Threatening to blacklist jurisdictions which fail to compile public registers of the beneficial owners of trusts and companies is all well and good, but politicians would do well to understand the legislations already in place in off-shore financial centres, says Dominic Wheatley of Guernsey Finance.
I only took over as chief executive of Guernsey Finance at the beginning of December last year, but have already been struck by the shear range of activities and topics that we, as the promotional agency for the island's finance industry, are dealing with on a daily basis.
I have found this diverse daily workload both invigorating and challenging, which is no bad thing. It does, however, demand of the team here at Guernsey Finance high levels of flexibility and a broad range of capabilities and knowledge.
Personally, my knowledge base has been developed predominantly across the insurance sector, having gained more than 25 years' experience in the international financial services market in the UK and Guernsey. This means that since December I have been getting to grips with the various different facets of the other sectors we represent.
The private wealth sector is certainly one of the most broad and fascinating to consider, and the one where the drive for high standards is most compelling and gaining most prominence.
For months we've been keeping a close eye on the growing desire in the UK and EU for the creation of central public registers of beneficial ownership for companies, trusts and other structures.
These moves gained even more attention at the beginning of February when Labour leader Ed Miliband, threatened to blacklist the British Overseas Territories as well as the Crown Dependencies of Guernsey, Jersey and the Isle of Man, should his party win the next general election and these jurisdictions have failed to compile public registers of offshore firms within six months.
The Miliband move has been referred to by many external commentators as a misguided attempt at winning public favour, with him wanting to be seen to be exerting pressure on offshore finance centres. What Mr Miliband fails to appreciate is that Guernsey was in fact one of the first jurisdictions in the world to regulate trusts and corporate service providers, something which still does not happen in many territories around the world today, including the UK.
Ahead of the curve
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 trust and corporate service providers (TCSPs). This means that Guernsey TCSPs can provide timely and robust beneficial ownership information should there be a requirement and request to do so by the relevant authorities, in the case of suspected illegal activity. Again, Guernsey is one of only a handful of jurisdictions that have such measures in place.
We are demonstrably ahead of the curve in this regard and we look forward to other jurisdictions stepping up to the mark so that we can help create a level playing field on beneficial ownership. Indeed our Treasury and Resources Minister, Gavin St Pier, in his response to Mr Miliband's comments, offered Guernsey's assistance in raising UK standards to meet those already in place in Guernsey.
Similarly, Guernsey has recently been instrumental in the formulation of a new benchmark for the regulation of TCSPs, established by the Group of International Finance Centre Supervisors' (GIFCS). The Standard of the Regulation of Trust and Corporate Service Providers, the first of its type, introduces a new minimum benchmark for businesses administering international trusts and companies to follow.
It is intended to promote and reinforce high standards in the sector among its membership, many of whom already regulate TCSP activity. It addresses matters of both prudential and conduct regulation, and is designed to complement the international supervisory standards of the Basel Committee, the International Organisation of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS). The Guernsey Financial Services Commission's General Counsel, Philip Nicol-Gent, was selected as chair of the GIFCS working group, which devised the new approach.
By adopting a common standard, jurisdictions will be able to more effectively demonstrate that their trusts and companies are being used for proper purposes. It will also aid the international fight against terrorist financing and money laundering.
These developments show that, far from being the 'tax haven' some commentators claim, Guernsey is extremely serious about its responsibilities and is already setting standards for regulation and transparency, leaving many other jurisdictions, both on- and off-shore, with some catching up to do. As the minister said, we would be only too happy to help them do so.
An original version of this blog was by published by Private Client Adviser, March 2015.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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