Not everyone was happy when the House of Commons voted last week to require companies registered in UK overseas territories to publicly disclose their beneficial owners. Critics argued that some owners have legitimate reasons for guarding their privacy, such as protecting themselves from corrupt officials or criminals.
Representatives of territories such as the British Virgin Islands said that the policy would undercut their status as offshore financial centres. Others argued that the move would only drive money launderers into even shadier corners of the global financial system.
It is legitimate for jurisdictions to compete for business by promising low tax rates or limited regulation. Not so the promise of freedom from all scrutiny
None of these arguments withstand serious scrutiny. The information that will become public is already available to governments, so they are none the wiser. It is conceivable that criminals would use company disclosures to target victims, but is finding rich people really so hard? In any case, the right of privacy for the wealthy must be weighed against the rights of the victims of criminals who move their gains into opaque shell companies.
If the finance industries of overseas territories are built solely on anonymity, then the disappearance of those industries is to be welcomed.
It is legitimate for jurisdictions to compete for business by promising low tax rates or limited regulation. Not so the promise of freedom from all scrutiny.
It is true that there are other places to hide wealth besides overseas territories in the Caribbean or Pacific. Not all of them are small islands or emerging-world outposts. The US, which has strong disclosure and enforcement regulations, has very weak disclosure requirements for beneficial ownership of companies.
But the fight against dirty money will not be won in a single go. Patiently and systematically plugging the leaks, big and small, is the only option. Transparency, crucial as it is, is not sufficient. The efforts of journalists and campaigners need to be backed up by government enforcement.
Financial Times, London, May 5