I have been considering the events of the past 12 months from an anti-money laundering (AML) regulatory perspective, and with what we may be faced with in the year ahead.

For me, the main issue arising from 2018 is the ongoing debate I have been having with a variety of NGOs and pressure groups who would see public UBO (ultimate beneficial owner) company register systems implemented across the board, including the Caribbean islands that provide offshore company services to the globe.

NGOs such as Transparency International and Global Witness have taken me to task on several occasions over our differing respective positions on this subject. I have stressed that both organisations do a tremendous job in advancing the public interest to counter corruption, to retard money laundering, and to undermine other forms of criminality. The world is a better place due to their efforts.

In May 2018, I wrote a post for the FCPA Blog, “Open company UBO registers are not the panacea to financial crime,” which as the title suggests provided a critique of those who were hoping that “open” public registers would foil sophisticated economic criminals, and that (separately) “tax avoidance” was best combated by changing laws onshore.

I was delighted that Global Witness’s Murray Worthy added his opinion to the debate, making some relevant counter-observations to my blog, but ultimately concurring (albeit in part) with my assertion that enforced regulation compelling company stakeholders to accurately disclose the identities of their UBOs was the way forward, rather than the lip-service currently being paid to this subject in places such as the UK and its flawed Companies House approach.

Murray stated in response:

As we have said many times before – simply having a public register isn’t a panacea — loopholes need to be closed and rules need to be enforced. That’s why we’re campaigning to improve the UK register and why it’s vital that the Overseas Territories build on the lessons already learnt in the UK.

I agreed with the points Murray was making. My only observation would be that the Overseas Territories have already learned from their mistakes of the past. The British Virgin Islands (BVI), which has historically suffered criticism, shot to prominence yet again on the back of the Paradise Papers release, following 2016’s Panama Papers. Many of the tales arising from these mass data dumps were hard to combat. Indeed, in years gone by, the Overseas Territories adopted a more than cavalier attitude to compliance, and the resultant criticism was deserved.

However, the inevitable attacks by the NGOs this year ignored the fact that the BVI and other locations, such as Cayman and the Bahamas, had already secured their “shores” with much tighter AML regulatory systems, and they were doing their best to enforce them diligently.

So, in 2018 we continued to see an onslaught of criticism against the Overseas Territories, despite the improved regulations they have put in place. It was this aspect of the UK’s and the NGOs’ criticism that I found unfair, unhelpful and prompted me to speak out on the Territories’ behalf.

In particular, I was extremely perturbed by the intervention of the UK law makers, who entered the fray stating that they were going to force the Overseas Territories to implement public UBO registers. Why? The much-lauded Companies House in the UK may be an open UBO register, but it is very poorly policed and there are still crooks using bogus information en masse to open English and Welsh companies. In effect, the public register in Cardiff is only as good as the information being provided by those who want to open an English and Welsh company: the lack of due-diligence is acting as an enabler.

If we add to the equation the ongoing scandals arising out of the Scottish Limited Partnerships situation, and their apparent ongoing abuse by crooks, in particular those hailing from behind the rapidly re-emerging Iron Curtain, the UK needs to get its own house in order before turning its sights on the Overseas Territories.

Indeed, in my May post for the FCPA Blog, I made the point:

According to the London Evening Standard, one company had an address which translated as “Street of the 40 Thieves” in “Ali Babba”, with another applicant describing their occupation as “fraudster.” Unsurprisingly, no action was taken against those responsible. The single Companies House prosecution success is shrouded in controversy, being a whistleblower seeking to illustrate how easy it was to mislead those compiling the register. This whole situation is shrouded in hypocrisy. If the UK and its vast resources cannot bring the true UBOs to book, what chance for the hard-pressed territories?

By October, was anybody surprised by the news that the UK’s National Crime Agency (equivalent of the USA’s FBI) had concluded that the Cayman Islands was entering into a process of passive resistance, by failing to cooperate speedily with the NCA requests for assistance? If indeed this was the case, perhaps the Caymans were objecting (via a form of civil disobedience) to what they saw as unfounded criticism of their compliance processes.

What struck me the most about this latter revelation was that the head of the NCA, Donald Toon, made the observation: “This is not quick work, because rich criminals are experts at hiding their ownership of corrupt assets.”

In my resultant post for the FCPA Blog, I suggested that the Cayman authorities were wrong to drag their feet, if indeed they were doing so, because this was arming those who would continue to attack the offshore financial services industry. That said, Mr. Toon’s observations regarding the deviousness of crooks who could easily bypass the public registers, confirmed (for me) the naivety of those who continue to believe that public UBO registers will resolve the world’s money laundering problems. They won’t, because crooks lie.

My good friend, fraud investigator Burke Files of Tempe, Arizona, put my point in a LinkedIn response to one of my FCPA Blog pieces, in a more pithy and pugnacious way than I have been able to muster: “The UBO registers are useless. For honest owners it becomes a burden. And for the dishonest, tis but a shimmy and a wiggle to go un-noticed and/or recorded.”

So, moving forward to the New Year, what do I predict will change? Sadly, I cannot see the onslaught against the Overseas Territories ending anytime soon. The NGOs will continue to target offshore service providers, insisting on open UBO registers. The campaigners hold a very firm assumption that this is fundamental for transparency. I will continue to tell them that they are incorrect, and they will continue to tell me why I am wrong.

As 2019 arrives, our debate will continue. But I would still like to wish them (and you) a very happy New Year and look forward to advancing the discussion on this and other important subjects in 2019.

With thanks to Tony McClements, Senior Investigator at Martin Kenney & Co, for his assistance with this post.


Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI, focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com | @MKSolicitorsIn 2014 he was the recipient of the ACFE’s highest honor: the Cressey Award for life-time achievement in the detection and deterrence of fraud. He was selected as one of the Top Thought Leaders of the Legal Profession in 2018 and 2019 by Who’s Who Legal International and as the number one offshore lawyer for asset recovery in 2017 and 2018.

This piece originally appeared in the FCPA Blog.