European Union: Beneficial Ownership Registers Are Working In Guernsey

Last Updated: 15 July 2019
Article by Dominic Wheatley

Most Read Contributor in Guernsey, July 2019

The system by which Guernsey, the other Crown Dependencies and the Overseas Territories exchange information on beneficial ownership with the UK authorities has been described as "extremely useful" to the UK law enforcement agencies in a report from the UK Home Office, published at the end of June 2019.

I am not at all surprised by this finding.

The arrangements cover the beneficial ownership of some 500,000 entities across the jurisdictions. In the 18 months between July 2017 and December 2018, there were 296 requests made by the UK authorities for beneficial ownership information – nearly four a week. Guernsey handled 18 of these requests.

The Home Office said that the law enforcement agencies stated that the arrangements had played a "valuable role" in a large number of investigations and would, in due course, be critical to prosecutions and the continuing fight against corruption, and other longer-term goals.

Guernsey and the other two Crown Dependencies were highlighted for best practice in ensuring their registers remain up to date.

Shortly before this report was published, the governments of the Crown Dependencies announced a series of steps regarding central registers of beneficial ownership information of companies and how they will move towards developing international standards of accessibility. These plans will increase transparency and accessibility while maintaining high standards of accurate, up-to-date and verified information. They set out clear stages consistent with the EU's approach to transparency of beneficial ownership data under its Fifth Money Laundering Directive.

Guernsey plans to strengthen the transparency of its register of beneficial ownership over a reasonable timeframe as global norms develop in these standards. The move towards a public register in Guernsey will follow an implementation review of the EU Directive in January 2022, with Guernsey drafting proposals for public access within 12 months of the publication of that report.

This arrangement gives time to review global developments in respect of public registers and beneficial ownership.

This is not changing Guernsey's policy in this matter.

Guernsey has a longstanding commitment to being in the mainstream of good practice across international financial services in all areas of tax practice, transparency, AML and regulation. In confirming our policy development alongside the implementation of AMLD5, we will continue our complete commitment to being a good global citizen.

However these developments should not be interpreted as simply Guernsey preparing to open our existing register to public access.

We respect the right – enshrined in international human rights – of the individual to reasonable privacy in their personal (including financial) affairs. We will continue to respect the reasonable privacy of those who come to Guernsey to do business. There is clearly a difference between legitimate privacy and the illegitimate desire for secrecy – just as there is a clear difference between legitimate public interest and public curiosity.

The argument of the effectiveness of public registers goes on. I would argue that public scrutiny plays no significant role in any of the public interest objectives of registers – the elimination of harmful tax practices, and the fights against corruption, crime and terrorism.

I have repeatedly asked proponents of public registers what actual benefits public access would deliver in terms of these policy objectives, and to date have not had one compelling answer.

In contrast there are very real issues and question marks surrounding public registers.

Firstly, those looking to nefariously avoid transparency will do so not where there is a first-class private register, but where there is a poor quality public one, or no register at all. Both these options are very much available in many countries around the world, including a large number of onshore jurisdictions.

Secondly, those merely seeking reasonable privacy will be more likely to choose to move their financial business to jurisdictions operating to lower standards of regulation, transparency and AML scrutiny. This will encourage those jurisdictions to continue to operate to lower standards and slow down or even half progress towards higher standards in international finance generally.

Thirdly, there are very compelling reasons why the right to privacy is one of the basic human rights protected within the United Nations Declaration of Human Rights (1948). These human rights are fundamental to a modern, civilised society, and must be applied universally, not selectively.

As the Home Office and the FBI have confirmed, Guernsey has a world-leading and highly effective register of beneficial ownership of companies that delivers accurate, timely information.

As the Home Office and, recently the FBI have confirmed, Guernsey has a world-leading and highly effective register of beneficial ownership of companies that delivers accurate, timely information.

Guernsey's tax practices have been verified by the EU in the report of their tax code group in March this year.

Our AML regime was verified by Moneyval (the EU's preferred inspection agency) and found to be the most compliant with FATF principles I the world, with compliance on 48 of 49 principles.

Our regulation complies with international best practice and is among the best and most effective in the world.

These facts have not come about by accident, or as a reluctant concession to political or public demands on us from outside, but as a result of our long-term commitment to proper and ethical practices in the international finance industry in which we trade.

Guernsey is, and will continue to be, a proactive and enthusiastic proponent of international good practices as they evolve – driving real world solutions to real world issues – not because others demand it of us, but because it is the right thing to do.

For more information about Guernsey's finance industry please visit www.weareguernsey.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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