Notorious tax haven British Virgin Islands to introduce public register of company owners

The territory’s secre­cy rules have long attract­ed crim­i­nals and secre­tive com­pa­nies cre­at­ed there have fea­tured in sev­er­al ICIJ inves­ti­ga­tions on off­shore finance.

The British Virgin Islands.

The British Virgin Islands, a pop­u­lar tax haven where secre­cy rules have long attract­ed crim­i­nals, will intro­duce a pub­lic reg­is­ter of own­ers of com­pa­nies cre­at­ed on the island.

The BVI, an over­seas ter­ri­to­ry of the United Kingdom locat­ed east of Puerto Rico, has a well-doc­u­ment­ed his­to­ry of being mis­used by drug traf­fick­ers, cor­rupt politi­cians, and tax evaders. Successive scan­dals, includ­ing exposés by the International Consortium of Investigative Journalists, have placed the BVI under pres­sure to increase transparency.

Andrew Fahie, BVI’s pre­mier and min­is­ter of finance, told the island’s House of Assembly in September that his gov­ern­ment would work “towards a pub­licly acces­si­ble reg­is­ter of ben­e­fi­cial own­er­ship for com­pa­nies,” albeit “sub­ject to reser­va­tions.” Liz Sugg, the U.K. min­is­ter with respon­si­bil­i­ty for ter­ri­to­ries like the BVI, lat­er tweet­ed that the pub­lic reg­is­ter would be adopt­ed by 2023.

Every time that there’s a glob­al exposé on illic­it finance, the BVI’s name comes up,” said Ava Lee, anti-cor­rup­tion cam­paign leader from the non­prof­it Global Witness. “The recent leak of files from FinCEN showed that at least 20% of the occa­sions when banks in the US raised sus­pi­cions of mon­ey laun­der­ing involved BVI com­pa­nies, and half the com­pa­nies exposed by the Panama Papers were reg­is­tered there.”

There is cur­rent­ly no sim­ple way for mem­bers of the pub­lic, jour­nal­ists, or lawyers to iden­ti­fy a BVI company’s own­er. Knowing a company’s own­er can be key to deter­min­ing whether laws have been bro­ken and help trace mon­ey, homes or oth­er assets in a divorce or oth­er dis­pute. Countries and law enforce­ment can offi­cial­ly request infor­ma­tion from the BVI. However, not all coun­tries can make such requests and, even if they can, infor­ma­tion can take sig­nif­i­cant time to arrive.

BVI, and secre­tive com­pa­nies cre­at­ed there, have played an out­sized role in major ICIJ inves­ti­ga­tions since 2014.

In 2014, reporters iden­ti­fied the old­est daugh­ter of the late Philippine dic­ta­tor, Ferdinand Macros, as a ben­e­fi­cia­ry of a BVI trust as part of the Offshore Leaks inves­ti­ga­tionOfficials lat­er said that they would exam­ine whether assets exposed by ICIJ were part of the esti­mat­ed $5 bil­lion her father amassed through cor­rup­tion. ICIJ also revealed BVI com­pa­nies owned by the sons of a for­mer South Korean pres­i­dent embroiled in a tax eva­sion scan­dal and of China’s for­mer ruler, Wen Jiabao.

The 2015 Swiss Leaks inves­ti­ga­tion revealed that HSBC Private Bank in Switzerland  helped cus­tomers set up shell com­pa­nies in BVI to skirt a new tax law. Many of those with secre­tive Swiss bank accounts pro­tect­ed their iden­ti­ty fur­ther by using the bank account under the name of a BVI com­pa­ny instead of in their own name, ICIJ revealed.

The BVI was the secre­cy juris­dic­tion of choice for cus­tomers of the Panama-based law firm Mossack Fonseca, accord­ing to an ICIJ analy­sis of leaked files that formed the basis of the 2016 Panama Papers inves­ti­ga­tion. Mossack Fonseca cre­at­ed more than 113,000 BVI com­pa­nies, out­strip­ping Panama as the most pop­u­lar tax haven.

In 2017, ICIJ also revealed flaws at top-tier law firm Appleby, which has an office in the BVI. Internal reviews found holes in the law firm’s paper­work and imper­fect knowl­edge of high-risk cus­tomers, accord­ing to doc­u­ments obtained by ICIJ as part of the Paradise Papers inves­ti­ga­tion.

ICIJ’s most recent inves­ti­ga­tion, the FinCEN Files, revealed that some of the world’s most prof­itable banks rou­tine­ly process mon­ey for com­pa­nies in tax havens whose own­ers are unknown. One in every five sus­pi­cious activ­i­ty reports filed by banks and reviewed as part of the FinCEN Files inves­ti­ga­tion con­tained a client with an address in the BVI, accord­ing to an ICIJ analy­sis.

Other U.K. tax havens received mixed news this month.

Anguilla, a tiny island of 17,000 peo­ple, was placed on the European Union’s black­list of coun­tries and ter­ri­to­ries that fail to meet stan­dards of trans­paren­cy, fair tax­a­tion and com­mit­ments to glob­al norms. Last month, ICIJ report­ed that Anguilla, whose offi­cials once had a close rela­tion­ship with scan­dal-taint­ed law firm Mossack Fonseca, had slipped fur­ther down a sep­a­rate glob­al trans­paren­cy index.

In the same E.U. announce­ment, European min­is­ters delist­ed the Cayman Islands, which has a zero cor­po­rate tax rate and has wel­comed tens of bil­lions of dol­lars in prof­its from the U.S., includ­ing from brand name com­pa­nies like Coca-Cola and Pfizer.  The ter­ri­to­ry is the “largest enabler of finan­cial secre­cy in the world,” accord­ing to the non­prof­it Tax Justice Network’s Financial Secrecy Index.

Experts and mem­bers of the European par­lia­ment expressed dis­be­lief at the deci­sion to give the Cayman Islands a clean bill of health and con­cern that the use of lists to pun­ish small­er tax havens exempts coun­tries like Switzerland, Luxembourg and the Netherlands.

Blacklists, gray lists or white lists – lists of any kind – are divi­sive and counter-pro­duc­tive,” said Afton Titus, law pro­fes­sor at the University of Cape Town. “This process is less about ensur­ing glob­al tax trans­paren­cy and glob­al tax fair­ness and more about cre­at­ing a mech­a­nism by which to pub­licly defend the inter­ests of indus­tri­al­ized and devel­oped coun­tries like the EU coun­tries,” Titus told ICIJ.

How cred­i­ble is a ‘tax haven black­list’ that includes small coun­tries such as Fiji, Samoa, Trinidad and Tobago and excludes or exempts some of the world’s biggest tax havens at the cen­tre of recent major tax scan­dals high­light­ed by the Paradise Papers and Panama Papers?” said Liliane Mouan, a lec­tur­er at Coventry University in the U.K.. “The black­list process is yet anoth­er exam­ple of pow­er­ful nations want­i­ng to play judge and jury while at the same time pro­tect­ing the sta­tus quo.”

Will Fitzgibbon, ICIJ.Org

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