Illicit finance and beneficial ownership transparency
Illicit finance and beneficial ownership transparency – ensuring that the UK’s financial sector, and those in the overseas territories and Crown dependencies, are hostile to illicit finances. There will be a strong focus on delivery of commitments, working closely with private sector and international partners. We will work with partners to promote international action, especially on tackling illicit finance.
This commitment is specific enough for monitoring and it can be split into two parts. The first covers the effective implementation of public beneficial ownership registers in the UK, the UK’s overseas territories and the Crown dependencies. The second part refers to tackling illicit finance. The first part of this commitment is specific enough because it tackles the thematic area of beneficial ownership across clearly-defined geographical boundaries. The second part of the commitment on illicit finance is specific enough as a thematic area.
 States of Guernsey, Joint Commitment by Guernsey, Jersey and the Isle of Man Registers of Beneficial Ownership of Companies, June 2019, https://www.gov.gg/CHttpHandler.ashx?id=119716&p=0
Our assessment is that the first part of the commitment is linked to five measurable commitments to increase beneficial ownership transparency both in the UK and its offshore financial centres:
- Beneficial ownership transparency for overseas companies holding UK property, which the UK government committed to at the 2016 London Anti-Corruption Summit.
- Reform of Companies House in the UK, which the UK government has committed to reform as soon as parliamentary time allows.
- Public beneficial ownership registers for companies incorporated in the UK’s Overseas Territories (OTs). The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) requires the UK government provide all reasonable assistance to the OTs to introduce public beneficial ownership registers. If the OTs fail to introduce public beneficial ownership registers by 31 December 2020, SAMLA requires the UK government to prepare a draft Order in Council requiring the OTs to introduce registers. Nine OTs have committed to introduce public registers, which the UK government expects to be implemented by the end of 2023.
- Public beneficial ownership registers for companies incorporated in the Crown Dependencies (CDs), which the governments of these jurisdictions have committed to introducing by the end of 2023.
- The Global Ownership Campaign launched by John Penrose at the 2018 IACC in Copenhagen has gained support from a dozen countries, and it has been extended to the UK OTs and CDs. As stated in the year 2 update of the Anti-Corruption Strategy, the UK government plans to convene the second meeting of the Beneficial Ownership Leadership Group in 2020.
Progress on the second half of the commitment related to illicit finance could cover three areas:
- Commitment 2.21 of the UK Anti-Corruption Strategy, which pledged to increase the analytical capability of the Joint Money Laundering Intelligence Taskforce.
- Commitment 2.22 of the UK Anti-Corruption Strategy, which pledges to work with others to establish or enhance public private intelligence sharing partnerships, including through membership of the Financial Action Task Force (FATF).
- Commitment 2.11 of the UK Anti-Corruption Strategy, which pledges to work with partners to ensure the International Anti-Corruption Coordination Centre (IACCC) is a valued and effective resource for law enforcement.
None of these three commitments are measurable.
 Department for Business, Energy & Industrial Strategy, Corporate Transparency and Register Reform: Government Response to the Consultation on Options to Enhance the Role of Companies House and Increase the Transparency of UK Corporate Entities, September 2020, p.17.
 UK Sanctions and Anti-Money Laundering Act 2018 https://www.legislation.gov.uk/ukpga/2018/13/section/51/enacted
 Government of the Virgin Islands, BVI Premier Reiterates Territory’s Commitment To An Appropriate Framework For Publicly Accessible Registers
 Joint commitment by Guernsey, Jersey and the Isle of Man registers of beneficial ownership of companies, June 2019, https://www.gov.gg/CHttpHandler.ashx?id=119716&p=0
 John Penrose MP, the Prime Minister’s Anti-Corruption Champion launched the Global Beneficial Ownership Campaign to “promote open and free registers of company beneficial ownership as a global norm”. For more details, see the case study on page 18 of the UK Anti-Corruption Strategy, year 2 update.
It is common for corrupt individuals to use a global web of anonymous companies, trusts and other legal entities situated across multiple jurisdictions to transfer and hide their illicitly sourced funds. These structures shroud the identity of the individuals who own and control companies and other legal entities. Illicit money is laundered through the UK, and then used to fund luxury lifestyles.1
Layers of secrecy facilitated by opaque company ownership prevent effective investigations by police and hinder due diligence checks by those working in sectors such as the property market. This means that UK assets can be acquired anonymously and anti-money laundering checks can be bypassed with relative ease. Public registers of the real owners of companies – the beneficial owners – have been a central recommendation in the fight against corruption, money laundering and corporate secrecy.
The UK’s public register of beneficial ownership came into effect at the end of June 2016, and was the first of its kind in the G20. In 2018, the UK launched a global campaign to make public registers of beneficial ownership a global norm, and in 2019 it launched a public consultation2 on reforms to Companies House3 to ensure the data held in the UK’s register is verified and accurate. In September 2020, the UK government announced welcome reforms, including introducing identity verification checks for all directors, people with significant control and those filing information on behalf of a company.
There is a clear correlation between corruption cases and the use of the secretive corporate vehicles based in the UK’s Overseas Territories and Crown Dependencies4 Transparency about the beneficial owners of these companies is an important part of the solution to tackling the laundering of corrupt and illicit funds. The UK government is required by law to provide assistance to the overseas territories in making this transition to public registers of beneficial ownership. In October 2019, the government of the Cayman Islands committed to introducing a public beneficial ownership register.5 In September 2020, the British Virgin Islands joined the other major financial centres in the Overseas Territories in committing to introduce public beneficial ownership registers.6 In June 2019, the Crown Dependencies committed jointly to voluntarily introduce central public registers of beneficial ownership for companies based in their jurisdictions within 12 months of an EU review into their implementation across member states. However, the commitment is unclear about when exactly these registers will be made available to the public. The latest development is that the UK government has stated to “consider that the end of 2023 is a reasonable deadline for the introduction of such registers”.7 Except for Gibraltar, at the time of this assessment, none of the OTs or CDs has implemented public beneficial ownership registers.8
The UK’s property market is a prime destination for corrupt individuals and other criminals to launder their stolen wealth. Using anonymous shell companies registered overseas, these individuals can purchase luxury property in the UK with the proceeds of their crimes and away from the prying eyes of businesses, politicians, law enforcement and the wider public. This enables them to enjoy their ill-gotten gains with impunity, and use much-needed housing as their own personal safety-deposit box. The government’s bill for a publicly accessible register of the true owners of overseas companies that buy or own UK property is a vital piece of anti-corruption legislation, and should be made law at the earliest possible opportunity. This would make it easier for the private sector to identify suspicious transactions and money laundering risk in the property market. The Registration of Overseas Entities Bill should be laid before Parliament at the earliest possible opportunity.
Beneficial Ownership Campaign – In the year 1 update of the UK Anti-Corruption Strategy, John Penrose MP, the Prime Minister’s Anti-Corruption Champion launched a campaign to promote open and free registers of company beneficial ownership as a global norm. In May 2019, at the Open Government Partnership Summit, he co-chaired the inaugural meeting of the Beneficial Ownership Leadership Group and proposed a draft set of Beneficial Ownership Transparency Disclosure Principles, which would commit participating countries to develop open and free-to-access registers of company beneficial ownership information by 2023, based on minimum technical standards. This campaign was also presented at the 2018 International Anti-Corruption Conference.9
To date, a dozen countries have expressed an interest in signing these principles, yet only five countries have officially signed up. Despite the UK government’s support for Open Ownership in establishing a Beneficial Ownership Leadership Group10 the UK has not yet joined. In the Anti-Corruption Strategy year 2 update, the government reiterates that in the second-half of 2020, “together with civil society partners, including the OECD Global Forum, and the Financial Action Task Force, the UK plans to convene the second meeting of the leadership group and encourage countries around the world to sign up to the Open Ownership Register”.11
)) Further, the strategy update stressed that the “UK will continue to work internationally to encourage jurisdictions to make progress on company beneficial ownership transparency, even where their ambition is lower than a fully open and free-to-access register”.11 While we hope to see these developments progress, as of October when this research was being finalised, the second meeting has not yet happened.
UNCAC12 has been extended to the Crown Dependencies, together with two of the UK’s 14 Overseas Territories: the British Virgin Islands and Bermuda.
Although all of these commitments are in progress, none are yet complete.
Challenges to effective commitment implementation
As stated in the previous section, one of the main challenges is the lack of parliamentary time to implement the much-needed legislation and policy to fight illicit financial flows through the UK. The business of government and Parliament has been slowed because of the dual disruptions of Brexit and the COVID-19 pandemic.
Opportunities to accelerate commitment implementation
The G7 next year will represent an opportunity for the UK, hosting the Summit, to reiterate its leadership in fighting illicit finance, and being a leader of beneficial ownership transparency. This year, the UK already has the opportunity to send this message by joining the Beneficial Ownership Leadership Group.
Support public corporate transparency of company ownership in the UK’s offshore financial centres by ensuring that they set up beneficial ownership registers by 2023 at the latest.
Introduce transparency over overseas companies holding UK property. The government should introduce the Registration of Overseas Entities Bill in Parliament at the earliest possible opportunity.
Companies House reform proposals, as announced by the government, should be tabled at the earliest possible opportunity. New powers for Companies House will be most effective if they are coupled with the introduction of transparency over the true owners of overseas companies holding UK property.
Beneficial ownership transparency is fundamental to good financial regulation. The UK government has been a global champion in this area. We urge the UK to keep demonstrating its international leadership by joining the Beneficial Ownership Leadership Group and prioritising beneficial ownership transparency and tackling illicit finance at the upcoming G7 meetings.
- Transparency International UK, At Your Service: Investigating How UK Businesses and Institutions Help Corrupt Individuals and Regimes Launder Their Money and Reputations2019
- UK Parliament, Companies: Registration – Question for Department for Business, Energy and Industrial Strategy17 June 2020
- Gov.UK, Companies House UK’s companies register·
- TI-UK, At Your Service: Investigating How UK Businesses and Institutions Help Corrupt Individuals and Regimes Launder Their Money and Reputations2019
- Cayman Island Government Office UK, Cayman Island Statement, https://www.cigouk.ky/beneficial-ownership/July 2020
- 20 September 2020
- UK Parliament, Publicly accessible registers of company beneficial ownership in the British Overseas Territories15 July 2020
- Gibraltar register: https://ubosearch.egov.gi/Login?ReturnUrl=%2f·
- Penrose, J., Canada Backs Anti-Corruption Campaign Launched by John Penrose blog post1 June 2019
- Open Ownership, Beneficial Ownership Leadership Group·
- Conference of the States Parties to the United Nations Convention against Corruption, Review of Implementation of the United Nations Convention against Corruption – Tenth Session of the Implementation Review Group20 March 2019