Wednesday 06 March 2019
Dear Members of Parliament
The proposed amendments, including that from the Rt Hon Andrew Mitchell MP and the Rt Hon Dame Margaret Hodge MP, to the Financial Services (Implementation of Legislation) Bill raise two important issues. We hope, respectfully, that the delay in the debate of this Bill will enable careful consideration of the consequences of those amendments, if passed.
Policy issue - registers of beneficial ownership and financial crime
The amendments seem to be based on common misperceptions about registers of beneficial ownership and transparency. We address these points below using Guernsey as an exemplar of high standards.
- The premise seems to be that the Channel Islands and the Isle of Man facilitate or conceal tax fraud and money laundering. In fact, Guernsey meets the highest standards of transparency, as recognised by the OECD, by MONEYVAL, and by the Financial Action Task Force. The assessment by those bodies show that our standards exceed those of the UK. Anyone looking to evade tax or launder money is foolish to attempt to do so using our jurisdiction. We spontaneously exchange tax information using the international framework established for this purpose, the OECD's Common Reporting Standard; and we regularly exchange information with the UK under an Exchange of Notes signed in 2016 which is reviewed annually. We have this year given a political commitment to the European Council in relation to the development of an integrated platform for sharing beneficial ownership information between EU Member States' and Guernsey's tax and law enforcement authorities.
- There is a misconception that a public register is automatically an accurate source of data. Registers, and the information sourced from them, are only as effective as the standard of data contained within. Guernsey has an established register of beneficial ownership. It has more accurate, up-to-date and verified information than that retained on the UK register. There are two fundamental differences between the approach taken by the UK and by Guernsey. The UK register is based on self-declared data and is updated on an annual basis. The Guernsey register is fully populated with data checked and verified by company service providers, who have been regulated since 2001. There is a legal duty to update these details as and when any changes are made and penalties for failing to do so. Consequently, the Guernsey data set is of a higher quality than the UK's. The information contained within the UK register is unverified; it is only what individuals are happy to acquiesce is placed in the public domain. Under these circumstances, it is understandable that the UK has made a policy decision that the register be public, presumably in the hope that the information might be verified by third parties instead.
- There is an assumption, which is not backed up by any evidence, that public registers of beneficial ownership are more effective at fighting financial crime and terrorism than private and transparent registers. This is one of the reasons that public registers are not yet an international standard. Guernsey has a long track record of adopting international standards as they emerge and sees the benefit in the creation of an international standard for registers. We have already supported global initiatives in this regard. Guernsey has developed its domestic policy in the absence of an international standard.
The Channel Islands and the Isle of Man are not - and never have been - part of, or dependencies of, the UK. The islands are not represented in Westminster. We are separate jurisdictions with our own legislatures, executives and judiciaries with full domestic autonomy.
The Channel Islands are British through their relationship with the Crown, as the modern day successor to the Duke of Normandy. We have a mature legal system with our own jurisprudence that is derived from Norman law. It is a centuries-held constitutional rule that the UK Parliament does not legislate for Guernsey on domestic matters without our consent.
To attempt to deviate from this constitutional position, at a time when the UK Parliament is debating matters relating to the UK's own sovereignty and the European Union, would create a constitutional
over-reach for which the irony cannot be ignored.
Should these amendments be included in any Act they would lead to inoperative legislation, based on a misunderstanding of the constitutional position. We would challenge it robustly. The amendments could leave the UK Parliament with a misconception that it had addressed a perceived problem. Unfortunately, this outcome would be to the detriment of addressing the global problem of financial crime and money laundering, the elimination of which is an objective shared by our governments. It would also disregard the higher standards attained and promoted by Guernsey.
We are part of the solution to the global problem of financial crime. As evaluated by international bodies, we should be judged objectively by our high standards and our robust and effective approach in combating financial crime.
We are committed to the development and implementation of an international standard in this area. We would like to work with you, HM Government, the OECD and the Financial Action Task Force to achieve this in a timely manner which respects the constitutional relationship between ourselves and the Crown. We would welcome the opportunity to meet with you as soon as possible to discuss the delivery of this commitment.
We look forward to the opportunity for constructive dialogue with all parties on these important issues - not just now, but in the months and years to come.
Deputy Gavin St Pier
Chief Minister of Guernsey / Le Prumier de Giernesi