Hawk-i Special Edition: Client confidentiality (Issue 10, Spring 2015)

Issue10

SPECIAL EDITION Client Confidentiality

featuring STEP Journal Roundtable Debate

Spring 2015

Issue 10 Spring 2015

Welcome I would like to welcome you to a special issue of Hawk-i, and our first of 2015. This edition has a sharp focus on client confidentiality - never has this issue been under such intense scrutiny with global transparency initiatives affecting all aspects of the trust and fiduciary services industries.

Alongside STEP Journal, Hawksford hosted a client confidentiality roundtable event in London in Autumn 2014. Held in the complementary backdrop of the Churchill War Rooms, the roundtable brought together a host of trust and wealth professionals to unravel the challenges being wrought by evolving transparency requirements. All involved were acutely aware that we are now operating in a strikingly different environment from the one in which we began our careers.

Maxine Rawlins CEO T: +44 (0) 1534 740000 E: maxine.rawlins@hawksford.com

“We begin 2015 by increasing our presence in Asia with the opening of our Hong Kong office.

This will cater for our ever-growing client base in Asia.” www.guidemehongkong.com

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With STEP Journal’s permission, we have published the feature in this issue of Hawk-i. I’m sure you will enjoy reading what was a lively, informed and engaging discussion on how we best manage clients’ privacy in a dramatically changed world.

Continuing the privacy conversation, Hawksford director Julian Hayden delves further into some of the more contentious discussion points, while Jacqueline Low, chief operating officer of Hawksford Singapore, and Leon Keen, director of our team in Switzerland offer us the Asian and Swiss perspectives on the evolving nature of client confidentiality.

It has been over a year since I took over the reins at Hawksford, and we’ve enjoyed a productive and successful year. The acquisition of Janus Corporate Solutions, now named Hawksford Singapore, alongside some key senior strategic appointments, helped us to consolidate the company’s growth and service expertise.

We begin 2015 by increasing our presence in Asia with the opening of our Hawksford Hong Kong office. This will cater for our ever-growing client base in Asia.

Looking ahead, there are many notable opportunities for Hawksford globally and I expect there will be plenty of news and developments across all our international offices and service pillars. We have a strong and dynamic team striving to deliver the best results for our clients.

2015 will continue to be a challenging year, with regulatory changes and client confidentiality themes remaining prominent. Clients can rest assured that the team at Hawksford will be at the cusp of developments, monitoring and responding to ensure we continue to deliver the highest levels of client service.

STEP Journal Roundtable STEP Debate

Client confidentiality under attack This STEP Journal roundtable, sponsored by Hawksford and held in October 2014, saw experts discuss the challenges and opportunities resulting from decreased client confidentiality in the wake of global transparency initiatives. The roundtable took place in the Churchill War Rooms. This wartime bunker sheltered UK Prime Minister Churchill and his government during the Blitz

of the Second World War. The events that unfolded in the War Rooms were utterly confidential; as a place to talk about privacy in the 21st century, it was a fitting venue.

Thank you to STEP for permitting us to share the Roundtable article which was first published in Volume 22/Issue 10.

THE PRIVATE CLIENT ADVISORS AND TRUST SERVICE PROVIDERS TAKING PART IN THE STEP JOURNAL ROUNDTABLE ACKNOWLEDGED THAT THEY NOW OPERATE IN A VERY DIFFERENT CONTEXT THAN THAT IN WHICH THEY STARTED THEIR CAREERS. HAVE THERE BEEN MAJOR CHANGES TO THE ENVIRONMENTS IN SINGAPORE AND SWITZERLAND? Jacqueline Low Singapore has witnessed significant changes in recent years and its ability to adapt has seen it emerge as a leading wealth management hub. With Governments worldwide signing up to various transparency initiatives, the impact on client confidentiality is global and far-reaching.

The most recent transparency agreement signed by the Singapore Government and the US was the FATCA Model 1 IGA in December 2014. Whilst some jurisdictions signed the Model 1 IGA earlier, Singapore indicated early it was prepared to commit. This desire to be compliant and an international player in the wealth management arena has translated into a number of recent industry changes.

Corporate Service provider regulations are also subject to enhancements by the Accounting and Corporate Regulatory Authority (ACRA) in response to AML/CFT transparency requirements.

Leon Keen There have been significant changes in the Swiss financial sector. Many senior practitioners say that the working environment they operate in now has changed beyond recognition compared to 10-15 years ago.

Banking and, by extension, client confidentiality, rather than secrecy, has a very long tradition in Switzerland in the same way that privacy rules are prominent in many other aspects of Swiss society.

Having said that, there is a consensus that the traditional Swiss banking confidentiality has been abused in the past. A number of attacks on this concept from other nations wishing to pursue tax offenders from their own countries, most prominently from the US, as well as a number of data leaks to the press and foreign tax authorities, have led to an erosion of this principle to an extent that some commentators say that Swiss

Banking confidentiality in the historical sense will have all but disappeared in 2017.

Separate from this is the domestic duty of confidentiality imposed on professionals (of all sorts) in relation to their clients, which the Swiss parliament recently refused to dilute and therefore still stands strong.

Swiss service providers are very aware of the tension between the demands for transparency and the rights of their clients to keep their financial affairs private.

Meet the STEP Roundtable panel Mark Bridges TEP, Partner at Farrer & Co

Helen Ratcliffe TEP, Head of Private Wealth at Bircham Dyson Bell

Charlotte Brambilla, Director of Hawksford Group

Maxine Rawlins, CEO of Hawksford Group

Jonathan Conder TEP, Private Client Department at Macfarlanes LLP

John Riches TEP, Co-Chair of STEP’s Public Policy Committee

Richard Hay TEP, Partner at Stikeman Elliott

Simon Rylatt TEP, Partner at Boodle Hatfield

Julian Hayden TEP, Director of Hawksford Group

Mike Walker TEP, Partner at KPMG

John Perkins TEP, Director of Hawksford Group

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Issue 10 Spring 2015

The EU’s trust register STEP Debate

In February 2013, in response to the international Financial Action Task Force’s (FATF’s) new recommendations to combat money laundering and terrorist financing, the European Commission adopted proposals to amend the EU’s Third Anti-Money Laundering Directive. A year later, the European Parliament voted in favour of a provision that brings trusts into line with the Fourth Anti-Money Laundering Directive’s transparency requirements. The outcome of the vote is that ultimate ‘owners’ of companies and trusts would have to be listed in registers in all EU countries and, controversially, those registers may be public.

Negotiations at EU level to reach political agreement on this issue, including if those registers will be public, began in October 2014 and resulted in the publication of the EU’s Fourth Money laundering directive and its associated regulations on 15th January 2015.

Importantly, the mandatory register of trusts applies only to taxable trusts and will not be public. These strict limitations were a positive outcome. Companies and foundations, however, will find their information on the register will be made available to those with a ‘legitimate interest’.

IN THE EU THERE ARE ONGOING DISCUSSIONS WITH REGARDS TO THE FOURTH ANTI-MONEY LAUNDERING DIRECTIVE AND THE LIKELIHOOD THAT ULTIMATE OWNERS OF TRUSTS AND COMPANIES WOULD HAVE TO BE LISTED IN REGISTERS IN ALL EU COUNTRIES, AND CONTROVERSIALLY, THESE MAY BE MADE PUBLIC. Jacqueline Low At present there isn’t a similar piece of legislation on the horizon in Singapore, but industry professionals are watching intently on how this will play out in the EU and what implications this will have on its clients.

With other industry professionals, we have been discussing ways to structure clients’ assets so they are not unduly subject to personal risk should there be a decision to introduce a public register. Like our colleagues overseas, we think the idea would trigger much debate in Singapore.

Leon Keen In Switzerland, the biggest legislative concern around clients is the automatic exchange of information between OECD tax authorities from 2017. Like many other countries, there are concerns about what will happen to the information once it is disclosed and whether the authorities of other countries will have sufficient systems in place to protect this information from being accessed by third parties. We have been helping clients from a variety of jurisdictions to develop their arrangements to preserve their confidentiality against non-governmental parties.

There are of course bilateral tax assistance treaties with other countries already in place, amongst them the UK/ Swiss agreement, which is seen as a mixed blessing. One of the options under the agreement was not to disclose an undeclared bank account to HMRC but to let the Swiss Bank collect deductions to be passed on to HMRC, without revealing the details of the account holder. This

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option was often perceived by taxpayers as a way of paying a higher fine in the form of the deductions, but of staying anonymous in return. It seems HMRC have recast their view on this. If the taxpayer chooses this option, the Swiss banks are no longer under an obligation to disclose the account to the HMRC. However, in HMRC’s view, the taxpayer remains under a duty to declare any such ongoing deductions by the bank. This of course may lead HMRC to investigate more fully.

As the bank accounts, or the wider affairs of the taxpayer, are in many instances not fully regularised by the payments under the UK/Swiss agreement, we have helped taxpayers to use the Liechtenstein Disclosure Facility (LDF) where they have already used the UK/Swiss treaty.

Fortunately, this often results in no or very little additional tax becoming payable and ensures that the taxpayer’s affairs are fully disclosed.

STEP Debate ‘The FATF initiatives are the genesis of the EU’s Fourth AntiMoney Laundering Directive – the text is lifted word for word from FATF’s revised Recommendations, and what one sees is the combination of anti-money laundering, anti-terrorism and know-your-client provisions that have come together with tax information exchange to create this perfect storm of initiatives,’ observed John Riches.

Whether the register will be in the public domain or only available to competent authorities is still an open issue. The prospect of the former was a serious concern for the panel. ‘Clients are well aware of reporting obligations, but the thought of a beneficiary register has spooked them. I have concerns that commercial enterprises will be able to access government information

and sell it on, or manipulate it,’ said Julian Hayden. The panel questioned the need for this register, as a great deal of the sort of information that might be added to it is already collected in various different ways, and in different places. ‘In Jersey, this sort of information is already available to the Jersey Financial Services Commission (JFSC). The JFSC and regulators in other countries are careful to keep that information to themselves unless they get a valid request pursuant to international co-operation law to share it,’ said Maxine Rawlins. ‘But to what extent will this information be accessed by others? If information goes on a public register, which could put clients at risk, then that’s a problem. Practical issues need to be considered to protect clients’ privacy, while giving governments information to protect our global society from criminal acts such as money laundering.’

JULIAN HAYDEN EXPRESSED CONCERNS THAT A PUBLIC REGISTER WOULD ALLOW COMMERCIAL ENTERPRISES TO ACCESS TO GOVERNMENT INFORMATION THAT THEY MAY THEN ‘SELL ON, OR MANIPULATE’.

Jacqueline Low I agree entirely with Julian. With increased technology comes the risk associated with it. Cybercrime is a real problem faced by all countries and Singapore is not spared.

According to the most recent International Monetary Fund data, Singapore is the third richest country in the world. This makes Singapore a target for cybercriminals.

Singapore must continue to be watchful and do everything it can to fight cybercrime by putting in place tougher, stricter safeguards and being one step ahead of cybercriminals.

Leon Keen With the push for transparency and information sharing, we must be mindful about the risks to companies and clients.

Emails can be intercepted, websites and databases hacked into and personal and private information accessed and manipulated. Sometimes lives are at stake because high net worth individuals (HNWIs) and their families become targets.

While it is difficult to control everything, what we can do, and are doing, is ensuring that client information is kept confidential until it is a regulatory or legistlative requirement for it to be shared.

As a result of the tradition of banking privacy, and particularly since the various instances of theft of client data in Switzerland and Liechtenstein, the financial sector is very concerned about cyber security. Swiss professionals are under very strict obligations to safeguard client data. The data thefts, however, concerned rogue employees rather than outside attacks. Swiss banks are generally regarded as well fortified with very sophisticated systems.

Cyberattacks have so far not extended to government data. The thoroughness with which the Swiss public sector is funded and operates, coupled with the long tradition of protecting the private affairs of individuals, is cause for encouragement.

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Issue 10 Spring 2015

The EU’s trust register continued STEP Debate

Privacy Versus Secrecy Mark Bridges, chair of the roundtable, highlighted the distinction between privacy and secrecy. ‘Privacy is a fundamental human right entrenched in legislation – the right of an individual to keep their affairs private. It extends to our personal finances, our tax affairs and it should genuinely protect our private interests. Secrecy, however, goes a step further. Nowadays, the use of the word implies that there is something wrong and that the concept may be being used by some to protect information where there is a genuine public interest in that information being available to others.’

‘The challenge of the regulators and governments,’ Mark explained, ‘is to attack and destroy secrecy, while the duty of advisors is to protect their client’s confidentiality. The problem is that the tools used by regulators and governments to deal with secrecy attack and undermine confidentiality, and we are left with a horribly narrow, grey line in the middle.’

The participants felt there should be a balance between authorities’ need of information for tax disclosure, and individuals’ right to a private life. Some requests, they explained, are difficult to justify to clients.

THE PROBLEM IS THAT THE TOOLS USED BY REGULATORS AND GOVERNMENTS TO DEAL WITH SECRECY ATTACK AND UNDERMINE CONFIDENTIALITY, AND WE ARE LEFT WITH A HORRIBLY NARROW, GREY LINE IN THE MIDDLE.’ Jacqueline Low There should be a balance between the authorities’ need for information for tax disclosure and an individual’s right to enjoy a private life. Asian culture has strong values around modesty and humility, displays of bragging are frowned upon and confidentiality is key. Additionally advisors have to be mindful of different political regimes in the world and the concerns for many high net worth individuals, which is the seizure of their assets.

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Leon Keen Many Swiss citizens were astonished that some German authorities bought data which had been appropriated illegally from Swiss banks, to pursue German taxpayers with undisclosed assets in Switzerland.

From the Swiss government’s perspective there appears to be less focus on obtaining information by unconventional means, possibly because state finances are not as stretched as in other countries.

The emphasis at the moment is on a regime of voluntary disclosures, which has been running very successfully.

Under the system individual taxpayers have a single opportunity to avail themselves of a tax amnesty, as long as they disclose fully the ten years leading up to the disclosure. Heirs only have to look back 3 years in relation to inherited estates.

STEP Debate

Security

The Rationale

The panellists were all aware of the threat to personal safety facing highnet-worth (HNW) clients in certain jurisdictions, including Russia, some parts of Africa, and Central and South America. They heard that there have even been kidnappings in Sweden. The risks, they explained, of information about HNW individuals leaking into the public domain and criminal elements acting on this information are not only to clients’ physical safety – fiscal harm is also possible.

The logic behind the public register was scrutinised. ‘This project is designed to provide access to information for competent authorities for law enforcement. What has happened is that the debate is now over public access.

The rationale is now that, with many eyes looking at it, we will be able to police the accuracy of the information. The government has favoured sporadic errorchecking by the public over systematic verification of the information. I think we have fundamentally undermined the core purpose, which is to give law enforcement and tax enforcement accurate information,’ said Richard Hay.

‘Cybersecurity has gone up the agenda for a lot of our clients and family offices.

Our forensic cybersecurity team has found that clients’ vulnerability to data theft is extraordinary, with most of them scoring at about 95 per cent vulnerability to attack,’ commented Mike Walker.

The other side of this story, Charlotte Brambilla explained, is that government authorities are also at risk of attack: ‘Private industry will develop protections to secure client information, and these protections can be put in place quickly, but the public sector hasn’t got the funds at the same level and won’t move as quickly.

Information may get lost because of that.’

With the OECD’s Common Reporting Standard (CRS) being enforced by 2017, John Riches queried the practicality of the EU’s public register. ‘I wonder whether the public register debate is a distraction. Information will be being exchanged automatically under the CRS to a very significant extent by 2017. The existence of a public register is worrying, but is the main point that we need to embrace the idea that we are going to have to manage the impact of the CRS?’

Will governments truly be able to benefit from more accurate exchange of data? ‘The governments are suspicious, as they were when they first set up the Liechtenstein Disclosure Facility (LDF), that they are losing revenue. The reality has fallen short of fiscal expectations.

However, by making this access readily available and contained to competent authorities, at least the fiscal authorities are able to access relevant information,’ said Maxine.

‘The actual and perceived loss of revenue appear so far to be quite different,’ qualified Mike. ‘There are hundreds of smallish cases being disclosed under the LDF, and I think there’s only a handful over GBP5 million. The government initially published a statistic stating that the LDF will recoup GBP3 billion, but the last number published was less than GBP900 million. I can’t belittle a figure of GBP900 million, but it’s just not yet proving to be on the scale that they believed it to be – though the LDF is open until 2016.’

So, where do we draw the line on sharing information? Tracking information for use by competent authorities was felt to be an appropriate level of information sharing, as long as the authority in question is able to maintain data security.

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Issue 10 Spring 2015

Current information exchange initiatives: the effect on IFCs STEP Debate

The EU trust register and CRS are still in the pipeline, but client information is already being exchanged between competent authorities under tax information exchange agreements (TIEAs). The next topic up for debate was whether the panel found TIEAs were restricting the flow of business to international finance centres (IFCs).

Richard Hay used the growth of STEP membership by way of an illustration. The Society was founded in 1991 and, 23 years on, it has over 19,000 members across 95 countries. The intervening years have seen a host of initiatives relating to exchange of information, but this has not hindered growth of the industry. ‘Clients still need our services, and I am very optimistic about the future of our industry,’ he commented.

Numerous examples of where it’s irrelevant if there is a TIEA or formal right in place were discussed, including: governments buying CDs of client information stolen from banks; practitioners commissioning reports on potential or existing clients that reveal a remarkable level of detail about their finances; and anecdotal cases where unscrupulous people have sought out information and used it for nefarious purposes.

‘It’s all very well setting up TIEAs and automatic exchange of information but this information is still available through informal channels.

To my mind, there is a degree of artificiality about this debate in terms of its practical effect. If the revenue wants to find out all about an individual’s affairs, and they are prepared to resort to marketplace arrangements, then they will be able to obtain that information. It goes back to the privacy versus confidentiality debate,’ said Mark.

Are IFCs suffering as a result of these initiatives? ‘No’ was the answer from the offshore panellists.

THE OFFSHORE PANELLISTS WERE CERTAIN THAT IFCS ARE NOT SUFFERING AS A RESULT OF THESE TRANSPARENCY INITIATIVES? WHAT ABOUT SINGAPORE AND SWITZERLAND? Jacqueline Low The same is true for Singapore. As an IFC, Singapore is considered a mid-shore jurisdiction; it provides a “half-way house” between offshore and onshore. This works incredibly well in adapting to today’s environment. Singapore has signed up to international tax co-operation agreements and has announced that it has criminalised certain tax evasion activities. With numerous DTAs, low tax rates, a strong legal system and good infrastructure many clients are looking to create real substance in Singapore. Whilst the impact of higher compliance is ongoing, wealthy clients see Singapore as a gateway to investment in India and Southeast Asia. In addition to the social demographic and wealth distribution changes through generations, we are seeing an increase in demand for professional advice on corporate and family governance.

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Leon Keen Although the Swiss market place has emerged with some bruises from the fallout of the financial crisis and subsequent pressure from foreign governments, it is still in remarkably good shape. It is estimated that over a quarter of worldwide private wealth is still held here. The Swiss financial sector is recalibrating to shed connotations of undeclared money and to focus on its traditional strengths of high levels of client service, financial sophistication and stability.

Unrest in other regions has led to an influx in investment in the Swiss franc as well as funds under management in recent months.

Maxine explained: ‘There are so many structures where it is efficient and, therefore, costeffective to use tax-neutral jurisdictions, especially those with good lawyers, accountants, systems with processes and regulation. When you get into double-taxation agreements and the complexities of trying to fit in multi-jurisdictional products, it becomes very complicated, unless you are going to use a neutral jurisdiction to hold it all together.

I’m not suggesting that that’s always going to be offshore – it really depends on the dynamic.’

STEP Debate The panellists felt that, as long as there is a common approach across all jurisdictions to exchange of information, then IFCs will not be adversely penalised. ‘As long as there isn’t a distinction between offshore and onshore in terms of transparency requirements, then transparency itself shouldn’t be a problem,’ said Maxine.

‘The transparency initiatives give rise to a simplification process. To my mind, wellorganised fiduciaries are going to benefit in that environment, provided they’re not being penalised for being offshore,’ commented John Riches.

‘Jurisdictions that do not keep pace will draw scrutiny if they attract the noncompliant business that flows from other centres embracing the new transparency standards. A short-term business gain could result in long-term pain as centres that lag emerging standards are challenged by the international community,’ Richard warned.

The use of IFCs: reputational structuring or tax planning?

Tax is no longer a primary consideration for clients, according to the panel. ‘In my experience, clients are prioritising longterm strategy over tax considerations.

Clients are less interested in sophisticated tax planning, but are more interested in preserving the integrity of the structure and keeping things simple, in a taxefficient way,’ said Julian.

‘There’s a huge reputational issue today, and families don’t want to overstep the mark. They want to have a tax policy that they can stand by, but they also don’t want to pay more than they need to,’ said Simon Rylatt.

Helen Ratcliffe explained that succession planning, estate planning and family governance are just as important as tax planning. ‘We often do a lot of project management where clients like using London lawyers and they like being in offshore centres. We are also seeing bigger structures, so I think that the future might be sustainable, because offshore centres are getting more wealth in larger structures, rather than less wealth in smaller structures.’

Mike highlighted that forum shopping on a dispute-resolution level is a reason for choosing a well-regarded IFC: ‘We have to consider what the best jurisdiction is, if there is going to be a fight in the family, where is best to hear the dispute, and where is best to seek a proper settlement.’

Other factors that draw clients to offshore centres are the stability of the jurisdiction, the strength of the judiciary, quality service providers and up-to-date legislation.

Opportunities for investment were also highlighted: ‘IFCs play a role in allowing clients to invest in the UK in a tax-neutral way,’ said Mark, ‘which is a very useful tool for the onshore world.’

Longevity is also a consideration. ‘There’s a lot more thinking about dynastic structures, the ability to create perpetual structures is greater, family offices are much more numerous and I think people are thinking longer-term. Clients are looking for somewhere that has stability for the long term, and they’re comfortable paying a bit more to achieve it,’ said Simon.

‘The ability to challenge governments and regulatory authorities over their decisionmaking is hugely important’, said Jonathan Conder, especially given the access they will soon have to clients’ information.

‘In some countries, such as Switzerland, the ability to challenge the decision of some of the regulatory authorities is very constrained – there is no concept of judicial review,’ he explained.

Jonathan felt that there are still plenty of tax-planning opportunities for the right clients in the offshore world, but that there will be a flight to quality. ‘In a few years, the volume of information that regulators will be able to access will be much higher. Anybody who’s associated with a jurisdiction or a fiduciary with a bad reputation is more likely to be targeted,’ he warned. ‘There’s going to be a premium on getting the governance, the accounting and the reporting absolutely right from the start. Service providers who are good at this will enhance the quality of the jurisdiction.’

The way forward The message that came out of the panel discussion was that a new era of transparency is dawning, and the industry must embrace it. ‘For clients, this means they will have to accept that a level of information about them, and their structures, will be available to competent authorities,’ said Simon.

But the greatest concern was security: ‘In what jurisdictions will our clients’ data be safest? Where will it be protected?’ asked Mike.

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Issue 10 Spring 2015

Key debate themes The STEP Journal roundtable focused on client confidentiality and the surrounding issues. Here, Hawksford director Julian Hayden elaborates further on some of the key themes and statements discussed during the roundtable.

The private client advisers and trustees taking part in the STEP Journal roundtable acknowledged that they now operate in a very different context than that in which they started their careers.

They perceive a changed world, where an absolute duty of confidentiality to clients – once sacrosanct – has given way to supranational initiatives imposing transparency.

It is simply a fact of life, for better or worse. No one would argue with legitimate disclosure to authorities that need access to information for appropriate reasons, although some people in our industry do have an issue with the gathering of information that is not actually needed for regulatory reasons. Mike Walker was clear about this at the debate; he made the point that some of the questions asked of our clients are extremely intrusive and are simply not relevant to tax reporting.

This approach throws up potential issues around the European legislation and the key principle of the right to a private life.

I personally feel that sharing information to ensure tax compliance is important, but do wonder why authorities need to know how much money clients have in a bank account abroad if there are no tax implications around these accounts.

There is also an issue surrounding commercial privacy – businesses will pay the taxes they owe but want their financial ownership and business arrangements personal to them, not to be shared. As an industry we need to find a way to marry up the issues of confidentiality and transparency. For some this becomes an issue of personal safety. At the most extreme, the more information available about a person the more likely threats in the form of extortion or kidnapping become.

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Whether the register will be in the public domain or only available to competent authorities is still an open issue. What is your opinion on this?

To better understand this, we have to go back to the issue of why we need a register - if the purpose is for proper uses, for use by the authorities – why does it need to be in the public domain? If it is in the public domain, the public then becomes the monitor of proper compliance rather than the authorities.

Trusts are established to provide an ownership structure that is separate from the enjoyment of the assets – trustees hold the family business or assets, not for their own benefit, but for the benefit of others. It is not always clear who will actually benefit from a trust

and therefore, is it right to make these details of potential beneficiaries public?

A public register of trusts could change the way we perceive people. The role of a trust is to create the separation of legal entities, and the proper use of trusts will help a person to protect him/herself or his/ her family from themselves and having too much money too soon. There has been a great increase in the use of trusts for old-fashioned reasons in recent years – to educate younger family members to help them get used to having new money.

Public register – ‘I have concerns that commercial enterprises will be able to access government information and sell it on, or manipulate it.’

I said this during the roundtable, and cybersecurity is already a real issue with the possibility of governments selling information to commercial third parties. Already we have law firms with departments specialising in cybercrime and not just financial crime – dealing with potential reputational damage and damage to image. When people make allegations against one another electronically, it is the role of the law firm’s private client to manage this. Doing a word search on Google as part of the due diligence procedure is common.

‘The challenge of the regulators and governments, is to attack and destroy secrecy, while the duty of advisers is to protect their client’s confidentiality.

The problem is that the tools used by regulators and governments to deal with secrecy attack and undermine confidentiality, and we are left with a horribly narrow, grey line in the middle.’

I would suggest that we push ahead with the confidential exchange of information with regulatory authorities, but with the understanding that the authorities will be restricted in what they can do with the information. Should HMRC be entitled to all of the information it is currently seeking? I am not 100% sure it needs all of the information it is requesting in order to ensure the tax affairs of our clients are as they should be. Likewise, we are not just talking about HMRC, and we just do not know what level of information management / confidentiality the governments / tax departments of other jurisdictions around the world adhere to.

Some countries do not have the same high levels of protection in place with regards to human rights, for example, and these considerations should come into play.

Are IFCs suffering as a result of these initiatives? ‘No’ was the answer from the offshore panellists.

High quality IFCs will always be in demand as clients will always want to plan for orderly succession, to hold assets in a safe environment and to hold those assets in a tax neutral jurisdiction to avoid duplication of taxes. Good governance and stability for commercial activity will always be of importance. Clients are often willing to take on commercial risks in other jurisdictions, provided they’re able to structure and resolve disputes within a tried and tested legal framework – and that is where a jurisdiction such as Jersey comes in.

There is a clear move from people wanting to save tax (and opportunistic tax savings) to those wanting long-term stability and efficient management. These are the types of clients our industry and our jurisdiction want to attract. Within the best IFCs the best opportunities are there for organisations, like Hawksford, that can supply first class accounting, management and record keeping because, moving forwards, the advisors of these clients are going to need all of this information promptly and accurately to discharge their clients’ reporting obligations and duties.

If accurate reporting is not in place, this could easily eat time and money, resulting in delays that could lead to tax authorities mounting enquiries.

For these reasons, I agree with the conclusion of the roundtable debate, that the new world of client confidentiality provides opportunities for the best provider, in the best jurisdictions.

Julian Hayden Director T: +44 (0) 1534 740140 E: julian.hayden@hawksford.com

“There is a clear move from people wanting to save tax (and opportunistic tax savings) to those wanting long-term stability and efficient management.“ 11

Contact details For further details on any of the content of this issue, or if you would like to contribute to future issues, please contact: Cherith Fothergill Marketing and Communications Manager T: +44 (0) 1534 740264 E: cherith.fothergill@hawksford.com

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MAGIC CIRCLE AWARDS 2013

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MAGIC CIRCLE AWARDS 2013

Trustee of the Year 2013 – Julian Hayden

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2012

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