Compliant confidentiality’ not secrecy an advantage for smaller jurisdictions

Regulatory arbitrage is working in reverse in markets such as the Channel Islands, Gibraltar and Malta, as authorities seek to create a more competitive environment away from traditional centres of secrecy such as Switzerland.

“Tax authorities around the world have cottoned on to the fact that it is very difficult for banks to stave off demands for information about taxpayers’ accounts,” says James Lasry, a partner and head of the funds team at Gibraltar law firm ­Hassans.

He has advised the country’s ­government and is instrumental in setting up the majority of Gibraltar’s funds, including the first experienced investor fund and the first protected cell company fund.

As a result of what is in Gibraltar called the “troubles in Switzerland”, more and more Swiss asset managers have been setting up parallel structures elsewhere in the eurozone.

“They are considering restructuring their business around Gibraltar and other EU centres that allow for passporting,” Lasry confirms, describing discussions he has had with Swiss fund manager representatives in Gibraltar.


The attraction of the smaller ­countries such as Gibraltar and Malta is that they offer EU funds ­passporting with potentially less onerous regulations than those ­operating in Switzerland.

Gibraltar, which last year made significant changes to its experienced investor funds (EIF) legislation to attract hedge fund managers and their management companies, is home to about 200 funds, with $4.5bn in assets.

Banks present in the jurisdiction serving this sector include Credit Suisse, Lombard Odier, Société Générale, Barclays, Royal Bank of Scotland and Lloyds.
Gibraltar’s reforms could not have been more timely. Gilbert Licudi, the new Gibraltar Financial Services Minister, said: “We want to make Gibraltar one of Europe’s premier jurisdictions for the establishment of hedge funds.”

The government scrapped a rule requiring a fund and its administrator to be based in the same place, replacing it with an authorisation system. The regulations also allow funds to redomicile to Gibraltar.

All the major European jurisdictions have signed up to the international norms on tax information exchange. They therefore commit to share information under certain terms agreed with other regulatory bodies.

In fact, according to Peter Niven, chief executive of Guernsey Finance, the promotional agency for the island’s finance industry: “Guernsey has never had banking secrecy enshrined in its law, unlike several European centres, where they have had secrecy for many decades, if not longer.

“What Guernsey does ensure, as do all major banking centres, is the principle of confidentiality of client records.” Malta abandoned its offshore status in the early 1990s, when most legislation was aligned with EU legislation.


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