UK Tax Haven

“In the steps they have taken to deter and detect money laundering, the authorities have demonstrated the political will to ensure that their offshore financial institutions and the associated professionals maximise their defences against criminal funds.” However, it also stated that there are a number of areas where Guernsey can further improve its record.

The report recommended that the Guernsey authorities impose a direct and unambiguous mandatory reporting obligation in all cases involving criminal activity.

In 1998, an audit of financial regulations in the Channel Islands and the Isle of Man carried out by Andrew Edwards, a civil servant, was largely complimentary about Guernsey.

UK Tax Haven - Guernsey

The stock response on the island is to criticise the OECD’s methods and motives. “The OECD didn’t do this very scientifically. The report was really a political attack,” says Ken Gibbs, general manager of the Bank of Bermuda (Guernsey).

“The OECD report was the most unsatisfactory set of negotiations I have ever been involved in,” adds Crook, who formerly worked at the Bank of England.
He claims that the OECD has yet to spell out the reasons why Guernsey was included on its black list. “We don’ t know why we are on the OECD list because they haven’t told us what we did wrong,” he says.

UK Tax Haven - Crook

However, the OECD threat of sanctions against jurisdictions that fail to homogenise their tax regimes so they fall into line with the rest of the world has not driven Guernsey’s financiers to despair just yet.

Close International Private Banking has just signed a 21-year lease on 25,000 sq.ft. of office space in St Peter Port. “We would not have done this if we thought our business on the island was under threat,” says Chris Fish, managing director at the bank. Unlike his contemporaries, Fish believes that the OECD report will have a positive effect on Guernsey and other offshore jurisdictions. “This may shake some of the complacency out of the offshore world,” he says.

UK Tax Haven - OECD

However, unlike in Jersey, Guernsey’s neighbour and principal rival, financial regulation is not divorced from government, a feature criticised in the Edwards report. The commission is currently led by the president of the States Advisory and Finance Committee, Guernsey’s equivalent of the UK’s Treasury. Next in command at the GFSC is a panel of four ‘ordinary members’ who represent different sectors of the island’s financial services industry. These are political appointees, nominated by the Advisory and Finance Committee and elected by the States.

In deference to the Edwards recommendations, the committee ruled late last year that the chairman of the GFSC need not be the chairman of the committee. According to Crook, this necessitates a change in the law, and the proposed amendments will be debated in the States before the end of the year.

UK Tax Haven & Edwards

Edwards also expressed concern about the promotional role played by the jurisdictions’ financial regulators. Last month Jersey’s regulator announced that it had earmarked £500,000 to set up a stand-alone promotional body as suggested by Edwards. The GFSC, however, is more reluctant to relinquish its role as the voice of the island’s financial services industry.

Crook considers himself to be the best-qualified person on the island to promote the interests of its financiers and believes it would be counterproductive to pass the mantle to another body or person.
“At the end of the day the best person to talk to about financial services in Guernsey is me. We are looking to have an individual promotional unit to cover finance but the commission will still have a big influence over it,” he says.

For more relevant news items and magazine articles please click the links below:

Article:  Tax Guide for Expats

News:  Jersey & Guernsey remain off tax haven black list

Article:  Weapons of Tax Destruction

Article: Stop the Tax Haven Abuse Bill