Offshore tax havens are still linked to the subject of money laundering despite the constant battle the industry has in dispelling this association. More can be done in breaking this link
I was listening to a news programme on BBC Radio 4 a few weeks ago, when along came a feature on international money laundering. It covered all the usual angles and interviewed a number of experts about the size, scope and impact of money laundering around the world.
All good stuff and nothing there that anyone could disagree with: money laundering is big, it is a problem and, naturally enough, something should be done about it. But then, with a weary inevitability, came the predictable mention of 'offshore tax havens".
Although never explained in full, this phrase was used as lazy shorthand for lax anti-money laundering regulations, a willingness to accept dirty money without asking too many questions, and, bizarrely, as a contribution to the ever-expanding gap between the very rich and the very poor. The 'expert" in question appeared to be implying that simply 'going onshore" was in itself a useful contribution to the alleviation of world poverty.
And that is what the industry is up against. Despite the best efforts of everyone involved in the industry, from companies to governments, it is still possible for 'offshore" to be dismissed as an all-round bad thing, with little effort on the part of the national press to question that interpretation.
How can we go about counteracting that false impression? A few well-chosen words and the occasional news release are not going to create a press that is ready to eat out of our hands. Few of us, I hope, would want that. The reason that we watch and listen to professional news programmes is that we want to hear robust questioning of established views. But we can be just as firm in standing up for what we believe to be the case.
One of the key things this industry has to face up to is that they still have more to do in putting their argument across effectively. And that means cautious, calm reinforcement of all the plus points on regulation, customer insight, rigorous compliance and market maturity. There is no silver bullet solution to all of this - a quick fix that will have media commentators smiling benignly upon us - but a long hard path that all the key players, whether companies or jurisdictions, are going to have to march down together. Despite our obvious frustration at being the cheap target of the ill-informed, a concerted long-term effort to put across our key message will, I have no doubt, bear fruit in the end.
It is worth reminding ourselves of the positive messages we can put out. Take regulation - and the Isle of Man and Channel Islands as a specific case in point. Regulation is not the only thing that will bolster the presentation of the offshore world to a sceptical media, and potentially on to a sceptical consumer. But it is one of the most effective ways of doing so and one of the most visible in its approach.
There can be few places in the world - let alone among the offshore community - that have received so many visits from global organisations than have the Isle of Man and Channel Islands over the last few years. A bewildering array of acronyms has arrived, seen, commented and gone away again. There have been visits from the EU, the OECD and from FATF, with 2003 getting the full IMF treatment.
As before, the IMF completed its assessment with a positive report on the three jurisdictions it looked at. There were recommendations, of course - in the Isle of Man, the need to strengthen the independence of the regulators from the politicians, for example - but the overall conclusion was that there was a high level of compliance with international regulations. I am not sure all of the onshore jurisdictions could be that confident of having the same said about them. Funnily enough, this did not get mentioned on the news report I listened to.
Increasing attention from regulators is set to be a feature of the year ahead, no doubt after careful and attentive consultation with the industries they regulate. In the Crown Dependencies, for example, some initial actions have already been taken on the development of new conduct of business rules, which would include an extension of cancellation rights and other post-sale regulation. What the eventual shape of all this regulation will be we do not yet know, but we should not be afraid of it, rather we should positively support these kind of regulatory changes as they look to provide further confidence in the openness of all that is done.
Yes, we want change to take account of business reality, but we need to continually prove that we operate from well-regulated, anti-money laundering environments.
These new rules should not be seen in isolation. They come off the back of a host of regulatory updates that have affected all the international life companies and other offshore practitioners. Regulations that are designed to show the most positive face possible to anyone who questions the seriousness with which anti-money laundering is taken.
The main focus for international life companies has been on all the issues surrounding source of wealth. The documentation required to satisfy regulators is now higher than ever, particularly as it is difficult to accept, in the Isle of Man at least, introducer certificates from IFAs. Instead we must insist upon authenticated copies of a rising number of appropriate documents.
There is no doubt that this can cause annoyance among the intermediaries many of us work with. We are sensitive to this and need to ensure that a robust regime of regulation does not topple over in to an unrealistic world of duplicated documents and subsequent inertia. It is not only the intermediary who is affected by this change, the life companies are also in the firing line of any additional requirements. We have to increase the amount of training we do, grow the size and experience of our compliance and processing teams, change literature and instigate rolling programmes of backdated checking. This all costs time and money.
We all need to remember - the legislators, life companies and intermediaries alike - that changes to rules do have an effect in the real world. Just as interesting is the FSA"s recent emphasis on 'treating customers fairly". It has been part of their regulatory toolkit for some time but the FSA are now actively driving home the message which underpins it. In essence, the principle of treating customers with the respect and fairness they have a right to expect sits absolutely squarely with a company"s senior management - it is not a box-ticking exercise, taking place, in the 'bowels" of compliance.
If 'treating customers fairly" is to have a genuine impact on the ethos and culture of a company, then it must be owned and lived by senior management. As the FSA has said: "The FSA"s principles, rules and guidance place responsibility on senior management for incorporating the fair treatment of customers into the firm"s corporate strategy, delivering that strategy and monitoring its effectiveness".
This is not of tangential interest for international operations. Parent companies in the UK are taking this very seriously indeed - as they should - and the impact of this is undoubtedly going to make itself felt among all of us in the offshore world. Again, it is nothing to shy away from. Whether life companies, banks, corporate services providers or anything else should actively encourage an open and well-lit marketplace.
It has been a little too easy perhaps for the industry to convince itself that it has taken a customer-friendly approach, when what it has actually done is to hide behind a supposed complexity of its chosen products. This will not be tenable for very much longer.
There is no need to panic. A legislative framework which encourages openness and honesty, applied from the top and down across all businesses will be further evidence of the unashamed transparency of the offshore industry.
In essence it is simply going to be a case of treating customers as you would like to be treated. Friends Provident Group, for example, takes 'treating customers fairly" very seriously and is probably not the only company to do so.
There is always a reasonable assumption that changes in legislation and regulation will be applied fairly and evenly across all the first-rank territories, and across all industries. Regulators are increasingly showing their awareness of this commercial reality as well, explaining the cost-benefit analysis they have gone through before adding additional regulation to the list of compliance measures. Which means that we are in this together. Increasing regulation and growing emphasis on customer fairness apply to us all and will only serve to improve the standing within the industry.
Looking ahead 12 months, a key test of this industry"s strength is going to be the ability of all of us involved in it to speak with one voice. If regulators feel that they are listening to two-dozen separate viewpoints, then they will not take them all seriously. The application of 'treating customers fairly", combined with the sensible application of regulations will give clients the confidence they have every right to feel, and the industry a real fillip.
I live in hope that, perhaps, when listening to the radio in the future, it will prove to be a refreshing break from tradition - experts will for once be praising the industry.
Offshore centres are still the whipping boy of lax money laundering rules in mainstream centres.
Offshore centres must be unafraid to robustly and publicly defend themselves, and should be unified in their defence.
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