Two MPs, Margaret Hodge and Andrew Mitchell, did a great thing on 1 May – they forced the government to open up the corporate registries of Britain’s Overseas Territories. This may seem like a niche piece of accountancy news, but it is one of the most important blows struck against global dirty money flows in years.
Most of Britain’s Overseas Territories are tax havens – although they prefer to be known as Offshore Financial Centres – which ensure the smooth and frictionless passage of capital around the world. This has benefited both their governments and ours. Since the 1960s, the financial industry has brought thousands of well-paid jobs to Cayman, Gibraltar, Bermuda and the British Virgin Islands. That has stopped the UK taxpayer from having to prop up the budgets of what would otherwise be remote and impoverished holdovers from the days of empire.
But there is a problem: the money is often tainted. The Cayman Islands became popular as a place for rich Americans to hide their money from US taxes; Colombian drugs cartels poured their cash into Anguilla; Chinese officials use BVI shell companies to obscure their crimes.
These jurisdictions were perfect places for crooks to stash their cash: they were British enough to be respectable, and independent enough to be secret. In recent years, the UK itself has opened up its registry and even begun to prosecute some corruption cases, but its overseas territories have hung back. They recognised that if they couldn’t sell secrecy, their financial sectors would lose their key competitive advantage, and that this would cost them.
Campaigners from Global Witness, Transparency International and other groups have long urged Britain to use its constitutional powers to overrule the territories’ governments. Indeed, under David Cameron, Britain came very close to doing so – but ultimately never did. The UK government insisted it wanted to see financial transparency, but argued that it was barred from doing anything about it because of its colonies’ autonomy. Hodge and Mitchell have called its bluff. Thanks to their amendment to the new Sanctions and Anti-Money Laundering Bill, tax-dodgers, kleptocrats and drug dealers will have to find somewhere else to hide their cash.
Of course, this amendment is only the beginning of the clean-up exercise. It is imperative we prevent the newly opened registries from sharing the problems of Companies House (and, while we’re about it, we also need to clean up Companies House as well), but when the registries are open we will all be able to see where their flaws lie, and then we can all help to seek out wrong-doers.
We will also need to support our territories in moving to a new way of earning a living. The strains caused by the Panama Papers and other such leaks have already driven business away from the British Virgin Islands, cutting the number of new incorporations registered there by more than half since 2012. If registries are open, demand will fall still further, reducing a key source of revenue for the territories’ governments, creating a shortfall that must be replaced.
It is, however, right that we do this. Every year, more than a trillion dollars are stolen from the poorest countries on earth, washed offshore and spent in the West on high end property, luxury goods and services. This epidemic of theft undermines armies, governments, doctors, and lawyers in countries from the Philippines to Peru; it spreads rage, terrorism, disease and despair from Ukraine to South Africa; it drives up house prices in our own countries, pricing young Brits out of their own cities. We cannot, of course, stop foreign officials from stealing, but we can stop helping them to do so: in ending anonymous companies, we are ending our enabling of kleptocracy.
Oliver Bullough is a journalist and author. His upcoming book, Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back, is due for release in September.