Guernsey is well placed for transparency
10 October 2017
Carey Group Managing Director Jim Gilligan shares his views in the Guernsey Press' Q3 Business Review about how the island’s strengths are becoming apparent within the global private wealth industry in the current age of transparency and disclosure.
Ever since the banking crisis politicians and the media have been looking to apportion blame and be seen to take action against those deemed to be responsible. This had led to a raft of measures to improve transparency in the financial world which has impacted all institutions and their clients and this is of course true for Guernsey and other similar offshore jurisdictions.
Transparency is a fact of modern life. Anyone using the internet or indeed rushing to buy the new iPhone X must accept that personal information is stored and may become public, intentionally or otherwise. Transparency requirements introduced into the financial services arena through a plethora of external reporting requirements, (i.e. FATCA/CRS), have been imposed rather than accepted. The frequency and complexity of the reporting has significant time and cost ramifications which many commentators suggest lacks proportionality.
Guernsey has coped very well with this challenge as, of course, in order to provide reporting you first need to gather information. In this regard the regulatory framework that Guernsey has operated in for many years has provided for a large part of that required information to be already held. Guernsey practitioners have more involved relationships with their clients as we are not a 'high volume' jurisdiction which further provides for the ability to meet this challenge.
This is not to say that such transparency requirements are easily achieved and to suggest otherwise would be pure folly. In order to deliver the requirements under CRS, we at Carey Group had to involve approximately 20 of our 50 or so people and all of our client-facing personnel. We also worked extensively with external advisors.
Like many in the industry, our team at Carey Group interacts with multiple jurisdictions on behalf of our clients. This has revealed that many locations have not been positioned as well as Guernsey has been to implement the expectations of regulation. The key reason has been that business in these jurisdictions were not required to hold enough information on file or indeed they had such a large number of clients that it was almost an impossible task to achieve the requirements within the timeframe. This was noticeable in the Caribbean jurisdictions where organisations tend to have much higher client volumes than would be typical of businesses in Guernsey.
Whilst these extraordinary reporting requirements do place a strain on the costs of doing business it would appear that we in Guernsey are better placed to manage these. There has been business in the past that has gone to cheaper jurisdictions. Now those competitors have had to bring their business processes much closer to those which we have worked hard to shape and implement here in order to manage the requirements placed on them.
For some of our competitor jurisdictions then, this has led to declining service levels among businesses that are trying to cope. Indeed, we have been winning business based on our ability to deal with these challenges, maintain our fee levels and at the same time continue to deliver the high service levels which Guernsey is known for.
The high service levels in Guernsey also come with higher levels of engagement with our clients and intermediaries. Transparency demands and the challenge from the EU and OECD will not reduce. It is common practice for members of Guernsey’s private wealth sector to proactively travel abroad and discuss these current and potential requirements with clients and contacts to agree a plan for how best to address the changes and achieve their real aims. This approach makes Guernsey stand out and is positively received.
One of the challenges with increased reporting is the loss of privacy and confidentiality, especially for private clients who don’t wish to air family matters to a wide audience. Recently this was a real challenge when explaining CRS reporting to a client I was visiting in Riyadh, Saudi Arabia. The CRS regime was initially designed to share information between different countries so that they could use it to assist their verification of tax and similar reporting in the country of residence. The family I was speaking to was bemused to hear this was occurring in 2018 in Saudi Arabia where there is no individual income tax scheme in place!
There are many non-tax reasons to create structures offshore and this has been the reality of our business in Guernsey for many years now. We are therefore increasingly discussing the challenges of transparency with clients and the benefits that Guernsey provides in this respect as well as the trusts, foundations and other similar structures we offer which are still in healthy demand.
There is no doubt that transparency will add greater challenges to these structures. Our role as representing the sector will be to encourage our clients to choose a jurisdiction that has a robust and proven legal system, is well regulated, is well respected internationally and has experienced and proactive professionals who are well placed to partner with the client through the ever-changing landscape.
An original version of this article was published the Guernsey Press' Q3 Business Review, September 2017.Back to News
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