Mr President, my Lord, ladies and gentlemen,
It is a great honour to have been asked to open this 22nd annual conference of STEP. I am conscious that STEP is one of the leading, if not the leading association of trust practitioners, and that I can say without risk of hubris that Jersey is the leading trust jurisdiction in the world. This conference is therefore an important occasion.
My background is of course in law, and my professional career concluded in the judiciary, but I am now, for better or for worse, spending some of my bonus years in politics. The perspective this morning is one that is given from that political and ministerial position.
In Jersey we have a new government and, although we are still in the honeymoon period, I think that I can say that we are in a stronger position than we have been for many years. The cabinet is composed exclusively of the Chief Minister’s nominees, and the in-fighting of recent years should be a thing of the past. I sense a greater confidence, despite the cumbersome nature of the political structure, that we will be able to achieve more in the next four years than ever before.
This is a government that is wholly behind business and that seeks to create an environment which supports the finance industry, creates more jobs, and helps the economy to grow.
Protecting Jersey internationally
I want to speak this morning of the part that the government seeks to play in order to create that benevolent environment, and to protect the Island in the international sphere.
Just a few words first of all on the structure that is in place. As in many other countries, responsibility for the Island’s foreign affairs is shared between the Minister for External Relations and the Chief Minister. Other ministers also have interests – namely the Treasury Minister (Senator Alan Maclean), the Assistant Chief Minister with responsibility for financial services (Senator Philip Ozouf), and the Minister for Economic Development (Senator Lyndon Farnham).
We operate through our offices in Jersey but also through the London Office in Queen Anne’s Gate, the Brussels Office (CIBO) and the Normandy Office in Caen, the last two in conjunction with Guernsey. And of course we fund trade offices through Jersey Finance and the Economic Development Dept in Beijing, Shanghai, Hong Kong, the UAE, Delhi and Mumbai.
The London Office enables us to develop relations with parliamentarians in government and opposition, and officials with other countries through the diplomatic community, and with the City of London and industry. It has only existed for a year, but has paid rich dividends.
The Brussels Office has existed since 2011, and has again enabled us to get in on the ground floor and to begin, in a modest way, to influence the formation of policy in the Commission by explaining what we do in Jersey. Of course we are not a sovereign state, and that limits our access to the corridors of power, but nonetheless we have had some success.
The Channel Islands Caen Office is new, and not so well resourced, but we have good relations in the region, and we intend to use those contacts to build relationships with the national government in Paris.
Ministry of External Relations achievements
I am sometimes asked what the Ministry of External Relations has achieved since its formation a year ago. It’s not an easy question to answer because much of the work involves building relationships with a view to avoiding collisions – preventing problems from arising in the future – and it is difficult to prove the value of something that has not happened.
One collision that did arise in 2013 was the placing of Jersey on a French blacklist of uncooperative jurisdictions as a result, in my view, of an unfortunate mismatch of expectations on both sides. A robust diplomatic response, and hard work by officials, resulted in the Island being removed from the blacklist before the punitive consequences came in to effect. It was, I would claim, a remarkable achievement.
Less publicly, we have achieved the Island’s removal from other blacklists – Argentina and Columbia – and we are working on other countries too.
There is no justification, I believe, for Jersey being on any blacklist. We are committed to observing all relevant international standards, and we do.
A strong record of compliance
Whether it is FATF recommendations, or international standards in transparency, or assisting developing countries to deal with corrupt and other illicit activities, or helping law enforcement agencies and tax authorities to combat tax evasion and other international crime – we are at the forefront of countries with a strong record of compliance.
There is sometimes a delicate balance to be struck between being a front-runner in the setting of international standards, and becoming uncompetitive by being too enthusiastic in embracing a new standard. We may not always have got that balance exactly right. But in one respect we did undoubtedly make the right decision, and that was to commit to the Early Adopters Group of countries.
On 29 October in Berlin, Senator Ozouf signed on Jersey’s behalf the Multilateral Competent Authority Agreement in connection with the global application of the Common Reporting Standard on AEOI. Some 50 other countries have also signed the Berlin statement, including a number of Jersey’s principal competitors such as Luxembourg and the Cayman Islands. Other such as Singapore are also publicy committed to the implementation of the standard albeit one year later.
The commitment to the Early Adopters Group has had a significantly positive effect upon attitudes in the OECD and amongst EU member states towards Jersey, and should have no adverse competitive consequences.
Register of beneficial ownership
The initiatives in relation to a publicly-accessible register of the beneficial ownership of companies, and another public register of settlors and beneficiaries of trusts are more difficult.
One suspects that proposals are sometimes generated without too much consideration as to the broader consequences of what may seem on the face of it to be a good idea. Pressed by aggressive campaigning by third sector groups for greater transparency, one can understand why the UK Prime Minister might have agreed that public registers of the beneficial ownership of companies were desirable. But the notion is fraught with difficulty.
One difficulty for us is that not many G8 or even G20 countries seem to agree with the UK government. Nowhere is this more evident that in the 'High Level Principles on Beneficial Ownership Transparency' document issued by the G20 following the summit in Brisbane last weekend. This makes it clear that information should be made available to law enforcement and tax authorities and not to the general public. It also says that “countries could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms”.
Jersey already has a central registry holding information on beneficial ownership and it is noteworthy that the G20 statement does not use the words ‘public central registry’. Our principal competitors have shown no indication of support for a public register of beneficial ownership. There are serious questions as to how to reconcile a public register with respect for the confidentiality of the private affairs of individual investors, and in some circumstances concern for the physical safety of such investors and their families.
The Jersey government’s position is that we have gone out to consultation with the industry, and we will in due course be publishing a report on the results. It is not possible at present to put a date on that report, because we will wish to take account of the fine detail of the UK government’s proposals and of the stance taken by other G20 countries, as well as Switzerland, Hong Kong, China, and Singapore.
The UK government has indicated that they would hope we will follow their lead, but we are not yet in a position to give any formal response.
What I can say to you without any equivocation is that while the government of Jersey will continue to ensure that information is available to law enfocement and tax authorities in accordance with international standards that have global application we will not be drawn into any commitment in relation to a public register of beneficial ownership that is not shared by our major competitors.
Public register of settlors and trust beneficiaries
The same principle applies in relation to the proposed public register of settlors and beneficiaries of trusts. In this case we have the support of the UK government but the European Parliament, many of whose members do not understand what is a trust, and suspect that it is a fiendish Anglo-Saxon plot, has indicated its strong support for the register in the context of the draft fourth AML Directive. Indeed the EU Parliament has also endorsed a public register of beneficial ownership of companies.
There is, however, some way to go, and the draft directive has yet to be considered by the European Council, where a number of member states, including Germany, can be expected to voice opposition to public registers. Our officials in CIBO have been speaking to a number of major committees and MEPs in Brussels with a view to explaining the Channel Islands' position.
The G20 while stating that as with companies countries should ensure that law enforcement and tax authorities have timely access to adequate, accurate and current information regarding the beneficial ownership of trusts have not, unlike with companies, referred to a central registry as an example of how this requirement might be implemented.
The Channel Island position in meeting the G20’s requirements is indeed a strong one. The main purpose of the proposed public registers for companies is to ensure that tax and other law enforcement authorities have access to information about beneficial ownership if they have legitimate reason to carry out inquiries.
We are already in a positon to supply such information in a proper case. Indeed the World Bank in its report on how the corrupt use legal structures to hide stolen asets and what to do about it, entitled 'The Puppet Masters' referred to the Jersey Model as the conditions under which the company registry can be considered a viable option for providing beneficial ownership information.
The regulation of company and trust service providers by the JFSC also enables up to date information to be available to law enforcement and tax authorities in respect of both companies and trusts in a way that is not possible in most other countries, including the UK. We have what we believe is the best way of meeting the requirements of law enforcement and tax authorities in the fight against tax evasion, money laundering and corruption while providing proper protection of personal privacy and the confidentiality of clients’ lawful business affairs – indeed that protection is an important and statutory duty of trustees – and the government of Jersey will continue to support you in that respect.
Automatic exchange of information
The move to AEOI should take some of the steam out of enthusiasm for public registers. The argument advanced by the NGOs is that public registers are needed to give support to developing countries in the fight against illicit money flows but the information made available through AEOI will be much more helpful in this respect. The Italian presidency of the EU hopes to conclude negotiations on the draft AML Directive in December, and some form of access to information by law enforcement and tax authorities seems almost certain to be agreed.
Hopefully, there will be some flexibility in the implementation of the rules as they take shape, in line with the sentiments expressed by the G20. We will be watching this carefully, although the EU Directive will not have a direct impact on us, and doing what we can to ensure that the legitimate interests of the Channel Islands are taken into account.
Jersey's value to Africa
Many here will know of the Capital Economics report on the value of Jersey to the UK, but I should like to say a few words about another report by Capital Economics that was published last week entitled 'Jersey’s value to Africa'. It’s a very important report, and I commend it to anyone who is interested in investment in Africa.
For far too long, Africa has been regarded as a war-torn, hopeless, corrupt continent which has failed to live up to expectations. Of course there are parts of Africa where some or all of those criticisms are justified. But the report makes it clear that Africa’s capacity for growth is vast.
Capital Economics estimates that the continent’s economy could grow by 5% year on year till 2040, quadrupling in size. It has been growing more quickly than most other parts of the world for the last decade. It has a young and expanding workforce that will boost urbanisation, and could fuel rapid growth. To achieve that growth, however, the continent needs investment, and Jersey is remarkably well placed to help in that process.
We enjoy respect in many African countries, not just for our commitment to transparency and international standards, but also for the quality of our courts and the skills of our professionals. Surprisingly, perhaps, we enjoy respect for our commitment to honesty and our determination not to allow Jersey to be used by corrupt politicians, officials, and their accomplices. They take note that, when we seize ill-gotten gains from local bank accounts, they are largely repatriated to the country from which they have been stolen.
Few countries in Europe can equal Jersey’s success in convicting and sending to prison African criminals who have stolen huge sums and laundered or tried to launder them in the Island.
The Capital Economics report is important in another respect too because it rebuts the unfounded allegations levied against Jersey and other IFCs by certain international charities and organisations such as the Tax Justice Network. Too often IFCs have been accused of involvement in complex corporate structures and abusive transfer pricing schemes when these are basically unknown in the Channel Islands.
One of the objectives of the Ministry of External Relations in 2015 and beyond is to support the work of Jersey Finance in building relationships with a number of key African countries including Nigeria, South Africa and Kenya. I visited the Nigerian High Commission in London a few months ago and the High Commissioner will be bringing a delegation to Jersey next week. He will visit the JFSC and Jersey Finance and I am optimistic that greater inward and outward trade will result.
The building of relationships in Africa is not always easy because with many countries standards of governance and the observance of international human rights norms are not always what they should be – they are developing. But I believe that Jersey has much to offer and much to gain from an engagement with a continent that is on the cusp of enormous economic growth. Helping Africa to find the inward investment that it needs will transform the lives of millions of the world’s poorest people, and bring good business here too.
Jersey's London Office
While working to expand our markets the Ministry will also continue to explain how Jersey works and what our constitutional position is to UK parliamentarians and the international community. The ability to reach so many key countries through their diplomatic missions in London was an important reason for the establishment of the London Office.
We are also keeping a close eye on the evolving EU / UK relationship which is critical to us. Our relationship with the EU is embodied in Protocol 3 to the UK’s Treaty of Accession to the European Communities. If the UK were to withdraw from the EU, our relationship with the EU would also disappear, and that could have profound constitutional consequences.
The government of Jersey hopes that some modus vivendi will be found which enables the UK to remain in the EU. A British exit would put Jersey in an uncomfortable position where we might have to choose between a significant loss of autonomy and a change in our constitutional status. So we are watching the situation closely, and businesses in Jersey should be thinking about it too.