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The UK should help its offshore tax havens develop alternative industries such as tourism in return for greater financial transparency, the government’s anti-corruption champion has said.
Baroness Margaret Hodge said the UK had a responsibility to help British overseas territories adapt to demands to publish registers of company ownership, arguing for “gentle persuasion” over compulsion.
Universities, private schools and museums may also need to implement “know your customer” checks similar to those required by financial institutions, she added.
Hodge was speaking as the UK government promised tougher action on “dirty money” in an anti-corruption strategy published on Monday.
David Lammy, the deputy prime minister, said the corruption coming from kleptocrats and organised crime “spreads across borders like a stain” and “too often the trail leads back here to London”.
Campaign groups have praised the ambition in the plan but said UK pledges were undermined by a lack of transparency in Britain’s overseas territories.
While all 14 UK dependencies have promised registers of beneficial ownership, listing the person who ultimately controls or owns an asset, British investigative think-tank TaxWatch said only Gibraltar and Montserrat had made them fully public.
Ministers have expressed frustration with the British Virgin Islands, which says it will offer more limited access to the register next year for those with a “legitimate interest”.
In other jurisdictions, this can include journalists investigating financial crimes and businesses carrying out due diligence checks.
Hodge, a former Labour MP and veteran anti-corruption campaigner, was appointed to the government advisory role last year and urged a conciliatory approach.
“It’s always much healthier if you get there through agreement,” she told the Financial Times.
She argued that Britain had “a responsibility” to help overseas territories find alternative economic models having encouraged them to become tax havens in previous generations.
“They were encouraged to develop as secret jurisdictions,” she said. “If we allowed them to get there, we’ve got to help them get out of it, so you’ve got to help them restructure their economy.”
Hodge cited attempts in the BVI to build an airport capable of taking more direct flights from the US and Europe. “It’s a beautiful country, it’s got a massive tourism industry, it hasn’t got an aeroplane runway that takes international flights,” she said.
“There could be something that we could do around supporting them in trying to develop an alternative economic base.”
Ministers are understood not to have promised any specific assistance in return for increased financial transparency from overseas territories.
Hodge said if they did not fulfil their commitments to offer ‘legitimate interest’ access to beneficial ownership registers by next summer, tougher action would be needed.
“In the end, this is a matter of huge importance for which there is support across government. So it’s got to happen,” she said.
Hodge acknowledged that tax haven transparency was one of the “tougher” aspects of a strategy under which she will also carry out a review of asset ownership in Britain itself and the ease of laundering money through the country.
“It will look at land, it will look at property, it will look at trusts, it will look at other corporate structures that people might be exploiting”, she said.
Recommendations are likely to include more transparency around trusts in particular, she said: “What we now know is that a lot of the illicit wealth is coming in through trusts.”
The UK strategy also says the government “will encourage cultural and civic organisations to strengthen resilience to corruption risks from high-value donations”.
The government has not said if this will be compulsory, but Hodge said money-laundering checks required by banks should be extended to universities, museums and others.
“It would require them to know their customer — they would have to do the checks on their customers properly to ensure the source of the wealth,” she said.
“A lot of the kleptocrats who accumulate stolen assets then try and get their reputations laundered by contributing to cultural institutions and to academic institutions and to universities.”
The UK Overseas Territories Association has been approached for comment.