Tag Archives: tax havens

Guest Post: Are Public UBO Registers a Good or a Bad Proposition? A Further Reply to Professor Stephenson

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Today’s guest post, from Martin Kenney, the Managing Partner of Martin Kenney & Co., a law firm based in the British Virgin Islands (BVI), continues an ongoing debate/discussion we’ve been hosting here at GAB on the costs and benefits of public registries of the ultimate beneficial owners (UBOs) of companies and other legal entities. That debate was prompted by the UK’s decision to mandate that the 14 British Overseas Territories create such public registries, and Mr. Kenney’s sharp criticism of that decision in a post he published on the FCPA Blog. That post prompted reactions from Rick Messick and from me. Our pushback against Mr. Kenney’s criticisms stimulated another round of elaboration on the critique of the UK’s decision, with a new post from Mr. Kenney and another from Geoff Cook (the CEO of Jersey Finance). I subsequently replied, explaining why I did not find Mr. Kenney’s or Mr. Cook’s criticisms fully persuasive. Today’s post from Mr. Kenney continues that exchange:

Public [UBO] registers are rather cheap political playing to the gallery, saying “Aren’t we wonderful to have done this?” – ignoring the fact that what we have established in the UK does not work properly….  It seems to me outrageous that the UK Government, who lack a lot in the area of anti-money laundering, should thus seek to impose on their overseas territories measures – often, where they cannot be afforded economically, that go far beyond what the UK has.

Lord Flight (Conservative), Member of the House of Lords, Speech to the House of 21 May, 2018, Debate on the Sanctions and Anti-Money Laundering Bill [HL] 

The fact that Professor Stephenson welcomes a good discussion and has opened the doors to his blog once again, means it would be impolite of me to not provide a response to his latest observations.

From the outset, I will stress that I will not seek to address every point Professor Stephenson makes. However, having addressed those below, if there are others he wishes me to respond to, I will endeavor to do so. Continue reading →

Offshore Tax Havens: Whose Fight Is It Anyway?

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By the end of 2017, offshore tax havens were (again) in the spotlight. This was largely thanks to the International Consortium of Investigative Journalists (ICIJ), which helped release the “Paradise Papers”, a trove of documents primarily concerning the clientele of Appleby, a prestigious law firm with offices in the Cayman Islands and the Bahamas. These documents illustrated how firms like Appleby help wealthy individuals use offshore tax havens to avoid or evade paying taxes in their home jurisdictions; this is possible because tax havens offer significantly lower tax rates compared to the home jurisdiction, and also offer a measure of secrecy surrounding financial transactions. (Tax havens often have little to offer but these discounts; they rarely have good governance, and opportunities outside the finance industry are difficult to find for the locals.)

The movement to crack down on offshore tax havens has gathered much support from anticorruption activists. Pointing to leaks like the Paradise Papers (and the Panama Papers before them), anticorruption activists argue that the secrecy associated with offshore tax havens exacerbates the problems of kleptocracy and corruption. While I agree that offshore tax havens pose serious problems, I’m skeptical whether this issue should be a focal point for anticorruption activists (rather than, say, advocacy groups concerned primarily with tax justice or global wealth inequality). There are two reasons for this: Continue reading →

A New BOSS in Town: Changes to BVI Beneficial Owner Information Regime

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As the British Virgin Islands (BVI) continue to recover from the devastation of Hurricane Irma, attention is properly focused on humanitarian relief and the repair of the BVI’s physical infrastructure. But there have also been important recent developments associated with the BVI’s legal infrastructure—changes designed to address the BVI’s reputation as one of the world’s premier tax havens, and as a popular destination for money laundered by corrupt public officials, organized crime networks, and others.

Thanks in part by a campaign by former UK Prime Minister David Cameron to remove the “cloak of secrecy” from Britain’s offshore territories, and in part to the embarrassing publication of the Panama Papers, the BVI recently enacted a new Beneficial Ownership Secure Search System (BOSS) Act, which went into effect last June.

The BOSS Act is the latest in a series of steps designed to clean up the BVI’s image. Previous moves have included signing an intergovernmental agreement with the United States on Foreign Account Tax Compliance and becoming a signatory to the OECD’s Common Reporting Standard for the automatic exchange of tax and financial information. In 2016, the BVI changed the law to make it mandatory – for the first time – for companies to report their lists of directors to the government. Overall, it’s not yet clear whether these moves have had any effect on the island’s offshore economy. Indeed, the BVI’s interest in preserving its status as a center of the world’s offshore economy has prevented more drastic steps and weakened those that have been taken. (The 2016 law changes, for instance, did not require the reporting of ownership stakes.) Half-measures are unsurprising given the centrality of secrecy to the BVI’s economic success – after all, you can’t expect turkeys to vote for Thanksgiving. While the BVI points out in its defense that its level of transparency is no worse than that of other UK offshore territories, and is in fact better than that of some US states, the fact remains that most of the BVI’s legal reforms have weighed business interests in secrecy more heavily than public interests in transparency.

The BOSS Act unfortunately seems to suffer from the same problem, though it is a step in the right direction. Continue reading →

Guest Post: Beneficial Ownership Secrecy–Not All Offshore Financial Centers Are Part of the Problem, and Public Registries Are Not the Solution

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Geoff Cook, Chief Executive Officer of Jersey Finance, contributes the following guest post:

The so-called “Panama Papers”—the documents leaked from the Mossack Fonseca law firm by an anonymous whistleblower—have highlighted how certain corporate service providers (CSPs) are able to set up, in offshore international financial centers (IFCs), shell companies for their clients, with bank accounts and other assets then owned by the shell company, so that the identity of the ultimate beneficial owner is hidden. That secrecy enables corruption, tax evasion, money laundering, and other nefarious activity.

While the Panama Papers revelations may have done some good in calling more attention to abuses of the legal and financial system – abuses that can and should be fought – much of the prevailing discussion in the wake of the Panama Papers revelations – much of it driven by moral outrage and salacious headlines about dubious deals – has produced two significant analytical errors, one concerning the diagnosis of the problem, and the other concerning the appropriate prescription. Continue reading →

The Panama Papers and the Structure of the Market for Asset-Concealment Services: Whack-a-Mole or Squeegee Men?

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The news item that’s caused the most buzz in the anticorruption community in the past month is likely the bombshell release of the so-called “Panama Papers” (though the initiation of impeachment proceedings against Brazilian President Dilma Rousseff runs a close second). Most readers of this blog probably don’t need much explanation of the Panama Papers or their significance. These documents, leaked from Panamanian law firm Mossack Fonseca to the International Consortium of Investigative Journalists, reveal how a very large number of very wealthy individuals, including many senior government officials and their close associates, have made use of middlemen, shell companies, obscure corporate secrecy rules, and other legal techniques to conceal their wealth from tax authorities, law enforcement, and the general public. (Rick’s post from a few weeks ago usefully highlights some of the most important legal loopholes that Mossack Fonseca helped its clients exploit.) Though in some cases the assets in question may have been acquired legitimately, in many cases they probably weren’t. And while it’s not entirely clear whether Mossack Fonseca broke any laws in assisting its clients, the whole affair is a window into the shadowy and often sordid practices that the very wealthy—including corrupt public officials and their cronies—use to hide their assets.

I haven’t yet weighed in on the Panama Papers brouhaha on this blog, mainly because I’m not sure what there is to say. On the one hand, the Panama Papers leaks are hugely consequential for at least two reasons: First, the identification of specific individuals—in addition to feeding our collective appetite for celebrity gossip—is likely to be important for holding those individuals legally or politically accountable. (And indeed, the release of the Panama Papers has already forced the resignation of Iceland’s former Prime Minister Davio Gunnlaugsson.) Second, the Panama Papers revelations have gotten a great deal of mainstream media attention, including front-page coverage on major newspapers and prominent discussions elsewhere. This may well help build momentum for efforts that anticorruption activists and others have been pushing for some time (such as crackdowns on corporate secrecy, closing gaps in the international money laundering regime, and other matters). Yet at the same time, individual names aside, it’s not clear that the Panama Papers revelations have told the anticorruption community anything that wasn’t already widely known (or at least strongly suspected): That corrupt leaders, and plenty of others with an interest in hiding their assets, take advantage of lax or uneven regulatory oversight, combined with networks of shell companies. So, while the added publicity is a boon, and the identification of individuals is necessary (though of course not sufficient) to holding them accountable, I’m not entirely sure whether the Panama Papers revelations have told us all that much that’s new. Of course, we still have a lot to learn from these documents—many of which haven’t yet been published—and I would be lying if I said I’d studied what has been released carefully enough to have any strong opinions. But I’ve been struggling to come up with something interesting to say about the Panama Papers, and mostly coming up empty.

There is, however, one thing about these revelations did strike me as potentially interesting, which I haven’t seen discussed in the coverage of the Panama Papers that I’ve read so far, so I thought I’d throw it out here to see what other people think: Continue reading →