British Virgin Islands: Trouble in paradise
The British Virgin Islands are often accused of helping wealthy individuals to avoid tax in their home countries File pic

A few days before this week's anti-corruption summit in London, The Guardian newspaper, a staunch advocate of ending the right to privacy enjoyed by offshore companies, claimed that Prime Minister David Cameron was under increasing pressure to "invoke special powers" against British tax havens to end their "fiercely protected secrecy."

You do not have to read the rest of the article to realise in which direction the newspaper is leaning.

Herein lies a problem. Some sections of the left-leaning media have jumped on to the release of the Panama Papers with glee, as if all their birthdays have come at once. Regardless of how inaccurate the newspaper is in continuing to describe all offshore service providers as "secretive", its insistence on doing so says more about the editorial relationship with its readers than the actual subject matter being discussed. This blinkered inability to actually assimilate and debate the facts is indicative of the politics of envy, rather than the real story.

The real issue is that Mossack Fonseca, the law firm at the centre of the Panama Papers revelations, appears to be guilty of an appalling lack of professionalism and ethics, leading to an abuse of the facilities offered by the offshore industry to some of its more dubious and colourful clients. As usual, the British Virgin Islands (BVI) featured strongly in media reports. The non-existent issue of secrecy is bracketed with the UK forcing the Caribbean territories to abolish the death penalty and decriminalising homosexuality – nothing too serious then?

Since the Panama Papers scandal broke (and yes, it is a scandal, but not always for the reasons being outlined by The Guardian), as a BVI-based lawyer who investigates fraud, corruption and money laundering to recover assets for victims, I have been inundated with requests for interviews and quotes by international media outlets. With little exception, most have wanted me to spill the beans on (what they considered to be) the poorly-regulated, secretive and clandestine world of murky offshore companies.

Unfortunately, they were in for a surprise as I explained that there was no secrecy in the BVI and that Ultimate Beneficial Ownership (UBO) identification information was readily available [with limited exception] to all competent authorities. This is because the BVI has laws stipulating that UBO information must be kept on the island with the formation agent, or be capable of being called into the BVI from a regulated person abroad, immediately available to the governments and law-enforcement agencies.

So what part of that is secret, let alone "fiercely protected"?

As in any system of regulation, liars and cheats try to get around it. We have some users of BVI companies who use fake UBOs, and it seems that Mossack Fonseca had a culture that resisted genuine compliance on the business side of the shop. However, in 90% of the cases that my firm has served High Court disclosure orders on, the crucially important UBO data has been promptly turned over. When I go to Delaware and Nevada, such orders yield nothing but darkness (save perhaps for the name of a Manhattan law firm that set up the company for an anonymous client).

Panama Papers: The 11.5 million document leak explainedIBTimes UK

It is true that the BVI offers privacy to businesses requiring it to operate and those seeking the added benefit of being tax efficient. But secrecy is an adjective incorrectly used in the context of the offshore industry in the BVI. If the information was being held secretively, by definition it wouldn't be available to others, including international law-enforcement officers. The BVI has signed information-exchanging protocols with tax regulators from across the globe, including the UK. The information they seek is readily available.

The fact is that it is not readily available to the general public nor the international media – but isn't everyone entitled to some level of privacy over their affairs?

I would hesitate to use the word "ignorance" in describing those churning out leftist propaganda for political gain. But surely by now the penny must have dropped that describing the BVI as a "Wild West" offshore location must have been dispelled over the last few weeks. If not, then selectively regurgitating rumours steeped in the 1970s is a silly business.

The anti-corruption summit this week will see changes made for the better. However, like Labour leader Jeremy Corbyn, The Guardian appears to be supporting threats that the UK will bypass democratically elected governments of the overseas territories and force new laws upon them. This beggars belief. The UK is about to vote on whether or not to remain in the EU, with Brexit campaigners complaining that the EU is undemocratically forcing laws upon the UK. This hypocrisy is not lost on islanders here.

Cameron wants all present at the summit to sign the first global declaration against corruption. I welcome this initiative. But any attempt at forcing changes in laws upon democratic states such as the BVI should be avoided. Public Registers will only force criminals to utilise frontmen as nominal UBOs, making the task of law enforcement and revenue collectors that much more difficult. People need to remember that economic criminals are by nature liars and cheats, no matter what systems you put in place (which they will always endeavour to bypass).

It appears to be lost on parts of the media that tax avoidance is legal, while tax evasion is a criminal offence. Therefore it is onshore that needs to get its own house in order by amending the tax laws that may be the cause of lost revenues. The Trillion Dollar scandal described by the anti-poverty group ONE does stipulate that these funds are lost through corruption.

The world's poor need governments to unite and investigate these crimes and put those responsible behind bars. As importantly, we need to identify and recover the assets stolen so that they can be repatriated. But none of this has anything to do with the BVI, because any competent authority can readily and expediently establish BVI corporate UBO identification.

Contrary to the assertions of well-intentioned and respected groups, the BVI is not an enabler of the corrupt. If it was, the records would be truly secret and thereby unavailable to all.


Martin Kenney is managing partner of Martin Kenney & Co Solicitors, a specialist investigative and asset recovery practice focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors