Why Government must clamp down on shadowy companies in British Overseas Territories

It's a human rights issue, says Alyn Smith MP

Last month the UK Government announced the introduction of targeted sanctions
against individuals involved in some of the most serious human rights violations and

I welcomed it. Targeted sanctions against such people are something that
we in the SNP have long supported, inside and outside of Parliament.

However, unless the UK Government show that it is committed to clamping down on the
shadowy companies based in the British Overseas Territories which act as fronts for
dictators and criminals to launder their dirty money, these sanctions will barely be
worth the paper they are written on.

The ink was barely dry on the Foreign Secretary’s statement when Rami Makhlouf –
first cousin to Syria’s President Bashar al-Assad and member of his inner circle
before a very public schism – revealed that the Syrian President used multiple
offshore shell companies to shield himself from similar Western sanctions.

He will not be the only one. The list of those targeted for sanctions by the UK Government includes those responsible for torturing whistle-blowers, murdering journalists, employing rape as a weapon of war and running prison camps for political prisoners.

What makes the UK Government think they will draw the line at financial crime to
protect their ill-gotten gains?

For those who are looking to circumvent the rules of the global financial system,
London is often the final destination of choice. Following research published in June,
openDemocracy described London as “a global hub for financial crime” after finding
that almost ten per cent of UK firms “do not, will not or cannot say who controls

This 10% represents a staggering 400,000 companies based in the United
Kingdom who continue to employ a series of legal loopholes which could facilitate
crime, corruption and tax evasion.

The same story can be told further afield, in the UK Overseas Territories which have
long been notorious havens for the corrupt and criminal to launder and hide money.

Such cases are repeated and documented: a company registered in the British
Virgin Islands was found to be providing financial services to North Korea’s main
arms dealer; shell companies in offshore locations, including BVI, were used to
register North Korean ships; a BVI-registered company was used by the man once in
charge of Muammar Gaddafi’s long-range missiles programme to buy properties in
the UK.

It may not surprise you to hear that the BVIs were not among the eight Overseas Territories which recently committed to a public register of company

The announcement was made by the UK Government in in July, stating that eight of
the UK’s fourteen Overseas Territories are on track to implement public registers of
beneficial ownership within three years. Even before this announcement, the UK
Parliament’s Foreign Affairs Committee noted its “profound regret” at the repeated
delays in implementing such registers, adding that “it is simply not acceptable” that
they will not be in place until long after the deadline stipulated in the 2018 Sanctions
and Anti-Money Laundering Act – the end of 2020.

The Act gives the Foreign Secretary the power to unilaterally impose publicly-accessible beneficial ownership registers in the BOTs Order in Council if the Territories do not do so by 31 December 2020. His clear unwillingness to do this threatens to undermine these sanctions which he has worked for years to bring forward.

The lack of transparency has been highlighted time and time and time again yet the
UK Government seems congenitally unwilling to do anything about it. From the City
of London to the Overseas Territories, the sickness and its symptoms are the same:
a no-questions-asked policy when it comes to the dirty money which systemically
undermines our society.

It makes our societies less fair and our country less safe, as detailed in the fifty pages of the recently released Russia Report.

Throughout the fifty pages, the Intelligence and Security Committee paints a picture of a state that is rotten from the head down: From unelected legislators in the House of Lords who “have business interests linked to Russia, or work directly for major Russian companies linked to the Russian state” to a vast nexus of business people who “have played a role, wittingly or unwittingly, in… promoting the nefarious interests of the Russian state”.

The British Government has for years, opened their wallets and closed their eyes while Russia, a “hostile foreign power”, has infiltrated every aspect of political and economic life in this country, asking “few questions – if any” as long as the rubles kept flowing in.

Someone who is willing to commit such egregious crimes against other human
beings is unlikely to follow the spirit of the law – these criminals will no doubt try
every other avenue available to move their money around to avoid the sanctions.

The Foreign Secretary must recognise as well as I do that it is within the gift of the UK Government to close many of these avenues and Dominic Raab must make it his
job to block up every single one.

He can begin this by immediately imposing publicly accessible beneficial ownership registers in the UK Overseas Territories: a simple first step that would demonstrate this Government’s commitment to fairness, transparency and – fundamentally – to human rights across the world.

Alyn Smith MP is the SNP’s foreign affair’s spokesperson.

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