The ingredients for what makes an effective and sustainable international financial centre were a focus for the recent WealthBriefing GCC Region summit in Dubai.
There is more to choosing a jurisdiction than its tax advantages
and the flexibility of structures, stability and confidentiality
in handling of information are major competitive advantages, a
panel of experts said at a recent WealthBriefing summit
Dubai, which this year introduced a wills and probate registry targeted at non-Muslims, was a fitting venue to discuss how international financial centres can remain relevant when major nations demand – or say they require – full disclosure and transparency.
The first panel discussion of the conference addressed the theme of “Jurisdictional Wealth Structuring in the Age of Transparency. The conference was held at the Mina A'Salam Hotel, Dubai and sponsors were Advent, ProFundCom, smartKYC, Dominion and Jersey Finance. Panelists were David Russell QC, of Outer Temple Chambers; Fiona McClafferty, senior manager, private client services at Deloitte; Stuart Hamon, executive director, Dominion; and Gary Hales, business development director for Jersey Finance.
“We all structure our wealth even if we have pension plans or just save for the future. Tax drivers are less prominent….it is more about confidentiality and privacy. Asset protection has come much more to the fore,” Hamon told delegates. “In Europe and the Middle East the big move is all to do with succession planning and how to ensure assets goes to those you want to do so upon your death. And we are also seeing this in the Muslim world.”
One of the benefits of clear structures for wealth is how this helps large families, such as those with operating businesses, to handle potential disruptions as and when generations move on, he said.
The issue of transparency was raised. Jersey Finance’s Hales noted that transparency and wider disclosure have been part of global agendas for the past two decades. “It is important to understand confidentiality as the opposite to secrecy,” he said, noting that the right to enjoy confidentiality is enshrined in human rights conventions.
A large issue at present is about the disclosure of beneficial ownership, he said, noting that there are some jurisdictions with hundreds of thousands of companies on registers that will need to have information about the owners. That could be challenging for some jurisdictions, he said.
“Not all jurisdictions are going to find it easy with this transparency agenda,” he said, arguing that Jersey has been an early mover in this regard and has had a register of beneficial ownership since 1999, but pointed out it isn’t a public register. He said the UK, the International Monetary Fund, among other entities, have acknowledged Jersey’s moves to uphold transparency.
Asked about the general position of offshore centres, he predicted there will be some consolidation among these centres.
Russell stated that there is an “enormous amount of hypocrisy” over the offshore and disclosure issue when it came to the position of large countries versus small IFCs. “I will say just one word: Delaware.”
Clients continue to present valid reasons to use IFCs, McClafferty said, citing instances of structuring motivated by concern over personal security, simplicity of administration, succession and probate, and also as a way of consolidating costs. On the other hand, McClafferty pointed out that non-compliant structures will always try to take shelter in some jurisdictions, but their lifespan may be severely limited and there is no doubt that such structures are most likely to have to be regularised in the near future," she said.
Russell said the use of trusts to avoid certain taxes is under
assault, such as income taxes: “The use of trusts as alter egos
for individuals in high tax jurisdictions is coming to a very
sticky and nasty end because it is misuse of the trust
structure.” He referred to the use of “sham trusts” as an abuse
that is likely to be attacked.
“We are going to see revenue authorities saying that if a person has a trust in a notorious tax haven with little or no commercial activity will be looked into. Some offshore jurisdictions have been going the wrong way and reducing the responsibilities of trustees and other traditional aspects of the trust relationship.”