Territories such as the Cayman Islands and Gibraltar will be forced to comply with the UK Parliament directive by 2020 after the government’s money-laundering bill was amended unopposed.
An attempt by Labour to include Guernsey, Jersey and the Isle of Man in their amendment was dropped after ministers from each island went to London to explain the constitutional position.
Policy & Resources president Deputy Gavin St Pier said the decision to withdraw that part of the amendment had averted a constitutional crisis, with the UK unable to legislate on the matter without Guernsey’s consent.
However, British Virgin Islands premier Orlando Smith said his island’s constitutional rights had been violated.
‘It is not only a breach of trust but calls into question our very relationship with the UK and the constitutional rights of [our] people,’ he said. ‘We will ensure that this constitutional overreach does not set a precedent and that the rights of the people whom I represent are respected.’
Cayman Islands premier Alden McLaughlin said his government was considering a legal challenge to the decision, which he said amounted to ‘colonial despotism’.
Similar sentiments were put forward by Bermuda premier David Burt, who has sought reasons for the Crown Dependencies’ exclusion.
‘This attempt to legislate for Bermuda from London is a return to base colonialism and is an action that has no place in 2018,’ he said. ‘It is especially telling that the Crown Dependencies are not included in this amendment which is restricted to the Caribbean OTs [Overseas Territories] and Bermuda.’
Mr McLaughlin also believed this to be an injustice.
‘Imposing such an obligation on the Overseas Territories while exempting the Crown Dependencies, discriminates unfairly against the Overseas Territories. This amendment is based solely on prejudice and a wilful misunderstanding of our current regulatory framework,’ he said.
The news was welcomed by anti-corruption campaigners, who viewed it as a seminal moment.
Duncan Hames of Transparency International UK said: ‘These jurisdictions have long been the Achilles heel of our defences against dirty money.
‘Agreement on this represents a hugely significant moment in the fight against corruption, not just in the UK but around the world.’
‘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.’
Naomi Hirst, from anti-corruption campaigners Global Witness, said the government climbdown signalled ‘a huge win in the fight against the corruption, tax dodging and money-laundering’.
Oxfam’s head of inequality Rebecca Gowland added: ‘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.’