British government has had to make a policy U-turn after dilly-dallying over lifting the veil of secrecy from tax havens.
The Foreign Office had promised to make closed company registers public by 2023.
But this was rejected by 20 Tory MPs who crossed the floor and voted against the government in a row over adopting the Sanctions and Anti-Money Laundering Bill.
Now, 14 British Overseas Territories must set up public registers revealing the beneficial owners of companies by 2020 or face sanctions from Westminster.
The territories include the tax havens of Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar.
Crown dependencies, such as the Isle of Man, Jersey and Guernsey are unaffected by the measure.
Panama Papers pressure
The government had faced mounting pressure after holding back from acting after promising to throw open the registers.
The involvement of companies in the British Virgin Islands in the Panama Papers scandal heightened the stress.
The Papers revealed how a law firm allegedly aided tax avoidance and money laundering through tax havens.
The pressure mounted after the nerve agent attack on former KGB spy Sergei Skripal and his daughter in Salisbury, Wiltshire.
The attempted killing led to calls for ministers to tackle the web of offshore shell companies investing in the UK and crackdown on wealthy Russians passing suspected illicit money through British Overseas Territories.
Corruption and crime
Labour MP Margaret Hodge, who championed the amendment, said: “We would know who owns what and where and we would be able to follow the money. We would be able to root out corruption and crime.”
She explained an estimated £68 billion had flowed out of Russia to the British Overseas Territories in the past decade.
“This secrecy allows the rich to hide their money and then transfer it, if it is corruptly secured, into the legal system by doing things like buying properties,” Hodge said.
Lorna Smith, interim executive director of British Virgin Island Finance, accused MPs voting for the legislation of ‘colonialism’, complaining that the British Virgin Islands had ‘done nothing wrong’.
The territories also pointed out that public registers would be expensive to set up and maintain.