Offshore banking centres have
been high-profile targets for regulation and governments eager to
get a bigger tax take to feed their expanding deficits.
Transparency has risen to the top of the priority list for wealth
managers, as has how to best serve Cross Border Declared
clients.
Go deeper with GlobalData
Nicholas Moody, editor, PBI: Has the global
push on tax transparency, created a fundamental shift or
readjustment in offshore banking?
David
Stearn, head of private banking, Fairbairn Private Bank:
During the fear in 2008, everybody wanted to blame somebody else.
The government took a bit, bankers took a lot and offshore got
some. It’s a puzzle to me how offshore banks took so much blame
because the British offshore islands: Jersey, the Isle of Man and
Guernsey, do not house the investment banking institutions where
the leverage of esoteric structures caused some of the mayhem. I do
not continue to see evidence of offshore being a completely broken
model with the tarnish that existed at its heights in early 2009,
but evidence exists that it may be a dwindling market so our
business has reacted by obtaining an onshore UK licence. [But the]
reality is that business done in the Channel Islands now is very
legitimate and rarely motivated by illegal money laundering.
Alex McBarnet, managing director, United Trust
Bank: I deal with Jersey, Guernsey, the Isle of Man, the
Cayman Islands and many other offshore jurisdictions. Outside of
our own community, the moment I say I’m setting up a company in,
say, the Cayman Islands, the usual reaction is a, supposedly,
knowing ‘Ohhhhh’. Barack Obama named and “shamed” all of these
jurisdictions, criticising their fiscal regimes when most of them
have equal or better regulation than the UK and the USA –
interestingly one jurisdiction he did not mention, but which has
rather weak regulation, is Delaware.
Stearn: It is as if Delaware does not exist in
the anti-offshore Obama world!
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By GlobalDataJohn Evans, editor-at-large, PBI: Nick, can you
tell us about the offshore proposition growing at Hoare &
Co?
Nick Hammond, branch manager, Hoare & Co:
We have linked up with Bank Julius Baer, with whom we have had a
longstanding association with for eight or nine years, so we’re
able to book assets offshore, essentially in Jersey, and have them
managed in the UK for predominantly UK resident non-domiciles. On
the banking side, we continue to be able to have offshore deposits
and offshore loans. Speaking entirely personally, not from the
bank’s view, if you are looking to do it now, you wouldn’t
essentially start from scratch. We have not yet seen the full
extent of the protectionism that will be undoubtedly coming down
the pipe.
Evans: Josh, you probably have the toughest job of all
of us. How do you keep US government hands off US
clients?
Josh Matthews, managing
partner, Maseco Financial: Well you can’t! I think it is
interesting talking about the financial crisis and how it has
affected where we are today in the offshore world. I have accounts
in both of your businesses [Hoare & Co and Fairbairn], so for
you guys to go offshore makes sense. Most of your clients are HNW
non-domiciled here – they need more services that are offshore. And
clients who are offshore need more services onshore.
I was at Citigroup for years before leaving and starting Maseco
and we did not do a good job of marrying onshore with offshore.
That is where you both have a huge opportunity, because wealthy
clients want to do that – they are not trying to hide money or do
anything untoward, they just need to be as tax efficient as they
can which means they need to have accounts and relationships in
both places.
Evans: Has the global regulatory attack on offshore
banking, particularly the Swiss model, reached its
peak?
Ian Woodhouse, director,
private banking and wealth management practice, PwC: We
are moving from a less transparent offshore world to a more
transparent world. I think that will be the future. I think you
should look at two issues: the crisis and the OECD willingness to
co-operate across borders. So you are seeing a lot of tax
information exchange agreements as we move towards a more declared
transparent offshore. You have to separate the traditional European
offshore clients from the newer offshore clients.
We have just looked at the
regulatory impact on private banking and wealth and there is a lot
of regulatory change coming down the pipe. I think this is just the
beginning.
The one that is on everybody’s mind right now is the US Foreign
Accounts Tax Compliance Act, but I think what you’ll see is a
gradual tightening. That will have impacts on the offshore centres
and there will be increasing change in the next five years.
Hammond: Transparency is one of my key
forecasts because businesses are getting pressure from both sides,
in the environment of rapid re-regulation that is forcing us to
give transparency to regulators. But on the other side, for private
clients that have emerged bruised from the past few years, their
biggest bug bear is the level of opacity. The structures themselves
and what goes into them has to be extremely transparent.
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