In the ring, Round 1: Transparency V Right to confidentiality

In a series of 3 articles (Rounds 1 to 3), we explore Jersey’s approach to the concept of transparency in respect of beneficial ownership information.  In Round 1, we set out the key ways in which Jersey upholds transparency in order to meet its international obligations.  In Round 2, we will discuss Jersey’s respect for the legitimacy of arrangements (e.g. discretionary trusts), which keeps matters confidential in many instances.  Round 3 will follow this up by providing an insight into the tension that exists between making details of beneficial ownership available to the public (as in the United Kingdom) and the rights of beneficial owners and how this interacts with the principles of transparency.

Jersey is that tiny little island embraced by transparent blue waters and dreamy waves.  However, offshore jurisdictions are often labelled as ‘secretive’ and ‘corrupt’.

The reality is that the Jersey government, Jersey Financial Services Commission (“JFSC”) and the Royal Court of Jersey are committed to good local and global financial governance.  This commitment has bolstered Jersey’s reputation and it is still regarded as an attractive place for incorporating a company.

 

THE BUILD UP

Transparency of information on beneficial ownership is considered important for two key reasons. These are:

  1. The tracing of the beneficial owner – these are individuals that are potentially responsible for or associated with fraud, terrorism financing and money laundering activities and who often hide themselves behind complex corporate structures.
  2. Following the money – we need to be able to identify the assets of a beneficial owner to assist in tracing the domestic and international proceeds of crime.

 

THE HIGHLIGHTS

Here are the Round 1 highlights of how Jersey is at the forefront of ensuring transparency of beneficial ownership information.

 

Transparency of beneficial ownership at incorporation

Only a Trust Company Service Provider (“TCSP”) or a Jersey resident can incorporate a company in Jersey.  This requires the consent of the JFSC.  The identity of the Ultimate Beneficial Owner (“UBO”) of the proposed company must be disclosed to the JFSC.  Jersey has been operating a Central Register of Beneficial Ownership since 1989 in which this information has been stored.  The JFSC also requires confirmation that there is no evidence in any part of the world that suggests that the UBO has been (amongst other items): declared bankrupt; concerned in the management of an insolvent company; and disqualified as a director.

Relevant legislation: Control of Borrowing (Jersey) Order 1958 and Control of Borrowing (Jersey) Law 1958.

 

Supervision of transparency facilitated by Jersey legislation

Monitoring the up-to-date and accurate upkeep of beneficial ownership information is a role that the JFSC takes very seriously.  TCSPs are required, by law, to ensure that documents obtained relating to UBO information are regularly reviewed and kept up-to-date.

As a supervisory body, the JFSC has the power to obtain information and documents from a company including in relation to beneficial ownership information by serving a notice in writing.  The JFSC can retain this information and documents for a period of one year.  If the information obtained relates to ongoing court proceedings, the JFSC can retain the information until the end of the relevant proceedings.

The JFSC can also take copies of the documents obtained (or extracts) and require the relevant person in possession of the documents and information to provide an explanation of them.  Further, the JFSC has the power to disclose information received by it to, amongst others, a relevant overseas supervisory authority as well as to local law enforcement agencies such as the Joint Financial Crimes Unit and the Attorney-General.  This can happen for the purpose of investigation and prosecution of fraud within Jersey and abroad.  In deciding to do so, the JFSC will consider factors such as: the seriousness of the case overseas and its importance in Jersey; whether the assistance to be provided could be obtained by other means; and whether it is appropriate in the public interest to provide such assistance.

Relevant legislation: Financial Services (Jersey) Law 1998; Money Laundering (Jersey) Order 2008; Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008; and JFSC Codes of Practice.

 

JFSC Electronic Register of Beneficial Owners and Controllers

This is a very recent development.  It is not a publically available register.  It is secure and private in contrast to the UK’s Register of People with Significant Control.  It enables the easy provision of UBO information to the police and local law enforcement.  This is Jersey’s commitment to “the on-going sharing of beneficial ownership information…for the prevention and detection of corruption, money laundering, terrorism financing, financing of the proliferation of weapons of mass destruction and other serious and organised crime” (Exchange of Notes between UK and Jersey).

The register stores information relating to the beneficial owners and controllers of public and private companies, limited partnerships and limited liability partnerships, registered in Jersey (“Jersey entities”).

In order to form this register, Jersey entities were required to submit a Statement of Beneficial Owners and Controllers to the JFSC’s Companies Registry by 30 June 2017 even if no change had occurred in relation to beneficial ownership since the date of incorporation.  Going forward, the JFSC must be notified of any changes to beneficial ownership of 25% or more using the relevant form, which is available through their website.

 

International Exchange of Information and Co-operation

Information Sharing Agreement

An Information Sharing Agreement between the JFSC and the Joint Financial Crimes Unit of the States of Jersey Police (JFCU) came into force on 30 June 2017.  UK law enforcement authorities and UK tax authorities (HMRC) are able to request and efficiently access accurate beneficial ownership information from the JFCU without informing the beneficial owner that such a request has been made.  Information shared is restricted to: surname, forename, DOB, birthplace, nationality, occupation, alias, gender and residential address of the beneficial owner.  This process complies with human rights legislation and Jersey data protection laws.

Tax Information Exchange

A request can be made by a foreign competent authority to the office of the Comptroller of Taxes (Jersey) for tax purposes under the applicable Exchange of Information instrument e.g. Multilateral Convention on Mutual Administrative Assistance in Tax Matters or Tax Information Exchange Agreement.

Attorney General’s powers to provide Mutual Legal Assistance

The Attorney-General of Jersey can assist law enforcement authorities and courts exercising criminal jurisdiction with information on beneficial ownership for a number of purposes including: assisting criminal investigations, prosecutions and confiscations; assisting investigations regarding serious or complex fraud; civil asset recovery investigations; and proceeds of crime cases.

Relevant links: June 2017 (JFSC-JFCU) Information Sharing Agreement; 2017 (HM Attorney General) Mutual Legal Assistance Guidelines; and (Jersey Government) Requesting information from Jersey under an EOI agreement.

 

THE ANALYSIS

Clearly, Jersey respects the need for transparency of beneficial ownership information.  It will not tolerate the misuse of its system in order to create corporate structures with a view to deceive.  In Al Tamimi v Al Charmaa [2017] JRC 033, the Royal Court of Jersey well and truly KO’d any concerns held by outsiders regarding Jersey’s standpoint on transparency:

“there is a public interest – a very strong public interest – in the Island being able to demonstrate that it has the ability to identify the beneficial owners of companies, or the beneficiaries under trusts. In our judgment the Court should not recognise any arrangement which detracts from the ability of regulators or law enforcement authorities to do so.” (At 117).

In its 2016 report, the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures (“MONEYVAL”) highlighted Jersey’s proactive approach:

“Jersey’s combination of a central register of the Ultimate Beneficial Owner with a high level of vetting/evaluation not found elsewhere and regulation of Trust or Company Service Providers of a standard found in few other jurisdictions has been widely recognised by international organisations and individual jurisdictions as placing Jersey in a leading position in meeting standards of beneficial ownership transparency”.

Next time, we will consider to what extent the traditional approach, which protects the confidentiality of beneficial ownership information, survives in the light of international moves towards transparency.

Amita Chohan, Pupil Barrister
amitachohan@bakerandpartners.com