The huge data leak from Panama law firm Mossack Fonseca has revealed the extent of the money laundering, tax evasion and other crimes enabled by offshore shell companies. More than half the companies were registered in UK-governed tax havens, or “Overseas Territories”.
This is not surprising. Anonymously-owned companies are the main method used by tax evaders and the corrupt to hide their identity and therefore hide their money. According to a study by the World Bank, the most popular place with the corrupt in which to incorporate a company is the UK’s Overseas Territories.
This means the UK has the power to fix this problem, by requiring its Overseas Territories to create public registers of the real owners of companies, just as the UK has done. This would allow law enforcement, journalists, civil society and the wider public to know who is behind these companies, and stop people being able to hide illicit activities behind them.
“It’s no surprise that the UK’s tax havens feature so prominently in the Panama leaks - we’ve seen for years how they are to the go-to destination for those with suspect cash to stash. The good news is, we can do something about it: the UK government has the power to make the tax havens come into the open by setting up public registries of the real owners of companies. The UK has intervened before when the issue was important enough - it should do so again now,” said Robert Palmer, campaigner at Global Witness.
“David Cameron has shown real global leadership in tackling corruption - he now faces a credibility test. Today’s news shows that unless the government uses the upcoming summit to require the UK’s tax havens to end anonymous company ownership, our other efforts won’t be effective in fighting poverty and instability. We have to clean up our own back yard first,” added Palmer.
David Cameron has himself stated that the UK’s overseas territories should do more to become transparent, while anti-corruption champion Sir Eric Pickles has said that the government could legislate to make this happen. The UK has used its powers over the Overseas Territories a number of times in the past. For example:
- Corruption in the Turks and Caicos Islands
The UK government suspended the Ministerial government and the House of Assembly in the Turks and Caicos Islands in 2009 following allegations of systemic corruption and administrative incompetence (1) The Governor, who is appointed by the UK government, was given the power to take charge of government matters, subject to instructions from the Foreign and Commonwealth Office. Direct rule from London was imposed despite opposition and criticism from other Caribbean countries.(2) Self-government was restored in 2011.(3)
- Abolishing the death penalty
In 1991 the UK government, by Order in Council, abolished capital punishment for the crime of murder in the Caribbean overseas territories (Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos Islands).(4)
The exception to this legislative step was Bermuda, which is considered the most autonomous overseas territory. However the UK Government threatened that it would consider using the ‘unprecedented step’ of imposing such a change on Bermuda if it did not voluntarily introduce domestic legislation(5) This threat had the effect of causing the Bermuda legislature to pass its own domestic legislation on the issue.
- Decriminalising homosexuality
In 2000 the UK legislated against the will of the Caribbean Overseas Territories when it decriminalised homosexual acts by Order in Council.(6) While the overseas territories were given an opportunity to adopt the necessary legislation themselves, the UK government adopted the Order when it became clear that the Territories were unwilling to legislate themselves.
Notes to editor:
(1) The Turks and Caicos Islands Constitution (Interim Amendment) Order 2009 (SI 2009 No. 701)
(2) David Brown, ‘Plan to seize control of Turks and Caicos approved by British MPs’, The Times, 1st April 2009. The action was also subject to unsuccessful legal challenge: R (on the Application of Misick) v Secretary of State for Foreign and Common Wealth Affairs  EWHC 1039 (Admin)
(3) The Turks and Caicos Islands Constitution Order 2011 (SI 2011 No. 1681), ss 97-105
(4) The Caribbean Territories (Abolition of Death Penalty for Murder) Order 1991 (SI 1991/988)
(5) Foreign and Commonwealth Office White Paper ‘Partnership for Prosperity and Progress: Britain and the Overseas Territories’, March 1999, p 21, paras 4.3 and 4.7.
(6) Caribbean Territories (Criminal Law) Order 2000.