Guernsey responds to UK PM's letter on beneficial ownership

The Chief Minister of Guernsey and the Chief Executive of Guernsey Finance - the promotional agency for the Island's finance industry - have both responded to a letter from UK Prime Minister David Cameron regarding beneficial ownership.

Last week Mr Cameron wrote an open letter to all Crown Dependencies and Overseas Territories exhorting them to join the UK in establishing a publicly available central register on beneficial ownership.

Fiona Le Poidevin, Chief Executive of Guernsey Finance, said: "We welcome the Prime Minister's recognition of our continued commitment to working with the UK to promote the application of high international standards.

"Indeed, it should be noted that in 1989 Guernsey became one of the first jurisdictions to regulate trust and company service providers and this is something which still does not happen in many territories around the world today, including the UK. 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 corporate service providers and is one of only a handful of jurisdictions that have such measures in place. However, Guernsey has always maintained client confidentiality and this information is not shared publicly.

"Guernsey is ahead of the curve 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. Whether that will include a truly public register remains to be seen given the significant implications, for example in respect of data privacy and human rights as well as the potential negative impact on inward investment for any jurisdictions which adopt measures that are not global in reach."

In September last year the Prime Minister told the House of Commons that it would be unfair to refer to the Crown Dependencies and Overseas Territories as "tax havens".

In October Guernsey and the other Crown Dependencies of Jersey and the Isle of Man signed an agreement with the UK on a package of tax measures. It enhanced the automatic tax information exchange provisions already in place between Guernsey and the UK under measures equivalent to the EU Savings Tax Directive.

In last week's letter, the Prime Minister said that he "welcomed [Guernsey's] continued commitments to work with the UK to promote the application of high international standards. Our joint approach has been our strength and I hope we can continue to push this agenda forward together."

He added: "I believe that beneficial ownership and public access to a central register is a key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasions."

Guernsey's Chief Minister, Jonathan Le Tocq, said: "The UK Prime Minister's letter of 22 April 2014 accompanies the UK Government's response to the consultation it launched last autumn on beneficial ownership. With regard to the letter, I am pleased that it again acknowledges Guernsey's commitment to the promotion and application of high international standards.

"We are looking at the detail of the UK Government paper in order to see how it might inform thinking on our existing regulatory framework for corporate service providers, and on how we continue to progress our action plan on beneficial ownership, which was published in June 2013.

"Guernsey continues to be supportive of any steps to create a truly global level playing field on transparency issues. I will be responding to the Prime Minister's letter in due course."

Transparency on beneficial ownership

The Prime Minister of the United Kingdom, David Cameron, has written to all the Crown Dependencies and the Overseas Territories following the publication last week of the UK Government’s report on its proposals to enhance the transparency of UK company ownership. 

In his letter to the Chief Minster, Mr Cameron welcomed the Crown Dependencies’ decisions to join the United Kingdom in leading work to raise standards of transparency globally. He said: “I appreciate that Jersey already has a central registry of company beneficial ownership in place and I welcome your publication of a consultation on its effectiveness.”

The Chief Minister, Senator Ian Gorst, commented: “I welcome the Prime Minister’s recognition of our long-established leading approach to transparency on beneficial ownership, which has also been recognised by the World Bank and others. However, what could also be added is our comprehensive licensing and regulation of trust and company service providers, which are not included in the United Kingdom Government’s proposals. We consider such provisions to be essential for law enforcement and for tax authorities to obtain, as they can from us, accurate, adequate and up-to-date information on beneficial ownership to help combat tax evasion, money laundering and corruption.

“Once we know the outcome of our consultation, we will be in a position to respond to the Prime Minister’s letter. In doing so, we will be considering how the approaches adopted by the UK Government and other G8/G20 members to enhancing transparency on beneficial ownership compare with what  is able to be achieved with our own approach.”

McAfee Labs White Paper - Jackpot! Money Laundering Through Online Gambling

In Martin Scorsese’s 1995 film, “Casino,” Robert DeNiro’s character is charged with operating a 1970’s Las Vegas casino for the Chicago mafia. He and his partner in crime (played by Joe Pesci), shake down the strip, skimming millions in casino earnings. The story ends in disaster for the pair—but the film’s plot underlines an important point: the ability to move massive amounts of money through a legitimate business, like a casino, is an effective means to disguise criminal activity.

This fact isn’t lost on today’s hackers and cybercriminals, especially when they need to make profits from the online sale of drugs, weapons, or other black market items appear clean, quickly. Our most recent report, “Jackpot! Money Laundering Through Online Gambling,” discusses this subject at length—looking at the why and how behind cybercriminals’ use of online gambling to launder money made from illegal activities.

Among the report’s primary findings: cybercriminals and hackers are turning to online casinos—an industry set to grow nearly 30% over the next three years—for money laundering. This may sound like something straight out of the movies, but it’s happening everyday. In fact, according to Dr. Ingo Fiedler, a leading researcher of online gambling, roughly $1.6 billion in criminal profits enter the mainstream economy through money laundering every year. And much of this can be linked to the emergence of virtual casinos, which provide crooks with the means to quickly and efficiently “launder” their money.

OECD: International community continues making progress on tax transparency

The international community continues making progress toward greater cooperation to ensure effective information exchange in tax matters. The Global Forum on Transparency and Exchange of Information for Tax Purposes issued today 12 new reports that highlight action being taken by jurisdictions to implement the international standard for exchange of information on request.  

Four Phase 1 reports were published assessing jurisdictions’ legal and regulatory framework for transparency and exchange of information. Colombia, Latvia, and Saudi Arabia qualify for the next stage of the review process, while the peer review of The Federated States of Micronesia (FSM) determined that the jurisdiction does not have in place a legal framework for transparency, and therefore does not qualify for a Phase 2 review.

The review of FSM was conducted under the special procedure for non-members, which ensures that jurisdictions do not gain a competitive advantage by refusing to implement the international standard or participate in the Global Forum. The FSM was identified in 2012 as a relevant jurisdiction for the Global Forum’s work, due to development of a captive insurance industry.

The Global Forum published Phase 2 reports - which review exchange of information practices - in four jurisdictions and allocated ratings for compliance with the individual elements of the international standard as well as an overall rating. Barbados received an overall rating of “Partially Compliant,” due, in part, to gaps in its network of agreements to exchange information, Malaysia and the Slovak Republic received an overall rating of “Largely Compliant” and Slovenia was rated Compliant. 

Four supplementary peer review reports were also published, assessing progress made by jurisdictions to address gaps identified in their legal frameworks and exchange of information practices since their previous reviews.

After substantial changes to implement Global Forum recommendations, Botswana and the United Arab Emirates are no longer blocked from moving to the next Phase of the peer review process. Mauritius is also shown to have implemented recommendations made by the Global Forum, and maintains an overall “Largely Compliant” rating.

The supplementary report on Panama points to several improvements in its legal framework, but concludes that further progress is necessary in a number of areas before it is able to qualify for a Phase 2 review.

As legal and practical improvements are being made in many other jurisdictions, more supplementary reviews are expected to be pursued this year. To date, the Global Forum has completed 132 peer reviews and assigned compliance ratings to 54 jurisdictions that have undergone Phase 2 reviews. Four jurisdictions remain non-compliant, three are now partially compliant and there are 13 jurisdictions which are blocked from moving to a Phase 2 review.

The Global Forum is currently revising its Terms of Reference for assessing jurisdictions in advance of a new round of reviews starting in 2016, with regard to the international standard of exchange of information on request. The Global Forum has also begun work on the implementation of the new standard for automatic exchange of information (AEOI) i.e. the Common Reporting Standard, which was released by the OECD in February 2014. G20 Finance Ministers endorsed the CRS during a ministerial meeting in Sydney, Australia, committed to implementation and called on all financial centres to match their commitments.

The first meeting of the Global Forum’s new AEOI group – currently comprising 54 jurisdictions – took place in Paris on 27-28 March. Delegates focussed on development of a monitoring and review mechanism for the new AEOI standard and on its global implementation, in particular, how to enable developing countries to participate in automatic exchange.

Transparency and trust: enhancing transparency of UK company ownership and increasing trust in UK business

Outlines how government plans to proceed with the following policies:

• establish a publicly accessible central registry of UK company beneficial ownership information
• improve transparency of company ownership and control, including:
• abolishing bearer shares
• prohibiting the use of corporate directors (with exceptions)
• increasing the accountability of those who control company directors
• improve trust in the UK regime for disqualifying company directors
• increase the likelihood of creditors being compensated where they have suffered loss from director misconduct

Transparency and trust: enhancing transparency of UK company ownership and increasing trust in UK business - government response

Consultation stage impact assessments to Part A of the transparency and trust proposals

Transparency and trust consultation responses

IMF Executive Board Concludes 2014 Article IV Consultation with Mauritius

On April, 21, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mauritius.

A stable macroeconomic environment was maintained in 2013, despite difficult external developments. Real GDP growth was lower than expected at 3.2 percent in 2013, mainly on account of construction, sugar and tourism. With subdued international prices, inflationary pressures declined in 2013, despite the public sector wage increases, and year-on-year inflation fell to 3.5 percent. The unemployment rate was unchanged compared to 2012 at 8.0 percent. Credit to private sector growth remained robust. On the external front, the current account deficit widened to almost 10 percent of GDP in 2013. The reserve cover of imports of goods and services stayed constant at 4½ months with the Bank of Mauritius (BOM) accumulating additional net international reserves.

The fiscal policy stance was more expansionary than planned because of cyclical and one-off factors but also slippages. The structural primary deficit was broadly unchanged relative to 2011. The overall deficit including extra-budgetary funds is estimated at 4½ percent of GDP. While revenues remained broadly unchanged in proportion of GDP, expenditures increased by over 2 percent of GDP. As expected wages increased following the Pay Research Bureau’s (PRB) report, which increases civil servant salaries beyond annual inflation adjustments periodically with the next adjustment expected in 2016. Additional spending was also related to the flash floods in Port Louis as well as unplanned transfers to local governments and public enterprises. Finally, capital spending including by the special funds was 1 percent of GDP higher, though partially due to cost overruns.

Monetary policy was somewhat accommodative. Throughout the year, while a sluggish domestic demand and low international inflationary pressures helped anchor inflation expectations. The public sector wage increase related to the PRB report did not lead to strong private sector wage pressures. In this context, the BOM maintained the policy rate at 4.65 percent in September 2013 and February 2014, following a 25 basis point reduction in June 2013. In October 2013, reserve requirements were raised from 7 to 8 percent to curb excess liquidity in the banking system. The authorities continued building international reserves and used limited interventions to moderate excessive fluctuations of the rupee. The banking system remained well-capitalized and resilient in a strong regulatory context. Regulatory Tier I capital to risk-weighted assets are well above Basel II and the proposed Basel III requirements. Non-performing loans (NPL) increased slightly in 2013, but banks remained profitable with a 20 percent return on equity, despite low leverage ratios. However, liquidity ratios have worsened in recent years and are on the low side in international comparisons. BOM is consulting with banks on implementation of Basel III regulations and continued to publish its bi-annual CAMEL ratings for all domestic banks. It implemented macroprudential measures aimed at addressing emerging NPLs in the construction and real estate sectors as well as rising indebtedness. Threats to financial stability posed by a Ponzi-like scheme in 2013 were contained successfully, and the regulatory framework was subsequently improved.

Mauritius has established a track record as a reformer with strong institutions and a dynamic private sector. The Africa Training Institute (ATI) is set to open in June 2014 in Ebene. The country statistical capacity continues to be strengthened, including ongoing work on Monetary and Financial Statistics (MFS) as well as balance of payments (BOP) and international investment position (IIP) statistics. Mauritius subscribed to the IMF’s Special Data Dissemination Standard (SDDS) in February 2012, being the second Sub-Saharan African country to do so and is working on subscribing to SDDS Plus.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They noted that Mauritius’ prudent policies and strong institutions have delivered steady growth, well-anchored inflation expectations, and continued financial stability. The near-term growth outlook is generally favorable, but an uncertain external environment carries risks. Against this background, Directors encouraged the authorities to consolidate recent macroeconomic gains, strengthen policy buffers, and pursue greater economic diversification through structural reforms to enhance the resilience of the economy.

Directors generally considered it appropriate to start tightening fiscal policy this year to smooth adjustment and increase the likelihood that the 50 percent target for the debt-to-GDP ratio is achieved by 2018, as mandated by law. They encouraged the authorities to articulate an ambitious consolidation strategy centered on better prioritizing public expenditure, strengthening tax administration, and broadening the tax base. Subsidy reforms and an overhaul of public enterprises, as well as an improved framework for fiscal devolution, including a better use of real estate taxes, could also underpin the budgetary adjustment over the medium term.

Directors agreed that the current monetary stance is broadly appropriate, but cautioned that a withdrawal of accommodation might be necessary if inflationary pressures intensify. They also suggested strengthening the institutional and operational arrangements that would support the eventual adoption of a formal inflation targeting framework.

Directors noted that the banking system remains well-capitalized, profitable, and resilient to shocks. They observed, however, that persistent excess liquidity in the banking system has hindered the monetary transmission mechanism, while also encouraging disintermediation and riskier lending. To address this issue, Directors encouraged the authorities to consider an approach to liquidity management involving additional issuance of government paper for monetary policy purposes and—more broadly—closer collaboration between the government and the central bank. Similarly, coordination between the central bank and the nonbank supervisor should continue to be strengthened to ensure the soundness of the overall financial system.

Directors took note of the staff’s assessment that the rupee appears to be modestly overvalued in real effective terms. To bolster Mauritius’s international competitiveness and durably reduce the large structural current account deficit, they recommended greater exchange rate flexibility, well-prioritized infrastructure investment, and stepped-up reforms to address labor and product markets rigidities. Directors also agreed that the external adjustment could benefit from further pension reforms that would boost national savings while strengthening social protection.

Directors welcomed the authorities’ intention to adopt the Fund’s SDDS Plus, and supported ongoing efforts to improve the collection of financial and labor market statistics.

FSC Mauritius Survey and FAQs on Credit Rating Agencies

The Financial Services Commission (“FSC Mauritius”) is developing a regulatory regime for credit rating agencies (“CRAs”), one of the factors which support the development of the corporate bond market.

Questionnaire

The FSC Mauritius is issuing three questionnaires for bond issuers, investors and credit rating agencies respectively to gather data which will assist the FSC Mauritius in developing the regulatory regime for CRAs. It is inviting the responses to the questionnaires to be emailed to crasurvey@fscmauritius.org by 30 May 2014.

FAQs

The FSC Mauritius is also issuing a list of Frequently Asked Questions to inform the public about CRAs and the IOSCO Objectives and Principles governing the regulation of the activities of CRAs.

Financial Services Commission

22 April 2014

Mauritius: FSC Annual Renewal Licence Fees 2014 – 2015 for Management Companies

All licensees holding a Management Company Licence (FS-3.1A) are required to fill in and submit the Remittance Advice for the payment of their Annual Renewal Licence Fee 2014-2015. The Remittance Advice has to be filled in electronically, printed, signed and submitted along with the payment.

UK: HMRC update to its offshore evasion strategy 'No safe havens'

HMRC published an update to its offshore evasion strategy 'No safe havens' on 14 April 2014. This strategy sets out a coherent and coordinated framework for HMRC's approach to tackling offshore evasion.

No safe havens 2014

APEC: Release of the Asia Region Funds Passport consultation paper

On 16 April 2014, the governments of the passport working group (Australia, Korea, New Zealand, the Philippines, Singapore and Thailand) released a consultation paper to seek views from the public on the details of the proposed arrangements. This follows the signing of a statement of intent on the passport by representatives from Australia, Korea, New Zealand and Singapore in September 2013, committing to jointly issuing such a paper.

Interested parties are invited to make a submission on the consultation paper via the relevant economy:

• Australia
• Korea
• New Zealand
• Thailand
• Singapore
• The Philippines

Submissions will be published on this website unless a submitter specifically requests that the whole or part of the submission is treated as confidential.

Consultation closes on 11 July 2014.

Following this consultation, economies which decide to be passport member economies will work to finalise the arrangements by early 2015 with a view to the passport commencing in 2016.

Mauritius: FSC Public Notice - Suspension of Management Licence of Apostle International Management Services Limited

Notice is hereby given that in accordance with Section 27 (7) of the Financial Services Act 2007 (the “FSA”), the Management Licence of Apostle International Management Services Limited has been suspended with immediate effect.

In accordance with Section 27(5) of the FSA, Apostle International Management Services Limited shall cease to carry out the activity authorized under its licence but shall remain subject to the obligations of a licensee and to the directions of the Commission until the suspension of the licence is cancelled.

Financial Services Commission

15 April 2014

The capacity conundrum

The question of capacity continues to be one for debate and it has become increasingly apparent that it is not solved simply by the provision of an arbitrary headline number or cap. Geoff Ruddick takes a look at the key things to consider when assessing the capacity of an independent director.

Offshore Fool - Offshore News Flash

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SOMO - Mailbox companies and human rights: the Dutch state duty to protect

SOMO researchers Roos van Os and Indra Römgens published an article in 'de Volkskrant' (Dutch newspaper) about the question: Why does the Netherlands make it possible for dubious mining companies, tax dodgers, dictators and arms dealers to hide their identity?

Read more

States of Jersey launches financial services policy framework

The Government of Jersey has today published the policy framework that will shape the direction of Jersey’s financial services industry.

The document sets out the underlying principles for the government’s support of Jersey’s main industry, and outlines the policies that are deemed vital to its future.

The policy framework has been based on four key priorities that were set out in last year’s independent jurisdictional review of Jersey’s financial services industry:

1. Sustain the core (protect existing business from the threat of competitive challenges)
2. Enhance enablers (excel in the areas that determine investors’ choice of location: the legal, regulatory and business environments)
3. Capture adjacent growth (attract business from the products, markets and services that are closest to our current positions)
4. Reposition and build new capabilities (explore more ambitious opportunities in less familiar business territory, repositioning our current offering and building new capabilities)

The Chief Minister, Senator Ian Gorst, the Assistant Chief Minister and Treasury and Resources Minister, Senator Philip Ozouf, and the Director of Financial Services, Joe Moynihan, presented the document to Jersey Finance Limited, the JFSC and industry representatives at a launch event today.

Treasury and Resources Minister, Senator Philip Ozouf said: “The financial services industry is vitally important to the Island and is key to our economic health. This is the first time that government has made a clear, joined-up and confident commitment to secure and enhance our position as one of the world’s leading finance centres. The framework set out in this document and the strategies that flow from it will allow us to build on our strengths and ensure that Jersey maintains an important role in the global economy of the future.

“We have also made it clear that government remains committed to maintaining strong standards of regulation, cooperation and transparency. Our reputation as a high-quality jurisdiction is an important part of Jersey’s attraction to new and existing business.”

Jersey Finance Limited CEO, Geoff Cook, added: “I am very pleased that the government has offered its full support to the financial services industry. Last year, Jersey Finance conducted an independent jurisdictional review of the industry and outlined a number of key priorities to secure our future. This policy framework outlines a clear direction from government, commends the industry’s achievements to date and highlights the potential for a bright future, all of which are very welcome.”

Jersey Finance appoints new Deputy Chief Executive

Richard, who joined Jersey Finance at the start of 2013, will continue to lead the organisation’s market development effort. In his earlier banking career he held senior roles with both The Royal Bank of Scotland International and Barclays Wealth, working in a number of leading finance centres. Before moving to Jersey Finance, Richard was Director for Barclays Wealth in Jersey.

Commenting on the appointment Geoff Cook, CEO of Jersey Finance, said: "I am delighted that we have been able to fill this senior role from within the organisation. Richard’s financial services background, his management skills and his more recent experience and insights in developing business in the key international markets, makes him ideally suited for the deputy chief executive role."

Richard Corrigan added: "I’m looking forward to the opportunity and challenge that the role brings in deputising for Geoff on occasions and supporting his work in representing the Industry where it is important that we have a voice, while continuing to oversee our international market development programme."

He replaces Heather Bestwick who left Jersey Finance in December.

ACCA: Falling corporate income tax revenues not down to aggressive tax planning, says new research

An academic report from RMIT University School of Economics, Finance and Marketing provides extensive evidence that the corporate income tax system is not ‘broken’ and that it is not being eroded. 

Commissioned by ACCA (the Association of Chartered Certified Accountants), the report Multinational corporations, stateless income and tax havens asserts that there is no evidence to support the belief that that UK or the US corporate income tax base is being worn away. 

The report also states that advanced economies face a fiscal challenge, which creates the environment for a ‘tax grab’.

Sinclair Davidson, author of the report and professor at the School of Economics, Finance and Marketing at RMIT, says: 'The argument is that the corporate income tax base is being eroded by aggressive tax planning by multinational corporations – yet the evidence to support this argument is lacking. It is one thing to point out that multinational corporations do not pay tax in some jurisdictions but that says nothing about the actual corporate income tax base. To the extent that corporate income tax revenues have fallen in recent years, this is more likely to be a result of poor economic conditions than aggressive tax planning.'

Chas Roy-Chowdhury, head of taxation at ACCA, comments: 'This paper may well show that the global corporate income tax system is not broken, but questions remain about the evasion/avoidance/aggressive tax planning debate. ACCA has always been clear - tax evasion is a criminal activity and ACCA believes companies should not, in principle, pursue aggressive tax avoidance. Multinationals need to be clear about the value they bring for the benefit of their shareholders and wider society, and to communicate to all stakeholders their underlying commitment to the building of a sustainable business. Companies must see the management of tax obligations as part of that process of creating long-term value.'

Sinclair Davidson concludes: 'My report ends by saying that multinational corporations add value to both their home economies and their host economies. Tax havens add value by allowing multinationals to reduce their tax liabilities while increasing their investments in high-tax economies. An increase in their tax burdens would reduce those levels of investment, leading to reduced employment opportunities, reduced consumption and reduced innovation.

'It is not clear that tampering with the tried and tested norms of corporate income tax to possibly generate more corporate income tax revenue while reducing the corporate income tax collected in foreign economies, and possibly reducing investment, employment and consumption at home, is good policy.'

IFC Review: Here Comes FATCA…What To Expect In 2014

With FATCA looming on the horizon, Scott Michel examines what 2014 holds for those caught in its web. 

IFC Review - Due Diligence: Digital Currency

With the usage of digital currencies gaining ever more traction, Burke Files ponders whether the rise of digital currencies such as Bitcoin could lead to the end of traditional brick and mortar banking.

IFC Review: The World Moves Towards Tax Transparency

As automatic exchange of information comes ever closer to becoming the norm, Monica Bhatia highlights the OECDs crucial role in the fight against tax evasion. 

IFC Review: Segregated Structures – An Offshore Innovation

While segregated structures have been common place in offshore jurisdictions, Alan Dickson highlights the growing use of Segregated Portfolio Companies in Asia to structure investments into China. 

IFC Review - Malta: Case Study - The Redomiciliation of a Company

With group treasury companies growing in popularity, Walter Cutajar examines the redomiciliation of a foreign company as a Maltese company and how they could benefit from Malta's extensive tax treaty network. 

IFC Review: Malta - An IFC Gaining Strong Growth Traction

With Malta making its mark on the global financial stage, Kenneth Farrugia highlights the reasons why the jurisdiction is considered such a 'stable ship'. 

IFC Review: Q&A with Maltese Minister for Finance Prof Edward Scicluna

Financial services now stand as one of the main pillars of the Maltese economy. IFC Media speaks with Minister for Finance Professor Edward Scicluna regarding the rapid development of Malta as an IFC.