Uk’s Anti-Money Laundering Law To Cripple BVI Economy

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By Mellica McPherson

“I want to make it clear from the outset that we would have preferred a different approach,” Minister of State for the Overseas Territories Lord Ahmad of Wimbledon announced; as he made a strong case for the British Virgin Islands and other Overseas Territories (OT’s) before the passage in the House of Lords on 21 May of the UK Sanctions and Anti Money Laundering Bill, which will have crippling effects on the OT’s financial services sector.

There was a valiant attempt by the BVI and her sister Overseas Territories to cause some change to the amendment that was added to Clause 22 (Amendment 22A) of the Bill which forces the Territories to implement public registers. The attempts to persuade even saw Premier and Minister for Finance, Dr. the Hon. D. Orlando Smith and Opposition Leader Hon. Andrew Fahie making the case for the Territory’s most beneficial industry in London last week.

In defense of the Territories, the Minister of State for the Overseas Territories echoed a number of points that are passionately being argued here in the BVI in opposition to the catastrophic amendment. Nonetheless, the UK Sanctions and Anti Money Laundering Bill which UK legislators noted represented eight years of work on their part was passed in the House of Lords, and was scheduled to receive Royal Assent on 23 May thus becoming law of the United Kingdom.

The UK Sanctions and Anti Money Laundering Bill can be summarized as a legislation that will allow the United Kingdom to impose sanctions when necessary for the purposes of compliance with United Nations obligations or other international obligations. Particularly the legislation is to further the UK’s foreign policy objectives. It makes provision for the purposes of the detection, investigation and prevention of money laundering and terrorist financing.

This legislation directly impacts the British Virgin Islands through an amendment that was made on 1 May in the House of Commons. This Amendment was inserted after Clause 44 of the original Bill which deals with Public Registers of Beneficial Ownership.  This particular amendment requires that the BVI and the sister Overseas Territories establish public registers that disclose the owners of companies by no later than 31 December 2020.

In furtherance of this requirement it was announced that the Secretary of State must no later than 31 December 2020 prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.

UK Government Wanted another Way

This amendment has caused a feeling of distrust from the point of view of the Overseas Territories towards the United Kingdom Government. However, in a subtle attempt to point out that this was not the Government’s doing, Lord Ahmad noted that this amendment was beyond their control.

In debating the Bill Lord Ahmad stressed that the UK Government would have preferred a better approach. “As evidenced by the amendments we had tabled in the other place and my response to this debate in your Lordships’ House. Our approach has always been, and remains, as a priority to work consensually, constructively and collaboratively, with the overseas territories. Indeed, we have established strong channels with the overseas territories,” he told the House of Lords.

Constitutional Intrusion and Break in Relationship Cited

The march, the many radio talk shows and other expressions of public opinion here in the BVI demonstrates angst at the constitutional reach the amendment touts. This outrage is apparently not lost on the UK Government as Lord Ahmad told the House: “Let me be absolutely clear: the overseas territories are British, but they are separate jurisdictions with their own democratically elected Governments, responsible for their own fiscal matters and are not represented in this Parliament. We have legislated for them without their consent only in exceptional circumstances, for example to decriminalise homosexuality in certain territories to ensure that they were compliant with international human rights obligations.”

“By contrast, financial services are an area of domestic responsibility for territory Governments, where they surpass — an important point to remember — international standards in the context of beneficial ownership. Legislating for these jurisdictions without their consent in this field effectively disenfranchises their elected representatives,” he further stated.

From a local standpoint the fact that the UK is proposing an Order in Council is deemed hurtful for the BVI which has been off granting aid for decades and has worked exceedingly hard to keep pace with financial services regulations. This is the sore point here and it appears to be a matter of remorse for the UK government who seem touched by the response it received since the amendment passed.

In noting this cogent aspect the Minister for OT’s said: “As the reaction of the territories and their leaders has demonstrated, legislating for them without their consent risks damaging not only our long-standing constitutional arrangements respecting their autonomy but also our very proactive, positive and progressive relations with the overseas territories. Let me assure noble Lords that I have held a number of meetings with leaders and their London-based representatives since our debates at Report stage, and I have reaffirmed the importance that the United Kingdom attaches to our relationship with their jurisdictions.”

He also noted that the Territories have as recently as 2016 conformed with UK compliance requests: “I would place on the record our gratitude to the overseas territories and to the Crown dependencies for the work that they have undertaken to implement the bilateral arrangements on the exchange of beneficial ownership information we concluded with them in 2016. In a relatively short timeframe, they have passed new primary legislation and delivered technological improvements to comply with the terms of these arrangements.”

Remorse for Wounding Golden BVI Goose

Lord Ahmad pointed out that the register would have catastrophic effects on the economies of the Overseas Territories; some of which he noted are still recovering from devastating disasters.

He told the House, “We are also fully cognisant of the territories’ concerns that the economic impact of imposing public registers on them will be significant—and these are not under normal circumstances. As noble Lords know, the British Virgin Islands, Anguilla and the Turks and Caicos Islands are still recovering from the two unprecedented category 5 hurricanes of last September.”

The UK Minister specifically mentioned that the BVI was still recovery and that this move is of bad timing: “In the British Virgin Islands, nine out of 20 schools still remain closed and are accommodating their students in tents. The tourism industry has experienced a drop of 50% and is only now starting to recover. There remains a real risk that this will destabilize the reconstruction efforts of the hurricane affected territories, and all of this shortly before the next hurricane season begins in June.”

“Accordingly, our preference would have been not to legislate in this manner without the territories’ consent, and let me assure noble Lords that our aim remains to work consensually and collaboratively with them to achieve the best possible outcome following the amendment,” he added.

Why Hit The Overseas Territories This Way?

It was noted by Lord Ahmad that what the Overseas Territories are being requested to implement is beyond global standards and will cripple economies needlessly: “We should be clear that the arrangements go beyond the current international standards set by the Financial Action Task Force; these do not yet require private, let alone public, registers, reflecting a lack of international consensus in this important area.”

“Imposing public registers on the overseas territories now carries with it the risk of a flight of business from them to other less regulated jurisdictions where our law enforcement authorities would not have the same level of access to beneficial ownership information as they do under the existing arrangements,” Lord Ahmad mentioned.

The Minister also asked his colleagues to be mindful of how they speak about the Overseas Territories as their words can have far reaching consequences: “I should also like to take this opportunity to place on record my deep concern about some of the intemperate language that was used in the other place about our overseas territories. References to “slave labour” and “money will go to where it is darkest” are liable to be misconstrued and are quite unacceptable in this context.”

BOSS Praised

In response to previous calls for a register of owners the BVI launched the Beneficial Ownership Search System (or BOSS) to facilitate requests for information. It has since been contended that the BOSS platform removes the need for a public register because law enforcers are able to gather critical information without the need for sensitive details made public.

Lord Ahmad seemed to have endorsed this point as he told the House: “Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar and the Turks and Caicos Islands already have central registers or similarly effective systems in place…In the case of Anguilla, the British Virgin Islands and the Turks and Caicos Islands, progress has been made notwithstanding some of the most challenging circumstances caused by last year’s hurricanes. These arrangements, which provide UK law enforcement authorities, on request, with access to beneficial ownership information within 24 hours and within one hour in urgent cases, are already bearing fruit.”

In further lauding the BOSS platform Lord Ahmad gave an example of how the system has served purpose. “As of 8 February, they had been used more than 70 times and the information obtained by UK law enforcement authorities as a result has been used to enhance intelligence leads and to support ongoing criminal investigations into illicit finance,” he disclosed.

In conclusion the Minister said that it is important that UK continues to work with the overseas territories and the Crown dependencies to implement fully these arrangements and, where necessary, to make improvements to the mechanisms for the exchange of information. [Read more in other news reports by Mellica McPherson]

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