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Chief Minister statement on UK Sanctions and Anti-Money Laundering Bill and Beneficial Ownership registers

Thursday, 10 May 2018

'The Isle of Man has closely followed the UK Sanctions and Anti-Money Laundering Bill since it was first introduced into the House of Lords in October last year.

It might be helpful if I explain that the Bill was of relevance to us, as during its passage through the House of Lords various amendments were tabled in respect of imposing Public Registers of Beneficial Ownership on the Overseas Territories. This was of concern, knowing that amendments could also be tabled that would attempt to extend to include the Crown Dependencies.  

The Sanctions and Anti Money Laundering Bill received its Second Reading in the House of Commons on the 20 February 2018. During that debate the Labour backbench MP Dame Margaret Hodge signalled her intention to bring forward an amendment to force the Overseas Territories to introduce public registers.

The focus throughout that debate continued to be on the Overseas Territories, not the Crown Dependencies, and the UK Government line remained that it was not appropriate to legislate for these territories.

However, we continued to closely monitor matters and work with the UK Government and a number of other parties to ensure our position was understood.

The Bill was then committed to a Public Bill Committee for scrutiny and thereafter it returned to the House of Commons for Report Stage. 

We recognised that this stage created a risk, as amendments specific to the Crown Dependencies, were very likely to be brought forward. We were also acutely aware of the possibility of their success when voted upon, as the UK Government does not have a majority. 

On Thursday 26 April Opposition amendments to the Bill were made public for debate at Report Stage, which was set down for Tuesday 1 May. 

We immediately identified significant concerns about the Opposition amendment New Clause 14, regarding the establishment of public registers of beneficial ownership in the Crown Dependencies.  If approved, this amendment would have mandated the Secretary of State to prepare a draft Order in Council requiring the government of any Crown Dependency that had not introduced a publicly accessible register of beneficial ownership of companies within their jurisdiction by December 2019, to do so.

The amendment was in direct contravention of the Isle of Man’s position as a self-governing dependency of the Crown with our own directly elected Parliament, own administrative, fiscal and legal systems, and own courts of law.

Also, as Honourable Members well know the Crown Dependencies are not part of the UK, nor are we represented in the UK Parliament. Furthermore the Crown Dependencies have never been colonies and are not Overseas Territories, which have a different relationship with the UK. Our parliaments make our own domestic legislation. Our primary legislation requires Royal Assent.

The amendment overlooked that our constitutional relationship with the UK as Crown Dependency is through Her Majesty The Queen. It is not enshrined in a formal constitutional document. We do of course acknowledge that Her Majesty’s Government is responsible for our defence and formal external relations by virtue of this relationship to the Crown.

Fundamental to our constitutional relationship with the United Kingdom is the mutual recognition of the principle that the UK Parliament does not legislate for us without our consent.

Where UK legislation does extend to the Isle of Man and our fellow Crown Dependencies, this is with our agreement.

This agreement can be given either by virtue of the Act itself or by Order in Council, known as a 'permissive extent clause' extending provisions of the Act in whole or in part. In either case, the agreement of the Isle of Man is required.

NC14 referred to the tabling of an Order in Council by the UK Government in relation to a matter of domestic competence for the Isle of Man.

This amendment was therefore in direct conflict with our constitutional position and basic democratic principles.

Furthermore, it could not be argued in this case that the UK would be intervening to hold the Isle of Man to account for its international obligations, given that we already meet or exceed all international standards in this area.

The amendment would have imposed a requirement on the Isle of Man where the UK Government, and UK Parliament, have no democratic legitimacy and which would have been in direct conflict with our established constitutional position.

The precedent this would set would leave the Isle of Man with no option other than to vigorously challenge the outcome by all means necessary.

We, together with our fellow Crown Dependencies, were very keen to avoid any constitutional crisis. We therefore took considerable measures to work with the UK Government and a number of others, to ensure our constitutional position was clearly understood.

The period of intense activity between the amendments being released on 26 April to the Report Stage on 1 May cannot be understated but proved invaluable to securing the withdrawal of New Clause 14.

I would, Mr Speaker, also like to comment on the Isle of Man’s position in respect of beneficial ownership which was the policy issue behind the opposition amendment.

The Isle of Man has consistently complied with international standards as they are promulgated by bodies such as the FATF and the OECD Global Forum.  

We already have our own robust systems in place to tackle tax evasion, money laundering and other financial crime, which meet the highest international standards, including a leading position on the retention and sharing of beneficial ownership information.

We have an enhanced relationship for sharing information with the UK which is working well.

The Isle of Manhas an accurate central register of beneficial ownership, statutorily overseen by an independent authority, – the Financial Services Authority - from which we can share information with tax and law enforcement authorities.

In common with almost all other jurisdictions across the world that have such registers, other than the UK, this information is available to relevant authorities, rather than to the public at large.

We closely monitor developments in this area to ensure that our systems remain robust, effective and in line with international standards and obligations.

I would add Mr Speaker that doing so is the responsibility of the Isle of Man’s democratically elected representatives.

Taking account of international standards and developments - such as the Exchange of Notes which the Isle of Man Government signed with the UK Government in April 2016 - we have further enhanced our domestic policy, including introducing additional requirements, to ensure the information held on our register is as up to date as possible.

This enables authorities in the Isle of Man to exchange information with other jurisdictions within 24 hours for a normal request or within one hour if the request is considered urgent – for example, where there may be terrorism financing concerns. The Isle of Man exchanges copious amounts of information each year through law enforcement and tax authorities to the declared satisfaction of law enforcement authorities, including the UK National Crime Agency. 

A review of the operation of the arrangements agreed in the Exchange of Notes with the UK Government has just been completed. This review was conducted along with law enforcement authorities from all jurisdictions and has confirmed that the arrangements are working effectively to get beneficial ownership information to those who require it – namely law enforcement authorities for investigation and prosecution of financial crime.

The Isle of Man has always, and continues to, closely monitor international developments in this area to ensure that our systems are robust and fit for purpose.

It should equally be noted that whilst the EU has taken the policy decisions to make beneficial ownership registers public through the 5th Anti-Money Laundering Directive, this has not yet become an international standard, and there is no impartial evidence that public registers assist in the prevention of financial crime. The critical factor, as has been stressed by the recent work of the FATF and the OECD Global Forum in this area, is that information contained on these registers is adequate, accurate and current for the purpose of law enforcement.

The Isle of Man has spent significant time developing submission and oversight systems to ensure adequate, accurate and current information is held on their registers, and this is the area where, in our view, true value can be gained in the worldwide fight against financial crime.

Mr Speaker I should advise that it is noted that the 5th Anti-Money Laundering Directive of the EU introduces a requirement for public registers of companies in the EU. The Directive has only recently been agreed and is yet to be published in the Official Journal. Whilst EU Directives and Regulations are not automatically binding on the Isle of Man, these are often considered in our policy approaches.

Consequently we have started to consider our policy position in respect of the 5th Anti-Money Laundering Directive, and monitor the situation as it develops, discussing with industry and our fellow Crown Dependencies, noting that the Directive does not come into force until sometime during the period between 2019-2021.

Whilst we may have questions on the Isle of Man about the effectiveness of public registers, last week’s events are a clear indication of the strength of support for such registers amongst policymakers in the UK and our nearest neighbours. 

As a modern, outward looking jurisdiction that seeks to be recognised for the high standards it applies we cannot ignore this. But I am resolute that any decision on this matter must be taken here.

The Sanctions and Anti-Money Laundering Bill will now continue its passage through the UK legislative process and we will, of course, continue to monitor it extremely closely.         

Mr Speaker, I hope this statement is helpful for Honourable Members and gives an overview of the work we have undertaken to defend the Isle of Man in respect of this matter.'

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