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Isle Of Man Trumpets Strength Through Diversity
Tom Burroughes
10 October 2019
As the world of international financial centres evolves, certain jurisdictions tend to grab more attention than others, particularly if they have the kind of qualities that fit well into glossy magazines or racy media stories. The problem, however, is that the qualities which might be valuable over the long haul can get overlooked. During a recent visit by this publication, it was hard to avoid the number of references the island’s government makes to areas such as aviation, IT and engineering – not to mention motorbike racing in the infamous annual TT race – as well as finance. Components for the Airbus aircraft are made in the Island. And the Isle of Man has been one of the earliest jurisdictions to build a presence in the blockchain/cryptocurrency arena, trying to juggle the feat of not being so far out front that it could fall flat on its face and close enough to the faster movers to not be left behind. Business growth The IoM knows it has further to go in achieving more business diversity, and like the rest of us, will be anxious that the neighbours in the UK get Brexit sorted out, one way or the other. What does appear clear, however, is that in an age of heightened uncertainty, its virtues are likely to attract more attention than perhaps they have in the past.
The Isle of Man, a British Crown Dependency boasting the world’s oldest parliament (established in 979), isn’t the largest IFC by population (about 85,000). It has a land surface area (221 square miles) which means that it isn’t nearly as densely populated as some, such as Singapore (279 square miles, population of 5.813 million) or Malta (122 square miles, 440,370). The sun does not blaze away – there’s a lot of rain - and while it is hilly and dramatic in parts, it does not have the appeal of Alpine mountains.
But the Isle of Man knows that it has enough to offer to make it a proposition that firms and individuals will consider. And the noise around Brexit means that jurisdictions linked to the UK but not a full part of it have experience of being “third countries” in dealing with the European Union. That’s attractive. With geopolitical uncertainties rising, such as the unrest in Hong Kong, there’s a premium for being stable, safe but also nimble.
The jurisdiction has made a conscious effort in the past decade to reduce its total reliance on financial services and offshore financial wealth management as a driver of total revenue. Financial services still account for about 42 per cent of total GDP, however, so it is still highly reliant on this area for much of its income.
The island has been affected, as other UK-linked IFCs have, by calls for public disclosure of registers of beneficial ownership. A thorny issue, the jurisdictions have worried that public registers, such as those for trusts, will endanger the privacy that people – arguably rightly – expect, and put some of their business at risk. In June, in a bid to head off some potential problems, Guernsey, Jersey and the Isle of Man governments jointly unveiled steps regarding a central register of beneficial ownership information of companies. Importantly, trusts were not included.
Banking
One of the largest employers on the IoM is .
The island’s asset management sector (as of the end of June this year) holds a total of $18.18 billion of funds under management, and there are 292 fund schemes and a total of 106 “exempt” schemes. Finance is clearly vital to the IoM’s prosperity, accounting for 42.3 per cent of gross domestic product.
WealthBriefing’s visit to the Island involved meetings with . This speaks of the mix of investment management and wealth structuring work going on in the IoM.
At Oak Group, for example, managing director Tanya O’Carroll points out that the firm has already expanded via amalgamation and is looking to expand further. Fairway Group, the Jersey-based fiduciary business, is in the process of merging with Oak Group, launched in March this year. O’Carroll is upbeat about the Isle of Man’s growth potential in her sector as a whole (her firm also operates in Jersey, Guernsey, Malta, Mauritius, and Luxembourg). “The staff are highly qualified, and we were , working across a variety of industry sectors in the past.
More than three years ago, legislation came into force in the IoM requiring all cryptocurrency businesses based there to formally register with its government to be inspected by the financial watchdog. The move was part of a series of steps by the Isle of Man to put businesses, such as those associated with the controversial Bitcoin digital currency, under some kind of formal insight. The attitude seems to be that rather than ban these technologies, it is better to create a structure where they can operate in a controlled environment. And it is a move that pits the Isle of Man against rival IFCs such as Malta, Jersey and Switzerland, to name just three.
At the time (late July) when this publication visited the Isle of Man, the Hubb, an incubator for blockchain and technology companies that work alongside Blockchain Isle of Man, had already incubated one cryptobusiness which grew significantly.
Billinghurst said there is a clear benefit to the Island in having such an incubation centre for this technology running alongside its existing status as a wealth management centre. For example, the technology can help drive areas such as KYC checks, he said. Blockchain distributed ledger technology is also useful in dealing with the kind of beneficial ownership information requirements that have arisen, he continued.
“What we are doing here is providing a safe space for businesses to develop their products,” he said, adding that part of his role is to give practitioners a “sense of realism” about what these technologies can, and sometimes cannot, do.
His colleague at Blockchain Isle of Man, Christine Hellman – strategic lead, said Blockchain Isle of Man helps people to try out new ideas in a supportive environment. “We know the regulators and we are in open dialogue with them; we strike a good balance and that’s been a differentiator for us,” she said.