM supports major plan to eradicate Corporate Crime

Responding to the Organisation for Economic Co-operation and Development (OECD)’s latest report for stamping out corporate crime, Chief Minister the Hon. Ralph T. O’Neal presented a two-step recommendation to combat illicit practices at the UK Overseas Territories Consultative Council (OTCC) meeting in London last Friday.

Firstly, to be “effective” and to avoid charges of “protectionism,” the OECD must address the problem “on the basis of a level playing field,” the Chief Minister said. “All countries must be subject to the same rules for any given activity, implemented to the same time-table, with the same consequences for non-co-operation.”

Secondly, there must be a “truly universal forum” for developing new policy and rules. “This must involve all countries affected on an equal basis,” he said. In his presentation, Mr. O’Neal also referred to a recently published report, “Towards a Level Playing Field,” which is a direct response to the OECD’s study of 2001 entitled “Behind the Corporate Veil” and intended as a contribution to the debate on the misuse of corporate vehicles. Unlike the OECD account, it includes a comprehensive benchmarking review of the regulation of corporations, trusts and limited partnerships in 15 OECD and non-OECD countries.

“This is the first time that such a comparison has been made generally available,” he said. Towards a Level Playing Field was undertaken by the international law firm Stikeman Elliott for the Society of Trust and Estate Practitioners (STEP) and the International Tax and Investment Organisation (ITIO).

It shows that because of partial attempts at regulation the OECD may fail in its bid to stop corporate crime and, instead, some dominant countries may get further commercial advantage over small and developing economies and even over their OECD partners, including the UK. The OECD initiative is based on the study “Behind the Corporate Veil,” which has proved influential and is being actively used by several international bodies.

“The Government of the BVI is concerned, however, that the OECD’s work in this area may not prove effective. It is simply too selective,” the Chief Minister pointed out.

“This matter is of considerable importance to small and developing states with international finance centres across the world, including the BVI and other UK overseas territories.”

Mr. O’Neal said he believes that OECD and non-OECD countries are resolved to remove the “scourge” of corporate crime. Unfortunately, the organisation’s report focuses on a limited number of financial centres, many of which are small and developing states, and was prepared without the involvement of non-OECD members.

“Financial crime is a global phenomenon and only a global approach can tackle the problem. Failing that, businesses will simply migrate to jurisdictions overlooked or excused from full compliance with the new rules being developed,” he said, adding that this will “worsen the very problem that the OECD is seeking to eradicate.”

Corporate entities underpin most entrepreneurial activities in market-based economies and have contributed to prosperity worldwide in recent decades. Governments and regulatory bodies have realised that, ranging from corporations and trusts to foundations and partnerships, they are often misused for money laundering, bribery and corruption, shielding assets from creditors, tax evasion, self-dealing, market fraud, and other dishonest activities. Prepared against this background, the OECD report attempts to open ways to prevent the malpractices, claiming that abuse occurs most frequently among those that provide the greatest degree of anonymity to their beneficial owners. With that in mind, the study, prepared by the OECD Steering Group on Corporate Governance, offers governments and other authorities options for obtaining information on the advantageous ownership and control of corporate entities to wrestle their exploitation for corrupt purposes.

On the other hand, the STEP/ITIO account confirms that, while arguing for tighter control of corporate entities in small economies, the OECD is effectively excusing large corporate domiciles such as Delaware and Nevada in the USA from compliance with new rules to regulate service providers and track beneficial ownership.

“The Government of the BVI commends the STEP/ITIO report to Her Majesty’s Government and asks them to support the principle of a level playing field in all matters relating to the regulation of financial services,” concluded the Chief Minister.

The ITIO is a grouping of small and developing economies set up in March 2001 to help members respond to global tax and investment problems and explicitly considers the development implications of these challenges. The BVI is one of the founding members.

Other members are Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Cayman Islands, Cook Islands, Labuan (Malaysia), St. Kitts and Nevis, St. Lucia, Turks and Caicos Islands and Vanuatu. The Commonwealth Secretariat, the Pacific Islands Forum Secretariat, the Caribbean Community (CARICOM) Secretariat, the Commonwealth Development Bank and the Eastern Caribbean Central Bank have observer status.