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Beneficial Ownership Takes Center Stage at House of Lords

January 29th, 2018 - Posted by Mark Dunn in Anti-Money Laundering

Wednesday marked the third reading of the UK Sanctions and Anti-Money Laundering Bill in the House of Lords—and the Members’ last chance to make adjustments to the bill before it moves on to the House of Commons. While the Bill’s readings only received moderate attention from the media, two proposed amendments spurred vigorous debate in the House of Lords and managed to earn a few headlines.

The Oh-So-Polite Debate on Ministerial Powers & Public Registries

Anyone who has seen the heated in-your-face debates—and in some cases brawls— that take place in political arenas, might be surprised by the House of Lords’ transcripts from recent meetings on the UK Sanctions Bill.  The gracious and eminently civil discourse could not, however, hide the fact that Members felt very passionately about an amendment related to ministerial powers and one related to beneficial ownership. Given that Brexit legislation will soon be on the agenda, the BBC  sees those strong responses as a precursor to what might take place when the Brexit legislation enters the agenda, noting, “Peers have been warming up by defeating the government on amendments to the Sanctions and Anti-Money Laundering Bill, and the Data Protection Bill.”

The House of Lords approved an amendment that dialed back the broad ministerial powers set forth in the original language of the Bill, instead voting to limit a government minister from introducing regulations to create new criminal offences related to money laundering and terrorist financing. The BBC writes, “Anyone who doubts their determination to block Henry VIII powers for ministers should read the speech by Lord Judge, the former Lord Chief Justice of England, who, unwearied by decades of jokes about nominative determinism, led one of this week's rebellions on the powers given to ministers on money laundering offences.”

The House of Lords then voted down an amendment that tackled the topic of beneficial ownership  by a narrow 10-vote margin. During the second reading earlier this month, Members had discussed a proposed amendment that would require the government minister assist the governments of six British Overseas Territories in the Caribbean and North Atlantic in establishing public beneficial ownership registries and require compliance by 2020. Despite its defeat in Round 2, however, the topic of beneficial ownership was raised again at the third reading. Lord Collins of Highbury  referenced a front page of article in the The Guardian regarding a Cayman Islands-registered holding company that has been banned from the U.S. financial system. Lord Collins said, “Anyone who reads that article will know that this issue will not go away and we will have to come back to it.”

Most agree that the issue of beneficial ownership, which can be used to hide money laundering and terrorist financing, cannot be left unchecked. The question is how to go about it. A majority of Members disagreed with establishing a public registry by decree.  Lord Ahmad, Minister for the Commonwealth and United Nations, pointed out that “Imposing public registers of company beneficial ownership on the Overseas Territories against their wishes and not including their legislative bodies and elected representatives is something that the territories will not take lightly.”  It’s worth noting that Bermuda has had a beneficial ownership registry for nearly 70 years, which it shares with regulatory authorities under tax transparency agreements. Making those registries public, however could damage the country’s international business sector, given that other countries are not held to the same standard.

The Sanctions and Anti-Money Laundering Bill now moves to the House of Commons. While we don’t know what the future will hold, it is clear that the spotlight on corruption, money laundering and beneficial ownership will not be dimming anytime soon.

Learn More

Download our ePaper, “The Hidden World of Beneficial Ownership,” to explore the topic further.

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