In numerous publications in the last few weeks, various headlines arose noting that “the state of Delaware (Secretary of State Jeffrey Bullock) supports HR 6403, a current US congressional Bill titled Counter Terrorism and Illicit Finance Act as the best way of ensuring that criminals, terrorists, and kleptocrats can no longer set up anonymous shell companies in the United States”.

HR 6403 proposes that the collection of beneficial ownership by the US Department of Treasury Financial Crimes Enforcement Network be nationally standardised, rather than the existing each US state-based approach.

Delaware, as many will recall, is one of a number of US states, such as Arizona, Nevada, Wyoming, etc, that according to one website “takes less than five minutes and a $49 fee” to incorporate a company. Transparency compliance is not an issue where underlying beneficial owners do not have to disclose their identities.

That’s Delaware.

The US as a whole currently ranks in second place on the Tax Justice Network’s Financial Secrecy Index, but “received a largely compliant better rating by the OECD on July 19, 2018 than Ghana, which already has a beneficial ownership register and has signed up for many of the international frameworks that the US refuses to join”.

What’s all the fuss here? Do we really care what tiny Delaware does, or doesn’t do? Or whether the US is fully compliant. Yes, we should!

Background. The topic of transparency in the registration of beneficial ownership in corporate and other entities is as relentless as ever, still quite offensive news to Bermuda islanders.

Why? Because our tiny island of Bermuda continues to be media-castigated by various organisations, politicians, and countries with far larger economies than Bermuda for what is deemed in their opinion, certainly not fact, to be our lack of transparency in beneficial ownership registration.

Such ongoing statements, deliberately, it seems, choose to ignore what our leaders had carefully legislated so many years ago, long before many of us were even born.

I am specifically referring to Bermuda’s almost 80-year-old regulations that, in the words of the OECD Global Forum on Exchange of Information for Tax Peer Review report, “Bermuda has a very comprehensive system requiring that:

“(i) information on the ultimate beneficial owners of relevant legal entities and arrangements be filed with the exchange controller; and

“(ii) beneficial ownership as defined under the standard, be maintained by AML (Anti-money laundering) obligated persons.

“Bermuda has a longstanding registry of ‘ultimate beneficial ownership information’ kept by the exchange controller which ensures that this type of information is readily available to Bermuda’s competent authority.”

Further, our governments, past and present, have consistently recognised our responsibility in adhering to and implementing regulatory transparency in a tiresome rote of ever-increasing demands of regulations on individuals and entities of their global financial dealings: QI, Fatca, CRS, IGA Model Agreements, BEPS, White Lists, on and on.

Yet, the goalposts for Bermuda are ever-ascending. Over the years, we have complied with all compliance by various global watchdogs, and other country monitoring systems, but, it never seems to be enough. The repetitive attacks on the reputational integrity of our island have continued.

Perhaps, it is not just about compliance, but actually outright economic discrimination? More often than not, at every new attack on the integrity of our island and industries, one can’t help but think every single competitor — and make no mistake, that’s what they are — would like to put Bermuda as an international economic power out of business.

They’d like nothing more than to be able to strip our self-sufficient living right out from under us, leaving islanders to pick over the bones of a few skeletal fish remains.

Our superb reputation. Our transparency rating. Our global companies, our innovative risk models, our sublime concentration of intellectual property — all have been attained through years and years of incredibly hard work by politicians and lay people alike.

Positioning this tiny island to take on world trade would have been an astonishing feat — for any large nation — but to have implemented an international business model that dominates re/insurance and related industries, is an incredible economic feat.

Bottom line. We must continue to be ever-vigilant to any threat to our economic security. We must continue to defend our island’s reputation of integrity, as both our past and present finance ministers continue to do.

Isn’t it ironic that the United States (Delaware) may finally get its transparency act together almost 80 years after Bermuda’s sophisticated island government enacted our registry of beneficial owners.

Note that the US congressional politicians have not yet passed HR 6403, they have passed it into committee review that at this publication may have been tightened, watered down, or substantially changed such that it never is brought into implementation.

So, the $60,000 question (or should I make that a clear $1 million) is: will the US Congress pass a Counter Terrorism and Illicit Finance Bill that has real teeth, putting an end to the anonymous shell company business, once and for all?

My answer? Cynically, I don’t think so. What are your thoughts, readers.

Sources

• OECD Peer Review Report — second round — Bermuda &Copy;OECD 2017, page 29, item 52.

• United States Congress HR6403 — To require the Secretary of the Treasury to modify the beneficial ownership requirements by creating an exception for certain accounts, 115th Congress (2017-2018), https://www.congress.gov/bill/115th-congress/house-bill/6403

• Delaware ready to crack down on anonymous shell companies. But is it too little, too late? Think Progress, Casey Michel, June 13, 2018, https://tinyurl.com/yb6dyobh

• FATF (Financial Action Task Force) Egmont Group Report: Concealment of Beneficial Ownership, July 2018, https://tinyurl.com/yam9yt75

• FATF has 37 member countries (all large economies), http://www.fatf-gafi.org/about/membersandobservers/

• Tax Justice Network: OECD stretches the truth to give the US a better transparency rating than Ghana, https://tinyurl.com/y9h62fbn

• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: martha.myron@gmail.com