A secure channel
21 October 2016
Its robust financial structures and strong transparency record make Guernsey a safe harbour for wealth while other jurisdictions face unstable futures.
Guernsey has continued to solidify its position within the mainstream of international finance over the past year. Despite the uncertainty created by the UK’s decision to leave the EU and the increased scrutiny placed on international finance centres in the wake of the Panama Papers, Guernsey has been able to demonstrate that it is a safe harbour for financial services, particularly for private wealth and institutional clients.
The Brexit vote came as a surprise to many and while the UK considers its own way forward, amidst all of the uncertainty Guernsey provides an oasis of stability. For a start, Guernsey’s constitutional relationship with the UK will be unaffected by Brexit. Guernsey was, is, and will continue to be self-governing. Guernsey’s constitutional relationship with the European Union will also remain unaffected by the result of the referendum. Guernsey was, is, and will continue to be outside of the EU, while its trading relationship with the EU for services (including financial services) will continue to be ensured through our own well-established third country provisions. We have secured this third country relationship with the EU due to the fact that over a considerable number of years Guernsey has been able to demonstrate equivalence to EU standards – a perfect example of this being the much-discussed Alternative Investment Fund Managers Directive.
As was the case with Brexit, the Panama Papers was another situation which saw Guernsey emphasise and demonstrate its stability amidst the uncertainty that had gripped financial markets. Much of the fallout from the Panama Papers data leaks centred on the beneficial ownership of companies and trusts, and the level to which this information should be made public. The media coverage at the time illustrated the fact that plenty of misunderstanding remains surrounding the standards Guernsey already works to, particularly as the island’s adherence to international standards is in fact ahead of other much larger jurisdictions. Indeed, Guernsey was one of the first jurisdictions to regulate trust and company service providers and this is something which still does not happen in many territories around the world today, including the UK.
In addition, Guernsey has had legislation in place since 2000 that obliges all beneficial owners of Guernsey companies and other legal persons to be properly identified and recorded by regulated corporate service providers and is one of only a handful of jurisdictions that have such measures in place. They also hold information that verifies sources of wealth.
We do not disclose this information publicly because we value client confidentiality, but this information can be accessed in a timely manner by law enforcement agencies and tax and regulatory authorities, both locally and internationally, when requested. Guernsey therefore fully supports international initiatives on beneficial ownership as in many ways we are already ahead of the curve and would welcome other jurisdictions enhancing their own regimes.
As Guernsey's recent MONEYVAL report also showed, not only do we have in place a highly effective anti-money laundering and anti-terror financing regime, Guernsey is active in its commitment to the practical implementation of tax transparency and meeting international standards.
A viable alternative
This global drive towards transparency has therefore added to Guernsey’s appeal as a jurisdiction for wealth planning. Our own experience from promoting Guernsey internationally and feedback from local practitioners who have been overseas working in various markets themselves backs this up.For example, Andrea Daley Taylor from Trust Corporation International, reported that in the wake of the Panama Papers, people in the US were particularly interested in what Guernsey could offer as a jurisdiction.
“Americans have historically favoured the Caribbean financial centres and are familiar with what they know," said Mrs Daley Taylor. “There's a definite interest in shifting away from that now. We're introducing Guernsey as a viable alternative with a strong judicial system and regulatory environment that can offer a better service.” She said that a move towards global transparency had been helpful in marketing ‘Guernsey PLC’ to US clients. “The nature of North Americans is that they are familiar with compliant structures and are generally comfortable with a higher level of disclosure. In light of the move in legislation towards greater transparency Guernsey becomes a more attractive option due to our reputation as a robust and transparent jurisdiction.”
Guernsey’s strong judicial system and regulatory environment are not our only differentiators. Other attractions that provide high-net-worth individuals with reassurance include our stable system of government, elected parliament, an enviable constitutional position, a neutral tax regime and a mature and sophisticated legal system.
Indeed, Guernsey’s wealth management sector, which boasts more than 150 lead corporate licensees, ranging from local, boutique providers to large, multinational organisations, has a heritage dating back more than 50 years in providing asset protection, succession planning and wealth management planning for HNWIs and globally mobile families through the use of companies, trusts and most recently foundations.
Like Mrs Daley Taylor, many Guernsey-based advisers are reporting a growing influx of interest from further afield. Marcus Leese, Guernsey-based Partner at offshore law firm Ogier, reported recently that he was seeing plenty of work from South East Asia, including mainland China.
“Hong Kong, South East Asia and mainland China continue to be a strong source of work for us,” said Mr Leese. “Onshore clients do have a lot of choice in terms of offshore jurisdictions for establishing structures, but Guernsey has a lot of attractions. First and foremost is the range of structures that are available: reserved powers trusts, foundations, non-charitable purpose trusts, perpetual trusts, and so on, many of which are attractive for South East Asian clients.”
Another source of business for the island’s wealth management services is coming from the Middle East, according to Alasdair McLaren, Client Services Director with First Names Group in Guernsey.
“A lot of our focus is no longer on the UK, but on places like the Middle East, where it’s more international families and ultra-high net worths. They want commercial planning, but also potentially club investing or buying into private equity structures. I’m dealing with a Middle Eastern family at the moment that is spread across five different countries in the region, and we are looking at asset protection, estate planning, and how to protect and secure their wealth when the patriarch dies.”
A different proposition
What is clear, is that individuals, families and institutions in markets further afield, such as Asia and the Middle East, are now increasingly looking towards well-regulated jurisdictions like ourselves to meet their wealth management needs. The substance evident in Guernsey’s business environment offers a high degree of stability, reliability and certainty in the current climate and one that is in tune with the future direction of the global financial services industry.
An original version of this article was first published by Spear's, October 2016.
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