Dominic Wheatley, Chief Executive of Guernsey Finance, considers reputation and argues that public registers of beneficial ownership are not the answer to the world’s ills.
These days I spend much time thinking, writing and talking about reputation. There is a good reason for this. Reputation is the foundation of trust, and trust is at the core of financial services. To be an effective jurisdiction for private wealth management, clients need to be confident of the outcome of arrangements over the long term. To achieve this requires not only the right infrastructure and culture now, but the reliability of that into the future.
The elements to this are conceptually simple, but hard to achieve. They are the reputation from the past, the efficacy of the present, and the sustainability of the future,
Reputation is won in inches and lost in yards – ask Gerald Ratner or John Profumo how quickly all can be lost.
Guernsey's reputation has been built on years of consistent positioning on key international standards – regulation, tax neutrality, transparency, and AML – combined with high quality services based on local substance and integrity, and the ease of doing business that comes with a highly interconnected business community.
Maintaining all elements of this over decades requires a great deal of planning and proactivity. It is not enough to be reactive to the demands of others, it is necessary to be an active participant in the development of relevant standards as they develop, and an enthusiastic part of the solutions to the issues they address. If you are not part of the solution, you are part of the problem.
The reputation we have established is exactly in line with these ideals. We were pioneers in the regulation of private wealth management in 2001; our neutral tax environment (repeatedly confirmed as being in line with international standards by the OECD, the UK and the EU) and modern standards of transparency (we were in the first wave of adopters of the Common Reporting Standard and FATCA) ensure that those doing business in Guernsey are fully accountable to their own tax authorities for taxes due; and we are at the very top of world standards of anti-money laundering – not in our opinion but as assessed by the EU inspectorate, Moneyval.
At the same time, we need to respect the legitimate needs of clients.
These include the right to reasonable privacy concerning their private financial affairs – privacy, not secrecy. Guernsey has a comprehensive register of beneficial ownership from which data can be provided to legitimate appropriate authorities, be they tax, criminal investigatory or security, in a timely manner. Our ability to maintain this position reflects our complete legislative autonomy – it really is our decision to make.
The register is maintained in real time, verified and regulated, and far exceeds globally adopted standards, and the standards of the vast majority of similar registers elsewhere. But it is not publicly accessible and will not be so unless and until this becomes a globally adopted norm.
In fact, we are convinced that public registers are counter-productive to the intended objective. Public scrutiny adds nothing to effective transparency in the fight against tax evasion, crime and terrorism – those determined to pursue such objectives will simply do so elsewhere – but it will encourage those seeking reasonable privacy to move to jurisdictions where those demands can be met and the overall levels of transparency in international finance would be reduced as a result. We have already seen signs that some clients are seeking to avoid CRS by using jurisdictions outside the CRS arrangements.
This balance of international standards and legitimate client interests is at the core of Guernsey's reputation. It has been at the heart of our strategy and will remain so. It is the balance between meeting the demands of being a good global citizen and a great place to do business – and they are not in conflict. Our reputation and that of our clients go hand in hand.
Clients coming here to do business can rest assured not only of the excellence of our existing industry and infrastructure, but also that their interests will be fully taken into account as we evolve in response to changes in the world around us.
