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UBO Registers: Cayman goes it alone

As somebody who has argued that open public corporate registers of Ultimate Beneficial Ownership (UBO) information are a flawed concept, I was somewhat surprised when one of the UK overseas territories suddenly decided to go it alone, after many arguments that the territories offered more robust company register systems than the UK.

The Cayman Islands has recently made the decision to go down the route of public registers (which it will introduce in 2022), although there does appear to be a rider that this is reliant upon the European Union establishing its own register online first.

I am bemused by Cayman’s decision. As inhabitants of another UK overseas territory – the British Virgin Islands (BVI) – both the government and those who work in the BVI financial services sector did not see this coming. Ordinarily, as the two locations have close relations, one would have expected to have heard rumors before the decision was publicized.

However, in this instance, Cayman took the offshore services world by surprise.

Why am I surprised? Well, the BVI government ordinarily would have been forewarned by our Caribbean neighbors and governmental counterparts. The fact that there does not appear to have been any forewarning makes me wonder why the decision has been taken: and why now?

I am aware of the political pressure being brought to bear by some global politicians and campaigning NGOs, who have an axe to grind with the whole concept of confidentiality. Some conflate the words ‘secrecy’ and ‘confidential’ to make one mean the other. Some are determined to force changes that would enable them to log onto public registers and enjoy a snoop around into the private business of both companies and individuals.

For whatever reason, Cayman has jumped (or was she pushed?). Although I do not agree with this decision, I respect it. However, I would implore the authorities on Cayman to reconsider, otherwise this risks being seen as a surrender by those with a political axe to grind, particularly in Europe.

What I would suggest to those on Cayman would be a system of billing for access to the open public register. By charging a fee per check, at least this would prevent many from busying themselves rooting through other people’s business for little reason. Let’s say £250 ($320) per check, which isn’t prohibitive for those with a genuine reason to visit the register, but would certainly put those off who simply have nothing better to do.

On the back of the Cayman decision, we in the BVI are expecting a further assault on our (highly effective) register system, from what I call the “anti-1% brigade.” I anticipate that the BVI will stand firm, though. We have evidenced that our regulatory system is far more effective and meaningful than that of the much-vaunted UK Companies House, whose data is rendered useless by a lack of meaningful oversight, verification and due diligence. Also, an open UBO register model (such as used by Companies House) is flawed, because it destroys valuable investigative material used to fight fraud and corruption, and to recover assets.

A system of “controlled transparency” (which I advocate) strikes a balance between privacy and the need of law enforcement authorities to have access to UBO data where good cause is shown. A fully open UBO register will add costs for the innocent and will move the bent and the crooked to file rubbish data.

Through our Beneficial Ownership Secure Search System Act 2017 (BOSS), the Egmont Group MLAT Requests and Tax Information Exchange Agreements, all major States globally and their competent authorities have ready access to verified UBO information. Sadly, proponents of unlimited transparency do not consider this to be adequate.

The fact that the EU, the UK, and in particular the USA, do not have effective and reliable systems in place, renders their intrusion a model of hypocrisy.

The Cayman Minister for Financial Services Tara Rivers has encouraged other countries to commit to the introduction of public beneficial ownership registers. Rightly or wrongly, by “other countries” I read this to be the BVI in particular. She stated:

It is appropriate that other jurisdictions with developed financial services industries follow suit, and we will make every effort to support the global development and implementation of evolving international standards in this area.

I think Ms. Rivers is aware that the Cayman Islands’ decision may have a negative impact upon their business and would like others to follow suit in order to protect their own interests.

From a business perspective, the Cayman decision may prove to be the best one for them, with the islands gaining business on the back of their choice. However, I can see some companies on Cayman gravitating towards the BVI and her systems of confidentiality, so both territories could potentially see an upturn in business.

Like many, I do not like bullies. The Cayman decision has a hint of having been borne of apprehension. Yet there is still time for it to stand up to those who are determined to press their own agenda and reverse this ill-founded decision.

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).

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