Three weeks ago, a colleague forwarded to me a link to an article by an offshore service provider. The article, now removed from that company’s website, was entitled, “Nevis LLCs Losing Their Shine.” It claimed that Nevis – half of the Federation of St. Kitts & Nevis – would be establishing a “public register” of companies in 2017. The register would supposedly make public the identity of “shareholders, directors, and the beneficial owners.”
Since I’m the president of a registered agent company in Nevis (Fortress Trust Limited), these claims immediately caught my attention. However, I was struck by the apparent ignorance of the article’s author, since LLCs don’t have shareholders or directors. Instead, the owners are called “members,” and those managing an LLC are designated simply as “managers.”
My Fortress partner immediately contacted the head of the Nevis Financial Services Regulatory Commission. She informed my partner:
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The article as written was totally false and completely misleading.
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Financial services are the lifeblood of the Nevis economy. There has been no legislation introduced to establish a public register, and the government has no intention of doing so. No such proposal will be introduced unless the requirement would apply to every country in the world. That would include all 50 US states.
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If such legislation were introduced, discussions would commence with service providers to determine the best way to implement it.
It’s true that service providers like Fortress must identify the beneficial owners of entities they create. But Nevis doesn’t have and has never considered setting up such a public register.
For over a decade, though, the self-appointed do-gooders at the Organisation for Economic Co-operation and Development (OECD) have been promoting this concept. I first learned about it in 2004, when the OECD co-sponsored a conference, “How to Identify Beneficial Owners.” It proposed identifying the beneficial owners of companies offering investments to the public. This was justified to prevent investor fraud.
If the concept of a public register were limited to companies soliciting business from investors, I would support it. However, since 2004, the scope of this proposal has grown much wider. In 2013, the G8 group of countries agreed to a set of principles on “beneficial ownership transparency.” The most important of these are:
- Beneficial ownership information on companies should be accessible to law enforcement, tax administrations, and other relevant authorities. This could be achieved through central registries of company beneficial ownership. Basic company information should be publicly accessible to anyone.
- The beneficial ownership of trusts, including information on the identity of beneficiaries and settlors, should be accessible.
- The use of bearer shares and nominee shareholders and directors, which could be used to disguise the identity of owners and managers, should be prohibited.
- All financial institutions and non-financial entities that deal with trusts and companies should be required to identify the beneficial ownership of these customers.
Since then, there has been slow but steady movement to implement these standards worldwide. Many countries, including the US, now require financial institutions to identify the beneficial owners of accounts opened in the name of a business entity or trust.
In the UK, the government has announced steps to end the secret ownership of property by foreign investors. Any foreign company buying or holding property in the UK will be forced to reveal its beneficial ownership to the government. (Now you know why sales of luxury properties in London have fallen by nearly 90% in the last year.)
In the US Congress, legislation has been introduced every year since 2008 to require disclosure of beneficial ownership in all 50 states. States that generate significant revenues from incorporation fees oppose the proposal. It could be years, if ever, before it comes into effect.
Many other obstacles exist in the path of worldwide registries of beneficial ownership. Earlier this year, France established a public register of trusts. The register gave anyone the ability to learn the identity of the settlors or beneficiaries of trusts linked to France. However, on October 21, a French court declared public access to the register a violation of the country’s constitution.
Having a public register is obviously an invasion of privacy, but the real threat of course is that such a register is an irresistible target to hackers and identity thieves.
In the meantime, the OECD, the Financial Action Task Force, and other do-gooder organizations will try to strong-arm low-tax jurisdictions like Nevis to implement these proposals. For the sake of their economic survival, however, these countries will resist these demands as long as possible.
Recently, we received notice that SMH Panama, S.A., a company that markets itself as providing “asset protection strategies through ownership of rare strategic and precious industrial grade metals,” was ceasing operations and had been placed in liquidation. The liquidator has requested the consent of those who had purchased “baskets” of such metals to sell them as part of the liquidation process.
If you are a customer of this firm, we recommend that you do not provide such consent, to avoid possible commingling of your assets with those of SMH.
Two attorneys who have assembled legal teams to litigate on behalf of clients to recover their metals are:
Rainelda Mata-Kelly
Tel. from US: 011-507-216-9299
Fax from US: 011-507-216-9298
Email: {encode=”rmk@mata-kelly.com”}
Michael R. Polin
Tel. from US: 1-858-750-1611
Fax: 1-760-489-6989
Email: {encode=”polinlawfirm@cox.net”}
