The Growing Role for IFCs in a World of Increasing Transparency

By Geoff Cook, CEO, Jersey Finance (01/05/2015)


The debate around transparency, information exchange and beneficial ownership continues to evolve and has demanded a real focus for those working in International Finance Centres (IFCs), which frequently find themselves in the frame when it comes to ill-considered accusations relating to secrecy and illicit financial flows.

In fact, Jersey and the other Crown Dependencies are coping well with increasing demands as far as transparency and growing amounts of regulation are concerned, and are working hard to obtain the credit many deserve for their response to the shifting regulatory agenda. 

Around 18 months ago there was a considerable political breakthrough when UK Prime Minister, David Cameron, made a welcome statement in the House of Commons in which he said it was no longer fair to refer to any of the Overseas Territories or Crown Dependencies as tax havens - an announcement which, for Jersey, echoed comments by the Secretary General of the OECD, Angel Gurría, who had written to Jersey’s Chief Minister the previous year to congratulate the jurisdiction on the measures it had taken in support of international tax transparency.

However, against a highly charged political backdrop this evidence constantly needs reinforcing with larger countries, often ironically with weaker or less effective regulatory and oversight infrastructures in place, looking to address national debt problems and – as has been the case in the UK recently – appeal to the electorate in an election year.


All the signs point to the demand for high quality international financial services continuing to grow, driven by two of the most enduring and significant trends of the current era, globalisation and population growth.

As a result, the long-term strategy for leading IFCs such as Jersey must therefore be to develop their financial services offering to meet the dramatic events prompted by these trends – changes that will have a transformational effect both on the demand for cross border investment and on wealth patterns around the globe.

For example, India and China are doubling their per capita GDP at a rate 10 times faster than Britain did when it led the industrial revolution in the 18th century. In Asia, within 10 years, nearly 2.5 billion people will live in cities in the continent – one in every two city dwellers in the entire world – whilst a quarter of the top 200 cities in the world will all be in China.

Technological change is accelerating at an astonishing rate too, whilst the roll out of technology is also unprecedented. It took 38 years for the radio to reach 50 million users, for instance, whilst television took 13 years to reach the same number, the IPod four years and Facebook only one.

Alongside, all societies face the reality of an ageing population. On current trends, developed economies will have twice as many older people as children by 2050 and, by 2040, China could have more people suffering from dementia than the rest of the developed world combined.

Naturally these trends take on added relevance for the global finance industry when the scale of growth in new markets is taken into account. Global demand for infrastructure investment will, for example, increase by over US$50trn by 2030 and capital investment will reach new all-time highs. Estimates also indicate the global asset management industry will grow from US$65trn to in excess of US$100trn within the next five years and that alternative investments will grow from US$6.5trn to over US$13trn.

These sorts of increasing cross border trade flows generate transactions, which in turn lead to demands for cross-border financing and capital management - the very things IFCs like Jersey are geared up to facilitate and specialise in.

More often than not, these demands are nothing to do with tax, but stem more from a determination to protect capital assets and pass them on safely to the next generation. Meanwhile, for institutional investors, the key is finding suitable locations to establish structures in order to meet global investment ambitions.

This growing demand for high quality cross border financial services brings into sharp focus the role of IFCs, and it would be fair to surmise that their role in facilitating this sort of necessary and entirely beneficial investment would be welcomed. Yet this jars with the consistent politically motivated moves to stymie this role through a whole range of regulatory and policy initiatives, which brings us back again to the focus on regulation and transparency.


The global debate on regulation and transparency is an important one, but it is vital that it does not rest solely on the actions of IFCs. For some years, Jersey has argued that developments in regulation and information exchange mechanisms need to be implemented in a concerted manner across the globe for them to be fair, as well as effective.

Indeed, the argument for ‘a level playing field’ has been recognised by influential global bodies such as the OECD, and the latest moves to introduce a common reporting standard, a step towards the implementation of a new single global standard for automatic exchange of information, are welcome. In total 51 countries and jurisdictions, including Jersey, are signatories to the ‘Early Adopters Group’ and are committed to the new OECD standard.

In addition, Jersey can point to signing more than 40 tax agreements with countries worldwide, and being a signatory to US FATCA, an inter-governmental agreement with the UK and the European Savings Tax Directive for automatic exchange of information within the EU. As far as tax evasion is concerned, it has been a criminal offence in Jersey since legislation was introduced in the 90s.

Undoubtedly, the momentum for greater transparency in financial services is gathering steam – both onshore and off - and this is a development that Jersey fully supports, providing it is done through the adoption of sensible workable global standards and a mature approach to balancing transparency with a legitimate right to an appropriate level of confidentiality.

Beneficial Ownership

As far as beneficial ownership is concerned, the issue was thrust back into the media spotlight in early 2015 when Labour leader Ed Milliband announced that if elected, Labour would demand that Crown Dependencies and Overseas Territories introduce an open public register of companies, or face the threat of being ‘blacklisted’. His intervention in the tax evasion debate sadly bore all the hallmarks of electioneering, designed to put pressure on the Cameron administration.

For the jurisdictions to be used as a political football in this way is a shame, as tax transparency – including beneficial ownership – is an important subject and one that Jersey takes seriously.

So far as Jersey is concerned, it has captured beneficial ownership information on a centrally held corporate registry since 1999 and this information is entirely available to law enforcement agencies. In addition, the Jersey Financial Services Commission (JFSC), Jersey’s regulator, regularly undertakes rigorous on-site examinations of businesses to assess compliance.

As a result, given there is ready access and availability of beneficial ownership information to foreign fiscal and investigative authorities, Jersey’s industry does not believe there is further benefit in pursuing a public register. Furthermore, Jersey’s ability to capture ownership information of companies is far ahead of those available in other onshore and offshore jurisdictions including the UK, which is one of only a few countries in the world calling for a public registry.

The fact is that Jersey leads on current international standards through operating a central registry and through regulating all corporate service providers, who have a legal obligation to ensure that accurate and up to date information is held on the real owners of companies, trusts and bank accounts. Few other countries do this, including the UK. Furthermore, if any legal schemes designed to minimise tax are challenged by HMRC and deemed to be illegal, the Jersey authorities will not house them.

Further, it is believed that there is not widespread support among governments for public registries. Indeed at the last meeting of G20 nations, one of the key findings on beneficial ownership was an endorsement of the current Financial Action Task Force (FATF) approach, which is to ensure that the true owners of value are known, that this information is readily available and that it can be exchanged between governments without undue difficulty.

This is absolutely the prudent approach adopted in Jersey – in fact, a public registry would quite likely be of dubious value, being simply bypassed by criminals and those who misuse companies to launder money or evade taxes, meaning any data captured will be unreliable and of little value.

Regrettably, it is all too conveniently forgotten that there are many legitimate and indeed sensible reasons why an individual or institution would transact business through an IFC, including protection of assets from corrupt governments in unstable countries, predatory tax officials or the risk of extortion or kidnap. While there is no fail safe system anywhere in the world that will pick up every single case of tax evasion or money laundering, many of the leading IFCs have better regulatory measures in place than their onshore counterparts - a point Jersey seeks to emphasise whenever possible.


Responsible IFCs are a key driver in facilitating cross-border finance, safeguarding investments and contributing to the global economy, whilst meeting regulatory obligations and supporting global initiatives in fighting financial crime.

It is vital that IFCs accumulate sufficient evidence to defend their role when necessary and prove their positive value to the global economy and their effective approach to transparency, including around the issue of beneficial ownership. Those centres like Jersey that can do so, and package, administer and invest international capital at a competitive cost without dislocating domestic tax systems, will thrive.

About the Author:

Geoff Cook is the CEO at Jersey Finance. In addition to speaking at industry events, he regularly writes on issues affecting Jersey. Geoff is a Fellow of the IFS School of Finance, a Fellow of the Chartered Institute for Securities & Investment, a Liveryman of the Worshipful Company of International Bankers and a Member of the Society of Trust and Estate Practitioners.