Annual review 2016 by Jersey Finance

Annual Review 2016

www.jerseyfinance.je

Contents 02

Our Vision and Mission

Private Wealth

Chairman’s Statement

Funds

Chief Executive’s Statement

Banking

2016 in Brief

Capital Markets

Transparency and Taxation

Education and Employment

Research and Innovation

Members’ and Gatekeepers’ Feedback

Marketing

Publications

Market Development

Useful Contacts

by Jurat Robert Christensen

by Geoff Cook

available to Members

Jersey Finance Annual Review 2016

Our Vision and Mission Vision

For Jersey to be demonstrably recognised as the leading international finance centre in its chosen markets.

Mission

To champion and develop the competitive position of Jerseyâ&#x20AC;&#x2122;s financial services industry through the promotion and innovation of its services and products in targeted markets, while maintaining strong and sustainable stakeholder relationships with industry, Government and the Jersey Financial Services Commission.

The Mission is underpinned by supporting Jerseyâ&#x20AC;&#x2122;s financial services industry by providing marketing, technical and business development support for the four key sectors of the financial services industry.

Private Wealth

Funds

Banking

Capital Markets

Through identifying and mitigating the risks faced by the industry via engagement with key stakeholders, whilst at the same time pursuing opportunities to maintain and grow business flows, we work to ensure Jersey remains competitive internationally.

Chairman’s Statement

Chairman’s Statement by Jurat Robert Christensen, MBE

I am delighted to introduce Jersey Finance’s review of 2016, an eventful year in which we have continued to advance Members’ priorities in supporting the Island’s finance industry.

Undoubtedly, the biggest news story of the year for us was the vote by the UK electorate on 23 June to leave the European Union. The consequences for Jersey are hard to predict even six months after the referendum, but are likely to become clearer in 2017 as the UK Government moves towards launching the two-year process of EU withdrawal. Our now well-established research programme published two very useful reports in the autumn, based on work that had begun even before the referendum campaigns had started. One updated our 2013 study of Jersey’s Value to Britain, while the second – Jersey’s Value to the EU – demonstrated that Jersey facilitates foreign investment into the EU which supports around 88,000 jobs. We did not rest on our laurels, however. A major research study into the potential for Jersey to adopt a new approach to banking at a time of great structural changes was in progress throughout 2016. There is more detail later in this review. Jersey’s financial services industry continues to make a vital contribution to the Island’s economy, creating 400 more jobs in the latest year for which data is available. The industry also supports more than 60% of Jersey’s tax revenues, and thus a large proportion of the cost of our public services.

I extend my thanks to all those who contributed to our work in 2016: the Government of Jersey, the Jersey Financial Services Commission, my fellow directors and our Members who give their time and resources so freely. The Jersey Finance team led by Geoff Cook and his senior management team work hard on behalf of the industry, and the board of Jersey Finance will continue to give them all their support during 2017. Finally, on Friday 6 January 2017, I was sworn in as Jurat of Jersey’s Royal Court. As a jurat, my role has the potential from time to time to create conflicts with my position as Chairman of Jersey Finance. Accordingly, I have given notice of my decision to retire as Chairman as soon as a suitable successor has been identified and appointed, a process which has already started. I feel privileged to have served as Chairman of Jersey Finance during the past four years and as a director between 2000 and 2008. I have always been impressed by the efforts made by Geoff and the rest of the team within Jersey Finance in pursuing the agenda set by the board and it has been my pleasure to support them over the years. I am confident that through their efforts the organisation will continue to provide the very best representation of the Island’s finance and related professional services sector.

Jersey Finance Annual Review 2016

Chief Executive’s Statement by Geoff Cook It has been a year of challenges for Jersey Finance, and the industry as a whole, with the publication of the leaked Panama Papers and the UK’s Brexit referendum result among the most notable.

The measures we have taken since the Finance Industry Strategic Jurisdictional Review in 2013 have put us in a good position to deal with such issues as the Panama Papers and Brexit. The first three-year plan to implement those measures ended in 2015, so 2016 marked the start of a new four-year plan during which more initiatives are planned to bolster Jersey’s position as a world-class international finance centre (IFC). The further advancement of Jersey’s reputation is one of three strategic priorities for the 2016-19

period and, in order to achieve it, we will continue the publication of evidence-based advocacy by leading researchers. The publication in the autumn of two of these papers – Jersey’s Value to Europe and a second edition of the Jersey’s Value to Britain report originally published in 2013 – was particularly timely in the aftermath of the Brexit vote. The reports contain incisive analysis by Capital Economics which demonstrates the contributions that the Island makes to the EU and to the UK. They make it clear that the legislative framework within

Chief Executive’s Statement

which our finance industry operates is unaffected by Brexit and they also provide independent confirmation of Jersey’s role as an IFC of excellence and substance. The revelations published in the Panama Papers generated an enormous amount of negative publicity for some international financial centres, though little of substance for Jersey. Indeed, it provided an opportunity for us to emphasise our adherence to international standards for the exchange of information, where we have led the world in capturing beneficial ownership data since 1989. Our efforts were supported by an Australian academic whose independent analysis concluded that central registries of beneficial ownership were effective only if their information was checked by licensed corporate service providers – something that Jersey does and other jurisdictions have failed to provide.

Future of banking With the Island’s banks under continuing pressure from low interest rates, we launched the Future of Banking Review at the start of the year to analyse the challenges facing the Jersey banking sector. The review made exciting recommendations for maintaining and enhancing the competitiveness of Jersey’s banks – including the digitisation of banking and the evolution of new business models. Work streams identified as part of this review will be taken forward throughout 2017. Much of our attention in the coming period is likely to be focused on the consequences of Brexit, with a warning in February of the uncertainty ahead even before the referendum. Standard & Poor’s (S&P) reduced its long-term foreign and local sovereign credit rating for Jersey from AA+ to AA, followed in

July by a further reduction after the Brexit vote to AA-. We should not be unduly concerned as many countries have seen much steeper downgrades due to the generally uncertain political and economic outlook. While the Brexit uncertainty has caused fluctuations in the markets and exchange rates, it has also created opportunities for Jersey, where the funds sector is growing, the trusts law is about to be updated, and legislative changes will increase the flexibility and international appeal of Jersey companies. During this period of uncertainty, Jersey’s stability and regulatory robustness have again been reaffirmed as amongst the best globally. Of particular note was the MONEYVAL report in May which described Jersey as having a “mature and sophisticated regime for tackling money laundering and the financing of terrorism”. Such endorsements demonstrate that Jersey continues to be a centre of excellence which can be relied upon. On behalf of our Members, I want to take this opportunity to thank Robert Christensen, MBE, for his outstanding contribution to Jersey Finance and to our industry. Robert was on the working group which helped to establish Jersey Finance and was a founding board member. He is stepping down as Chairman following his appointment as Jurat in January 2017, and we wish him every success in this new role. Finally, I would like to thank all Members for their support in 2016. It has helped to underpin Jersey’s leadership position as an IFC and it was good to see the Ipsos MORI poll of Members again giving positive feedback on our work and priorities, as well as valuable suggestions about improvements for the future which we will address in 2017.

Jersey Finance Annual Review 2016

2016 in Brief · Citywealth IFC Awards 2016: International Financial Centre of the Year · Jersey and Switzerland sign joint declaration on the automatic exchange of information in tax matters · Jersey Business Tendency Survey shows finance industry is optimistic about long-term employment opportunities and profitability

· Financial Centre of the Year at Global Investor/ISF Annual Investment Excellence Awards · European Securities and Markets Authority (ESMA) confirm Jersey one of only 12 non-EU jurisdictions to have no significant obstacles in being able to apply the AIFMD passport · Jersey Finance appoints An Kelles as Business Development Director for Greater China, to spearhead its strategy across the Far East

· Standard & Poor’s (S&P) longterm foreign and local sovereign credit rating is amended for the first time – it is amended again in July to AA-

· Jersey Finance Annual Funds Conference: Clear Direction

· Jersey Financial Services Commission and the Financial Services Regulatory Authority of Abu Dhabi Global Market sign Memorandum of Understanding allowing exchange of confidential regulatory information and cooperation on supervision and regulation of financial systems

· Law to enable credit balances on dormant bank accounts to be transferred to a central Jersey Reclaim Fund is lodged. Dormant Bank Accounts (Jersey) Law is approved by States of Jersey in June

· Jersey and Liechtenstein sign Memorandum of Understanding

· Anti-money laundering and terrorist financing laws extended to cover virtual currencies such as Bitcoin

· Jersey secures maximum thirdcountry recognition from the European Commission for its oversight regime of auditors of Jersey-listed companies · A joint Government / regulator consultation is published on the rationalisation and consolidation of Jersey’s private fund and unregulated fund regimes

· Jersey - First for Finance: Eighth edition is published

· Double taxation agreement with UK amended to include profits made by non-UK resident developers of UK property

· The body responsible for promoting trade and investment between the Commonwealth’s 53 countries, The Commonwealth Enterprise and Investment Council, visits Jersey

2016 in Brief

· Jersey Finance Annual Private Wealth Conference: Guiding Lights · Jersey reaffirms commitment to sharing beneficial ownership information and combating global financial crime with UK Government · Double taxation agreement signed with United Arab Emirates · Business Tendency Review: more than 90% of finance firms see the same or greater levels of business compared to the previous three months

· Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) conclude Jersey’s beneficial ownership regime puts it at the forefront of the transparency agenda · Wealthbriefing European Awards 2016: Best International Finance Centre · Jersey and Rwanda sign Memorandum of Understanding

· Finance industry jobs reach 13,010 the highest figure since 2009

· International Finance Centre – Editor’s Award at WealthBriefing GCC Region Awards 2016

· Three reports commissioned by Jersey Finance are released: Jersey’s Value to Europe, Jersey’s Value to Britain, and The Internationalisation of Chinese Wealth

· Government of Jersey publish enhanced policy on Beneficial Ownership and a Register of Directors

· Clear Direction: Jersey Finance Asia Roadshow in Shanghai and Hong Kong

· Jersey becomes BEPS Associate and a member of the BEPS Inclusive Framework - BEPS country-by-country reporting for multinational enterprises comes into force · Jersey signs Memorandum of Understanding with the Prudential Regulation Authority and Bank of England on exchange of confidential information and investigative assistance · WealthBriefingAsia Hong Kong Awards 2016: Best International Finance Centre · Citywealth Awards Overall Marketing Campaign for Jersey’s Value to Africa research

· Best International Finance Centre at the International Fund and Product Awards

· Multilateral Competent Authority Agreement (MCAA) which sets the parameters for the automatic exchange of country-by-country tax reports on multinational enterprises is signed by Jersey

· Limited Liability Partnerships (Jersey) Law is adopted by States of Jersey, making the Jersey LLP a more competitive vehicle · The Channel Islands Stock Exchange and the Bermuda Stock Exchange sign Memorandum of Understanding

· Chief Minister Senator Ian Gorst represents Jersey at Lords EU Select Committee inquiry into the effects of Brexit on the Crown Dependencies · Jersey’s high-value resident regime is published

Jersey Finance Annual Review 2016

Transparency and Taxation The first tax information was automatically exchanged in 2016, as Jersey continued to demonstrate its commitment to international standards for combating financial crime.

low number of money-laundering prosecutions, convictions and confiscations given the size and characteristics of the Island’s financial sector. Jersey’s Government has committed to increasing the number of court cases resulting in convictions and confiscations and has increased the capacity for the investigation and prosecution of serious financial crime.

Top marks for regulatory regime

Base Erosion and Profit Shifting (BEPS)

A major report published on 24 May 2016 described Jersey as having a ‘mature and sophisticated regime for tackling money-laundering and the financing of terrorism’. It also found that Jersey’s beneficial ownership regime had put it at the forefront of the transparency agenda.

Jersey’s commitment to the OECD’s Base Erosion and Profit Shifting programme developed over 2016 with the Island becoming a BEPS Associate and a member of the BEPS Inclusive Framework in June. The aim of BEPS is to ensure that profits are taxed where the economic activities generating them are performed. Corporate profits that ‘disappear’ or are artificially shifted to low- or no-tax environments create revenue losses estimated by the OECD at US$100240 billion annually – between 4% and 10% of global corporate income tax revenues.

The report was prepared by MONEYVAL, a body of the Council of Europe, in a periodic assessment of Jersey’s compliance with international standards as required by the Financial Action Task Force (FATF). Of the 49 assessment areas, Jersey was rated compliant or largely compliant in 48 – ranking the Island at the very top of the global table. The one main assessment area where Jersey was rated only partially compliant related to the relatively

1st

MONEYVAL ranking Jersey highest for compliance with international standards

1st

As a BEPS Associate, Jersey can contribute to the international debate and has committed to adopting international standards. In October, Jersey signed up to the Multilateral Competent Authority Agreement

BEPS Associate

committing Jersey to adopting international standards

Transparency and Taxation

(MCAA). This provides for the automatic exchange of multinational enterprise tax information country-bycountry. The agreement helps governments prevent tax planning strategies that artificially shift profits to low- or no-tax locations where there is little or no economic activity. Jersey has recognised that for tax to be levied where it is properly due, countries need to have the information required to make accurate tax assessments. And since Jersey’s limited number of double taxation agreements (DTAs) means that it is not typically used for profit shifting and transfer pricing, the BEPS programme could strengthen its competitiveness against onshore ‘DTA jurisdictions’. Indeed, BEPS could bring opportunities for Jersey around three themes: 1 As a jurisdiction of substance, Jersey is well-placed to become a ‘consolidate to’ international finance centre. 2 Its tax neutrality means there is minimal scope for DTA arbitrage, with a 0% headline rate of tax eliminating the need for preferential tax regimes. 3 The Island’s leadership role on transparency means that Jersey has no concerns about exchange of tax information.

BEPS Associates Jersey became a BEPS Associate and a member of the BEPS Inclusive Framework on 16 June 2016. All BEPS Associates are committed to consistent implementation of the BEPS package, including its four minimum standards. The four key standards that Jersey has committed to meeting, and their action points within the BEPS package, are:

• Harmful tax practices

(Action 5)

• Treaty abuse (Action 6) • Transfer pricing documentation and country-by-country reporting (Action 13)

• Dispute resolution mechanism (Action 14) Implementation will be subject to monitoring by the OECD and a peer review undertaken by members of the BEPS Inclusive Framework. Before the signing, OECD Secretary General Angel Gurría said that the organisation recognised Jersey’s high level of compliance with international standards. The new regulations were ratified by the States of Jersey on 14 December. (Continued overleaf)

24-hour

1-hour

to requests for exchange of beneficial ownership information

to requests for exchange of beneficial ownership information if related to terrorist financing

deadline response

Jersey Finance Annual Review 2016

(continued from page 9)

Public registries of beneficial ownership Jersey signed an Exchange of Notes with the UK on 13 April 2016, committing the Island to exchange beneficial ownership information on request within 24 hours (one hour if related to terrorist financing). For more than 20 years Jersey has had a central register of beneficial ownership which has been subject to strict and robust validation by regulated professionals. The JFSC is responsible for implementing the new technology required and for enforcing the new 21-day deadline for the reporting of changes in beneficial ownership to the registry. The UK Government’s register of beneficial ownership for UK-incorporated companies, which is open to public scrutiny, went live on 30 June. Crown Dependencies and Overseas Territories have been encouraged to follow its example by creating their own public registers of beneficial ownership. However, Jersey has asserted that while law enforcement and tax agencies should have access to such information, preserving the privacy rights of individuals and businesses means that it should not be public. If made public, wealthy individuals in many parts of the world could be exposed to undue risk of kidnapping or extortion. And investors or businesses have valid reasons for keeping information such as business plans, trade secrets and strategic decisions confidential. Support for Jersey’s model came in April with the publication of a report on the effectiveness of central registries commissioned by Jersey Finance as part of our research programme. The author, Professor Jason Sharman of Griffith University in Brisbane, said that to be effective, a centralised registry needed data to be verified by licensed corporate service

‘Jersey model’ for a central registry endorsed by a leading academic

providers, describing Jersey as ‘one of the leading pioneers’ in this matter. These arguments have not convinced a number of groups, such as the UK parliamentary select committee tasked with examining the Department for International Development. In a report in October the committee urged the Government to continue to lobby the Crown Dependencies for public beneficial ownership registers in order to increase transparency. New measures linked to the EU’s Fourth Money Laundering Directive, which became law in May, could include a requirement for member states to keep central public beneficial ownership registers for corporate and other legal entities such as trusts. Jersey Finance will continue to point out the serious shortcomings of public registries and the quality of Jersey’s approach, as highlighted by MONEYVAL and the Sharman report. Jersey Finance is also involved with the B20 Anti-Corruption Task Force on this matter.

Blacklisting of non-cooperative tax jurisdictions The Council of the European Union has been seeking to harmonise member states’ approaches to blacklisting non-cooperative tax jurisdictions. In November, its General Secretariat agreed three criteria that would have to be met for jurisdictions to be regarded as cooperative: 1 Tax transparency – including commitment to the OECD’s Automatic Exchange of Information standard (the Common Reporting Standard) and at least a ‘largely compliant rating’ on the OECD Exchange of Information on Request Standard. Also a commitment to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters or equivalent exchange arrangements.

Automatic exchange of information with UK’s tax authorities starts

Transparency and Taxation

2 Fair Taxation – an absence of preferential tax measures that could be regarded as harmful under the EU’s code of conduct for business taxation, and also of offshore structures aimed at attracting profits which do not reflect real economic activity in the jurisdiction. 3 Implementation of anti-BEPS measures – by committing to the OECD’s minimum standards in 2017, with a positive assessment for effectiveness after that. These criteria will be subject to a vote by the Council in 2017, but it is not yet clear what the consequences of blacklisting might be. As an international finance centre of substance we are confident that the challenge can be met and we believe that the Island meets every requirement with one possible exception: not facilitating offshore structures or arrangements aimed at attracting profits which do not reflect real economic activity. However the definition of ‘economic activity’ is very woolly and, similarly, ‘offshore’ means any country other than your own, so the criterion does not make sense. The notes on fair taxation also say that the absence of a corporate tax system or a nominal corporate tax rate of zero or close to zero would be a possible indicator of non-compliance. While this is a concern, the release of the draft led a number of jurisdictions to say that a 0% tax rate would not of itself result in a blacklisting. Since Jersey appears to meet the other criteria we are in a strong position to address any challenge by the Council.

Autumn Statement, with the new regime set to come into effect in April 2017. The amendments include the deeming as UK-domiciled non-doms who have been resident in the UK for 15 of the past 20 years, and UK residents who have a UK domicile of origin. Inheritance tax will also become chargeable on UK residential property held indirectly by non-doms through an offshore structure. However, non-doms who have a non-UK resident trust established before they are deemed as UK-domiciled will not be taxed on income and gains arising outside the UK if retained in the trust. Earlier in 2016, an amendment to the Jersey-UK Double Taxation Agreement announced in the Budget made a significant change to the tax treatment of Jersey companies involved in the development of UK property. In addition, the UK is increasingly implementing BEPS recommendations into domestic law, with new initiatives enacted or proposed on matters such as hybrid mismatches, country-by-country reporting and restrictions on the tax deductibility of corporate interest expenses. Other measures appearing to be in the pipeline include a consultation on whether all non-resident companies receiving UK taxable income should be brought within the corporation tax regime. A large number of anti-avoidance, disclosure and penalty measures have also been introduced or proposed. They include a new corporate offence for failing to prevent tax evasion, a statutory obligation requiring taxpayers to correct historic tax issues, a requirement to register complex offshore structures, and new civil penalties for offshore evaders.

UK taxation changes Previously discussed amendments to the UK tax regime for residents not domiciled in the UK (non-doms) were confirmed in the November

TIEAs – tax information exchange agreements

DTAs – double taxation agreements

Jersey Finance Annual Review 2016

Research and Innovation In 2016, Jersey Finance continued its programme of research and innovation to advance Jersey’s reputation and develop new products and strategies. On advancing the Island’s reputation, we commission credible and independent research, which produces reports that demonstrate Jersey’s important role in international finance. During 2016, we published two reports in this series: Jersey’s Value to Europe and a second edition of the Jersey’s Value to Britain report which has made a big impact since its first publication in 2013. Both reports were launched at a breakfast briefing for Members in Jersey, and to the wider world at three events in London – two in the Houses of Parliament and the other in the City. On new products and strategies, the biggest project has been the Future of Banking Review, a summary of which is in the Banking section on page 30.

r188 bn foreign investment into the EU through Jersey

Jersey’s Value to Europe This report focuses on the economic, financial and fiscal linkages between Jersey and the European Union excluding the UK. It was prepared by Capital Economics, the respected independent research firm responsible for the 2013 report on Jersey’s Value to Britain. The report begins by looking at the essential role played by Jersey in the international economy where globalisation is growing fast. This trend has generated strong demand for services that facilitate efficient and secure cross-border transactions, which Jersey provides and which drive global economic growth. Although not a member of the EU, Jersey has beneficial relationships with it and its member states. The report estimates that a large share of

88,000 jobs supported in the EU’s economy

Research and Innovation

the q1.7 trillion of assets held in the Island is from EU countries excluding the UK. For example, it concludes that roughly a third of the almost q300 million of funds administered or managed in Jersey is derived from the EU. And around 12% of the combined value held in Jersey has been invested in assets located in EU countries other than the UK – almost q190 billion of accumulated investment, mostly from non-EU sources. On fiscal linkages, the report demonstrates that Jersey is neither a tax haven, nor a centre for corporate profit-shifting which could reduce the tax revenues of EU countries. And Jersey’s tough criminal code and regulatory regime leave few ways for EU citizens and businesses to use the Island to avoid or evade their domestic taxes. While there is some scope to reduce tax liabilities through Jersey, the report estimates that no more than q100 million at most is lost by the 27 EU countries each year. This is more than offset by tax revenues of at least q1billion – or ten times that sum - generated by economic activity stimulated in member states and facilitated by investment mediated through Jersey.

vehicles and funds, roughly three quarters originates from beneficial owners who are not domiciled in the UK. Almost half of this, however, accrues to UK-domiciled residents, companies or institutions, facilitating foreign investment into the UK of some £500 billion – nearly 5% of the UK’s total stock of foreign-owned assets. The report estimates that the maximum theoretical loss to the UK exchequer would be £457 million a year through tax evasion, with the actual level likely to be significantly lower. However, Jersey is a net contributor of over £4.5 billion in tax revenues to the British exchequer that result from the economic activity it generates in the UK. Overall, the updated report raises its estimates of the net benefit which Jersey contributes to the UK economy to the order of 250,000 jobs and £14 billion of economic activity.

Chinese wealth With signs that wealthy Chinese investors are looking to diversify beyond the mainland and use specialist expertise for structuring their portfolios, Jersey Finance joined forces with Hubbis, a Hong Kong wealth management consultancy, to find out more about China’s market. Key findings of The Internationalisation of Chinese Wealth – 2016, a report compiled by Hubbis using an online survey of advisers in Hong Kong and Singapore, one-to-one interviews and a roundtable discussion, were that:

Jersey’s Value to Britain In 2016, we commissioned Capital Economics to update Jersey’s Value to Britain to reflect developments since the first edition was published in 2013. The report estimates that, of the £1.3 trillion of wealth held in Jersey’s banks, trusts, special purpose

£14 bn Jersey’s net benefit to the UK economy

• Business succession planning is the main focus today • Estate planning and diversification were also priorities • Knowledge is limited on how to diversify portfolios, manage risks and deal with inheritance taxes in mature markets (Continued overleaf)

250,000 jobs supported in the UK

Jersey Finance Annual Review 2016

(continued from page 13)

• Chinese investors need more information on international regulation and its impact on wealth structuring - but they often do not know how to get good advice The Hubbis report concluded that wealthy Chinese investors prefer to take an active role in their investments and fear that they will lose control if they use international wealth structuring. However, recent volatility has increased demand for advice, and they are looking for tailored approaches, a high degree of personalisation and confidence that they are in safe hands with advisors. It also found that family offices are increasingly popular, followed by trusts.

Financial technology (fintech) Jersey’s strengths in the financial sector, our pro-business environment, the robust regulatory regime and our expanding digital sector positions the Island as the ideal jurisdiction for investors, start-ups and established businesses working in fintech. Indeed, finance and technology are no longer mutually exclusive sectors, if they ever were, and the Future of Banking Review has already identified the digitisation of banking as a strategic priority for cutting costs in the sector and meeting customer demand for improved and innovative services. Jersey is one of the first jurisdictions to have adopted a regulatory regime for virtual currencies. The regulation exempts businesses involved in virtual currency exchange from paying fees to the Jersey Financial Services Commission (JFSC) for regulation until they reach a specified turnover. This means that while these businesses must register and comply

£0.5 tn of foreign investment in the UK via Jersey

with the KYC/AML handbook, there is sufficient room for innovation with minimal regulatory costs. To further facilitate the growth of fintech in the Island, Jersey Finance, working in partnership with Digital Jersey, established proposition development groups. These groups involve finance industry representatives collaborating with technology specialists to ensure that Jersey remains at the forefront of fintech developments. The groups are currently exploring exciting initiatives in the fintech sub sectors of regulatory technology, wealth management and distributed ledger technology (blockchain).

Philanthropy and employment Other strategic projects completed in 2016 have included:

• Jersey for Philanthropy – a published report into the motivations, methods, and growing impact of philanthropic structures established through Jersey’s finance industry

• Completion of the biannual Employment and Growth Survey and education initiatives in Jersey (see page 34)

The finance industry’s contribution to Jersey In 2016, Jersey Finance commissioned independent research into the true contribution that the industry made to the Island. Based on the most recent figures available, the report concluded that the finance industry through its direct, indirect and induced impact sustained almost 26,500 jobs in Jersey,

£1

of every £20 investment in the UK is via Jersey

Research and Innovation

The industry’s contribution to Jersey

£396m total tax contribution

£2.2bn

£1.7bn

total economic contribution 58% of the Island’s economic output

direct economic contribution

£230m purchasing through local businesses

£266m direct tax contribution

equivalent to 46% of all employment. The industry’s own workforce numbered 12,590 and the remaining 13,910 jobs were in the industry’s supply chain and in businesses where its staff spent their wages. The research also found that the finance industry made a contribution of £2.2 billion to Jersey’s GDP in 2014, which was 58% of the Island’s economic output. It concluded that its health was vital to the government’s ability to raise the taxes that fund

50%

of all jobs in Jersey are dependent on the finance industry

government spending on health services, education and other public services. In 2014, the finance industry supported £396 million in tax receipts, sufficient to finance more than half of government expenditure in that year. Member firms and their staff also contributed significantly to the community by supporting activities such as environmental, arts, and sports projects and events.

13,010 professionals directly employed in the finance industry

Jersey Finance Annual Review 2016

Marketing Events and Communications Our data-driven approach to marketing enabled us to extend our reach across target audiences with targeted, integrated and innovative campaigns. Events Our improved registration system, launched in 2016, allowed us to ensure that our London flagship conferences were attended by relevant key contacts in the funds and private wealth sectors. The new system enabled us to target a greater number of key stakeholders and to improve engagement with them by identifying their areas of interest. While the number of attendees at events hosted and sponsored by Jersey Finance remained static at just over 4,000, the proportion of those who worked for Member firms increased substantially, from 35% (1,436) in 2015 to 53% (2,150) in 2016, all of whom were in a better position to engage with target stakeholders. Representatives from 23 Member firms spoke at Jersey Finance events in Dubai, Qatar, Hong Kong, Shanghai and London, and we gave 64 passes to Members to attend third-party events globally.

4,055 attendees at all Jersey Finance events

33 Jersey

Finance events

78 interviews

undertaken

69 media releases Events by sector

Private wealth Funds Banking Miscellaneous

or statements

sponsored third-party events

Marketing

Opportunities to see Jersey Finance messages in traditional media

Communications Media coverage which would have cost ÂŁ1.6 million to buy through advertising was generated by providing comment, interviews and articles for local, national, international and trade media.

24,903,577

During the year, 70% of all coverage related to Jersey was rated as having a positive or neutral editorial sentiment. This was due in part to Jersey Financeâ&#x20AC;&#x2122;s ability to provide the media and Member firms with balanced responses which counteracted negative reports from sources such as the Panama Papers. Expert opinion was provided through interviews and articles, and through the production of factsheets and online reports.

Opportunities to see Jersey Finance messages on social media

5,897,005

Database of international contacts:

30% total increase

USA

+5%

Europe

+140% South & Central America

+25%

GCC

+45%

+22%

Africa

+11%

India

+60%

South East Asia

+16%

Jersey Finance Annual Review 2016

Marketing Digital Channels Our strategy of using engaging content to nurture relationships with targeted audiences led to a record 16% increase in traffic on the Jersey Finance website. Website and social media activity was focused around Jersey Finance’s events, and we used analysis from those campaigns to improve and repurpose our content. This resulted in greater engagement with stakeholders and increased traffic to our site.

Social media Jersey Finance’s social media audience is now 241% larger than our nearest competitor, Guernsey. During 2016, we grew our follower base on Twitter by 40% and on LinkedIn by almost half (49%) through organic and paid-for activity. Overall, traffic from social media to our website increased by 25% compared to 2015, and LinkedIn now accounts for almost two-thirds (66%) of our social traffic. We increased the targeting of our email and social activity: traffic from Jersey Finance emails rose by 52%, with a 63% increase in unique users, and social media traffic to the website increased by 25%.

The user experience was improved by the introduction of elements such as the research section, Member news ticker, and by driving users to deeper, more relevant pages. Over the year, 26 issues of our fortnightly newsletter Industry Insight were delivered to more than 2,600 staff at Member firms. Adding Technical Updates to Industry Insight led to a 43% increase in the number of Members creating accounts to view Members-only content.

Number of page views in 2016 Overall

Member Directory

+12%

+14%

Publications

Technical Updates

+23%

+624%

www.jerseyfinance.je Traffic from the website to Member firms’ sites grew by 70% to 11,768, and there was a 250% increase in on-site ‘events’ such as downloads and clicks. We closed our overseas websites and redirected traffic to the relevant pages on our main website to ensure that users received the most up-to-date content.

Marketing

40% increase in followers

49% increase in followers

52% increase in

traffic from emails

Average time spent reading Technical Updates up

Traffic from Jersey Finance’s to Member firms’ websites up

15% 70% +250% increase in

24% of users

access Jersey Finance’s website via a mobile device

on-site ‘events’ such as downloads and clicks

Visitors to Jersey Finance’s website:

16% total increase

+16% UAE

Jersey

+44%

+14% Qatar

+367%

India

+17%

Greater China

+16%

Jersey Finance Annual Review 2016

Market Development The start of the second Jersey Finance four-year business plan in 2016 has followed the restructured international development programme implemented in 2015, which focuses on four markets. Top growth priorities remain the key frontier markets of the Gulf Cooperation Council (GCC), followed by the future options markets of India and Greater China. Next are the traditional markets of the UK and Western Europe which will grow more slowly but still account for a large share of the assets and deposits in Jersey. Finally, there are the secondary frontier markets which look set to be the next group of growth economies: South Africa, Nigeria and Kenya.

Flexibility We continue to take a flexible approach in the light of economic, financial and geopolitical developments. For example, we have adopted a lighter programme of activities in Russia and the Commonwealth of Independent States (CIS) in view of the continuing difficulties in the region.

1,445 gatekeeper meetings

We have, however, increased activities in our most recent target market of North America, where we have seen an increasing interest in Jersey’s evolving funds regime as the EU implements the provisions of the AIFMD. Jersey Finance’s CEO and Business Development Director for Funds both engaged there with the US funds industry, with a core focus on private equity and real estate. In May, Jersey Finance sponsored the PERE CFOs and COOs Forum in New York, and followed that in June with SuperReturn US in Boston. The Government of Jersey also became involved in some US-based activities during the latter part of 2016.

Strategic approach A strategic objective in our 2016-19 marketing programme is to further develop the ‘Top 100’ approach to market which encourages business development teams to focus on face-to-face meetings with their top 100 contacts likely to generate the most value for Jersey. The Jersey Finance roadshow series help to meet this objective. The wider community in each region is targeted by other means such as email, events, web content, social media and print campaigns to familiarise them with Jersey Finance’s messages.

268

inward investment meetings

Market Development

UK Representation in London

Europe

Russia

China

Representation via Jersey

Fly-in model

Hong Kong office and Shanghai representation

India

GCC Dubai office

USA Fly-in model

New Delhi and Mumbai representation

Nigeria Representation via Jersey

South Africa

Kenya

Representation via Jersey

Jersey Finance target regions Africa | Asia | Europe | Gulf Cooperation Council (GCC)

412

Member firm meetings

Total meetings by region UK/Europe GCC States Asia Africa Multiple Other

Jersey Finance Annual Review 2016

Market Development in UK and Western Europe

A goal of Jersey Finance’s 20162019 Business Plan has been to increase the Island’s share of mature markets in the UK and Western Europe, which still account for the largest share of assets and deposits in Jersey. It was heartening to see in 2016 a marked increase of inward investment and a healthy pipeline of firms considering relocating to Jersey and actually making the move. Our two flagship London conferences that promote the funds and private wealth sectors again attracted large audiences in 2016. And we continue to sponsor high-profile conferences organised by other bodies such as Legal Week, STEP, the Alternative Investment Management Association and the Association of Foreign Banks. The UK vote in June to leave the European Union has caused considerable uncertainty about future developments which are unlikely to be resolved soon. But as part of neither the UK or Europe, we believe that Jersey is well placed to take advantage of opportunities that will emerge.

179

gatekeeper meetings across the region

It was timely, therefore, that after the Brexit vote we were able to publish two high-quality reports analysing the importance of Jersey to both the UK and the EU. These were launched in October in Jersey and London, attracting comment in the UK in particular for the sizeable updates in the value of the contributions made to the British economy since the first edition, published in 2013. Meanwhile, Jersey’s position in the EU market for alternative investment funds, one of only five non-EU jurisdictions cleared for passport access to the EU, may prove attractive to UK fund managers. And many of the numerous European events sponsored by Jersey Finance in 2016 were funds-related, including the Managed Funds Association Global Summit, the BVCA Summit, the IBC’s 30th annual Transcontinental Trusts conference and the HedgeFund Intelligence European Summit in Paris. It is hardly surprising, therefore, that Jersey received endorsement from independent bodies and institutions in 2016 for its qualities as an IFC. These included recognition as Best IFC of the Year from both Citywealth International Financial Centre Awards and WealthBriefing European Awards.

146

inward investment meetings across the region

Market Development

Market Development in Kenya, Nigeria and South Africa

Since the publication of Jersey’s Value to Africa in 2014 there has been a wave of activity in Africa for both Jersey Finance and the Government of Jersey. This continued through 2016 as the Island has been negotiating double taxation agreements and tax information exchange agreements with African countries. Engagement with South Africa is part of an agreed strategy to foster stronger links with the world’s fastest growing region, with the aim of boosting jobs and growth in Africa and Jersey. This resulted in a visit to the Island in September by His Excellency Mr Obed Mlaba, the South African High Commissioner to the UK. Meetings with the Chief Minister and others explored ways of deepening the bilateral relationship.

investors with a wide range of financial services companies, dealmakers and investment bankers. We also sponsored two Financial Times events in October: the FT Africa Summit, the leading conference in the world on African business and economics, and the FT Private Equity in Africa Summit, an annual platform to gain the latest intelligence on the continent’s private markets and identify opportunities.

Award winners Citywealth’s Brand Management and Reputation Awards awarded Jersey Finance the Overall Marketing Campaign award in June for our work in communicating the findings of Jersey’s Value to Africa. The judges were looking for a winner that could demonstrate creativity and an innovative approach across communication channels to achieve specific objectives.

Sponsorship of events Jersey Finance continued to sponsor events on relevant subjects, such as the Africa Financial Services Investment Conference in May which brought together many of the continent’s most significant

217

gatekeeper meetings across the region

Jersey Finance delegations to three countries

Jersey Finance Annual Review 2016

Market Development in Greater China and India

Jersey Finance joined forces with Hubbis, a Hong Kong wealth management consultancy, to find out more about China’s market. China The results of the Hubbis Report, The Internationalisation of Chinese Wealth – 2016 (see page 13), have given a clear indication of the opportunities in the region. The report was launched at Jersey Finance’s October roadshows in Shanghai and Hong Kong to audiences totalling more than 200 senior finance and business professionals. The third China-Jersey Business Forum took place in Jersey in November, with the involvement of Minister Jin of the Chinese Embassy, the China Chamber of Commerce in the UK, and various Chinese companies with operations in London. This event, now an annual fixture, draws on Jersey Finance’s developing relationships with major Chinese firms which have been built up through a partnership between our London and Greater China offices. It was an opportunity for business leaders from both sides to explore possible new cooperation and business opportunities. Jersey Finance also hosted a visit to Jersey by the China Banking Regulatory Commission (CBRC) in December to enable them to further understand

579

gatekeeper meetings across the region

trust supervision in Jersey. This included meetings with the JFSC, Government and the industry, in a programme drawn up with the involvement of our representatives in Hong Kong, Shanghai and London. Events sponsored by Jersey Finance in 2016 included the Financial Times Family Office Summit in Shanghai in January, and – for the first time – CBBC’s China Outbound Conference in November, also in Shanghai. In June, Jersey was crowned Best International Finance Centre at the WealthBriefingAsia Hong Kong Awards 2016.

India Jersey Finance sponsored several events including the launch of STEP India’s Mumbai chapter in April, where the primary theme was succession planning for family business, promoting the concept of succession and estate planning. We also sponsored the second annual Indian Family Wealth Forum, hosted by Hubbis in Mumbai, which was attended by our Business Development Director for the GCC and India. In August, we sponsored the Hubbis Indian Wealth Management Forum 2016 in Mumbai, and our CEO, Geoff Cook, was a speaker at the annual Foundation for International Taxation conference in December, also in Mumbai.

inward investment meetings across the region

Market Development

Market Development in UAE, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain The deepening links between Jersey and the Gulf Cooperation Council (GCC) were highlighted in October with visits to Abu Dhabi and Dubai by Senator Sir Philip Bailhache, Jersey’s External Relations Minister. This official visit followed the signing of a double taxation agreement (DTA) between Jersey and the UAE in April. The signing of the agreement coincided with Jersey Finance celebrating the fifth anniversary of the opening of its office in the GCC.

With the Jersey Finance roadshow programme to the region now an established annual event, in April our roadshow visited Doha and Dubai. Led by Geoff Cook, the events featured the Director of Financial Services for the Government of Jersey and industry experts who covered topics including Islamic finance, family offices and real estate. With the value of Shariah-compliant assets worldwide predicted by Standard & Poor’s to top $3 trillion by 2019, the roadshow highlighted Jersey’s enduring strengths as a centre of choice for Islamic finance.

GCC awards

Relationship-building

Jersey won the International Finance Centre Editor’s Award at the WealthBriefing GCC Region Awards 2016, held in Dubai in November.

Jersey Finance activities in the GCC continued to focus on building relationships during 2016, with a total of 466 meetings organised across all GCC countries, including gatekeeper and inward investment meetings.

The publisher of WealthBriefing, and CEO of Clearview Financial Media, Stephen Harris said that the awards ‘recognise the very best operators in the private client industry… the awards truly reflect excellence in wealth management.’

Our Business Development Director in the GCC, who is leading our increased focus on Saudi Arabia, jointly hosted events in Riyadh and Jeddah with the British Ambassador in September.

334

gatekeeper meetings across the region

years since launch of the Jersey Finance GCC office

Jersey Finance Annual Review 2016

Private Wealth Jersey’s private wealth and estate planning specialists continued to increase staffing in the year to June 2016, despite the publication of the Panama Papers, which exposed weaknesses in several IFCs. The documents from the Panamanian law firm Mossack Fonseca, leaked by the International Consortium of Investigative Journalists in April, generated an enormous amount of negative publicity for so-called tax havens. However, few of the Panama Papers documents relating specifically to Jersey were of sufficient interest to make international headlines, and there was no evidence of criminal activity taking place in Jersey. In fact, the revelations presented an opportunity for the Island to put clear water between itself and other IFCs by highlighting Jersey’s expertise, transparency and sound regulation, and re-emphasising its political and fiscal stability, and commitment to the rule of law. The Island’s private wealth sector has seen some evidence of a flight to quality, with new business attracted by Jersey’s qualities as an IFC, and this is a trend we expect to

327

Jersey foundations

continue as individuals and businesses give greater consideration to the jurisdictions with which they are doing business. The public image of international finance was certainly affected by the revelations and the global response to the Panama Papers was to demand an improvement in the exchange of information between jurisdictions, so that the identities of beneficial owners could not be hidden. Jersey was in a position not only to reaffirm its adherence to international standards for the exchange of information, but to remind the world that it had been an international leader in capturing beneficial ownership information since 1989. Geoff Cook used media interviews to point out that Jersey could provide law enforcement agencies and tax authorities with ‘adequate, accurate and timely information’ – a requirement of the Financial Action Task Force (FATF). Jersey Finance welcomed moves for greater transparency and called on other jurisdictions to introduce regulatory regimes similar to the Island’s.

Private wealth conference The Jersey Finance Annual Private Wealth Conference on 25 May came soon after the Panama Papers revelations, which were the main topic of interest

1,225 STEP members

– the world’s largest branch

Sector Private Wealth

for participants. Fortuitously, one of the keynote speakers was Professor Jason Sharman, who presented the findings of a paper which Jersey Finance had commissioned a year earlier into the effectiveness of central registries and the role of regulated corporate service providers in combating financial crime.

closely on the proposals for a seventh revision with Jersey Finance’s Trusts Law Working Group, which brings together leading practitioners in the Island. Responses from law firms, the Jersey Association of Trust Companies, several trust companies and individuals were received and Government’s response paper is expected imminently.

Professor Sharman told more than 400 senior private client, tax, trust and wealth management professionals in London that central registries were not the only way of monitoring companies’ beneficial ownership. Indeed, they may not even be the best means of doing so, unless the information is verified by licensed corporate service providers, as happens in Jersey.

One proposed amendment relates to beneficiaries’ rights to information, and the degree to which they should be restricted in certain circumstances.

The conference, which was entitled Guiding Lights, was moderated by Stephanie Flanders, the former BBC Economics Editor, who is now Chief Market Strategist for the UK and Europe at J.P. Morgan Asset Management. She spoke about the current state of the markets and the potential implications of the UK referendum on EU membership. Another keynote speaker was Steve Meiklejohn, a partner at Ogier, who outlined proposed amendments to Jersey’s trusts law. Jersey Finance also sponsored 15 private wealth events organised by other organisations in 2016, which included the FT Family Office Summit in Shanghai in January and the Adam Smith Private Investor Conference on Russia and the CIS in October.

Trusts law The Government of Jersey has been continuing its consultations on new proposals to amend the Trusts (Jersey) Law 1984, which has been subject to amendment on only six occasions in the 32 years since it was enacted. The Government has worked

112

trust businesses

Other proposed amendments include clarification on the reservation of powers by a settlor and the widening of options for the accumulation and distribution of income. The Government intends to bring forward the proposed amendments to the States before Easter 2017, with a view to making sensible and targeted revisions that will maintain Jersey’s position as the pre-eminent trust jurisdiction globally. Jersey Finance will make the consultation paper and the response paper available on its website and share information on progress with Members and the wider finance industry.

Foundations The number of foundations formed in Jersey had reached 327 by December 2016, a 7% increase over the year. Our Jersey Foundations Law Working Group has been brought together again to look at amendments to the legislation. The aim is to further improve the Island’s offering to the private client community of a flexible and well-regulated vehicle that can be created for both charitable and noncharitable purposes.

Trust Law Working Group meetings with 16 leading practitioners

Jersey Finance Annual Review 2016

Funds The total net asset value of Jersey funds rose by £18.5 billion in the year to 30 September 2016, reaching more than £237 billion. There were 231 fund promoters in Jersey at the end of June, with the most popular asset classes remaining private equity (21.6%), hedge (20.9%) and real estate (16.9%). During 2016, Jersey Finance created a healthy pipeline of 14 new fund managers interested in relocating to the Island. We continued to invest in raising the jurisdiction’s profile in the sector through a variety of events during 2016, including our flagship Jersey Finance Annual Funds Conference in March, attended by more than 300 London, UK and European fund professionals. Entitled Clear Direction, it examined global trends across the alternative funds spectrum, including real estate, private equity, hedge, debt and infrastructure. Speakers also provided insights into Jersey’s role as a centre for fund servicing and management, and in supporting funds flows spanning Asia, the GCC, Europe, Africa and the US. Broadcaster Nick Robinson, former BBC Political Editor, also offered insights into current UK and global political trends. The keynote address was given by Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration. He focused on the

£237.3 bn net asset

value of regulated funds under administration in Quarter 3 2016

importance of the OECD’s Base Erosion and Profit Shifting (BEPS) project, saying that it now gives more than 100 countries an opportunity to compete on an equal footing in promoting global growth. The closing speech was given by Tim Harford, the behavioural economist and award-winning Financial Times columnist, who also presents the BBC Radio 4 programme More or Less. We also sponsored 18 funds events organised by other organisations in 2016, including the Managed Funds Association Global Summit 2016 and the BVCA Summit 2016. In October, Jersey was named Best International Finance Centre at the International Fund & Product Awards, hosted in London by International Investment magazine.

AIFMD In July, the European Securities and Markets Authority (ESMA) recommended that Jersey be among the first group of ‘third countries’ granted a passport permitting the Island’s alternative investment funds to be marketed throughout the EU. Twelve non-EU countries have been assessed

115

authorised alternative investment fund managers

Sector Funds

by ESMA as part of the journey towards gaining a

continue with business as usual while assessing the

passport under the Alternative Investment Fund

full impact of AIFMD.

Managers Directive (AIFMD), which is intended to replace the need for funds to comply with individual Member States’ National Private Placement Regimes (NPPRs). ESMA had already recommended in 2015 that Jersey be granted an AIFMD passport again and, assessed against updated criteria in 2016, concluded there were no significant obstacles to extending the AIFMD passport to Jersey. The decision to extend the passport to third countries based on ESMA’s recommendations will now be considered by the European Commission, Parliament and Council. Currently, Jersey’s alternative fund managers can market into most European jurisdictions through NPPRs, which permit access to professional investors without the burden of certain obligations required under full compliance with AIFMD. This option has proved popular, with more than 100 managers and over 200 funds currently authorised by the Jersey Financial Services Commission (JFSC) to market into Europe. Jersey funds offering alternative asset classes have been growing strongly at 12% in the year to September, with growth of 21% in hedge funds and 16% in real estate. The potential award of a passport was welcomed by Jersey Finance, which believed the move demonstrated that satisfying ESMA’s criteria had not been a foregone conclusion – reflecting the excellent work of the JFSC. In addition, there is a third option for Jersey’s alternative fund managers that market outside the EU or whose marketing in the EU has been completed. They can choose to meet EU requirements under AIFMD, while at the same time serving the rest of the world in a lower-cost non-AIFMD environment. This has allowed them to

Other developments The JFSC and Government published a consultation paper in August on the rationalisation and consolidation of Jersey’s Private Fund and Unregulated Fund regime. This aimed to simplify the Island’s funds legislation and regulatory process while retaining flexibility and innovation. Jersey Finance coordinated the industry response to the consultation which ended in September. The paper confirmed the intention to introduce products to the market which could include a manager-led Jersey Registered Alternative Investment Fund (JRAIF), supervised by the JFSC by proxy, with the regulated fund manager responsible for ensuring compliance with AIFMD. The consultation also provided detail around a proposed new universal definition of a ‘professional investor’, as well as phasing out COBO only funds and unregulated exchange-traded funds. The JFSC issued a consultation paper in September setting out proposals to provide additional guidance to funds and fund operators on the application of anti-money laundering, and the requirements for countering the financing of terrorism. This welcome initiative proposes to add a new funds section to the AML/CFT Handbook to clarify the sector’s obligations. Another JFSC consultation document was published in July, at the request of Jersey Finance, with the intention of providing greater clarity on outsourcing policy and its application. The consultation closed in September 2016, and the next step will be the publication of the JFSC’s feedback paper.

251

360+

marketed into Europe

attended Jersey Finance’s flagship London conference

alternative investment funds

senior professionals

Jersey Finance Annual Review 2016

Banking In the eight years since the global financial crisis, Jersey’s banking sector has gone through a period of rationalisation. While balance sheets have shrunk, depositgathering has been resilient and the core customer deposits have remained relatively stable in the face of the significant market disruption from international issues. Interest rates have remained low for so long that, globally, investors are increasingly looking to alternative investments which have the potential to offer higher returns. Additional pressures have included further regulatory changes, as well as planning for the ring-fencing of the core activities of UK banks, recommended by the Vickers Report in 2011, which will challenge the traditional deposit up-streaming model of Jersey’s banks. Despite these pressures, banking remains the Island’s largest source of employment and continues to play a vital role in Jersey’s position as a leading international financial centre (IFC), providing services that are key to other finance industry sectors, including trusts, funds and corporate services. We are confident in the robust nature of our banking industry and its improved profitability signals forward momentum on which we are determined to build. With this in mind, in 2015 Jersey Finance set up a review to analyse the

challenges facing the Island’s banks and make recommendations for maintaining and enhancing their global competitiveness.

The Future of Banking Review The Future of Banking Review involved many stakeholders including banks, professional firms, Government and the regulator, participating through interviews and workshops. It analysed the challenges resulting from economic changes, regulatory developments, cost pressures and disruptive technologies. Three were seen as particularly critical:

• The continuing consolidation of operations across IFCs by banking groups – driven by factors such as cost-cutting, increasing regulatory costs and a flight to quality.

• Digitisation and automation of services – creating further pressures on banks’ offshore operations.

• De-leveraging of the global banking system – restricting the long-term profitability and growth of Jersey’s banks by reducing the value and purpose of their traditional deposit-taking business model.

£111.5 bn

a reduction of two through natural consolidation and retrenchment

in September 2016 – an increase of £3.7bn during Q3

banking licences

in deposits

Sector Banking 251

241

233

217

20 10

32 12

Given these challenges, the review identified three strategic priorities: to ensure that Jersey emerges as a winner from the consolidation of banks; to increase the value realised from its banks’ deposit books through new banking activities; and to maintain employment and competitiveness through digitisation and innovation in banking and the evolution of new business models. These objectives will be developed into a focused action plan which will require the involvement and close cooperation of many stakeholders across the whole financial services industry.

Other developments In March, the Government of Jersey published its consultation on a new bank resolution regime, which proposed legislation broadly consistent with the equivalent EU and UK regimes. This will ensure that the Island can meet the new European standard for facilitating the resolution and recovery of an institution considered to be failing or likely to fail. Jersey Finance submitted its response in April and the legislation is expected to be passed in the first half of 2017. Jersey, along with the other Crown Dependencies, became part of the geographical scope of the direct debit and credit transfer schemes of the Single Euro Payments Area (SEPA) on 1 May. This enables Jersey’s banks to apply for membership of the SEPA schemes, which facilitate fast and secure crossborder transfers in euros more easily, efficiently and cheaply. Following consultations in 2015 by the Chief Minister’s Department, the States adopted the Dormant Bank Accounts (Jersey) Law in June 2016. Once approved by the Privy Council, banks will be able to close a dormant bank account by depositing the balance in the central Jersey Reclaim Fund, which will be used to support charitable causes.

11.3% depositors who are Jersey residents

195 4 22

221

2009

197

2010

193

183

169

2012

2011

2013

181 4 18

162 3 13

159

2014

136 2 11

146

123

2015

2016*

Banks incorporated in Jersey and overseas: Consolidated Assets £bn Loans

Investments

Other

While the overall banking balance sheet has contracted by around £70 billion, core customer deposits have stayed relatively static over the last seven years and grew by 6% in 2015. On the asset side there has been notable growth in liquid assets while the overall loan book has contracted, driven by bank deleveraging. 251

241

233

217

195

43 33

181 29

162

136

14 8

107

2009

110

2010

108

112

2011

101

2012

2013

101

2014

107

2015

2016*

Banks incorporated in Jersey and overseas: Consolidated Liabilities £bn Customer deposits

Bank deposits

Other liabilities and equity

*In both graphs, the figures for 2016 are for Q3, while the figures for previous years are for Q4.

4,400 employees in Jersey’s banking sector

Senior debt issued

Jersey Finance Annual Review 2016

Capital Markets In 2016, Jersey remained a leading jurisdiction of choice for corporate entities seeking to list, retaining the greatest number of FTSE 100 and AIM companies registered outside the UK. The jurisdiction is home to companies listed on stock exchanges in London, Amsterdam, Hong Kong, Toronto, New York. The 96 companies had a total market capitalisation of £241 billion at the end of December 2016.

highlighting its comparability to a UK plc: its shares can be traded directly through CREST, the UK share settlement system, and tax advantages include 0% corporation tax, dividends, interest and royalties free of withholding tax, and shares in Jersey holding companies free of stamp duty. Work commenced on prospectus requirements, and further amendments to the Companies Law, and continued on demerger regulations which will further increase the flexibility and international appeal of Jersey companies once enacted.

Channel Islands Securities Exchange

The order extending the ability for Jersey companies to facilitate the electronic holding and / or transfer of shares was extended in 2016 to include the Johannesburg, Luxembourg and Cyprus exchanges.

The first regulated bitcoin fund to be listed on any exchange globally was admitted to the Official List of the Channel Islands Securities Exchange (CISE) in December 2016.

Jersey remains an attractive place for companies to register. After 2015’s record number of annual incorporations, the first half of 2016 was buoyant with more than 1,200 new companies incorporated, bringing the total on Jersey’s Companies Registry to 33,582 at the end of June.

Global Advisors Investment Fund plc was one of 502 new listings on CISE in 2016, an 18.7% increase on the previous year which brought the total market capitalisation to £393 billion.

In 2016, Jersey Finance promoted the use of Jersey holding companies as listing vehicles by

Jersey companies listed on global exchanges

In November, CISE and the Bermuda Stock Exchange (BSX) signed a memorandum of understanding to explore the opportunities offered by working more closely together.

£241bn market capitalisation

up £61.9 billion on 2015 figures

Sectors Capital Markets

40 42 1 13 quoted on AIM

listed on the main London Stock Exchange

listed on the Specialist Fund Market

listed on other leading international exchanges

companies listed worldwide

quoted in London valued at almost £169 billion

Davictus Plc

western food and beverage franchises in SE Asia and the Far East

notable Jersey holding companies

Glencore Plc

one of the world’s largest diversified natural resource companies

The CISE is best known for listing investment vehicles, including open- and closed-ended fund structures, and international debt securities. BSX provides a fully electronic stock exchange platform to Bermuda’s domestic capital market and is known for supporting the global reinsurance and capital markets through the listing of a variety of investment vehicles such as fund structures and insurance-linked securities. The exchanges agreed to look at areas of both regulatory and commercial cooperation.

33,094 Jersey Companies Registry

– buoyant after a record 2015

Randgold Resources gold mining operations in West Africa and DRC

The Channel Islands Securities Exchange Authority updated its listing rules in September for investment funds listed on the CISE. The updates to Chapter 7 of the rules now encompass all types of investment vehicles, including unregulated investment companies and associated legal entities. The listing rules have also been changed to an approach based on principles and guidance: this sets out overarching principles to be adhered to, with accompanying guidance on how to achieve compliance.

No.1

for non-UK companies on FTSE 100 for three years

Jersey Finance Annual Review 2016

Education and Employment With research indicating that more than 1,000 additional roles are likely to be created in the finance industry over the next five years, Jersey Finance launched several initiatives in 2016 to address the demand for skilled employees. The biannual Employment and Growth Survey, which we carried out in both March and October 2016, found positive employment growth. This confirmed a trend highlighted in government statistics which showed that, in 2015, the total number of staff in Jerseyâ&#x20AC;&#x2122;s finance industry had risen for the second consecutive year, by more than 400, to reach 13,010, the highest figure since 2009.

Projection of demand Almost two-thirds (64%) of respondents to the Employment and Growth Survey indicated that their headcount would grow in the next 12 months. Over the next five years to 2021, the survey projected a net growth of 1,155 new jobs in the finance sector.

26,500 jobs in Jersey sustained directly and indirectly by the finance industry

While this figure cannot be guaranteed, we have tested it and have a reasonable degree of confidence in its reliability. The majority of new jobs are expected to be in trust/company services, real estate/private equity funds, client services and banking. The greatest demand will be for entry-level administrator/officer positions, followed by graduates and manager roles. The majority (89%) of new roles were anticipated as being filled by people who were already Island residents, but the survey indicated that employers were finding it increasingly challenging to recruit sufficiently experienced professionals locally, as the finance sector reached a state of full employment.

Projection of supply Jersey Finance commissioned research in 2015 to identify potential skills gaps and assess the desire of young people to join the finance industry after leaving school. We also surveyed the aims and aspirations of Jerseyâ&#x20AC;&#x2122;s population as a whole. This found that there was a real appetite among more mature workers to re-train and enter or move sector within the finance industry. However, only a fifth of students currently in further education, or planning to attend it, put employment in the finance sector as their first choice and just half (49%) wanted to return and work in Jersey.

71% increase in traffic

to the careers section on our website

Education and Employment

The research also concluded that, while a wide range of specific qualifications were available before or upon entering employment in the finance sector, there was a shortage of some more basic skills, including verbal and written communication skills.

Addressing the demand for employees The research, which shaped our work in 2016, recommended improving the perception of the sector by Island residents, increasing promotion of finance as a career option and enhancing young people’s basic skills, such as numeracy and communication, through education. During 2016, several initiatives were launched to help meet the demand for employees from the Island’s existing workforce where possible:

• An engagement plan to educate local people who are not currently working in finance and those still at school or college. It has reinforced and re-emphasised the value of the industry to Jersey.

website, jerseyfinance.je/careers, increased traffic by 71% and has provided more comprehensive information for career-switchers, as well as information on entry criteria, work placements and bursaries for younger Islanders.

• Our Life in Finance programme placed 41 students in 20 Member firms. We have run the programme since 2010 enabling Year 12 students to experience work in the finance industry.

• We spoke to hundreds of Year 9 –13 students about their career options at the 2016 Jersey Skills Show. Five Member firms took advantage of our presence there to promote their own education programmes directly to young people.

• In order to attract students, interns and secondees, we have encouraged the Government to consider potential amendments to visa, housing and work requirements. We have also discussed specific recruitment shortages and emphasised the importance of off-Island recruitment.

3% 22%

• A relaunch in October of the careers section of our

Employment by sector in Jersey

11% 13%

13%

22% Financial and legal activities

9% Construction and quarrying

13% Public sector overall (excluding former and current trading committees)

7% Miscellaneous business activities

13% Education, health and other services (private sector)

projected net growth

in finance jobs in next five years

1,155

3% Agriculture and fishing 2% Manufacturing

13% Wholesale and retail trades

1% Computer and related activities

11% Hotels, bars and restaurants

1% Electricity, gas and water

13%

1,155

5% Transport, storage and communication

89%

of new roles anticipated as being filled by Island residents

Jersey Finance Annual Review 2016

Membersâ&#x20AC;&#x2122;and Gatekeepersâ&#x20AC;&#x2122; Feedback About the surveys

Findings

Jersey Finance commissioned Ipsos MORI to conduct surveys into the views of both Members and gatekeepers - the wider group of stakeholders identified as potentially providing opportunities for Members to access new business.

This year, scores for favourability and advocacy have significantly increased, and Members recognise some clear strengths in the activities that Jersey Finance undertakes around reputation management and promotion of the financial services sector.

Both surveys sought to benchmark Jersey Finance against key competitors and gather feedback on our performance. We were also able to directly compare the findings of the Members survey to 2015â&#x20AC;&#x2122;s survey. An additional objective of the gatekeeper survey was to assess their business development activity and communications across Europe, Greater China, the Gulf Cooperation Council, India, and Africa.

Jersey Finance also receives high levels of favourability and advocacy compared to the promotional bodies of other international finance centres. This is particularly welcomed as gatekeepers, who are often users of several international finance centres, appear to be more engaged with Jersey Finance than other jurisdictional promotional bodies.

To conduct the survey, Ipsos MORI first contacted Members by email and then conducted 20-minute qualitative telephone interviews. Gatekeepers who had been contacted by Jersey Finance in the last 12 months were sent an email inviting them to take part in the five-minute online study. A dual language option was available for Chinese respondents, with five choosing to answer in Mandarin.

While the interviewed sample of gatekeepers are likely to skew positively towards Jersey Finance, the feedback is useful to assess our engagement strategy.

98%

of Members are favourable towards Jersey Finance

94%

of Members would speak highly of Jersey Finance

Members’ and Gatekeepers’ Feedback

How favourable or unfavourable is your overall opinion of Jersey Finance?

Members

Very favourable Very favourable Mainly favourable Neither favourable Mainly favourable nor unfavourable Neither favourable Mainly unfavourable nor unfavourable Very unfavourable Mainly unfavourable Very unfavourable

Gatekeepers

Gatekeepers are more favourable towards Jersey Finance than competitors’ promotional bodies and almost all Members have a positive view of us.

To what extent would you speak highly or critically of Jersey Finance?

Members

Speak highly without being asked Speak highly without Speak asked highly if asked being Speak highly if asked Be neutral Be neutral Don’t know Speak know critically if asked Don’t without Speak critically if asked being Speak asked critically without being asked

Gatekeepers

Four in five Members would speak highly of Jersey Finance; no one would speak critically, even if asked.

Gatekeepers

High levels of advocacy are largely due to Jersey Finance’s activity around the promotion of Jersey as an international finance centre.

How well do you know Jersey Finance as an organisation?

Members

80%

of gatekeepers are favourable towards Jersey Finance

Very well Very well Fairly well Just little Fairlya well Heard about it Just a little Never it Heard heard aboutabout it Never know heard about it Don’t Don’t know

68%

of gatekeepers would speak highly of Jersey Finance

Jersey Finance Annual Review 2016

Gatekeepers’ Feedback Tax neutrality and a mature and sophisticated legal framework are the most important attributes in an international finance centre for gatekeepers and their clients. Our survey showed that they regard Jersey extremely highly for these and other important attributes.

Gatekeepers prefer to keep up to date via conferences and seminars, and via newsletters, and these have been the main ways in which they have interacted with us. The evidence suggests that these methods are having a positive impact on awareness and perceptions of Jersey as an international finance centre.

The main reasons that gatekeepers and their clients give for using international finance centres:

The attributes that an international finance centre should possess, as ranked by gatekeepers and their clients:

Private wealth structuring and planning

Mature and sophisticated legal framework

Fund formation and management

Tax neutrality

Establishing holding companies

Good quality of professional services providers available

Banking

Positive reputation of the centre

Establishing listing vehicles

Adherence to international standards

Philanthropy

High quality of services

Other

Comprehensive and robust business and communication infrastructure

Don’t know

Being at the front of digitisation and technological innovation Don’t know / prefer not to say

Private wealth structuring and planning is the main reason that gatekeepers give for using an international finance centre, except in the GCC where establishing holding companies comes top.

90%

Increased a little Stayed the same Decreased a little Decreased a lot Don’t know

of Members are satisfied with their interactions with Jersey Finance

A mature legal framework is most important to gatekeepers in Europe and India; Greater China and the GCC prioritise tax neutrality; African Positive reputation of the centre gatekeepers most value the high quality of services. Adherence to international standards Mature and sophisticated legal framework Tax neutrality

73%

High quality of services

Good quality of professional services providers available

of gatekeepers interviewed had met, spoken to, or had contact with a Jersey Finance representative in the previous 12 months

Comprehensive and robust business and communication infrastructure Being at the forefront of digitisation and technological innovation

Presenting a positive view of Jersey’s finance industry

Members’ and Gatekeepers’ Feedback

Mature and sophisticated Mature and sophisticated legal framework legal framework

Private wealth wealth structuring Private and planning structuring and planning Fund formation Fund formation and management and management Establishing holding Establishing holding companies companies

Tax neutrality Tax neutrality Good quality of professional Good quality of professional services providers available services providers available Positive reputation of the centre Positive reputation of the centre

Banking Banking

Adherence to international standards Adherence to international standards

Establishing Establishing listing vehicles listing vehicles

High quality of services High quality of services

Philanthropy Philanthropy

Comprehensive and robust business Comprehensive and robust business and communication infrastructure and communication infrastructure Being at the front of digitisation Being the front of innovation digitisation andat technological and technological innovation

Other Other Don’t know Don’t know

Don’t know / prefer not to say Don’t know / prefer not to say

The proportion of gatekeepers who rate Jersey as ‘good’ or ‘very good’ for possessing key attributes:

Use of Jersey as an international finance centre in the last 12 months:

Positive reputation of the centre Positive reputation of the centre Adherence to international standards Adherence to international standards Mature and sophisticated Mature and sophisticated legal framework legal framework Tax neutrality Tax neutrality

Gatekeepers

High quality of services High quality of services Good quality of professional Good quality of professional services providers available services providers available Comprehensive and robust business Comprehensive and robust business and communication infrastructure and communication infrastructure Being at the forefront of digitisation Being at the forefront of innovation digitisation and technological and technological innovation

JerseyPresenting performs well on reputation a positive view a positive viewabove) and ofPresenting Jersey’s finance industry (75% rate Jersey 8 or of Jersey’s finance industry Supporting the growth adherence to international standards Supporting growth of Jersey’sthe economy Jersey’s economy (73%), but ofhas room to improve on Working together to develop Jersey digitisation and technological innovation. Working toand develop Jersey financial together legislation regulation financial legislation and regulation

Increased a little Increased a little Stayed the same Stayed the same Decreased a little Decreased a little Decreased a lot Decreased a lot Don’t know Don’t know

A quarter of gatekeepers report an increased use of Jersey as an international finance centre in the last year, and nearly half say it has remained the same.

Encouraging local talent Encouraging local talent Facilitating new clients Facilitating new clients and business opportunities and business opportunities Bringing new entrants Bringing new entrants

58%

0-3 0-3

of gatekeepers received a newsletter from Jersey Finance

4-7 4-7

8-10 8-10

52%

of gatekeepers attended an event organised by Jersey Finance

Very effective Very effective Fairly effective Fairly effective Not very effective Not very effective Not at all effective Not at all effective

Tax neutrality Comprehensive and robust business and communication infrastructure High quality of services Jersey Finance Annual Review 2016 Being at the front of digitisation and technological innovation Good quality of professional services providers available Don’t know / prefer not to say Comprehensive and robust business and communication infrastructure

Decreased a little Decreased a lot Don’t know

Other Don’t know

Being at the forefront of digitisation and technological innovation

Members’ Feedback While Members recognise our strengths in Positive reputation of the centre representing a positive view of Jersey’s finance Presenting a positive view industry supporting growth of Jersey’s economy, of Jersey’s finance industry Adherence to and international standards the work thatSupporting Jersey Finance does to bring in new the growth Mature and ofsophisticated Jersey’s economy entrants, and to facilitate legal frameworknew clients and business Working together develop Jersey opportunities, is to not so strongly associated with financial legislation regulation Taxand neutrality us. This is perhaps due to a lack of information or local talent HighEncouraging quality of services unclear expectations of our role in these functions.

and growth opportunities, technical developments that affect business in Jersey and activities for small and medium size Member firms (which is largely driven by smaller firms). Increased a little Stayedvia the same Members engage with Jersey Finance a high Decreased little number of touch points. The most commona of Decreased aand lot the these are our website, reports, newsletters Don’t know events advertising that we produce. Jersey Finance are well attended, enjoyed, and leave Members thinking positively of the organisation.

Facilitating new clients

Good and quality of professional business opportunities Members’ top three priorities for strengthening services providers available relations remain the same as they did in the 2015 new entrants Comprehensive andBringing robust business and communication infrastructureon international markets survey: more information Being at the forefront of digitisation and technological innovation

0-3

4-7

Members rated Jersey Finance’s performance between 0 (very poor) and 10 (very good):

8-10

How effective or not is Jersey Finance at representing your needs?

Presenting a positive view of Jersey’s finance industry

Very effective Fairly effective Not very effective Not at all effective Don’t know

Supporting the growth of Jersey’s economy Working together to develop Jersey financial legislation and regulation

Members

Encouraging local talent Facilitating new clients and business opportunities Bringing new entrants

0-3

4-7

Attracting new entrants to Jersey strongly endorses our success at promoting the industry and supporting economic growth.

8-10

84% say Jersey Finance is effective at representing their needs. Very effective Fairly effective Not very effective Not at all effective Don’t know

84%

of Members consider Jersey Finance to be effective at representing their needs

99%

read a report or briefing comissioned by Jersey Finance

Members’ and Gatekeepers’ Feedback

You said you would speak highly of Jersey Finance, why is that?

“

I think they are unrivalled among promotional bodies in traditional offshore centres…they do such a good job at Jersey Finance that it frees industry to focus on clients and products rather than promoting the Island.

” “

“

They engage extremely well externally in their promotional role, but I think they also do an extremely good job internally within Jersey too.

”

Because they are critical as a promotional body for the finance industry in Jersey. I say critical because they are the only body to represent all pillars of the finance sector holistically. They have technical expertise across the different pillars and are very strong in that area.

”

What would you say are the main challenges for Jersey in relation to its competitor jurisdictions?

“

Managing third-country legislation changes, managing reputation on financial matters and managing global organisations like OECD and EU inclusions.

“

” “ ” ”

Transparency. For example, CRS and FATCA, retaining young talent, taxation changes in the UK. Brexit, contraction of the banking industry.

Ill-informed media attacks on Jersey as a “tax haven” and coping with unfounded criticism.

Jersey Finance Annual Review 2016

Publications

Available to Members In 2016, Jersey Finance’s stable of marketing material grew. Along with all past publications, the new literature is available to Members in print and to download from www.jerseyfinance.je/publications

e Beneficial Solving th nundrum: Co Ownership LUE JERSEY’S VA t and PE y and investmen TO EURO between Jerse the linkages Investigating Union the European prosperity in October 2016

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Melanie Debono Alexandra Dreisin Andrew Evans John Phelan l Mark Pragnel

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Jersey Finance Annual Review 2016

Useful Contacts The Government of Jersey www.gov.je

Jersey Finance Members www.jerseyfinance.je/member-directory

Jersey Financial Services Commission www.jerseyfsc.org

Law Society of Jersey www.jerseylawsociety.je

Jersey Association of Trust Companies www.jatco.org

Jersey Bankersâ&#x20AC;&#x2122; Association www.jerseybankersassociation.com

Jersey Chamber of Commerce www.jerseychamber.com

Jersey Funds Association www.jerseyfunds.org

Chartered Institute of Marketing Jersey Branch www.cimjersey.co.uk

Locate Jersey www.locatejersey.com

Digital Jersey www.digital.je

Jersey Society of Chartered and Certified Accountants www.jscca.org

Jersey International Insurance Association www.jerseyiia.org

Head Office Jersey Finance Limited 4th Floor, Sir Walter Raleigh House 48-50 Esplanade Jersey JE2 3QB Channel Islands T: +44 (0) 1534 836000 E: jersey@jerseyfinance.je www.jerseyfinance.je

@jerseyfinance

linkedin.com/company/jersey-finance

youtube.com/jerseyfinance