This article is more than 1 year old

This article is more than 1 year old

Ministers have pulled a financial services bill from the House of Commons, fearing the government was almost certain to be defeated on an amendment requiring Jersey, Guernsey and the Isle of Man to clamp down on money laundering.

The Conservative MP Andrew Mitchell and Labour’s Margaret Hodge want the crown dependencies to introduce public share ownership records by December 2020, which the three territories resist.

Mitchell said the government had pulled the bill “in face of certain defeat” because it was backed by a group of rebel Tories as well as Labour and the other opposition parties. The former cabinet minister added, however, that the amendment would be put to a vote whenever the bill was resubmitted.

Hodge said the government had taken an “outrageous step” in pulling the bill because “they knew we commanded a majority. I hope the government will accept our proposals, but if not, we will continue to campaign for public registers.”

Anti-corruption campaigners believe public records of share ownership would restrict the use of anonymous offshore companies by terrorists, dictators, corrupt politicians and criminals.

An anonymously owned Isle of Man company was cited as being part of the “Global Laundromat” money-laundering scheme, a way for Kremlin insiders and well-known Russians to shift cash abroad.

Jersey, Guernsey and the Isle of Man, all major offshore financial centres, maintain they are self-governing territories and it is not for the UK parliament to dictate how they are regulated.

Downing Street indicated the bill had been pulled so ministers could study the constitutional implications for the three crown dependencies. It insisted the UK was committed to maintaining global tax transparency standards.

The shadow chancellor, John McDonnell, said pulling the bill was “more evidence that this government is incapable of getting its business through parliament. People have just had enough of the chancellor dragging his feet on tackling tax avoidance.”

Conservative MPs backing the amendment include the former chancellor Ken Clarke, the former Brexit secretary David Davis and the chairwoman of the Treasury select committee, Nicky Morgan.

A joint statement from Jersey, Guernsey and the Isle of Man welcomed the bill’s deferral and said it provided an opportunity for “meaningful engagement” with UK ministers, although it did not commit to public shareholder registers of beneficial ownership.

“We want to move forward in a way that does not breach the rule that the United Kingdom does not legislate for the crown dependencies on domestic matters without our consent,” they said.

“We are committed to exchanging adequate, accurate and current information on beneficial ownership to combat tax evasion, money laundering and corruption.”

Hodge and Mitchell succeeded in getting a similar amendment through the Commons against the government’s will in May 2018, forcing British overseas territories such as the Cayman Islands and the British Virgin Islands to introduce public registers of share ownership by 2020.

The government has sought to delay that to 2023, to give the territories more time to comply, but the amendment reasserts the original deadline of 31 December 2020. It is not clear when the bill will now be timetabled for debate.