The Turks and Caicos Islands Government Ministry of Finance, Trade and Investment sought public feedback on the Turks and Caicos Islands’ Action Plan to Prevent the Misuse of Companies and Legal Arrangements with respect to the maintenance of Legal and Beneficial ownership information.
In recognition of the Turks and Caicos Islands’ contribution to the global economy, the consultation was open to the public, both locally and internationally, in order to provide an opportunity for broad representation. This release summarises the consultation responses; and outlines the Government’s current position, and proposed action points, on the following matters:
– Legal and beneficial ownership; and
– A central register of beneficial ownership information.
Legal and beneficial ownership
Of the 6 respondents, (three of whom were international NGOs, two local financial service providers and one local representative body for a set of financial service providers), the 3 international NGO respondents indicated that the legal and beneficial ownership arrangements were not sufficiently transparent, the 3 local respondents, including the representative body indicated that the Turks and Caicos Islands’ collection and maintenance of beneficial owner information was effective and satisfied international standards at the time of the Turks and Caicos Island’s most recent AML assessment and in accordance with existing international standards. The Government notes that, although the Turks and Caicos Islands has not experienced disproportionate occurrences of financial crime, we will continue to evaluate our legal and beneficial ownership regime and implement improvements in order to mitigate and, if it were possible given the inventiveness of criminals, to eliminate abuses of our system. Continuing to improve our system, in ways that support sound business growth locally and globally, therefore remains our position as the correct course of action at this time.
Central register of beneficial ownership information
Of the 6 respondents, the 3 international NGOs said they were in favour of a central public registry and the 3 local respondents, including the representative body, said they were not in favour of a central registry of beneficial ownership information, or of access to such a registry by the public. If the implementation of a central registry system becomes the required method of meeting the global standard, the local respondents also indicated that such a register, although central, should not be accessible to the public; rather, it should only be accessible by law enforcement, regulatory, and tax authorities. The 3 local respondents to this question pointed out that beneficial ownership information is adequately available through existing appropriate mechanisms. To determine if a central register is the most appropriate and effective way to improve transparency in the Turks and Caicos Islands, it is first necessary to test our current regime against the Financial Action Task Force (FATF) standards for availability and accessibility. Here it is worth underscoring that, although they are global in nature, the FATF Recommendations do allow jurisdictional flexibility – not in the intended outcome of the recommendations, but in how that outcome is achieved. In particular, FATF Recommendation 24 on legal and beneficial ownership outlines three avenues by which a country can comply with the availability of information standard. Of these avenues, a central register is one path; using data collected from licensed and regulated service providers is another. In accordance with the latter method, for many years, the Turks and Caicos Islands has a required licensed and regulated person within the financial services sector to collect, maintain and update beneficial ownership information. Principle No. 4 of the G20 Communiqué titled High-Level Principles on Beneficial Ownership Transparency, issued on 16 November 2014, reinforces FATF Recommendation 24 by stating, with respect to access to adequate, accurate and current information regarding the beneficial ownership of legal persons, that: “Countries could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms.” There are valid reasons for asserting, in the case of jurisdictions that choose to comply with FATF standards via the central registry option, that the central registry should be available to law enforcement, regulatory and tax authorities. However, to allow public access to a central register raises real and genuine concerns for law-abiding individuals that may infringe upon the right to privacy, which is a fundamental principle at common law and is enshrined in the Turks and Caicos Islands’ Constitution. Considerable doubts have been expressed as to how accurate information collected via a central public register will be, given that those who engage in illicit activities are not likely to self-report true and correct information. By contrast, law-abiding individuals who do self-report true and correct information may fall victim to any number of cybercrimes, including identify theft. This could erode confidence in the Turks and Caicos Islands’ services and systems. Until such time as there is global agreement on appropriate exemptions and safeguards, and this becomes the internationally practiced standard, the Turks and Caicos Islands will continue to follow its current regime.
Conclusions
The Government acknowledges the usefulness of this consultation, as part of the Turks and Caicos Islands Action Plan to Prevent the Misuse of Companies and Legal Arrangements, in informing our continuing programme of enhancements that ensure our regime meets local needs, and also fully complies with practiced global standards.
Our broad approach to the consultation was in line with our firm belief that solutions to illicit activity, including corruption and exploitation of the natural resources of developing countries, will be found only through constructive engagement. We recognise and, more importantly, understand the rationale behind the increasingly convergent nature of global regulatory initiatives.
The long standing commitment of the Turks and Caicos Islands to the value of these initiatives is evident through our engagement and responsiveness to the following tax initiatives:
– US FATCA and UK FATCA;
– being an early adopter to the Common Reporting Standard (including the Turks and Caicos Islands signing of the multilateral agreement on automatic exchange of information in Berlin on 29 October 2014);
– our high-level participation in the Global Forum for Transparency and Exchange of
Information for Tax Purposes;
– the extension to the Turks and Caicos Islands of the Convention on Mutual Administrative Assistance in Tax Matters;
– the abolition of bearer shares and the requirement to convert all bearer shares to registered shares;
– the establishment of Prevention of Terrorism legislation;
– the creation of the Financial Intelligence Agency to analyze trends and typologies to prevent financial crimes; and
– launched a National Risk Assessment of the financial services sector.
As indicated above, recent international initiatives and our public consultation process have given Government an opportunity to evaluate the current Anti-Money Laundering (AML) and Customer Due Diligence regime, as it relates to the issue of transparency of beneficial ownership of the Turks and Caicos Islands companies and arrangements. Upon such evaluation, Government acknowledges that, like any sound system or model in operation for many years, there are aspects that can be strengthened in order to tackle the misuse of legal persons and arrangements for illicit purposes such as corruption, tax evasion and money laundering. In this regard, changes are being made to reform the Gaming Industry.
In addition, Government is committed to adhering to the core set of principles as set forth in the G20’s High-Level Principles on Beneficial Ownership Transparency, and we will continue to monitor other international developments, including the European Union Fourth AML Directive.
Accordingly, in 2015, Government proposes to enhance the current framework to uphold such principles, and to take actions that will assist with the elimination of wrongful uses of legal persons and arrangements, while enhancing accuracy, access, availability and monitoring/enforcement of ownership information.
By mid-2015, Government also proposes to complete its National Risk Assessment, which should identify any further areas for improvement that can be addressed. Government’s proposed initial actions are as follows.
Government stands committed to vigilance in this area and to the continuation of its programme of active engagement with local and international stakeholders; develop subsequent improvements to our business model; and ensure that our authorities effectively cooperate, both domestically and internationally, so that our jurisdiction continues to provide an efficient platform for legitimate business in the Turks and Caicos Islands.
