Offshore centers look back and forward in these uncertain times
We chat with industry figures at various IFCs across Europe to ask them how international pressures and the global pandemic have shaped business and strategy.
Since the pandemic erupted in early 2020, it has revolutionized the way financial services work, accelerating the use of digital technology to deal with canceled flights and enforce remote working. And a select group involved in all of this turmoil is the World Club of International Financial Centers.
Islands and mini-states have been havens of stability, often benefiting from high vaccination rates that have been praised by locals. (The United Arab Emirates and Malta, to give two cases, have both achieved high rates.) On the other hand, the charms of an alpine island or village can fade if one cannot not leave it for months to see family, friends and important business contacts. HNW people who planned to use an offshore hub as a place to stay for a few weeks in the sun have to squat for a whole year or more.
As the crisis dragged on, many IFCs kept their heads under wraps, although from time to time news broke about their rankings in terms of business, money laundering, etc. . In its annual report on global wealth, the Boston Consultant Group said that in 2020, the rankings of the main ‘cross-border’ centers were, in descending order of silver size: Switzerland, Hong Kong, Singapore, the United States. United, the Channel Islands and the island. from Man, United Arab Emirates, mainland UK, Luxembourg, Monaco and Liechtenstein. In 2025, the BCG foresees the following classification: Hong Kong, Switzerland, Singapore, the United States, the United Arab Emirates, the Channel Islands and the Isle of Man, the British mainland, Luxembourg, Monaco and Liechtenstein . In 2020, Switzerland had $ 2.4 trillion in wealth.
Pandemic or no pandemic, the pressures on IFCs to behave have not gone away, although it should be noted that concerns about intra-government data exchange have not abated either. , considering issues such as cybersecurity attacks against government tax departments. The fiscal and regulatory climate for offshore centers is not getting any easier. An overwhelming majority (97%) of private wealth professionals believe governments are stepping up efforts to tax offshore wealth and close the economic hole caused by the global pandemic. According to an Intertrust Group study published in April, more than half (56%) believe this is an “extremely likely” scenario. And yesterday, the International Consortium of Investigative Journalists released another big treasure trove of data breaches affecting multiple offshore sites.
Additionally, the impact of the pandemic has coincided with Brexit, and beyond, G20 calls for a minimum global corporate tax rate of 15%. Jurisdictions such as Jersey, Guernsey and the Isle of Man have had to determine the often uncertain task of how to exploit the situation without falling into the trap of bigger neighbors. In another twist, mainland China’s crackdown on Hong Kong, the former British colony, has prompted wealthy Hong Kongers to relocate their possessions and families. Places like Switzerland, UK and Dubai, among others, are expected to benefit.
As far as this news agency can tell, a number of IFCs appear to be setting the tone, judging by how well they have managed to avoid “blacklists” or “gray lists” of jurisdictions deemed slow, poor or both in complying with tax laws. information exchange, AML checks and other behaviors.
Some jurisdictions appear to have emerged from the pandemic in good shape, showing good governance and responsiveness, Andrew Morriss, professor at the Bush School of Government & Public Service and the School of Law at Texas A&M University, told this publication. . General competence is very important and appreciated by the industry. âThese places are like ‘hotels for money’,â Morriss said, noting that when staying in a fancy hotel, the staff pay attention to the little details, which makes guests believe that the bigger ones details will also be well handled.
One IFC that seems to have quite a âhaloâ is Jersey, the Crown Dependency. It is not on the FATF list of countries considered to have AML deficiencies; it is no longer on the US State Department‘s âPrincipal Concernâ list. There is no sanction against him. Jersey is not on the list of non-cooperative jurisdictions in the EU for tax purposes.
Other places have not done so well. Malta, for example, has been put on the FATF’s âgray listâ for anti-money laundering purposes, a fact that this EU member state and former British colony must tackle quickly. Cyprus, to give another case, has put its âgolden visaâ regime on hold.
Some IFC promoters, but not all, seem to want to participate in roadshows, as is the case with Malta and the Isle of Man, as well as Jersey and Luxembourg. In Switzerland’s case, the nation does not have some sort of promotional âfinancial Switzerlandâ, although policymakers in Berne have spoken to their peers in London, for example, to strengthen financial ties.
The state of play
This information service reached out to a number of groups to take the temperature.
“Travel restrictions have had a positive impact on travel to the Isle of Man,” Janine Cubbon, Head of Private Wealth, Suntera, told her Isle of Man office. âIt’s refocused decision-making to focus more on ‘where do I want to be based if travel is limited?’ ”
âThe Isle of Man has seen increased global recognition as a place where people want to live as a result. Lifestyle, safety, good health and education, a strong economy, a strong sense of social responsibility and supporting local infrastructure all play their part. Deploying a rapid vaccination program to ensure the island’s borders can open and allow freedom of travel for the masses has also been essential, âCubbon said.
Paul Hunter, Group Head of Family Office Services, Crestbridge, was asked how IFC’s value proposition holds up in today’s world.
âIn general, customers are actively seeking stability and certainty, and we’ve been seeing this for a few years now, in the wake of the global financial crisis, Brexit and now the pandemic. For the past few years, however, we have focused on the United States as a growth market for our family office services business. It is a strategically important growth market not only because of the impact of the pandemic, but because of the long-term growth rate of some regional markets in the United States, the increasingly global nature of the landscape. US private customer base and the prevalence of an industry that continues to mature in terms of cross-border and non-national capabilities, âsaid Hunter.
âThis is why we have strengthened our presence in the United States in recent years and why we have launched a joint venture with Willow Street to create Crestbridge Fiduciary in 2020. The unstable political and economic landscape in the United States in recent years years has certainly enabled us to introduce internationally dynamic families in the United States to solutions through our own network, as part of their search for certainty and peace of mind, and we expect that this trend continues.