Guernsey: Panama Papers – How Has Guernsey Responded?

Last Updated: 2 February 2017
Article by Marcus Leese

In early 2016 several million client-related documents were stolen from a Panamanian law firm.  The documents were subsequently passed to the International Consortium of Investigative Journalists who proceeded to publicise the theft and to selectively release small elements of the stolen material (seemingly on the basis of what it judged to be the most salacious and embarrassing of the material).  The popular press reported these events widely – aware of the popularity of any story which conflates money, the powerful and/or famous, and the offshore world.  The usual and expected public outrage was generated.  This became widely known as the Panama Papers. 

With the greater part of a year having now passed, it is perhaps timely to consider how Guernsey has responded.

One could legitimately say that in response to the Panama Papers, Guernsey has done absolutely nothing.  Or, more accurately, has done absolutely nothing differently from what it was already doing.

The simple reason for this is that for the past in excess of 20 years Guernsey has been taking active steps to minimise the risk of the types of shortcomings revealed by the Panama Papers happening in Guernsey.  And we are continuing to do so.

A few examples.

In 2000 Guernsey enacted a comprehensive all crimes anti-money laundering regime.  The regime includes all criminal conduct (including tax matters and terrorism) as predicate offences and imposes a positive obligation for disclosure with very severe penalties for breaches.

For just as long, Guernsey has had a comprehensive regime requiring the licensing and on-going regulation of all financial services providers, including in particular those who incorporate, establish and administer companies, trusts, foundations and similar vehicles.   This has ensured not only higher service standards and protection for consumers using such providers, but also provided a mechanism to reinforce the anti-money laundering regime and ensure that comprehensive information on the source of funds and the identities of ultimate beneficial owners of such structures are always obtained and kept up to date.    

In the area of tax information exchange, Guernsey has been at the forefront.  When tax information exchange agreements (TIEAs) were first proposed, Guernsey embraced the principle and has now signed 60 such agreements.  Although not part of the European Union, when the European Union savings tax directive was implemented, Guernsey introduced equivalent domestic legislation to ensure Guernsey entities could not be used to avoid the directive.  Guernsey actively requested to be a party to the international convention on mutual assistance in tax matters and has been subject to it since 2014.  Guernsey has entered into relevant inter-governmental agreements with the United States and is a fully engaged and compliant participant in the FATCA  regime.  Guernsey entered into similar arrangements with the United Kingdom for the UK FATCA regime.  And Guernsey has been an early adopter of the Common Reporting Standard (CRS) regime.  Guernsey also has full double tax agreements in place with a range of countries and also agreements for mutual assistance on tax matters with many other jurisdictions. 

The above are all examples of Guernsey's long-established policy of active international engagement.  Unlike some other international finance centres, Guernsey has chosen a path of active engagement with international governments and supra-national bodies.  The Guernsey office in Brussels to assist in discussions with the European Union and its constituent bodies, our continuous dialogue with the United Kingdom government and authorities and our readiness to respond to international initiatives are all part of this.  This is not to say Guernsey will supinely acquiesce to any edict irrespective of its own interests (our record on the United Kingdom proposal for a public, central register of beneficial company ownership is testament to this).  Simply, we will actively engage where it is the right thing to do.

And all of the above has quite rightly resulted in positive endorsement from international bodies.  Positive statements from relevant ministers in the United Kingdom parliament, positive reports from Moneyval and the OECD regarding our regulatory regime, endorsement from the European Union authorities regarding our tax regime are all examples of this.

None of the above is intended to sound complacent.  It is never possible to design any system which prevents all abuse by those focused on achieving it.  Moreover, the world is developing constantly and the demands upon Guernsey (and all other international financial centres) are changing with it.  But Guernsey has shown over the course of several decades that it is ready and willing to engage in a positive fashion and develop its own regimes to comply in a way which meets those evolving standards but still provides a system which allows international financial transactions to flourish.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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