WILL THE RECENT ACTION OF THE UK GOVERNMENT BURY OUR OFFSHORE FINANCE INDUSTRY?

IS IT TOO LATE TO STOP IT?

16,475 companies registered in TCI, of which more than 10,000 relates to International Companies.

35 licensed companies’ managers in TCI
71 employees at Financial Services Commission (FSC)
FSC gross revenue 2016/17 – $8,551,408
FSC net surplus 2016/17 – $2,515,558
FSC transfer to TCIG 2015/17 – $2,501,149

Introduction

In May 2018, the UK Govt. passed an amendment to their Sanctions and Anti-Money Laundering Bill which requires the Overseas Territories to have public registers of the beneficial owners by December 31, 2020. This decision may have a significant impact on us. Hence, this article is an attempt to explain the concept of public register of beneficial owners, the possible impact that the UK legislation has on TCI and recommendations on what we need to do.

Background Information

In 2017, the Turks and Caicos Islands passed the Company Ordinance and as part of the ordinance, management companies must provide the financial Services Commission a register of the beneficial owners within 14 days after forming a company.Like TCI, other overseas territories made amendment in 2017 to their legislations to provide for registers of beneficial owners but it was not public. The overseas territories felt this was adequate to meet the needs of the UK especially since they can currently access the registers.  Less than a year later, the UK wants the registers to be public and so the territories feel betrayed. The UK has also demonstrated hypocrisy in that it does not require its Crown Dependencies such as Jersey, Guernsey and Isle of Mann to have public registers by 2020.

What is a beneficial owner in TCI?

A beneficial owner is

• A person that holds directly or indirectly 25% or more of the shares of a company.
• Controls 25% of the voting rights of a company.
• Has the right to remove or appoint the majority of the directors of a company.
• Has the Legal right to exercise significant influence over the company, partnership or trust.

What is on the register?

The register of the beneficial owners contains the full legal name, date of birth, nationality, usual residential address, information identifying the person from his government and the date the person became a beneficial owner.

Who can access the Register?

Currently, information from the register cannot be disclosed to anyone except to the Royal Turks and CaicosIslands Police Force.It should be noted that the relevant UK Authorities can access the register from Financial Services Commission via the Royal Turks and Caicos Islands Police Force.

Why did the UK pass this legislation?

The UK claimed they passed the legislation because of transparency. If so then why don’t the rules apply to Jersey, Guernsey and Isle of Mann. Therefore, I do not believe that is the reason why. Is the UK doing this because they have public registers in the UK? Is it because of the embarrassment of the leaked Panama Papers in 2015? Is it because the UK thinks that the overseas territories are harbouring terrorist financing (particularly Russian money), tax evasion and money laundering activities? If they think so, the UK knows very well they can access our register anytime through the Police Force.

What does this mean for TCI?

Even though the TCI offshore financial sector is not significant as BVI, Cayman and Bermuda, a 1%variation to our economy is significant given the size of our economy. Our Offshore is estimated to be about 10% and is our second main industry after tourism. Individuals form companies in Turks and Caicos for a number of reasons and two of the main reasons are confidentiality and security. Some individuals do not want their spouse or other family members and other people to know their business so they form companies overseas. It does not necessarily mean they are involve in money laundering or evading the payment of taxes. It is simply a privacy issue.

If individuals now know that their information is now public, then they can go to other rival jurisdictions where a public register is not required. As a result, many individuals will opt not to renew their TCI incorporated companies. If there is a significant reduction in renewal of incorporated companies then then the revenue from the FSC and the local management companies will decline which may be forced them to lay off some employees.

In addition, the future growth of our offshore industry may be limited. It is very possible that there may no impact in that individuals will not move to other jurisdictions, but it is also highly possible that it can have serious impact. We do not really know what will happen. Because of this uncertainty, we need to have alternatives to fill the gap in the event our offshore financial industry fails. We should not rely solely on tourism as it is very risky.

What should the Government do?

The TCI Government along with the other overseas territories need to fight this jointly though the law is already passed in the UK. If TCIG is unable to fight this jointly with the other territories, then TCIG should consult and retain the best international lawyers to represent TCI. We must do all we can in our power to ensure that this legislation is delayed for years or until it becomes a global standard. TCIG,the FSC and the industry need to ensure that the residents (from the children to the adults) are fully informed of the possible consequences of this UK legislation so that everyone can be onboard and rallied up to retaliate the actions of UK together like the people in BVI.

Conclusion

BVI, Bermuda and Cayman have made it clear what they intend to do. TCI now needs to make its position very clear publicly. Until we realize the possible significant impact it will have it on us, we will remain quiet. We need to think about the overall impact on our country overall and not the impact it will have on us individually.I think the actions of the UK Government will bury our industry. I know the amendment has passed in the UK but we should not accept that as final. We must not accept this“hand me down” legislation that will possibly have a significant impact on us. A message must be sent loud and clear by the people of TCI and that is why it is important we highly educate our residents about this UK legislation.It is not too late to save our small offshore finance industry. Let us save it and expand it so that we can continue to be financially independent of the UK.