Editors

Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Bill Steinman
Contributing Editor

FBI recognizes efficacy of Cayman Islands’ exchange of information system

There have been several developments in recent weeks that have struck damaging blows to those who state that open public registers of Ultimate Beneficial Owners (UBOs) are the only answer to global corruption and tax evasion.

One of the most recent of these was the U.S. Federal Bureau of Investigation coming out hard and strong in favor of the Cayman Islands authority’s ability to provide law enforcement with verified UBO information when requested. 

The FBI’s Acting Deputy Assistant Director (Criminal Investigative Division), Steven M. D’Antuono, stated before the U.S. Senate Banking, Housing, and Urban Affairs Committee last month the “immense value” of the UBO information shared by UK Overseas Territories and Crown Dependencies, including the Cayman Islands. All should similarly take note. Mr. D’Antuono said: 

“UK law enforcement has access to company beneficial ownership information in support of investigations. This information must be made available within 24 hours of a request. Our colleagues at the UK’s National Crime Agency have continually noted the immense value of such information in their investigations.” 

The fact that the FBI has commended the Cayman Islands’ regulatory systems, that operate almost exactly the same as those implemented by the rest of the UK’s Overseas Territories and Crown Dependencies, lends support to those who have resisted all calls for “open” public (company) registers. I have resisted these calls on the basis that such a move would be unnecessary, and it would impinge negatively on the privacy of those who comply with all legal requirements, as well as perversely hinder the fight against economic criminals.

The subject of the availability of verified UBO information features again in an article posted onto the ICAEWs website (the ICAEW is the UK’s premier chartered accountancy members organization). Written by tax expert John Hood, the article makes for interesting reading and some of his research and statistics are extremely enlightening.

His piece refers to something called Exchange of Information Notes, as required under the UK’s Proceeds of Crime Act 2002. These notes came into force in 2017 and were intended to provide law enforcement agencies such as the police and Her Majesty’s Revenue and Customs (HMRC) with rapid access to UBO information held on 500,000 corporate entities registered offshore in the Overseas Territories and Crown Dependencies. 

The resultant figures from the first eighteen months of the system are impressive. Of the 296 requests made of the Overseas Territories and Crown Dependencies for UBO information, law enforcement agencies received their information within 24 hours in all but four cases. Think about that for a moment: the so-called “secretive” and “sinister” offshore service providers have been open and helpful to the competent authorities seeking such information.

Not very secret is it?

As always, buoyed by this information exchange success, the HMRC is now advocating extending these EoNs from criminal to civil tax matters. There are those of us who will argue that this is an abuse of process, that shifting the crosshairs in such a fashion should only be sanctioned after the matter is debated and agreed by the law makers; and only the after the Overseas Territories and Crown Dependencies have voiced their concerns regarding the pressure this will bring to bear on their regulatory systems and ability to respond speedily to Exchange of information Notes (due to the obvious pressure this will bring upon their clerical systems).

As Mr. Hood states, a balance needs to be struck between protecting the economic wellbeing of the UK and the right to privacy. Proportionality is everything. Otherwise we will end up in a Big Brother scenario, where the State will be prying and sticking its nose into matters that it has no need to know about. Privacy is a human right: it should not be something surrendered at the whim of a government agency. 

The more broad conclusion is obvious, though. The systems in operation in the Overseas Territories and Crown Dependencies are not only working — and working efficiently — they are much more effective than those onshore in the UK (and the United States). Thus the argument for open public registers continues to diminish: the facts speak for themselves.

With thanks to Tony McClements, Senior Investigator at Martin Kenney & Co, for his assistance with this post. He served for 33 years with UK police forces and has specialized in Fraud & Financial Investigation since 1998. He is also a lecturer in these subjects at the University of Central Lancashire (UCLAN).

_____

Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI, focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors. In 2014 he was the recipient of the ACFE’s highest honour: the Cressey Award for life-time achievement in the detection and deterrence of fraud. He was selected as one of the Top Thought Leaders of the Legal Profession in 2018 by Who’s Who Legal International and as the number one offshore lawyer for asset recovery in 2018.

Share this post

LinkedIn
Facebook
Twitter

2 Comments

  1. Great for law enforcement, rubbish for UK regulated firms who are legally required to know the ultimate owners of entities in these jurisdictions!!

  2. I can only say that the more I hear your argument on this matter, the more I tend to disagree with it. That line from Shakespeare springs to mind about protesting too much. Overall the global interception rate is estimated at less than 1% of illicit funds, so really, no matter how well the FBI or any particular system would like to say it is functioning, one might consider it an exaggeration when you are talking about dirty money, which all kidding aside, is what we are really talking about here. Of course you could point out that this interception rate will not be significantly impacted by public registers as indeed the illicit funds that slipped through Danske Bank are still at large as I understand it. Still, it is easy enough to argue that this policy could reduce compliance costs for the financial industry, by having a centralized registry (at least by country) for customer due diligence available at taxpayer expense. Will the benefit received by the public be equal to this expense? One could argue about this but if it reduces tax evasion to any significant degree than I would say so. Will it be perfect? Of course not, but if I recall there seems to be a consensus on this blog that we do not live in a perfect world. And if we improve even a few percentage points here, based on the efficiency of the current regime, I think it might be worth it. Furthermore, it seems that corporations at least must be reminded from time to time that they exist at the pleasure of the State, not the other way around. I would say this cuts strongly against your claims that the owners of these entities deserve privacy as a 'right' in regards at least to the fact of their ownership.


Comments are closed for this article!