In recent years, global regulatory attention has been squarely focused on prohibiting the use of elaborate corporate structures to obscure the identities of their beneficial owners. Concealment of beneficial ownership identity is especially problematic when these complex structures are used to hide criminal activity, such as tax evasion, money laundering and terrorist financing. International standard setting bodies are increasingly calling on countries to put in place beneficial ownership transparency rules so that their authorities can easily identify the true beneficial owners behind corporations.
Beneficial ownership differs from legal ownership. Whereas a legal owner is the official owner and can be either a natural or legal person, the beneficial owner refers to the natural person who is the ultimate owner or who ultimately controls the company. While for some companies it is easy to identify the beneficial owner, this is not always the case when there are multiple layers of corporate structures. An issue arises when these complex structures are used for illegal activity, and it is difficult to know who the decision-maker is and who should be ultimately held responsible for any wrongdoing. Data leaks like the Panama Papers have shown the extent to which many persons go to hide their identities.
Barbados’ Beneficial Ownership Rules
Barbados prides itself on being a compliant, mature international financial centre (IFC) of substance. It has no interest in allowing corporate entities within its jurisdiction to be used as fronts for illegal activities. Such activities could not only negatively impact Barbados’ reputation but also its quest to strengthen its compliance ratings. Moreover, it would not want its financial system to be infiltrated by illicit funds or its economy to be distorted by illegal activity[i].[ii]
When Barbados revised its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) National Plan in February 2020 to increase its compliance with FATF regulations, it included action items on beneficial ownership.[iii] While Barbados does not yet have a beneficial ownership register, it has been taking steps to ensure that its beneficial ownership rules comply with international standards.[iv]
Section 448 of the Companies Act, Cap. 308 defines a beneficial owner as “the individual who ultimately owns a body corporate or who exercises the ultimate ownership or control over the body corporate”. In July 2021, the island’s Corporate Affairs and Intellectual Property Office (CAIPO) released updated guidelines for the application and interpretation of the term “beneficial ownership” and the identification of beneficial owners of companies pursuant to section 448A of the Companies Act, CAP 308 of the Laws of Barbados.
Barbados’ legislation requires legal persons to identify and verify the beneficial owners of a legal entity. They are to maintain accurate and up to date beneficial ownership information and in a way that can be accessed in a timely manner, including providing access to the Registrar or a designee of the Registrar if required.
Companies, except those regulated by one of the prudential regulators, are now required to notify the Registrar that they have maintained beneficial ownership information at their registered office. This statement is now one of the fields on the annual return form companies are required to complete and certifies that they kept accurate and up to date beneficial ownership information; and it was maintained for the preceding year at the company’s registered office. If there a change to a company’s beneficial ownership, they are required to notify the Registrar of such change within 14 days of the date of the change.
Section 17 of the Companies Act requires a company to maintain a register of shareholders at the registered office of the company. It prescribes the information that the register of shareholders should contain. This includes the name and latest known address of each shareholder and whether the person holds or has held a prominent public office in Barbados or elsewhere, a statement of the shares held by each shareholder, the date on which a person was entered on the register as a shareholder, as well as an up to date and accurate record of the basic and beneficial ownership of the company.
Directors and officers of companies are required to obtain information on the identity of the natural person who is their beneficial owner, verify their identity, record details of how they meet the definition of being a beneficial owner, record the beneficial ownership information into the register of shareholders, keep accurate and up to date beneficial ownership information and provide access to the information as requested by the Registrar or his/her designee.
The guidelines further outline the beneficial ownership information to be obtained. These include the full name, nationality/ies, primary residential address, contact information, date of birth, national registration number or passport number, type of beneficial ownership, details, date of becoming/ceasing to be a beneficial owner and whether the beneficial owner is a politically exposed person (i.e. has held prominent public office in Barbados and elsewhere, and if so, the details of holding that prominent public office).
The penalties for failure to comply are steep. There are also penalties for making a false report, return or other document, failure to produce information to the Registrar within 14 days and general failure to comply with the guidelines. Failure to comply with the guidelines to produce beneficial ownership information could result in a fine as high as BDS$100,000 (US$50,000) or up to five years imprisonment.
In 2022 CAIPO distributed an electronic questionnaire to all corporate entities, companies and societies with restricted liability (SRLs), with the twin purposes of determining the adequacy of their internal compliance systems and procedures in satisfaction of the Companies Act, CAP. 308 and to allow CAIPO to gauge the island’s position regarding several international standards. These entities were required to state whether they maintain beneficial ownership information, whether the information is accurate and up to date, the reasonable steps taken to identify, obtain and verify such information and whether the information is recorded in the share register.[v] The findings of the survey are not public but they are key to assisting the authorities in determining companies’ current levels of compliance with the existing beneficial ownership requirements.
While there is still much more to be done, Barbados is making strides on beneficial ownership transparency. By requiring that its companies disclose and keep beneficial ownership information, Barbados is ensuring it plays its part as a responsible and compliant IFC in the global effort to promote corporate transparency and fight the ills of tax evasion, corruption, money laundering and terrorist financing.
[ii] Barbados is currently rated as Partially Compliant on FATF Recommendation 24 and Largely Compliant on Recommendation 25. https://www.fatf-gafi.org/en/publications/Mutualevaluations/Assessment-ratings.html
[iii] FATF Recommendations 24 and 25 cover beneficial ownership transparency.
[iv] The island is however taking steps to work on this: https://www.ifcreview.com/news/2022/july/barbados-beneficial-ownership-register-to-improve-compliance/
Alicia D. Nicholls is an international trade consultant with over a decade of experience providing bespoke trade research and advisory services to a variety of clients. She is currently a research fellow and part-time lecturer with the University of the West Indies. Miss Nicholls is the founder of the Caribbean’s leading trade policy and development blog, www.caribbeantradelaw.com, since 2011. She also presents regularly at both regional and international academic and industry-related conferences and webinars. While she maintains an interest in all issues affecting Caribbean trade and trade policy, her specific research focuses primarily on global financial regulation and small States, foreign investment law and policy and international business.