The IFC Economic Report spoke to Jersey’s financial regulator John Harris about the compliance issues facing international financial centres and in particular Jersey. He spoke frankly about the impact regulation and blacklists are having on the industry.
IFC: How important has it been for Jersey to get the message out that its financial services sector is highly regulated and compliant with international norms?
John Harris: Very important and a constant battle not least given changing cast lists in major country institutions and international organisations, essentially meaning we are constantly pressing the ‘refresh’ button. The world is not fair but it is what it is and we must continually evidence our ability to match (and sometimes exceed) international norms / standards.
IFC: Jersey has been very proactive in commissioning research into the importance of the services it provides – do you think getting this information into the public domain has contributed to its absence on the contentious EU Commission blacklist of non-cooperative jurisdictions?
JH: Yes, it has been a factor but probably more subliminal than overt. The overall reason for staying off most blacklists has been bi-lateral and multi-lateral engagement on fiscal and regulatory co-operation.
IFC: Jersey subsequently found itself on the District of Columbia blacklist – what were your thoughts on this?
JH: This was a typical example of a non-state actor using old, historic, outdated and non-credible information sources to form a conclusion that is, by definition, flawed and damaging. We, together with Guernsey, are working to illuminate them on the matter.
IFC: Do you feel these blacklists are helpful on any level?
JH: Not as a general rule. They tend to be arbitrary and overly influenced by often misguided political considerations. If there is a case for them then they need to be contemporary, kept up to date and based on credible and thorough (third party) research and evaluation. Otherwise in the worst instances they are discriminatory and unreasonably punitive. The world can and should do better!
IFC: How important is Jersey in the efficient flow of investment around the world, particularly into/from the UK?
JH: Mission critical. It is what we do – move money efficiently and effectively as a conduit to where it is best deployed ie, in real economy terms.
IFC: Do you think this role is overlooked by mainstream media and what can be done to ensure the reputation of financial centres like Jersey reflects the true nature of the business being conducted there?
JH: Yes it is and the media could do better and be more neutral and informed. But it is up to us to generate the information and present it in an assimilable and effective way. We have not always done that consistently well.
IFC: Do you think small IFCs are in a more difficult position when it comes to selling their services in the global forum? Does attention focus unfairly on what are perceived to be negative aspects of the ‘offshore’ industry?
JH: Yes, definitely. The stereotype persists and is tough to shift. But that is no reason to down tools!
IFC: What impact are FATCA and the other international regulations – CRS, BEPS etc, having on business in Jersey?
JH: Jersey practitioners can cope but there is unequivocally a cost and a concern (given that we will implement properly) on ongoing competitiveness.
IFC: Is there a danger of regulatory demands stymying competition and growth in the financial services sector?
JH: Stymying is probably too strong a word but dampening definitely. In theory all are in the same boat but relative speed of implementation can create unwanted second order effects. This is manageable but additional friction on our overall offer.
IFC: How important was it for ESMA to recommend Jersey for an AFIMD passport?
JH: Reputationally very positive and has given Europe institutions and member states and any detractors something to think about. It is another example that when we are evaluated fairly by informed third parties we perform and are judged to be effective. In concrete market access terms much now depends on how the EU generally proceeds. Keeping the recommended status and the NPPF regimes in parallel is what we need. Reputational benefit and market access at the same time – good position!
IFC: The Crown Dependency Disclosure Facility has yielded less than expected for HMRC – do you think this is evidence that the scale of tax evasion in the Dependencies is not quite as extensive as is sometimes assumed?
JH: Unequivocally yes. It was never what was assumed and another read of Jersey’s Value to Britain report would not go amiss.
IFC: Do you feel that automatic exchange of information is the way forward for the financial services industry?
JH: Yes, it’s here – let’s just get on with it.
IFC: How does Jersey compare and compete with its peers?
JH: Time and again – across our overall offering and approach – we stand out as successful, resilient and capable of adaptive and agile thinking. We have a strong position to depend and a number of inherent and built advantages. However, complacency is not recommended and we need to continue all of the above and continue to seek new niches, opportunities and opportunities for innovation. Regulatory philosophy and approach will remain central factors in this.
IFC: What does the future hold for the Jersey financial services sector?
JH: I am positive and there are good reasons to be. The world has moved towards embrace of the Jersey model of substance, transparency, co-operation, strong regulatory and other relevant international standards whilst we remain commercially minded and open for business. There are undeniable challenges still ahead and I am confident we will meet them.