Guernsey

UK to adopt EU laws on combating terrorism and money laundering


By added on 23/07/2018

 

(The Guardian) -- The UK will adopt sweeping European laws designed to combat terrorism and money laundering, the government has confirmed, in a move that could unmask for the first time the beneficiaries of thousands of secretive trusts.

In a letter sent to the MP Margaret Hodge, the Department for Business, Energy and Industrial Strategy (BEIS) says the government will to adopt the fifth EU anti-money laundering directive.

The legislation was created following the escalation of terrorist violence in Europe and as a response to the Panama Papers, in which a global consortium of journalists revealed the widespread use of trusts and opaque offshore structures to launder money generated from bribery, corruption and tax evasion.

In the letter confirming the government’s intention, Lord Henley, a parliamentary undersecretary of state at the BEIS, wrote on 16 July: “You ask about the government’s plans in regard to complying with the requirements of the fifth anti money laundering directive. The deadline for the transposition of the directive falls within the implementation period and the UK will transpose this directive.”

The UK will officially leave the EU next March, but while negotiations on the final deal are ongoing, there will be a transition period until the end of December 2020. During this time, Britain has promised to abide by all existing and new European laws.

The fifth anti-money laundering directive contains the following measures:

 

  • Public registers of company owners in every member state.
  • Access to the names of the beneficiaries of trusts for law enforcement agencies and those with a “legitimate interest”, including investigative journalists and NGOs.
  • A cross-border database of company and trust owners, overseen by the European commission.
  • Automatic access to the names of bank account holders for national financial intelligence units.

 

 

 

 

 

 

“This is great news,” said Alex Cobham, the chief executive of the campaign group Tax Justice Network. “At least in this area the UK will not pursue a post-Brexit race to the bottom on financial secrecy. This decision will help establish the fifth directive and its position on public registers as the international standard.”

The directive applies only to member states, rather than their satellites. UK affiliated offshore financial centres will be left to decide whether to adopt some or all of the measures. The overseas territories, which include the British Virgin Islands and Bermuda, and the crown dependencies of Jersey, Guernsey and the Isle of Man still allow companies and trusts registered on their shores to operate in comparative secrecy.

In the case of a no-deal Brexit, it is unclear whether the government would still implement new EU laws, such as the fifth anti-money laundering directive. However, the UK is likely to stick closely to EU policy on anti-money laundering if it wants continued access to European markets.

A spokesperson for BEIS declined to comment, saying the letter from Henley was private, and the department was unable to share personal correspondence.

Adoption of the directive in the UK would increase pressure for transparency in the network of affiliated tax havens. A cross-party coalition led by Hodge has already forced the government to adopt legislation which would reveal offshore company owners in the overseas territories.

Hodge, the Labour MP for Barking and a prominent campaigner against tax avoidance, said: “This is a welcome further step in our big campaign to eradicate dirty money and tax avoidance in the UK. Britain’s crown dependencies should now come into line and agree that they too will adopt public registers of beneficial ownership.”

The crown dependencies are highly dependent on doing business with European financial institutions such as banks and pension funds. They have in the past chosen to adopt a range of anti-money laundering measures introduced by Brussels, such as the creation of financial intelligence units.

 “The crown dependencies, recognising the importance for their business models of maintaining full access to EU markets, are likely to align with the standard,” said Cobham.

Member states must transpose the directive into their national legislation by 10 January 2020 – nearly a year before the end of the Brexit transition period. MPs will have to decide what restrictions to place on access to information about the owners of trusts. There will be no public database, but member states will have to draw up rules to allow those with a “legitimate interest” to obtain the information on a case by case basis.

The directive says those rules should take into account the preventative work done by non-governmental organisations and journalists in combatting money laundering.