HSBC Shows ‘Support’ for Public Beneficial Ownership Registers

Trust Bloomberg BNA's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.

By Ben Stupples

HSBC Holdings Plc, Britain’s largest bank by market capitalization, has privately expressed support for public company and trust ownership registers, marking a boost for tax transparency efforts.

Representatives from the London-based bank said they “support” public beneficial ownership registers in a Feb. 10 meeting with the EU’s Panama Papers inquiry committee, according to a confidential report seen by Bloomberg BNA.

An HSBC spokeswoman confirmed the accuracy of the report—which focuses on the inquiry committee’s fact-finding trip to London between Feb. 9 and Feb. 10—by telephone March 24.

The revelation comes amid scrutiny of the U.K.'s stance on public beneficial ownership registers. Along with increasing financial transparency, the registers aim to fight tax evasion, tax avoidance and money laundering by identifying exactly who profits from, and controls, individual companies.

In April 2016, the U.K. became the first country to introduce a public beneficial ownership register, forcing company owners to provide details such as their name, date of birth and nationality.

While it applies to U.K. companies, however, the public register omits Britain’s crown dependencies and overseas territories, including the British Virgin Islands, Jersey, and the Cayman Islands.

Crown Dependencies

Last month, U.K. lawmakers rejected an amendment that would have established a public beneficial ownership register for companies based in the crown dependencies, namely Jersey and Guernsey.

Four days later, though, the European Parliament voted for member states to create mandatory public registers of company ownership and trust beneficiaries. The lawmakers also backed detailed rules to prevent ultimate beneficial owners hiding behind directors or other company employees.

In the past, the U.K. has successfully lobbied against the European Union’s efforts on public trust registers. The stance is based on the way trusts are used for “purely private purposes” far more in the U.K. than in Europe, according to the U.K.’s Society of Trust and Estate Practitioners, or STEP.

Nearly half of the companies listed in last year’s Panama Papers data leak were registered in the British Virgin Island. The data leak of more than 11 million documents from Panama law firm Mossack Fonseca & Co. also identified nearly 2,000 U.K.-based intermediaries—such as accountants, lawyers and tax advisers—who helped facilitate individuals or entities with tax evasion or avoidance.

Money-Laundering Control

In addition to combating tax evasion, public beneficial ownership registers may help banks comply with anti-money laundering laws by increasing the transparency of their available financial data.

Rather than fighting it, though, HSBC has often been the focus of money laundering investigations. Five years ago, the bank paid a $1.9 billion settlement in the U.S. over money laundering charges.

The 2012 settlement also included the bank appointing an independent monitor to oversee efforts against money laundering. While HSBC has made “commendable progress,” the bank still needs to make improvements on anti-money laundering controls, according to the monitor’s latest review.

“It didn’t cost HSBC anything to say that they are in favor” of public beneficial ownership registers, Prem Sikka, emeritus professor of accounting at the University of Essex, told Bloomberg BNA in a March 24 telephone interview about the bank’s comments last month to the PANA committee. “Instead of what they say, we should try and judge them more by their actual actions.”

PANA Committee

Set up two months after the release of the Panama Papers, the European Parliament’s inquiry committee—known as the PANA committee—aims to investigate the misuse of European Union laws among the bloc’s member states through money laundering, tax avoidance and tax evasion.

The committee will report on its findings within the next year. In a Feb. 8 telephone interview, the PANA committee’s vice chair Fabio de Masi told Bloomberg BNA that the U.K. is “very relevant” to the inquiry‘s investigations due to the number of intermediaries linked to it via the Panama Papers.

This week, the PANA committee has visited the small U.S. state of Delaware, which is infamous for its lack of financial transparency. In a four-day visit to the U.S., the PANA committee members met with Delaware finance officials to discuss issues including company beneficial ownership rules.

HSBC declined to provide further comment.

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj in London at psukhraj@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.