The Government has backed down in the face of a potential Tory rebellion to ensure Britain’s offshore tax havens are forced to be more transparent.
Foreign Office Minister Sir Alan Duncan said the Government accepted there was a majority view in the Commons to ensure British overseas territories publish details of the true owners of firms.
He insisted British overseas territories are separate jurisdictions with democratically-elected governments, responsible for their fiscal matters and unrepresented in the UK Parliament, and warned that legislating without their consent “effectively disenfranchises their elected representatives”.
But with defeat looming and last-ditch Government amendments not selected by Speaker John Bercow for debate, Sir Alan conceded to the demands outlined in a proposal moved by Labour’s Dame Margaret Hodge and supported by 21 Tory MPs.
Dame Margaret’s amendment to the Sanctions and Anti-Money Laundering Bill was passed unopposed by MPs and will now be added to the Bill.
Speaking at the Bill’s report stage, Sir Alan told the Commons: “We do not want to legislate directly for them, nor do we want to risk damaging our long-standing constitutional arrangements which respects their autonomy.
“However, we’ve listened to the strength of feeling in this House on this issue and accept that it is without a doubt the majority view of this House that the overseas territories should have public registers ahead of it becoming the international standard, as set by the Financial Action Task Force.
“We will accordingly respect the will of the House and will not vote against new Clause 6.”
MPs and campaigners have said public registers would make it easier to uncover money-laundering, corruption and tax-dodging.
Sir Alan added: “I give the overseas territories the fullest possible assurance that we will work very closely with them in shaping and implementing the order in council which this Act of Parliament might require.”
Shadow foreign minister Helen Goodman welcomed the Government’s “change of heart” and called for more transparency in the crown dependencies, after Labour former minister Liam Byrne warned that “dark money will move to wherever the law is darkest”.
Ms Goodman said: “He’s absolutely right, and that’s why I think we need to make changes on the Crown dependencies because we are going to make changes on the overseas territories.”
Under the amendment, overseas territories such as the British Virgin Islands and the Cayman Islands would be required to establish public registers of the beneficial ownership of firms in their jurisdictions by the end of 2020.
Speaking in the Commons, Dame Margaret said the move was “a remarkable, important and really world-changing measure in relation to the fight against corruption”.
Conservative former Cabinet minister Andrew Mitchell, who led support on the Tory benches, added: “The overseas territories share our freedom. They travel under our flag, and they should also share our values.”
However, Tory backbencher Geoffrey Cox (Torridge and West Devon) said ministers had pledged to the Cayman Islands in 2009 not to interfere in their domestic legislation.
“By this measure today, we are breaking that promise to them, and it is beneath the dignity of this Parliament to do away with that promise and that pledge of good faith,” he added.
Tory former Foreign Office minister Sir Henry Bellingham raised similar concerns, saying he now “feared” that some territories would be looking at the move and asking: “Why should we remain in the British family?”
He said: “I do foresee a very serious stand-off with at least three of the territories and I also fear not just for the economies of those territories if change happens very quickly and there’s a significant loss of income.”
The move was welcomed by campaigners and development charities.
Duncan Hames, Transparency International UK’s director of policy, said: “This afternoon, corrupt individuals everywhere will be deeply concerned that they are about to lose the secrecy afforded by the British overseas territories that has until now given them an easy route to launder their ill-gotten gains.”
Oxfam head of inequality Rebecca Gowland added: “This is great news for the world’s poorest people. Ending secrecy in UK-linked tax havens will help developing countries to recoup billions of lost revenue that could pay for much-needed schools and hospitals.”
Sir Alan earlier confirmed changes to ensure the Bill would impose sanctions for gross human rights violations, which are known as the so-called “Magnitsky rules” and named after Russian lawyer Sergei Magnitsky – who died in prison after testifying against corrupt officials.
He also said anyone sanctioned under the Bill would have their names published on a publicly available administrative list.
An SNP amendment, which said those registering Scottish limited partnerships (SLPs) should have an active UK bank account, was narrowly defeated by 314 votes to 301, majority 13.
The Department for Business, Energy and Industrial Strategy has previously linked SLPs to criminal networks in Eastern Europe and alleged use in international arms trafficking deals.
The Bill received an unopposed third reading and moved a step closer to becoming law. The House of Lords will consider the amendments made by MPs at a later date.