Tax avoidance communication document published by the EU

The Cabinet Office has published a communication document from the EU Commission to the EU Council and Parliament on its tax avoidance proposals:

The five challenges listed by the Commission are to:

  1. Harness the link between Anti Money Laundering and Tax Transparency rules
  2. Improve Information Exchange on Beneficial Ownership
  3. Increase Oversight of Enablers and Promoters of Aggressive Tax Planning
  4. Promote higher tax good governance standards worldwide
  5. Improve the protection of whistle-blowers

Of note, the Commission wants to lower the threshold for declaring beneficial ownership for passive corporate entities to a 10% ownership stake  (down from the current 25% stake) . EU member states will also be required to give public access to information on companies and business-type trusts.

The Commission wants tax authorities to be given access to the national beneficial ownership registries, a decision currently at the discretion of member states. The Commission is also looking at ways through which member states could automatically exchange their national information on beneficial owners.

European Commission expands Committee of Inquiry into Money Laundering, Tax Avoidance, and Tax Evasion

The European Parliament's Committee of Inquiry into Money Laundering, Tax Avoidance, and Tax Evasion (PANA) has announced the appointment of its chair and four vice chairs. Wenrer Langen was elected chair, with Ana Gomes, Pirkko Ruohonen-Lerner, Fabio de Masi, and Eva Joly to serve as first to fourth vice chairs, respectively.

The Committee consists of 65 members, excluding the chair and vice chairs. It will investigate alleged contraventions and maladministration in the application of European Union law with respect to money laundering, tax avoidance, and tax evasion by the European Commission or member states.

Its establishment was prompted by the leak of the Panama Papers. The Committee is required to submit its final report into the investigations by June 8, 2017, when its mandate from the European Parliament will expire.

Bermuda, Cayman and Isle of Man propose 'passport' to grant alternative investment funds access to the EU

As reported by The Royal Gazette, Bermuda has proposed to a European Union financial watchdog gaining a "passport" that would allow island-based alternative investment funds to freely market their services throughout the 28-country bloc. The Island is one of nine countries  (including the Cayman Islands, Isle of Man and Singapore)  awaiting an update expected this month after an assessment by the European Securities and Markets Authority.

A spokesman for financial services at the EC told Bloomberg: "The Commission is awaiting Esma's advice and hasn't yet taken a decision. Third-country provisions vary for each piece of EU legislation and are tailored to each specific sector and activity."

Hedge funds and lawyers based in London will be watching the decisions closely, especially since Britons voted to leave the EU in a referendum last month, potentially jeopardising the future of UK financial services' passporting rights.

EU and Monaco sign information-sharing agreement

The European Union and Monaco have signed an information-sharing agreement covering banking customers, amid a global crackdown on tax evasion.

Under the deal signed Tuesday, from 2018 Monaco will automatically provide the names, addresses, tax identification numbers and birth dates of EU residents with accounts in the country, as well as other financial and account balance information.

The EU will reciprocate with details of accounts held by nationals of the small principality, a Mediterranean enclave surrounded by France.

"The EU and Monaco have today sent a joint clear signal: we are allies when it comes to tax transparency and allies in the fight against international tax avoidance and tax evasion," EU Economy Commissioner Pierre Moscovici said in a statement.

The agreement is in line with new international standards from the OECD, which foresees an annual exchange of information between governments on accounts held by individuals and entities.

Jersey prosecution into money laundering demonstrates the island as core to global fight against tax avoidance

In a statement from Attorney General Robert MacRae QC Jersey, with the support of the European Court of Human Rights, have demonstrated their commitment to fighting financial crime and money laundering through the imprisoned of an Indian national, of whom is thought to have had business connections to the corrupt military dictatorship of General Abacha. Bhojwani was paid $178 million between 1996 and the following year and put all the money into accounts at the Bank of India in Jersey. The Royal Court estimated that he profited to the tune of around $40million from the scam.  Full statement from the Law Officers' Department of Jersey is below:

-Bhojwani v United Kingdom

The judgment of the European Court of Human Rights released today  (Tuesday 12 July 2016)  marks the end of a very substantial criminal prosecution in Jersey litigated over many years in which Mr Bhojwani was convicted of money laundering and forfeited the sum of £26.5 million. The case is now concluded and we are pleased that the European Court has unanimously held that the Mr Bhojwani's complaint that he was denied a fair trial is inadmissible.

The case demonstrates Jersey's commitment to fighting financial crime and money laundering.
Mr Raj Arjandas Bhojwani was convicted of money laundering  (two counts of converting the proceeds of criminal conduct and one count of removing the proceeds of criminal conduct)  contrary to the Proceeds of Crime  (Jersey)  Law 1999. The criminal conduct with respect to which the convictions relate concern the negotiation of two contracts between Mr Bhojwani and officials in the military dictatorship of General Abacha  (then President of Nigeria)  for the supply of vehicles to Nigeria at dishonestly inflated prices; the dishonest receipt of the sums paid for the vehicles from Nigerian Public Funds into Jersey Bank Accounts; and the dishonest transfer of large sums by Mr Bhojwani to other countries linked to the Abacha Regime.
-Sentence: 6 years' imprisonment.
-Confiscation Order: £26.5m.

The case has been reported via the Bailiwick Express.

Beneficial ownership ' banks face the challenge

In a piece for The Banker, Tom Golding of Accuity discusses beneficial ownership and how banks are now seen as the first line of defence from authorities in recovering funds and tracing the source of investment. Golding cites the problems banks face in addressing beneficial ownership as being a reputational risk.

Regulators worldwide now require banks to identify the ultimate beneficial owners  (UBO)  of the organisations they do business with, setting the threshold of ownership at 25%, 10% or even lower. But banks are struggling to meet this requirement and find themselves behind the regulatory curve.