Reform in sunny places – do we have a window of opportunity?

What do you think when you hear of the British Virgin Islands, the Cayman Islands, the Turks and Caicos Islands?  Some may think of exotic holiday destinations.  Accountants may think of good job prospects.  Others may think of great places to avoid paying tax.

What do I think?  I think of bribery, places to hide secrets and lack of transparency – alongside the stunning locations.  These issues were shown in this week’s Panorama programme, where an undercover reporter demonstrated that if you were a corrupt person wanting to hide your ill-gotten assets, these locations are perfect.

Sunny places, with some dark deals.

These are some of the UK’s Overseas Territories and Crown Dependencies – many of which are known as ‘secrecy jurisdictions’ as they appear to be devoid of making substantial progress on tackling corruption and promoting transparency.  For example:

–              Only 1 Overseas Territory (OT) out of 14, has ratified the most comprehensive anti-corruption Convention (the United Nations Convention) and only one other OT has signed the OECD Anti-Bribery Convention.

–              The UK Bribery Act has not been extended to cover legal persons incorporated in the Overseas Territories and Crown Dependencies – in short, meaning that companies incorporated in these locations, but which do not carry on a business in the UK, could be used to commit foreign bribery without fear of prosecution under the Act.[1]

–              Lack of transparency is evident – unlike the UK, many of the OTs and CDs do not even publish shareholder registries.  This means it is even easier for corrupt persons to hide their identity and channel their wealth through ‘shell companies’ which they set up.

The challenge isn’t easy.  The UK’s relationship with each of these jurisdictions is complex and is the outcome of historical processes and accepted practices.  The UK attempts to strike a balance between building strong communities and governance in these jurisdictions, alongside granting the OTs and CDs autonomy and the right to self-govern.  But as was highlighted in yesterdays Anti-Corruption APPG meeting, the neglect of law reform and administrative support in these jurisdictions, risks continuing the status quo – where not only the UK and other states miss out on tax that is due, but developing countries lose out from stolen and corrupt funds being deposited in these locations, or firms continuing to use bribery as a means to win business.

We therefore must see reform, despite the complexity.  Perhaps the UK needs to take a more proactive approach to tackling corruption in the OTs and CDs, involving both compulsion and further encouragement.  As the OECD highlighted earlier this year, ‘the UK can and has extended international treaties to the OTs and enacted legislation in these territories’ indicating that action could be taken if deemed necessary.

We need to push for change – and I have the audacity to believe that this is possible and that we have a window of opportunity with the Prime Minister last week saying that he will prioritise ‘tax and transparency’ at the G8 in 2013.  So let’s hold the Prime Minister to this – not only because it is in our own interest, but because it’s a matter of justice for poor communities worldwide.


[1] As highlighted by the OECD Review team earlier this year.

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