It has been drawn to my attention that the chair of Christian Aid in Jersey has resigned, saying:
[T]he decision made by Christian Aid UK to participate in the meeting held at St Paul’s Centre on Thursday 12th March 2009, entitled, ‘Offshore centres, past, present and future. Why reform is vital’ was hasty. The actual active involvement of Christian Aid UK, following considerable representation prior to the event from Jersey was an error of judgement, in which Christian Aid UK were na?Øve and negligent in not respecting the views of those within this Island who in recent years have been most generous supporters of Christian Aid through lent lunches, Christian Aid week collections and Overseas Aid Committee grants.
On April 24th, meetings took place which brought further illumination for Christian Aid UK to the fact that Jersey was and remains a well regulated international financial centre, committed to ensuring the highest standards of transparency in full co-operation with other jurisdictions. Jersey is not part of the problem, but our experience and models of good practice place us ahead of the game and therefore in a position to be a part of the solution. To suggest that Jersey is otherwise simply does not measure up to scrutiny.
The ongoing relationship of Christian Aid UK with the Tax Justice Network and Attack Jersey is, I believe, seriously misguided.
Personally, I can no longer represent Christian Aid whose position seems irreconcilable when on the one hand they are inaccurately critical of Jersey on Tax issues, but on the other hand keen to continue to receive financial support from the States of Jersey Overseas Aid Committee and residents of this Island.
As far as I can tell the person writing this is an ordained minister in the Church of England, although he has not signed it — the only attribution being to ‘Andy’.
I am sorry to see this person write in this way, for I feel it is he who is seriously misguided. I say so as someone who sees his work in seeking tax justice as a Christian vocation. It’s in that context that I regret to say that the person who drew my attention to this issue was probably right when he said:
I’m surprised you haven’t yet mentioned the resignation yesterday of the head of Christian Aid in Jersey, seemingly because he did not support the attack on Jersey’s finance industry by TJN and Attac, Christian Aid in Jersey has clearly been losing the financial support of local institutions which seems to be lesson in not biting the hand that feeds you.
The Church has an uncomfortable history of accommodating the government hand that feeds it. Doing so has rarely been to its credit. Apologies have almost invariably to follow. I suspect that might be the case here, but let me try to raise the level of the debate a little above that which Andy reaches. He appears to say that because the authorities in Jersey have access to the names of those who, for example, use the withholding option under the European Union Savings Tax Directive, which Jersey deliberately provides knowing that that chance of tax evasion elsewhere is significantly enhanced as a result, then it must be ‘fully cooperative with’ other jurisdictions. This is, of course, very obviously untrue because by offering this option it is refusing full automatic information exchange, which it is clear those states want. But let me instead consider this issue instead at the level at which Andy is hopefully qualified to engage in it i.e. at the Biblical and maybe theological level. I stress that in doing so I am speaking purely as an individual and that I do not suggest for a moment that what I say represents in any way the opinion of any organisation I work with.
I think there are a number of unquestionable moments when Jesus defined what faith was. One was of course when offering the two principles of that faith. As recorded in Matthew:
One of them, an expert in the law, tested him with this question: ‘Teacher, which is the greatest commandment in the Law?’Jesus replied: 'Love the Lord your God with all your heart and with all your soul and with all your mind.' This is the first and greatest commandment. And the second is like it: 'Love your neighbour as yourself.' All the Law and the Prophets hang on these two commandments.
That seems like a statement he meant to be taken seriously. But note how the story develops in Luke, where the questioner asks “But who is my neighbour?”. I cannot see any way in which we can know that in Jersey: anonymity is guaranteed there so that we are denied knowledge of who we are dealing with in that jurisdiction and others like it. I see no way that this is consistent with the teachings of Christ. One cannot know one’s neighbour in that case: worse still, that neighbour might abuse us with impunity, and I believe they do. How can that be consistent with the Law?
Let me take another section of Luke I think pretty important (Ch4 18-19) when Jesus said in his first public address:
The Spirit of the Lord is on me, because he has anointed me to preach good news to the poor. He has sent me to proclaim freedom for the prisoners and recovery of sight for the blind, to release the oppressed, to proclaim the year of the Lord's favour.
I believe that this is what Jesus really did mean his ministry to be about: I think that is played out in the Pauline theology which sees Jesus as the fulfilment of the promise made to Abraham on behalf of the people of Israel, which from the time of Jesus onwards would be extended beyond the Jews to the world at large. Jesus when saying this was, after all, referring quite deliberately to Isaiah 61. There is also no doubt at all that when proclaiming the year of the Lord’s favour Jesus meant he was declaring a Jubilee — a year in which debts will be forgiven and the poor set free, based on the teaching of Leviticus. That book, which (I fully accept) is hard to always apply to modern day life does in the chapter to which I link set out standards for behaviour which we can, however, all recognise as remaining ethically appropriate: that our business conduct be fair, open, transparent, accountable and respectful of the condition of each human being, all of whom are valuable.
I cannot relate that to tax haven activity. As Christian Aid has shown, tax havens cause deaths in developing countries. This is not by chance: tax havens as secrecy jurisdictions set out to do this. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so. The fact that Jersey knows the identity of those undertaking this abuse which I think is in contravention of Christian law makes no difference to its standing: it does nothing to stop it. Whether it is legal does not matter: Christians of all people have a duty to work to a higher standard.
And Christians of all people have a duty to bear witness to that. as the liturgy says in the post Eucharist prayer of the Church of England says:
Almighty God, we thank thee for feeding us with the body and blood of thy Son Jesus Christ. Through him we offer thee our souls and bodies to be a living sacrifice. Send us out in the power of thy Spirit to live and work to thy praise and glory. Amen.
This is not the moment when the service ends: it is the moment when the service to God, the other 167 hours of the week if you like, begins. A Christian says when offering this prayer that they will continue that service until they next come to the Eucharist. There is sacrifice in the process of doing so. That’s not easy. It’s not meant to be. It involves, as the word sacrifice implies, forgoing what is available but inappropriate in the pursuit of the path of faith if one is to live and work in accordance with that faith.
I do not see how the work of offshore finance is consistent with living and working to the praise and glory of God. I cannot see how it treats a neighbour as oneself, for the very essence of that activity is to deny to others what one has claimed for oneself. I cannot see how that trade brings good news for the poor, for it is designed to increase the gap between rich and poor, and most assuredly does so. I cannot see how there is in the ethical standard that Jesus required of those who follow, however inadequately in his footsteps.
In saying that I am not condemning those who work in offshore finance: many have no choice. Their home jurisdictions have been taken over by offshore finance. They are left with little choice but work in a sector that is doing harm, at least when seen from what I believe to be a Christian perspective. But there are many — those who set up and direct these organisations, those who support them in politics, those who excuse them in the Church, who have a choice. When they make the wrong choice — are wide of the mark — sin if you like — then it is the duty of the Church to say so. When it does not it fails in its duty. I think there is risk of that in Jersey.
And in saying so I am not for a minute decrying banking, finance or commerce. The tale of the Good Samaritan which follows on from the question ‘who is my neighbour?’ in Luke did require that the Good Samaritan had the means to settle the innkeeper who cared for the victim of a crime. But it did not ask that he secured those funds unethically: his ethical act could not have been condoned his unethical procurement of the means to undertake it. That is not possible.
So I will not apologise for believing in the merits of trade, of business, and of the right to make an honest profit. But I stress the word honest. And I cannot see how honesty is possible behind closed doors, when the light of transparency is denied, when the accountability for ones actions which is at the heart of Christian belief is not present — both here and now and in what is to come.
Put simply: I think the Chair of Christian Aid in jersey is profoundly wrong. For me at least the action of the Tax Justice Network is profoundly motivated by Christian belief, by the conviction that this is indeed the way in which I am required to ‘live and work to Thy praise and glory’.
You can differ if you wish. I’m sure some will. If done appropriately then I will of course welcome comments. What would be really good was if the church in jersey could accommodate alternative opinion as well. Surely, that is part of its role? But I should warn, rather more than usual I will moderate those out which do not respect the aspect of faith within this post.
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Richard,
I think the problem here is that you have no idea why people use offshore centres. In my experience, it is not tax driven. Being tax neutral (and all that means is not paying tax in Jersey) is a necessity, but it is not sufficient.
Private banking and trust work is almost entirely carried out these days for people – be it res non-doms, wealthy Arabs or others – who are not subject to income tax in their jurisdictions of residence.
Investment funds are invariably established offshore because the offshore regime is quicker and more flexible for funds that are aimed at non-retail investors.
So you ask ““But who is my neighbour?”. I cannot see any way in which we can know that in Jersey: anonymity is guaranteed there so that we are denied knowledge of who we are dealing with in that jurisdiction and others like it”
The plain fact is that anonymity is NOT guaranteed. All financial businesses in Jersey must know who their client is. All financial businesses must report any suspicion of tax evasion. The JFSC has access to all information held by FSBs. Politically exposed persons must provide reams of info to show how their wealth is derived. Information will be provided on request to any tax authority that asks for it.
Now, if you are saying that you believe everyone’s financial information should be a matter of public record, that is fine. But why not try to achieve this in the UK first.
At present, Jersey has the same level of “anonymity”/confidentiality as the UK. That is what the OECD found: that is fact.
The reason why Christian Aid is wrong on this issue is because people giving money to that charity assume it will be used to help the third world. If it is being used in a political campaign that is based on injustice (i.e. asking Jersey to enact policies that the UK, US, France, Germany etc have not introduced), then surely you can understand why people may decide to give to another charity, perhaps one that actually tries to address injustice and inequality rather than promote it.
The church in Jersey can accommodate alternative opinion, but surely the fact is that if you are going to seek donations from any society, attacking that society is not the best way to maximise your appeal.
Paul
Respectfully, debate is helped when people tell the truth
In the UK I can look for and almost always find out who is the beneficial owner of a UK company, I can get its constitution and accounts. I cannot do that in Jersey. The UK shares data under the EU STD. Most data in Jersey is not shared under the EU STD.
I fully accept the UK does not go far enough: but to say Jersey and the UK are the same is simply wrong. Please do not misrepresent the truth.
Likewise, although I stress I do not speak for Christian Aid – are you saying they are wronmg to point out the causes of povetry – one of which is proven to be tax havens? Wouldn’t that be extraordinary if that is what they were required to do? To know something and say nothing?
I hope further contributions to this debate stick to the facts. Real facts.
Richard
I think there are certain fundamentals here about the way people of faith should behave
1) Biting the hand? the principal “hand” that should be recognised is the hand of God.
2) The end never ever justifies the means. If Christian Aid believes that Jersey plays a role in the world that worsens the condition of the poor, no amount of money or donations should prevent them saying so. You can say they are mistaken but they really have no choice but to speak out.
3) Telling the truth and not covering it up for some perceived real-world advantage. Jesus said he was “the truth”. That means he is always present in the truth and he is not present anywhere else.
This comment does not address whether Christian Aid are correct in their belief, but it does demonstrate that comments about whether it would be judicious to keep quiet are quite irrelevant.
Richard,
You can get the mem and arts of any Jersey company over the internet from the JFSC website. You can also find the identity of the legal owners of the shares. The beneficial ownership of the company is not disclosed but then, to my knowledge, it is not in the UK.
In Jersey, providers of company admin and trust services are regulated: in the UK they are not. That is why in the Economist recently the correspondent found it was easier to open a bank account or form a company in the UK or US than in Jersey.
As you know, Jersey wanted to share data under the EUSTD. But certain EU countries refused: Jersey has always desired a level playing field.
OK, to be factual, I do not know whether tax havens cause poverty in the third world. I do know that there has been some money from the third world held in Jersey and Guernsey in the past from (among others) the ex-leaders of Nigeria and Indonesia. The money was frozen and was repaid to the countries where it was embezzled from. I do know, for a fact, that financial institutions in both Islands actively take steps to avoid taking such money now, to the extent that they are “off the map” for people with ill gotten gains.
The crux of the matter remains, if you are a third world dictator (or, more likely in this day and age, member of the “energy department” of a third world government), Jersey, Guernsey and the Isle of Man are among the last places you would seek to deposit assets. The current legislation requires financial services businesses to report prospective clients who give grounds for suspicion.
I realise that you despise the finance industry in Jersey and Guernsey. But as I have said before, to blame them for the ills of the world is like living in a cold house and blaming your triple glazed windows for not being quadruple glazed while you leave the doors open and the roof uninsulated. If you want “bang for your buck” there are far better places to concentrate your fire on than 2 of the cleanest, most highly regulated jurisdictions on earth.
And that is why Christian Aid is wrong: because when people give them money they expect them to use it for ends that clearly benefit the third world. They may have grounds for seeking to attack the finance industry in Mauritius or Vanuatu or Delaware or Switzerland or anywhere else where people can establish companies and bank accounts “no questions asked”. But as all independent research has shown (and I would again refer you to the piece in the Economist that you highlighted on these pages) Jersey and Guernsey are not among those places.
Paul,
regarding your claim that “Information will be provided on request to any tax authority that asks for it.”, I am afraid that this statement is plainly false.
Jersey can exchange relevant information in civil tax matters only under a handful of bilateral provisions. Generally, no information exchange is possible in civil tax matters. Precisely this is impossible, that ‘any tax authority’ can ask for ownership or bank information.
Information exchange in criminal matters requires that significant evidence about criminal conduct must be submitted beforehand – thus, this information exchange remounts only to a post factum confirmation of already known facts and is thus useless in practice.
Last but not least, even if it was possible for an African country to come up with convincing facts, the competent authority (Jersey tax office or JFSC) require additional authorization by the Attorney General.
In this light I find your comment grossly distorting and – should you be aware of the aforementioned facts – intentionally so.
Paul
Like Markus I am, to be candid, a little shocked at your blatant disregard for the truth.
I do not know that Jersey wanted to share data under the EU STD. As a fact I have been told in Jersey and London that it was dragged kicking and screaming into doing so, and only under threat. I believe those in senior positions who have told me so in both places.
More than that though, the facts do not support the claim. It could withdraw the withholding option if that was its wish. Cayman never exercised it after all. Jersey could do the same. It does not. That is a choice it has made.
I regret that you abuse the truth so blatantly when writing here. How can anything you write be taken seriously when your you so willingly misrepresent facts?
Please either base your argument on facts in future, or I will be forced to block the misrepresentations you offer.
Richard
“All financial businesses in Jersey must know who their client is.”
I’d be interested to know how this is achieved. How can you really know what any given client is up to?
Many people don’t know what their spouses are getting up to, let alone someone on the other side of the globe, who they have never even met.
Professional fraudsters are generally pretty good at providing seemingly good references, and putting on a respectable front, especially when they’re dealing with someone who thinks they’re going to get a piece of their apparent wealth.
We always knew this arranged meeting in Jersey would end up back firing. It was inaccurate and actually cheeky and following the white listing a humiliation for them.
The only people that have lost out on this now is Christian Aid. Perhaps ATTAC and the TJN should think before they speak in future. Many people asked as to why this meeting was not arranged in a place like Switzerland anyway. Many people thought Jersey was being unfairly knocked here.
James
TJN is certainly not embarrassed. We stand by everything we’ve ever said: it all remains appropriate.
Gordon Brown seems to agree. After all, he has said very clearly in his letter of 9 April that Jersey has a long way to go yet, both in beating international expectations and in tackling tax avoidance.
I think he’s right and that you make a big mistake in thinking this issue resolved. That is far from so.
Richard
““All financial businesses in Jersey must know who their client is.”
I’d be interested to know how this is achieved. How can you really know what any given client is up to?”
You verify the identity of your client through passports, utility bills and face to face meetings. You ask for documentary evidence of the source of wealth and references from professional advisers. You pay for a World check search. You Google (surprising how much turns up).
You also remember, that if you get it wrong, your head office in London, Berlin, Paris etc will hold you to account if you get it wrong. No wonder most of the money is clean.
The response of the head of Christian Aid in Jersey is all too typical of the island society in general. Finance is pervasive, indeed hegemonic and determines even minor forms of conduct and behaviour.
Island organisations of conscience are unable to accept that what goes on under their noses in their community is morally reprehensible. They are hypocrites essentially. Suffering and poverty elsewhere is something with which they can empathise and it makes them feel more worthy than others to know they are the only ones to really care, yet when justified criticism is made of finance locally they become defensive.
Its just like the production of sugar in the New World in the 17th and 18th centuries using slavery: who would have the courage to state that slavery is abhorrent when it produces the wealth of society?
Island communities are incapable of self reflection. They have been captured by capital and that is precisely why capital is there, because they are so easily controlled in its interests.
These modern day plantation societies are incapable of self reform. Only external pressure will bring change, at which point capital will depart leaving desolation in its wake.
Frankly to Golden Brown, all I can quote is Matthew 7.5
“, first take the plank out of your own eye, and then you will see clearly to remove the speck from your brother’s eye”
It also bears some comment that Christian values also promote world poverty, like the prohibitation of contraception leading to overpopulation and the AIDS epidemic in Africa.
Dan- as proven many times due dilligence carried out in the crown dependencies is far more stringent than in the UK
“Professional fraudsters are generally pretty good at providing seemingly good references, and putting on a respectable front”
Just like those nice guys at the SCC giving Madoff glowing references to offshore investors you mean? I agree, once “onshore” get their act together then it will be a lot easier for “offshore” firms to see through the fraudsters.
May be the US could look at a bit closer at 1209 Orange Street, Wilmington Delaware with it’s over 200,000 registered companies, over 10 times more than Obama’s biggest tax scam example in the Cayman Islands.
Also Richard, how many times has the UK tax authority shared tax information with other countries about UK resident non domiciles and revenue they earned in other countries and haven’t remitted back to the UK??
Richard,
You say that in the UK you can “look for and almost always find out who is the beneficial owner of a UK company”. Yet the TJN’s submission to the Treasury Select Committee at page 41:
“Shareholdings can in some places be issued in the form of ‘bearer shares’ which means that simply the possession of share certificate is indication of ownership of the share. That ownership need not be registered. This is mechanism that can be – and is – used for money laundering.
Regrettably it must be highlighted that the UK is also a party to great many of these abuses. It is possible to use nominee registered offices, shareholders, directors and secretaries in the UK. Bearer shares are allowed. Accounts are required to be filed , but little action is taken by Companies House if they are not … The UK acts as a tax haven in this respect and has to remedy these defects in its own company administration arrangements as a matter of priority to stop the tax evasion that doubtless occurs as a result.”
Can you confirm whether any of the Crown Dependencies permit the issue of bearer shares? Please identify the section in the respective company laws which permit them (in the UK it is section 779 of the Companies Act 2006).
Can you get copies of every UK companies accounts? Will you be able to once the EU Directive on Small Business Entities comes into force.
Can you get a copy of the shareholder register for every company in the UK?
Compare Part 8 Chapter 2 of of the Companies Act 2006 (UK) with equivalent provisions in the Crown Dependencies (in Guernsey you need to look. You may be surprised at the strange parallels between the regimes in the UK and the Crown Dependencies. Indeed I can confirm that the regime in Guernsey and the UK are identical in effect.
I accept you can get the Memo & Articles in the UK, but you can get them online in the Crown Dependencies as well.
You cannot claim in a submission to the TSC that UK Company Law permits nominee shareholders, directors, registered offices, bearer shares etc and then say in this forum that you can get access to this information in the UK but not in the Crown Dependencies.
Either your submission to the TSC was false or your statement here that you can almost always identify the beneficial owner of a UK company is false.
Creg
My blog makes very clear I think Christians make mistakes. We do. The concept of sin and forgiveness would be pretty irrelevant if that were not true
You may have noticed Obama is planning to tackle Delaware
And you’re right on domicile – but no one has done more than me to try to abolish that appalling rule
I have further meetings on that very issue today
Richard
Barwick
I am delighted to see you study my work with such rigour.
And you have correctly read what I wrote, and have reported it accurately. I need change nothing. My criticisms all stand.
But you do, as is commonplace in the Crown Dependencies conflate issues, and I suspect deliberately so, for the points I make address entirely different aspects of the issue.
Of course the UK has problems that need to be addressed: I want reform here as much as in the Crown Dependencies. But as a matter of fact when a person goes to the public register on share ownership in the UK they can be pretty sure that in most cases the answer they find will be honest and correct, and name the real beneficial owner. And the accounts usually correct any information on trusts recorded as owners etc if they are in place since the effective control of companies has to be recorded in our accounts, and we have to put them on file, unlike you.
So my statement is entirely and completely correct, because I did note that there are exceptions, which I accept, and which as you note I have hoinestly recorded and where I have campaigned for change. How can you then say I have acted without integrity?
I can say with certainty that if I do the same search in Jersey or Guernsey I cannot usually find this data. Worse, the prevailing culture is to hide that information and of course accounts are wholly unavailable
And I am as concerned with ordinary people knowing with whom they are asked to trade without recourse in the event of failure as I am with government.
So all I wrote was absolutely right, on both occasions.
I hope you have the courage to apologise.
And if you want to join the demand for reform in thge UK please do – but at least reach some basic standards of integrity and disclosure at home first.
Richard
“But as a matter of fact when a person goes to the public register on share ownership in the UK they can be pretty sure that in most cases the answer they find will be honest and correct, and name the real beneficial owner”
Is that not because the majority of companies in the UK are small trading businesses owned by the actual shareholders?
Whereas in Jersey, although the locals do run companies, the ones you are interested in are investment vehicles. And because they are investment vehicles that will themselves invest in other companies, the named shareholders will almost invariably be a financial services entity as they will be the ones that have to sign documentation on behalf of the company.
To keep it simple, isn’t the fact simply that the named shareholders are going to be those people who administer the company on a day to day basis? For a firm of plumbers in the UK, that will probably be the principals themselves. For a private investment company in Jersey investing on behalf of a third party pursuant to a discretionary mandate, its likely to be the investment company.
Paul
Obfuscation in defence of opacity
Given the disaster of financial services do you really see that as any reason for not knowing real owners? Isn’t that the best reason for knowing, precisely because it would increase understanding and reduce risk?
What is your problem with data that increases the efficiency of markets?
Richard
Richard
You say that it should be a requirement that beneficial ownership of a company should be on public records so that third parties know who they are dealing with when trading with that company. Likewise third parties should be able to see the accounts of the company on public record to enable them to assess the financial status of the company before trading with it.
That’s fair comment in respect of trading companies but the vast majority of offshore holding companies in the Crown Dependencies are passive investment trading companies who simply do not trade with third parties. This point is simply not applicable. So who else has any need to know this information ? The tax man ? Definitely. Anybody else ? I’m struggling to think who else might have any need for the information. You state that “we” need to know. Who is “we” ? Tax Justice Network ? Why ? What on earth would TJN need such information for ? Its none of anybody else’s business unless the beneficial owner is hiring behind privacy to break the law.
Rupert
Ownership carries rights and responsibilities – it is not a passive act
So yes, “we”, that is ordinary people anywhere, any time, have a right to know about who owns what when they do so through limited liability entities affording a benefit granted by society as a whole.
If you want the benefit of privacy don’t use a legal structure- use your own name – that’s the answer. But the reality is the structure is used to secure a benefit which will alter property rights in society at large- and with that right comes the obligation to disclose.
Please say why not.
Richard
Richard,
I think it is clear that most “offshore” vehicles are investment companies. So lets say Mr Z decides to set up a structure in an offshore jurisdiction, and that structure establishes a company, XYZ/
XYZ is, by and large, going to invest in property of all types but almost exclusively, in my experience, in real estate, funds and shares. Now, I really cannot see what general public interest there is in knowing who owns a company that is buying a house in Monaco or London, or investing in a specific fund, or holding a minority interest in a quoted company.
I can see an interest in knowing who owns a vehicle that is taking a significant stake in a quoted company or building up a monopoly through company acquisitions, but the mechanics to discover this are in place.
But what is the public interest in you knowing whether Mr Z has £100m invested through a series of investment companies or not? You say the benefit of limited liability means that the owner owes an obligation to society, but in the case of an investment company, limited liability is irrelevant: the entity simply invests, it does not borrow (unless it has ample security) or trade.
Paul
I find your attitude extraordinary
We have, for example, in the UK land registries and share registries precisely because a) ownership of property carries responsibility with it and we wish to know who has that b) we wish to know with whom we deal c) we wish to hold those with power (and in our society property is power) to account.
Yes, we do need to know. Very much so.
Richard
Richard,
I think you are being disingenuous. If you find out that Mr Z owns a company called XYZ, that owns less than 3% of a fund called ABC, and ABC owns shareholding of less than 3% in over 100 quoted companies, what benefit is that to anyone?
Of course, if you find out that XYZ owns 20% of Tesco and is buying more, then there is a public interest in discovering who is behind XYZ. But the Takeover Panel looks into that, and whenever any beneficial owner takes a stake of more than 3% of a listed company that is disclosed.
Unless someone is taking a material stake in a company I really cannot see how “wishing to know who we deal with” is relevant.
I think your main argument is “wishing to hold those with power/property” to account. But I would disagree: it is called private property for a reason, and as long as somebody is using their property in a legal manner the general public has no right to know what that property is. I’m all for strong laws preventing monopolies, environmental abuse etc. And if breaches occur they should be prosecuted. But I’m not sure why the general public should know whether Mr Z is “worth” £1m or £1bn, or what he does with his money.
As long as he pays his tax and obeys the laws, he has a right to privacy.
Paul
Disingenuous? Definitely not.
Principled, like those who established these rules for good reason in the UK? Yes.
Having a dislike for thsoe who seek to cirumvent those rules and thereby the rule of law by using offshore entities? Most certainly.
Having distrust of those who facilitate them in doing so? Absolutely.
Richard
Richard,
I meant disingenuous in that you overlooked my comment that there was a right to know who was behind the build up of a material stake in a quoted company.
I simply think it is both wrong in principle and dangerous in practice to try to develop principle based legislation (such as a general right for the public to know details of everyone’s assets) based on examples that can be dealt with by a much less draconian framework.
If you want an extreme case, look at Huntingdon Life Sciences, a case I am sure you are familair with. Would it be right if the situs of all of the assets of every director and shareholder of that company was public knowledge? Can you imagine the firebombing of holiday homes that would take place?
As I say, if people break the laws they should be held to account. But a general right to look into peoples’ wealth, coupled with the dissemination of that information across the internet, would not assist the development of a tolerant, inclusive society.
And how far would you go: would you want people’s credit card bills placed online? If a wealthy person buys a painting for £1m, should that be made public? If people are acting legally, why does anyone else have a right to know any of that stuff?
Richard,
Firstly I apologise if you feel I questioned your integrity that was not my intention, rather I was simply pointing out that there appeared to be an inconsistency between the TSC statement and your statement here. Respectfully they cannot both be correct.
Either you can identify the beneficial owner of all private companies or you cannot. It is not consistent to say that it is easy to hide beneficial ownership in the TSC submission and then say that you can almost always find out who the beneficial owner is in this forum.
I repeat my challenge provide evidence that your can idenfity the beneficial owner of almost all of the 4million plus companies on the UK register.
Limited Liability does carry responsibilities. That is why the directors of a company can be held liable for allowing it to trade whilst it is insolvent. That will include shadow directors. That is the key measure of accountability.
As far as finding out who the shareholders of a company are, that information is just as freely avaliable in the Crown Dependencies as it is in the UK. Indeed the provisions on access to share registers in Guernsey is the same as in the UK. In fact your statement that anyone can find out who the shareholders of a UK company are is not correct. Under the 2006 Law not everyone is permitted access to the share register, it is only those who make the request for a proper purpose. Mere interest in the who is behind a company is probably not going to make the grade, a proper purpose is something entirely different.
The primary protection for people dealing with companies is the personal liability of the directors of those companies. Access to accounts and share registers makes almost no difference. After all if the accounts are routinely not filed with companies house, as you suggest, then what protection do they offer. Also the accounts of Enron, Parmalat, HIH, BCCI, Madoff etc were regulalry filed but didn’t seem to provide any protection whatsoever. The EU seems to agree that they add no value as they will exempt small companies from any obligation to file accounts.
Also knowing who the shareholders are provides not protection. Shareholders are simply not liable for the debts of the company (unless they are a director or shadow director as well).
The key issue is the identity of the directors as it is those to whom creditors will turn to make good any liability of the company from insolvent trading or otherwise breaching thier duty to the company.
Paul,
I think your example of the company XYZ is sanctimonious. You ask:
“If you find out that Mr Z owns a company called XYZ, that owns less than 3% of a fund called ABC, and ABC owns shareholding of less than 3% in over 100 quoted companies, what benefit is that to anyone?”.
Of course in this constructed case of yours there is little benefit in knowing who Z is. But the point is another one: this very same private company owned by Mr. Z is not only entitled to own minority shares in a huge, diversified fund, but is entitled to own almost whatever company XYZ fancies to own (except banks and human beings – see Truman Show). And this includes majority stakes in other private companies, real estate, intellectual property rights, etc. Furthermore, this same private company is entitled to bill for easy-to-abuse-services such as consultancies, etc. There is the problem: the company can own things and intellectual property (and thus exert power over it) and can bill other economic actors (and thus claim legitimate payments). Here is the problem coming in. If you engineer an artificial case in which a private company invests only in minority share-holdings: why would you justifiably want limited liability? You are not incurring any risk, are you?
I am afraid Paul that you are again not seriously engaging in the debate here.
As regards your hardly believable definition of ‘private property’: “it is called private property for a reason, and as long as somebody is using their property in a legal manner the general public has no right to know what that property is.”
As far as I am aware of there was never any serious theoretician coming up with the flawed idea that ‘private property’ entails secrecy of ownership. Private property is usually defined as the exclusive right to enjoy the property in freedom – not to conceal the identity of the owners. And you again engineer the truth away: we are in no instance asking that the complete wealth of each individual citizen shall be published centrally. The only thing we ask for is that for any legal entity that enjoys protection conferred by the public and state, the ownership must be publicly knowledgeable.
Markus,
You might find the example sanctimonious, but the simple fact is that the majority of “offshore” companies are just of that type: a single vehicle, held by a trust, managed by a financial institution, with the aim of investing the wealth of a family on the stock markets.
But you see, you start with the assumption that everyone who is wealthy and in particular everyone using offshore must be up to no good and the onus should be on them to show they are innocent. I start with the assumption that what somebody does with their money is of no concern to the rest of the world as long as they obey the law, and that people should be presumed to be innocent.
Barwick
Your claim is quite wrong: I envisage two differing circumstances for two differing purposes: of course two answers are possible. Your comment is disingenuous, just as is your assumption that because some commit fraud there is no benefit from accounts, etc. Of course there are. Most do not commit fraud.
Like Paul you work from an exception (another being that clearly there are cases where the real beneficial owners of shares are not filed in the UK – something I would wish to amend) to make a generality. In the process you seek to undermine the arument for law: you say because some break it we should not have it. Very obviously that is an argument in absurdum, and to be ignored as a result.
Candidly – if you and Paul say that because there is abuse it should be tolerated and even permitted you reveal the attitude of those working offshore.
Richard
Paul
I think Markus has resoundingly dealt with the issues you raise – and what he did not touch upon I have ion my comments to Barwick.
Richard
Paul
Let’s assume you’re right. If so here we have an industry built on the desire of the wealthy to a) record their wealth in a way not attributable to them even though that is what the law of places like the UK demands and b) to avoid the taxation obligations that arise to them as a consequence of enjoyment of that wealth or c) both the above.
Now you may thinking avoiding the rule of law to be acceptable: I don’t. I think getting round the law a matter of considerable concern. And yes, I most certainly want to know who is doing so, not least because when I deal with them I might find they act with the same indifference from behind the veil of incorporation- and that is something I definitely need to be warned about.
Oh yes I wan to know the names of these people: they are a threat to my well being.
No doubt that’s why they are also willing to pay for anonymity: they know they threaten my well being and do not want to be accused of it.
Richard
Paul,
it is again not true that I work from the assumption that wealthy people are not honest. I work from two assumptions: First, that people who engage in honest business do not need to hide themselves (and this is quite different from saying that all the others must be up to sth – it suffices that a minority is). Second, that those who want to do business have the legitimate choice between two options: either they prefer total privacy in which case they can manage the financial affairs without switching a company in between (why would you need limited liability in your example of wealth preservation? quoting you: “a single vehicle, held by a trust, managed by a financial institution, with the aim of investing the wealth of a family on the stock markets.” why can’t you let a financial institution do that in your name or the name of the family without using a company? I cannot think of any legitimate reason); or people prefer limited liability, in which case they can create a separate legal person whose owner must reveal her identity to the public. I cannot see how ‘offshore business’ should be hindered in the slightest should everything going on there be so perfectly legal as you claim.
It is late in the piece but I wished to follow this up:
‘We have, for example, in the UK land registries and share registries precisely because a) ownership of property carries responsibility with it and we wish to know who has that b) we wish to know with whom we deal c) we wish to hold those with power (and in our society property is power) to account.‘
This is not my understanding. I thought that the property registers were primarily required to provide clear ownership (registration = ownership) and minimise fraud (ie in the sense of selling shares/land you don’t own). I do know that property registers were used in connection with voting, but there the purposes was really somewhat the contrary to your high ideals, in that the point was disenfranchisement of the masses.
More broadly, limited liability does not entail any moral imperative to reveal your name – in many ways this would erode the correct incentives in this case. The point of limited liability is that you have no recourse to the owners’ funds. Whilst this is clearly understood (and also not really a problem) in dealing with large companies, I find it impossible to believe that requiring publication of the owner(s)’ name(s) would not, in the case of small companies, lead to a belief that the owner was in fact somehow ‘behind’ the company when s/he is of course not at all.
Finally, why is disclosure required in the investment fund example? What public interest is their besides tax? I don’t mean any value judgement here, I just want to be sure that we agree or not that tax is the only public interest involved in these cases.
@Richard Murphy
Richard,
Ad hominem attacks, really has the tone of debate sunk so low already. I did not say say that because some break the law we should not have it. Instead you choose to ignore the questions that I asked and then misrepresent my comments in your rebutal. Then you ignore my points altogether. I will put them down in a list, feel free to respond if you like:
1. How does knowing the shareholders protect creditors? The shareholders are not liable for the company’s debts.
2. How does filing accounts on an annual basis provide any protection to creditors? How many creditors who deal with companies go and look at the accounts of that company?
3. Prove that you can identify the beneficial owner of “almost all” UK registered companies.
Barwick
I can’t find the ad hominem attack. Forgive me: I don’t think it’s there. I dealt with your arguments with cold logic.
As to your questions:
1) If I know who the shareholders are I know in many cases how they might expect the company to be managed. If you really think all those enquiries for AML purposes about who the shareholders might be are just for fun, think again. They tell you what this organisation is likely to be for, how it will be managed, and who created it, thereby indicating its likely modus operandi. I will be personal: your question is incredible from someone who seems to lay claim to financial competence.
2) If I know the company is at or near insolvency I am forewarned. I know lots of people who use this data.
3) As a matter of fact I can never remember not finding the real owners – unless they were registered offshore. I have done thousands of searches in my career. Experience tells me I am right.
You have not made a case.
The argument you have presented is not credible. That’s not an attack. It’s fact.
Richard
@Richard Murphy
How do you “know” that the registered sharedholder is not holding the share on trust for someone else?
Patrick
Forgive me, but I find your comment incredible. Being in possession of wealth provides access to power. This is reality. I said nothing about voting.
But I do want those with access to power by this means to be held accountable for it: why not?
I think I and Markus have more than adequately dealt with your other points
Richard
Barwick
Sorry, but you might find this quite shocking, but 99.5% of people have never used a trust, do not want to use a trust and are perfectly and completely happy to stand up for their responsibilities in their own name.
In the UK I can safely assume that.
I also know because in many cases I’ve asked. Often as an auditor.
Richard
My point was not normative, it was positive. You provided as per my quote a positive reason for public registration. I provided my understanding of the actual reason for registration.
If you only mean by the quoted passage that that is how you see registration and why you like it, fine. But if you mean that that is in fact why we have registration, which is how it reads, then I beg to differ, as stated.
As for the rest, well we disagree on limited liability I guess. And your and Markus’ comments seem to suggest a general public interest in ‘knowing what other people are doing’, which I do not think is necessarily a public interest at all, but I guess that is a cultural point on which we will also disagree.
Richard
You say: “So yes, “we”, that is ordinary people anywhere, any time, have a right to know about who owns what when they do so through limited liability entities affording a benefit granted by society as a whole.”
On what basis do you make that assertion ? Why do you need to know such information if you not being asked to trade with a particular company ? It doesn’t affect you and is therefore none of your business.
We have a very simple disagreement of a principle here. You assert an alleged right to know information which is totally irrevelant to you. and I can find nothing in any law which grants you such rights. I assert that anybody is free to use a company (and has been for several years) in privacy, unless there is a relevant need to be a public company, in which case certain information is available to the public as a result of the company having the right to seek to raise money from the public. I can find nothing anywhere which states that the right to use a private company is illegal or inappropriate, although obviously if the use of the private company is illegal (ie to evade tax) then clearly that would be a different matter.
So where is the authority upon which you say that “we” (i.e. the public) have a right to automatically know information about a private company unless you intend to trade with or borrow from or lend to such a company ?
The clue is in the name…private company versus public company.
Dear Patrick,
beg your pardon, but you are a spin doctor of excellence (and sadly, I am afraid that you might take this as a real compliment…).
Again: in no line do we suggest that there is a public interest in knowing what other people are doing as long as they are not threatening the public. In this sense you are intentionally not saying the truth. Others call this lying. Full stop.
Not to threaten the public involves an inevitable choice between privacy and limited liability. It was never intended for those creating the concept of limited liability that the owners remain anonymous. To the opposite, it is logically wrong to assume that if limited liability is given, anonymity would still make sense: the former makes the latter redundant.
So if you are unable to choose between privacy and limited liability, then, yes, it is not a tremendously long way off to infer that something rotten could be under the surface of this wish to have both. Come on: how did all this financial mess come about? Do you really want to say that “how it ever was, it is fine”? Furthermore, there is a huge amount of dirty money to be laundered each year: where and how do you think does this take place? These funds stem from forced prostitution, drug trafficking, child pornography etc. It is in this context that all your comments defend the status quo – a status quo that costs more than 20.000 children’s life each day.
And you are concerned that you cannot remain anonyomous whilst acting without full legal accountability? If you call this cultural difference, I’d disagree once more: I’d call it rather a fundamental difference in values. One of our attitudes I’d call self-concerned and -centered, and motivated by fear. You guess.
@Richard Murphy
Richard, where in UK law is the obligation to disclose beneficial ownership. You say that in your experience 99.5% of people have never used a trust. That may be the case but how many people manage bank accounts for their children? As far as I am aware that is a relationship of trustee and beneficiary until the child turns 18.
I realise you will accuse me of using a ridiculous argument. But if you are serious about having a register of trusts in the UK you will require every parent who opens a bank account for thier child to file a trust deed and register that trust with the registrar of trusts.
I hope you achived your goal, the fees generated for lawyers will be astronomical and there is nothing society needs more than more wealthy lawyers.
On a more serious note. Compare s.116 and 117 of the Companies Act 2006 (UK) with sections 127 and 128 of the Companies (Guernsey) Law 2008. both of which deal with access to the share registry and both of which are near enough identical.
On beneficial ownership have a look at part 29 of the Guernsey Law as well. I think you will find that Guernsey’s company law regime on beneficial ownership is significantly better than that in the UK. You should also note that this part of the Law is in addition to AML/CFT obligations.
When the UK and all the other jurisdictions have met or exceeded the legal standard in Guernsey then you will have cause for complaint. Until then perhaps you should focus on jurisdictions where there is way of anyone finding out the beneficial owner of a company, Jason Sharman’s reseach from Griffith University in Australia idenfities a couple of those particular jurisdictions.
Markus’s comment that “people who engage in honest business do not need to hide themselves” is interesting. I was once approached by one of the wealthiest families in the world. They wanted to establish a structure in jersey and would provide proof of their residence but only if I undertook to destroy it as soon as I had verified it. I could not give such an undertaking: as a matter of Jersey law I have to keep copies of such records.
Their reasoning? Over the years a number of family members had been kidnapped and they were ultra sensitive about allowing any information about them into the public domain.
Why else might people want that confidentiality? Well, perhaps a family does not want its young children and their school friends to know how wealthy they are. Perhaps people want to be treated as equals within their community, and not subject to comments like “here’s X, he’s worth £75m but he must be mean because he only drives a cheap car”.
People have a basic right to privacy. Just because someone is wealthy does not mean they have given up that right. It does not mean people should be able to find details of every asset they own, every penny they spend and hold them to account, unless they have been acting illegally.
Or, to look at the principle applied to the poor, rather than the rich, would you propose that a record be kept of people who are on benefits and spend money on cigarettes, Sky TV or other unnecessary items so that their benefits can be cut? Because if you promote the principle that everyone’s financial transactions are a matter of public interest, that is one of the unintended side effects.
But no, I am sure you will call that obfuscation, because I suspect the real agenda that is being promoted here is simple class war against the wealthy.
Paul,
this poor man: he will have hardly found rest again in his life after the kidnappings.
But his story just shows: concealing of company-ownership did not help him at all. I am sure that the kidnapping had nothing, but nothing to do with any information to be found on public record. It is absurd to assume that kidnappers go through the publicly available records to find their victims.
Fear is no good advisor, not here, never. And you can create the most secretive and private ‘structures’ on earth – they will not be able to guarantee your safety. Criminals will just notice where the wealthy live and go there. Do you want to seal off an entire country for the rich? As a matter of fact, crime unfortunately only decreases if inequality decreases. All fear-driven law-and-order policies find their end in this statistical evidence.
Again, your example with the children is pure polemic: we are not arguing that individual’s entire wealth should be put on or be retrievable through public record. It is an altogether differnent thing to require beneficial ownership of limited liability companies to be on public record. Any person can freely chose not to be on any public record by simply not chosing an entity that comes with limited liability. You can choose, that’s freedom!
Consider your nightmare: In Scandinavia, individual’s wealth and income situation is on public record. I never heard that there are tremendously more kidnappings or crime rates would be higher – to the contrary.
What is going on here, rather than ‘class war against the wealthy’, seems to me rather a driveness by anxiety and a persecution complex.
I’m sorry, Paul, but you are wrong about a class war being waged against the wealthy. The real big story is the class war that has been waged by the wealthy against the poor. Secrecy is one of the weapons used.
Rupert
Your position is wholly untenable: that I must prove I have an interest in a particular company to get data, but cannot know whether I need to do so until I have the data.
It is, of course, the same logic as that of the Tax Information Exchange Agreement.
Where is the right to which I refer enshrined? Start with UK company law. Not perfect I know, but enough to show that the princuiple of open access is essential.
For a start, transparency always stops abuse. Note the consequence of its absence in the UK Parliament.
I rest my case: but at least I have one. You have not even established an argument as yet.
Richard
James
I think you summarise what is being said here extraordinarily well
This whole ‘argument’ from the Crown Dependencies is about preserving the opportunity for tax abuse that their structures – all of the offshore ones of which, by definition, have no economic substance – provide for the continued abuse of the vast majority of the people of this world by the wealthy majority.
And since when was asking that those who owe tax pay it class war? Isn’t it just a request that people abide by the law? Is there a class issue in that? Aren’t we all subject to the same law? In which case why should some be able to buy secrecy the sole use of which is to avoid the obligations of the law through use of a place with which they hav no other association?
Richard
Lets look at an analogous argument.
We know that some people beat their wives. Therefore there should be CCTV cameras in every house in the country, as this will reveal who is a wifebeater and those who do not beat their wives have nothing to hide. If people want to be private they should live alone: losing privacy is a fair trade off for the benefits of companionship. Anyone who is opposed to this proposal must, therefore want to protect wifebeaters.
And finally there is not secrecy in the Channel Islands. Switerland and Singapore have secrecy, the Channel islands have confidentiality: there is a difference. Banking confidentiality is based on the Tournier principles set out by the UK Courts. If you object to that, challenge it in the UK Courts as CI jurisprudence will follow.
But it seems rum to attack Jersey and Guernsey for following the UK.
Paul
An absurd argument:
a) The wife has the capacity to complain
b) The beating may also be heard
c) The evidence may be apparent
In other words, the crime can be discovered, so CCTV is not required
That is not true with regard to the vast majority of data in the Crown Dependencies
And I have to be candid: if you think the Crown Dependencies do not have de facto secrecy then you are deluded. I can’t put it more bluntly. Banking secrecy law is not required to create the effect of banking secrecy law, as the Swiss rightly point out on this occasion
A certain degree of both reality and honesty would be of benefit in your comments
Richard
Richard,
“And I have to be candid: if you think the Crown Dependencies do not have de facto secrecy then you are deluded. I can’t put it more bluntly. Banking secrecy law is not required to create the effect of banking secrecy law, as the Swiss rightly point out on this occasion”
Here’s the difference: if a Swiss or Singaporean banker releases client information, he has committed a criminal offence and can go to prison.
If a Jersey or London banker does the same he has committed a civil offence and can be sued by his bank and the client. But if the client has committed an offence that the banker has revealed the court is unlikely to punish the banker, as the client would not be deemed to have clean hands.
The difference is material.
Paul
It is only material to the financial adviser
It is utterly irrelevant to anyone else as the consequence is the same – and as we know – the evidence that financial advisers in the Crown Dependencies is overwhelming
Open your eyes: you are not the epicentre of interest in this issue
Richard
I’m sorry Rupert and Paul, your arguments stem from your wallet. There is no reason whatsoever not to promote transparency within the products used for investment vehicles. I don’t give a stuff if rich-man X wants to hide his wealth. If he does then invest under his own name. Setting up tax dodging vehicles is akin to theft and should be treated as such. Just because you’re making a packet from advising sociopaths doesn’t mean that the reality for the poor is any different. The investment industry is not real life. It’s a game. Money is not designed to be hidden. It is a tool to facilitate trade. Why are people so precious about how much money they have? It’s truly absurd.
I suggest you crime-hiding apologists go and live where real people do real work and ask them what they think of their rich bosses and ask them where they think the money is all going. it beggars belief that intelligent people are desperately clinging on to this medieval worship of shiny things.
Children playing games without knowledge of responsibility and consequences need to be re-educated. Send them down the mines for tuppence hapenny a day!
‘Class war’? The rich are arrogant attention seekers that believe their wealth gives them rights. Until someone gives me a good argument why their distorting and generally malign influence on society is necessary, I will stick to my perceptions based on observations.
Now stop pretending you’re important and build a future.