Guernsey lays out plans to comply with MLD5 and demonstrates its robust regulation and commitment to fighting financial crime
Contributed by Parish Group
22 June, 2020
Guernsey, as a self-governing British crown dependency with its own government, has set out its stance on registers of beneficial ownership to improve transparency and assist in tackling financial crime and the financing of terrorism. The European Parliament resolution 2020/2557 of 12th February, in line with the Brexit negotiations, contained details on forming a new partnership with the UK which included in section 21, the UK's commitment to ensuring that it will adhere to the evolving standards on taxation and anti-money laundering legislation within the EU. This will include tax transparency, the exchange of information on tax matters and anti-tax avoidance measures and the EU has asked for a commitment from the UK to ensure its Overseas Territories, Sovereign Base Areas and Crown Dependencies comply with this also.
Paragraph 21 of the said document expressed concerns regarding the tax regimes of the Crown Dependencies which includes Guernsey. This article challenges the misconceptions regarding Guernsey's compliance with tax matters, transparency and tax information exchange. Guernsey has committed to a plan of action demonstrating its intention to comply with the 5th Anti-Money Laundering Directive issued by the EU , as well as identifying the efficient and robust system of tax information recording and exchange of information that is already in place in Guernsey
Guernsey's Beneficial Ownership Register
The said amendments were carried out in response to a common misapprehension regarding registers of beneficial ownership and transparency. Guernsey's tax transparency is at the forefront of its regulatory mandate and it ensures strict governance around financial services with a fully regulated financial services industry which is in compliance with internationally recognized standards. The OECD, MONEYVAL, and The Financial Action Task Force has certified Guernsey to be one of the jurisdictions with the highest standards in all areas but also areas of transparency. Guernsey is already well ahead of many other EU jurisdictions and the UK in its records of beneficial ownership information.
In this context, it's crucial to note that there's a fundamental difference between the UK's and Guernsey's beneficial ownership register. The former follows an open publically accessible persons of significant control register while the latter has a fully verified private register of beneficial ownership. An open publically accessible beneficial ownership register does not necessarily guarantee transparency.
A little probe into the facts would reveal that the UK's register is updated annually based on each companies' self-declared data. The UK does not verify the data provided, rather ensures a check by making it available on the public domain so that third parties can run checks on the data as and when required. Undeniably, this fosters transparency as records are uploaded for public scrutiny. However interrogation of this register has identified thousands of entries which are incorrect. As with all registers, they are only as good as the information stored in them.
Guernsey, on the other hand, has a different system in place in which all data is checked and verified to ensure quality and then updated on the register. Unlike the UK, Guernsey's system does not only rely on data provided by the companies but also data verified by regulated financial services businesses which are themselves scrutinized by Guernsey's sophisticated regulator with substantial fines and criminal offences for non-compliance.
The belief that public registers ensure transparency is not backed by any solid evidence. If one is to go by international standards, then there are varied and multiple ways of maintaining beneficial ownership registers, all with the ambition of keeping maximum transparency in data management. Guernsey has followed international standards in the past and would continue to do so in the future.
The States of Guernsey is working to improve transparency as required by AMLD5 and has laid out a plan to achieve this as follows in three stages:
- To give the EU's Law Enforcement Authorities and Financial Intelligence Units, direct access to the Guernsey register of beneficial ownership of companies as well as gain reciprocal access from the EU countries registers into Guernsey.
- Access to be given for financial services businesses and certain other prescribed businesses to provide easy access to due diligence information from the Beneficial Ownership Register.
- Public access to the beneficial ownership register will be made available.
In the words of Chief Minister of Guernsey, Deputy Gavin St. Pier, "Guernsey has stated repeatedly that we would move to a public register of beneficial ownership as that becomes an international norm. We are publishing a detailed action plan to demonstrate how Guernsey will respond to global developments in regard to beneficial ownership over the next couple of years. It will also help the understanding of our commitments and approach."
He also remarked, "The action plan also reinforces our message that it is for Guernsey to determine its own policy position. We will never compromise the high standard of our register, which is populated by verified up-to-date data, by the adoption of an inferior model. Our action plan will ensure that our register and corporate regulation continues to set a standard for larger jurisdictions to follow."
Guernsey, along with Jersey and Isle of Man, have jointly written a letter to the President of European Parliament, underlining the commitments and the future strategies that are to be taken in order to uphold the EU directive. Following the past precedents, the islands do not aim for any relaxation to the tax regimes, maintaining its strict prohibition for businesses engaging in unlawful money laundering.
Guernsey also awaits the implementation review of the 5th AMLD in January 2022. The governments of Guernsey, Jersey, and the Isle of Man, would then bring forward their own legislative proposals to establish public access to beneficial ownership data of companies held on a central register, in line with the principles of the EU's 5th AMLD. The Crown
Dependencies expect the EU member states and the UK to introduce reliable methods of beneficial owner verification and regulation of trust and corporate service providers to improve the standards and demonstrate the accuracy of their beneficial ownership registers.
It will be interesting to monitor the progress of the implementation of AMLD5 across the EU member states as well as the UK to see if their respective commitments are able to be met within the timeframe. In light of the recent pandemic, which has stretched resources and government finances in all jurisdictions it will be illuminating to see whether these improvements will remain a priority amongst all the other imminent economic pressures currently at play. Guernsey, as well as the other crown dependencies with their robust, regulated and efficient registers are already well placed to comply when the time comes.
This article was written by Dr Charlotte J Grisley BSc. Hons. PhD TEP, Client Services Director at Parish Group.
« Go Back to Articles