Transparency and co-operation in the international trusts industry

It is, perhaps, unsurprising in a UK General Election year that tax transparency and tax information exchange continue to inform a fair amount of debate at the moment.

As it evolves, this debate has demanded a real focus for those working both in International Financial Centres (IFCs) and in the wider trust sector, with both communities often finding themselves in the frame when it comes to some of the political rhetoric and misinformation relating to secrecy, illicit financial flows and their supposed links with IFCs and trust structures.

The regulation and transparency debate is an important one, and it is vital that it does not rest solely on the actions of IFCs or trust practitioners. For some years, Jersey has argued that developments in regulation and information exchange mechanisms need to be implemented in a concerted manner across the globe for them to be fair, as well as effective.

In fact, Jersey is coping well with increasing demands as far as transparency and increased regulation are concerned, and is working hard to obtain the credit it deserves for its response to the shifting regulatory agenda – which in many cases is more advanced than in other larger countries.

Around 18 months ago, for instance, UK Prime Minister David Cameron, made a welcome statement in the House of Commons in which he said it was no longer fair to refer to any of the Overseas Territories or Crown Dependencies as ‘tax havens’ – an announcement which, for Jersey, echoed comments by the Secretary General of The Organisation for Economic Co-operation and Development (OECD), Angel Gurría, who had written to Jersey’s Chief Minister the previous year to congratulate the jurisdiction on the measures it had taken in support of international tax transparency.

Against a highly charged political backdrop, however, this evidence constantly needs reinforcing, with larger countries, often with weaker or less effective regulatory and oversight infrastructures in place, looking to address national debt problems and appeal to the electorate by shifting blame to IFCs.

In fact, there are many perfectly legitimate and sensible reasons for individuals and institutions to transact business through IFCs like Jersey and for trust structures to be used. For jurisdictions to be used occasionally as a political football is a shame, as tax transparency and international cooperation are important subjects that merit serious, informed discussion.

The momentum for greater transparency in financial services is undoubtedly gathering steam, both onshore and offshore, and this is actually something that Jersey fully supports, providing it is done through the adoption of sensible, workable, global standards and a mature approach to balancing transparency with a legitimate right to an appropriate level of confidentiality.

Indeed, the argument for ‘a level playing field’ has been recognised by influential global bodies such as the OECD, and the OECD’s move to introduce a common reporting standard is welcome.

For its part, Jersey can point to signing more than 40 tax agreements with countries worldwide. The UK’s ratification of the OECD Multilateral Convention on Mutual Assistance in Tax Matters has been extended to Jersey. In addition, it is a signatory to US FATCA, an intergovernmental agreement with the UK and the European Savings Tax Directive for automatic exchange of information within the EU. In October 2014, Jersey was one of the 51 jurisdictions to commit to the new OECD reporting standard as part of the ‘Early Adopters Group’.

As far as beneficial ownership is concerned, Jersey has captured corporate beneficial ownership information on a centrally held registry since 1999 with this information being made available to law enforcement agencies under internationally-agreed information exchange mechanisms. Information on the beneficial ownership of trusts is equally accessible in appropriate circumstances, with professional trust and company service providers fully and rigorously regulated and supervised by the Jersey Financial Services Commission and trustees required under Jersey law to maintain full and accurate information on the beneficiaries and accounts of the trust.

In fact, one of the outcomes of the most recent G20 meeting was an endorsement of the current approach to beneficial ownership – to ensure that the true owners of entities are known, that information is readily available and that it can be exchanged between governments without undue difficulty.

This is absolutely the approach adopted in Jersey. In fact, Jersey’s capabilities are way ahead of other onshore and offshore jurisdictions, including currently the UK, which is one of only a few countries in the world calling for a public registry.

Jersey’s finance industry does not believe that there is anything to be gained by making its beneficial ownership registry public. Its current model delivers adequate, accurate, and timely beneficial ownership data to law enforcement and competent authorities, whilst legitimately preserving the confidentiality of those who use its formidable financial services expertise.

For trust practitioners, thanks to the existence of a number of different information exchange models around the world, reporting has never been more complex, and monitoring how the landscape evolves further will be vital. The implications for those working in the international private client world are significant and there is potential for future developments to have a profound impact on trust companies and their service providers; they may yet prompt a reconfiguration of the IFC landscape, and dictate an increasingly central role for technology, issues that will be explored at Jersey Finance’s annual Private Client Conference in London this month (13th May).

The future is likely to belong to those trust professionals who can most efficiently meet these international requirements, administering international capital without dislocating domestic tax systems. Jersey is committed to being ‘front and centre’ in that future landscape.

Featured image credit: ‘Reflexiones’, by Saint Serge. CC-BY-2.0 via Flickr.