Jersey ~ first for finance (seventh edition) 2015 2016 by Jersey Finance

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Published by TIMES Group

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Seventh Edition 2015-2016

JERSEY FIRST FOR FINANCE -

AN AWARD-WINNING

G LOBA L LE ADE R Best Succession Planning and Trusts – Jersey | Euromoney Private Banking and Wealth Management Survey 2015 Trust Company of the Year – Jersey and Hong Kong | Citywealth International Financial Centre Awards 2015 Top 25 Most Admired Companies | eprivateclient 2015 Trust Company of the Year | STEP Private Client Awards 2014/2015 Outstanding Wealth Planning and Trust Provider | Private Banker International Global Wealth Awards 2014

Seventh Edition 2015-2016

I N TRUST AND FIDUCIARY SE RVICES

Institutional Trust Company of the Year – Hong Kong and Singapore | WealthBrieﬁng Asia Awards 2014 Institutional Trust Company of the Year | Citywealth Magic Circle Awards 2014 Top 25 Trust Companies | eprivateclient 2014

TO LEARN MORE, PLEASE CONTACT +44 (0) 20 7029 7580 OR TRUSTINFO@RBC.COM. VISIT US ONLINE AT RBCWEALTHMANAGEMENT.COM

RBC356/CA/2729/March 2016

Published by TIMES Group

This advertisement has been issued by Royal Bank of Canada on behalf of certain RBC ® companies that form part of the international network of RBC Wealth Management. This advertisement does not constitute an offer of products or services to any person in any jurisdiction to whom it is unlawful for RBC Wealth Management to make such an offer.RBC Wealth Management provides trust and ﬁduciary services via the principal operating companies detailed below:Royal Bank of Canada Trust Company (Bahamas) Limited (regulated by the Central Bank of the Bahamas); Royal Bank of Canada (Caribbean) Corporation and Royal Bank of Canada Financial Corporation (regulated by the Central Bank of Barbados); Royal Bank of Canada Trust Company (Cayman) Limited (regulated by the Cayman Islands Monetary Authority); Roycan Trust Company SA; RBC Trustees (Guernsey) Limited (Registered company number 37379 regulated by the Jersey and Guernsey Financial Services Commissions); Royal Bank of Canada Trust Company (Asia) Limited (regulated by the Mandatory Provident Fund Schemes Authority); RBC Trust Company (International) Limited (Registered company number 57903: regulated by the Jersey Financial Services Commission); Royal Bank of Canada Trust Corporation Limited; RBC Trust Company (Singapore) Pte.Ltd (registered company number 198702460K regulated by the Monetary Authority of Singapore, licence number TC000053-1). The Private Client Fiduciary Services Terms and Conditions are updated from time to time and can be found at www.rbcwminternational.com/terms-and-conditions-British-Isles.html ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. 45_08940_005

Jersey’s global reach I Funds I Private equity I Trusts I Philanthropy Corporate services I Compliance I Banking & finance I Jersey roundtable I FinTech

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Welcome to Moore

WE ARE A

F I R S T/ N A M E S GROUP COMPANY

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Published by

Time International Media & Events Services Ltd. 3-4 Rumsey House, Locks Hill, Rochford, Essex, SS4 1BB, UK. T: +44 (0)1702 53 0000 | F: +44 (0)1702 53 3088 | E: mail@timesgroup.co.uk | W: www.timesgroup.co.uk In partnership with

Jersey Finance Limited 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB, Channel Islands. T: +44 (0)1534 836000 | F: +44 (0)1534 836001 | E: info@jerseyfinance.je | W: www.jerseyfinance.je

N.B. This publication has been produced by the Times Group without any financial contribution from Jersey Finance Limited. Publication Consultants Louise Ashworth, Head of Marketing, Jersey Finance Limited Peter Musker, Marketing Officer, Jersey Finance Limited Editorial Department Wayne Fessey, Editor John Willman, Consulting Editor Production Department Design Vision (UK) Ltd., Design & Production designvision123@yahoo.co.uk Clare Brown, Production Coordinator Publisher Kevin Sammon Directors Mark Brown and Kevin Sammon Acknowledgements: The editor would like to thank the following individuals and organisations for their invaluable assistance towards producing this publication: Cathy Keir – States of Jersey • John Harris – Jersey Financial Services Commission • Geoff Cook, Louise Ashworth and Peter Musker – Jersey Finance Ltd • Mike Sunier and Adam Riddell – Crystal PR The views expressed in Jersey ~ First for Finance are not necessarily shared by Jersey Finance Limited, nor should they be taken as the views of the editor or Time International Media & Events Services Ltd. (the publishers). Jersey Finance Limited has not sought to dictate the content of the articles appearing within this publication. The views expressed are those of the individual contributors. No responsibility or liability is accepted by Jersey Finance Limited, the editor or the publishers for any loss occasioned to any person, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in Jersey ~ First for Finance. The publication of advertisements does not in any way imply endorsement by Jersey Finance Limited, the editor or the publishers, of the products or services referred to therein. The entire contents of this publication are protected by copyright, full details of which are available on request. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission from Time International Media & Events Services Ltd. or Jersey Finance Limited.

Jersey-First for Finance

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240 YEARS IN THE CITY AND WE’RE STILL THINKING LIKE BRIGHT YOUNG THINGS We are perhaps one of the industry’s best kept secrets and to this end we’d like to share some of our secrets with you. Call Tim Childe, Head of Jersey Office on 01534 506 070 or visit www.quiltercheviot.com

Investors should remember that the value of investments, and the income from them, can go down as well as up. Quilter Cheviot Limited is registered in England with number 01923571. Quilter Cheviot Limited is a member of the London Stock Exchange, authorised and regulated by the UK Financial Conduct Authority and regulated under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom.

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ADDITIONAL RESOURCES

ADDITIONAL RESOURCES JERSEY FINANCE www.jerseyfinance.je Jersey Finance is the official body funded jointly by Jersey’s Government and Finance Industry to represent and promote the Island as an international finance centre of excellence, both within and outside the Island. JERSEY GOVERNMENT AND REGULATION

JERSEY

www.gov.je The official website of the Government of the Island of Jersey.

JERSEY FINANCE OFFICES Jersey Jersey Finance Limited, 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB Tel: +44 (0)1534 836000 | Fax: +44 (0)1534 836001 | Email: jersey@jerseyfinance.je

www.locatejersey.com The official website of Locate Jersey which assists individuals or organisations looking to relocate to the Island.

London Jersey Finance Limited, 4th Floor, 2 Queen Anne’s Gate, London SW1H 9BP Tel: +44 (0)7908 274694 | Email: london@jerseyfinance.je Hong Kong Jersey Finance Limited, Room 5, 20th Floor, Central Tower, 28 Queen’s Road Central, Central, Hong Kong Tel: +852 2159 9652 | Fax: +852 2159 9688 | Email: china@jerseyfinance.je Shanghai (Launchpad presence with CBBC) Unit 1708, Garden Square, 968 Beijing Road, W Shanghai 200040 Tel: +86 21 3100 7900 Ext.226 | Fax: +86 21 6229 0001 | Email: garry.zhao@jerseyfinance.je Abu Dhabi Jersey Finance Limited, Regus Sowwah Square, 34th Floor, Al Maqam Tower, Abu Dhabi UAE Tel: +971 (0)2 418 7533 | Email: abudhabi@jerseyfinance.je Dubai Jersey Finance Limited, Level 41, Emirates Towers, Dubai, UAE PO BOX 31303 Tel: +971 (0)4 319 9923 | Email: gary.hales@jerseyfinance.je

Mumbai Jersey Finance Limited, (Sannam S4) 9SE, 9th Floor The Ruby, 29 Senapati Bapat Marg Dadar (West) Mumbai 400028 Tel: +91 (0) 22 6742 3211 | Email: india@jerseyfinance.je

INDEX OF ADVERTISERS 7 30 5 9 55 66 115 27 62 61 IBC 34 71 116 18

For details on Jersey residency contact: k.lemasney@gov.je DIGITAL JERSEY www.digital.je Working alongside government and industry, Digital Jersey coordinates activities towards improving the Island’s environment as a location of choice for digital business. THE JERSEY DEVELOPMENT COMPANY

Delhi Jersey Finance Limited, (Sannam S4) 3rd Floor, Devika Tower 6, Nehru Place, New Delhi - 110019 Tel: +91 11 42124102 | Email: india@jerseyfinance.je

ADCB Ashburton Investments Baker & Partners BNP Paribas Carey Olsen Collas Crill Comsure Group Crestbridge Deutsche Bank Equiom First Names Group HSBC Expat Infrasoft Technologies Jersey Limited JT JTC

www.jerseyfsc.org The Jersey Financial Services Commission, responsible for the regulation and supervision of the Island’s financial services industry.

www.jerseydevelopment.je The Jersey Development Company (JDC) - wholly owned by the States of Jersey – develops States’ land and property assets no longer required for public service and the Waterfront development.

Kendrick Rose Logicalis Moore Management Moore Stephens Fund Administration Nedbank Private Wealth Limited Ogier PINEL Advocates PwC Channel Islands Quilter Cheviot RBC Wealth Management SANNE Sator Regulatory Consulting Limited Sure International Touchstone Viberts Voisin and Volaw

10 13 IFC 88 14 25 91 75 2 92, OBC 81 48 112 95 96, 97 102

Jersey-First for Finance

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CONTENTS

Contents 11

PREFACE By Senator Ian Gorst, Chief Minister, States of Jersey

FOREWORD By Joe Moynihan, Director of Financial Services, States of Jersey

INTRODUCTION By Geoff Cook, Chief Executive, Jersey Finance

OUTLOOK

Outlook 2015 By Bill O’Neill, Head of CIO Wealth Management Research UK and Dean Turner, UK Economist, UBS Wealth Management

JERSEY: A STERLING REPUTATION

Jersey’s broadening role as a gateway into European markets By Robert Christensen MBE, Chairman, Jersey Finance

JERSEY’S GLOBAL REACH

Jersey’s External Relations By Senator Sir Philip Bailhache, Minister for External Relations, States of Jersey

Jersey’s ever expanding international reach By Richard Corrigan, Deputy Chief Executive, Jersey Finance

Jersey Finance 2015 Roundtable

LEGAL SYSTEM

Robust and responsive legal support By Timothy Le Cocq QC, HM Attorney General, Jersey

REGULATION, SUPERVISION & COMPLIANCE

Addressing a dynamic regulatory environment By John Harris, Director General, Jersey Financial Services Commission (JFSC)

Jersey’s evolving AML /CFT regime By Helen Hatton, Managing Director, Sator

CORPORATE SERVICES

Enhancing Jersey’s cutting edge corporate law By Robin Smith, Partner, Carey Olsen

Jersey-First for Finance

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Stephen Baker

William Redgrave

Simon Thomas

UNRAVELLING COMPLEX ISSUES CONTENTIOUS TRUSTS We are specialists with a reputation for excellence; offering clear, independent advice and practical solutions to contentious trust issues. We employ the sharpest legal minds, able to deliver the level of responsiveness and attention to detail you would expect from an JOUFSOBUJPOBM MBX mSN XJUI TXJGU JOTJHIUGVM BOE DPODMVTJWF SFTVMUT To achieve your objectives, contact Stephen Baker, Senior Partner via stephenbaker@bakerandpartners.com. www.bakerandpartners.com

YOUR LEGAL EXPERTS

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CONTENTS

Contents BANKING & FINANCE

Jersey’s attractiveness for banks and their customers By Richard Ingle, President, Jersey Bankers Association (JBA)

Jersey’s adaptable and innovative banking industry By Andreas Tautscher, Chief Country Officer, Deutsche Bank

Expats expect a tailor-made service By Dean Blackburn, Head of HSBC Expats

ACCOUNTING

Representing accountants in Jersey for 40 years By Andrew Quinn, President, Jersey Society of Chartered and Certified Accountants (JSCCA)

MARKETS & EXCHANGES

Jersey and the capital markets AIMing for the top By Sara Johns, Managing Associate, Ogier

FUNDS

A forward looking funds industry By Ben Robins, Chairman, Jersey Funds Association (JFA)

Jersey’s international standing as a funds jurisdiction By Maxine Rawlins, CEO and Claire Keeney, Head of Funds, Hawksford Group

CLEANTECH

Recognising the power of cleantech By Nigel le Quesne, Group CEO & Chairman, JTC

PRIVATE EQUITY

The rise of private equity in Jersey By Andrew Weaver, Partner, Appleby

Jersey-First for Finance

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Where your success works for your successors. 0ลขTIPSF #BOLJOH Security for the future. Itโ s what all ambitious people aspire to. With ADCB, youโ re now able to ensure that your IBSE FBSOFE XFBMUI JT QSPUFDUFE JO B XBZ UIBU HJWFT ZPV HSFBUFS DPOUSPM PG ZPVS ลฃOBODJBM SFTPVSDFT 0VS 0ลขTIPSF Banking Jersey branch is accessible via our award-winning online banking facility or in branches and ATMs throughout the UAE. "%$# 0ลขTIPSF #BOLJOH ล +FSTFZ #SBODI JT B SFHJTUFSFE CVTJOFTT OBNF PG "CV %IBCJ $PNNFSDJBM #BOL 1+4$ +FSTFZ #SBODI ล "%$# +FSTFZล XIJDI JT SFHVMBUFE CZ UIF +FSTFZ 'JOBODJBM 4FSWJDFT $PNNJTTJPO *UT QSJODJQBM QMBDF PG CVTJOFTT JO +FSTFZ JT )JMM 4USFFU 4U )FMJFS +& 6" 5IF SFHJTUFSFE IFBE PลฅDF PG "CV %IBCJ $PNNFSDJBM #BOL JT BU "CV %IBCJ $PNNFSDJBM #BOL )FBE 0ลฅDF #VJMEJOH 4IFJLI ;BZFE 4USFFU 1MPU $ 4FDUPS & 1 0 #PY "CV %IBCJ 6 " & "CV %IBCJ $PNNFSDJBM #BOLล T MBUFTU ลฃOBODJBM TUBUFNFOUT NBZ CF WJFXFE BU XXX BEDC DPN "%$# +FSTFZ JT B QBSUJDJQBOU JO UIF +FSTFZ #BOL %FQPTJUPST $PNQFOTBUJPO 4DIFNF 5IF 4DIFNF PลขFST QSPUFDUJPO GPS FMJHJCMF EFQPTJUT PG VQ UP b 5IF NBYJNVN UPUBM BNPVOU PG DPNQFOTBUJPO JT DBQQFE BU b JO BOZ ZFBS QFSJPE 'VMM EFUBJMT PG UIF 4DIFNF BOE CBOLJOH HSPVQT DPWFSFE BSF BWBJMBCMF PO UIF 4UBUFT PG +FSTFZ XFCTJUF XXX HPW KF EDT PS PO SFRVFTU * Terms and Conditions apply.

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CONTENTS

Contents TRUSTS

Jersey’s trust industry 30 years on By Alan Binnington, President, Jersey Association of Trust Companies (JATCo)

WEALTH MANAGEMENT

Vive la Difference By Ann Marie Vibert, Head of Private Client Wealth Management, RBC

PHILANTHROPY

103 Jersey: international centre for philanthropy By Zillah Howard, Partner, Bedell Cristin

ISLAMIC FINANCE

109 Family governance and succession planning: emerging trends in GCC By Siobhan Crick, Director, Private Client, Sanne

ICT

113 Jersey: an ideal environment for FinTech By Paul Masterton, Chairman, Digital Jersey

117 FOCUS ON: JT Mobile Intelligence By James Trenholme, Head of Wholesale Business Development, JT

119 FOCUS ON: A Sure thing from Jersey to the World By Graham Hughes, Chief Executive, Sure (Jersey)

JERSEY’S ECONOMIC DEVELOPMENT

121 Jersey’s economic evolution By Senator Philip Ozouf, Assistant Chief Minister, States of Jersey

ON THE HORIZON

125 Jersey: responding to what is on the horizon By Colin Powell CBE, Adviser – International Affairs to the Chief Minister, States of Jersey

Jersey-First for Finance

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Greatness starts somewhere.

keep reaching BNP Paribas, partnering tennis with passion for over 40 years.

bnpparibas.je

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WOMEN IN BUSINESS As a woman in business, it would be great to see more women on the ‘network circuit’. Much has been written lately on the subject, particularly following the UK government report of Women on Boards as reported by Lord Davies where, interestingly, amongst other factors, it is noted that a lack of networking by women is a major contributing factor to their lack of success. Or maybe, as one female HR Director recently commented to me, it’s because the non feeearning women in senior roles simply don’t get invited? There is now some great work being done locally in the Channel Islands to represent women at senior level. The Jersey Community Relations Trust (JCRT) is committed to supporting women to achieve their career ambitions in business. In 2012, the Trust released the first report of its kind on the status of women in Jersey. The report considered issues of inequality and discrimination affecting women and highlighted areas that require urgent action. Since then, in 2014 the Trust has held a seminar titled ‘Advancing Women in Politics & Public Life’ with a keynote address by The Right Hon Dame Tessa Jowell. The Trust has also initiated the ‘WIB Series for 2014, (Women in Business) a campaign to support more women to achieve board positions.

Shelley Kendrick, Managing Director of executive recruitment specialist and HR consultancy, Kendrick Rose, discusses gender diversity at senior level

THE BOARD APPRENTICE SCHEME The recently launched Board Apprentice Scheme has been initiated by independent executive NED Charlotte Valeur. The issue of board diversity is being discussed around the world, with a current emphasis on gender diversity. Many countries have implemented quotas to force the issue; The Board Apprentice Scheme offers an immediate solution, by introducing apprentices into the boardrooms of UK and Channel Islands companies. Kennedy Wilson Europe Real Estate Plc., a Jersey domiciled FTSE250 company, were the first to agree to take on a Board Apprentice in 2014. Please contact us if you would like to find out more information and contribute your talents to help create more diversified, better performing boards.

www.kendrickrose.com

Meticulous selection Kendrick Rose is a recruitment, resourcing and HR solutions company dedicated to providing a first class service delivered with the utmost professionalism. Our focus is on supplying superior services to our clients which will enable them to accomplish their goals, by providing industry expertise combined with professionalism, efficiency and accessibility. We achieve this through our meticulous selection of candidates. We match an individual’s competency and aspirations with an organisation’s culture and ethos. We are passionately dedicated to resourcing excellence. We also provide a range of strategic HR consultancy services to our clients, providing specialist advice and HR solutions to assist them in meeting their organisational goals. Shelley Kendrick, owner and founder, is a Fellow of the Chartered Institute of Personnel and Development. Kendrick Rose is based in Jersey and operates from offices based at Lister House Chambers, First Floor, 35 The Parade, St Helier. To find out more about how we can help you, contact Shelley Kendrick on 01534 715150 or 07797 744254 or email shelley.kendrick@kendrickrose.com

RECRUITMENT AND SELECTION | RESOURCING STRATEGIES | HR SOLUTIONS

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P R E FA C E

Preface By Senator Ian Gorst

ersey’s financial services industry has demonstrated an innovative and resilient approach to many years of change in the global economy. It has one of the highest gross national incomes per capita in the world and compares well with top performing jurisdictions in the OECD’s ‘Better Life Index’ for overall life satisfaction, personal safety and social support networks. The Island is home to a highly respected international financial centre with a valued reputation for stability. Jersey is in a strong position to build on these firm foundations, laid down over many generations. During the difficult years of the downturn we followed the advice of our Fiscal Policy Panel and put more money into the economy, supporting businesses and jobs. We set up an Innovation Fund and established Jersey Business to support local firms. We commissioned a review of Jersey’s financial services sector so we could maintain the success of the industry for the future and we published our Financial Services Policy Framework, setting out how Government, industry and regulator will work together to shape the future direction of the industry. The Government has consistently made necessary decisions to deal with emerging challenges on taxation, pensions and international standards and, through a policy of prudence, has substantial financial reserves. These strengths are reflected in our international credit rating, AA+ with a stable outlook, one of the best ratings possible for a jurisdiction of this size. We have adapted as the marketplace has changed and we need to maintain this nimble approach to global developments if we are to capture our share of an increasingly competitive global market for financial services. We must be aware of trends that affect our Island and cannot take the future for granted. Like many other jurisdictions, Jersey is facing significant economic, social and environmental changes, and while we are seeing improvements in our economy, our income is rising at a slower rate than in the past. Our Government has highlighted four priorities that we believe will ensure Jersey adapts to this fast-changing world. Those priorities are: health, education, economic growth and the regeneration of our capital, St Helier. As our population ages and as medical science enables us to treat more illnesses, health care is becoming more specialised and more expensive. We need to change the way we provide health services and that will cost a significant amount. We are focusing on finding savings in the public sector to help safeguard investment in health care. We also need to support economic growth to help us to meet these costs. Ministers will be working to create the conditions that will foster economic growth. We will support increased productivity across the economy and encourage new business start-ups. We want people to work smarter, not longer, and we will be helping businesses find new and innovative ways to embrace technology. We will stimulate inward investment and enterprise, and provide quality office space in a modern, vibrant town that is the engine of our economy. We plan to preserve the best of St Helier’s history, while accommodating a new finance centre, a distinctive retail centre and high quality homes and public amenities. A properly planned town can provide attractive homes and open spaces while protecting the coast and countryside from development. Of course a successful community and a competitive financial services industry require people with the right skills to sustain them. Our schools need to prepare young people for the jobs that a modern island economy can deliver. Jersey is globally competitive and needs a highly skilled workforce, so we will be focusing on raising standards and teaching the skills employers need. The Education Minister is giving head teachers the autonomy to lead creatively and inspire their students, and he is building stronger links between schools and businesses, so young people can leave school with an understanding of the world of employment, a good grasp of technology and a ‘ready for work’ approach.

Jersey-First for Finance

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P R E FA C E

Photo: Chris George

While we are still operating against a backdrop of instability in the global economy, we have worked hard to ensure we can come out of the financial crisis stronger than at the start. We have taken steps to increase our efficiency, to cut costs, to encourage investment and innovation, and we are sticking to our long term economic plans. The difficult decisions we have taken in the past have put us in a stronger position for the emerging economic recovery, our entrepreneurial spirit is alive and well, and we are ready to take bold, decisive action to secure the long term quality of life in our Island. We will now seize the opportunities to increase economic growth and that means increasing productivity, encouraging inward investment and dismantling barriers to trade. One of our strengths is the enterprise of our people. Our latest figures show that half of the businesses active in the private sector were singleperson undertakings. As we recover from a long and difficult recession, we remain a creative, innovative island community that has avoided complacency and is working hard to create jobs and growth. Our Gigabit project is bringing the next generation of broadband services to every home and business in Jersey. Superfast broadband will provide speeds of up to one gigabit, the fastest for a residential network in the western world, and will underpin our push to promote digital start-ups and to support the development of FinTech.

“We have established a steering group to advise on the actions required to ensure Jersey remains a top-rated international finance centre. Government is working closely with Jersey Finance in the delivery of this vital work to ensure that our legislation remains competitive” Jersey-First for Finance

We are open to competition and inward investment, we are promoting innovation in new technologies and supporting Visit Jersey to bring new generations of visitors to appreciate the unique beauty or our home. We have established a steering group to advise on the actions required to ensure Jersey remains a top-rated international finance centre. Government is working closely with Jersey Finance in the delivery of this vital work to ensure that our legislation remains competitive. I am committed to ensuring we maintain our well-earned reputation for quality financial services. We are maintaining a prompt response to market needs, high standards and an innovative approach to new business opportunities. I look forward to continuing to make a positive contribution to international business flows and to steering our community through the years to come.

Senator Ian Gorst Senator Ian Gorst is the Chief Minister of Jersey. Senator Ian Gorst was first elected as Chief Minister of Jersey on 14th November 2011 and re-elected on 3rd November 2014. First elected to the States Assembly in 2005, Senator Gorst’s previous role was as Minister for Social Security. He also served concurrently as Chairman of the Jersey Overseas Aid Commission. Previously, he was an Assistant Minister in both the Chief Minister’s Department and in the Treasury Department. Senator Gorst is an accountant with significant experience in private client, private equity and retail fund sectors. Married to Dionne, they have two daughters, Sophia and Lily-Mim. Senator Gorst is actively involved in the church and serves as a Governor at Le Rocquier School. He has a keen interest in overseas development and he and his wife have travelled to participate in Jersey Overseas Aid Commission projects. He is also an Honorary Fellow of UNICEF UK.

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www.je.logicalis.com | www.gg.logicalis.com

Focus on Your Core Business. Logicalis will deliver your IT. IT is at the core of most businesses today. But what technology is right for your business? With all this talk about Cloud, hosting, virtualisation, BYOD, Big Data and the like it can be difficult to know which way to go. An IT partner should be able to help here. Business leaders doní t need an IT partner to sell to them – they need someone who will become an impartial and trusted adviser, just as they would select and use their financial adviser, legal services provider, and accounting professionals as specialist partners. Advisers who will consider their individual requirements, and understand their wishes, and constraints. At Logicalis we seek to understand what a business needs, what would be a good fit and offer the customer greater choice in how they own and consume IT.

Call Jersey on 288088 or Guernsey on 737000 for a free no obligation and conﬁdential discussion on how Logicalis can help your business to make the right IT Choice.

Gettingg Business and Technology gy working as one Enable technology and business to work better together Improve efficiency of corporate IT resources Maximise value from past investments Embrace new technologies with confidence Exploit new ownership and consumption models Enable new user experiences and services Address security with confidence

Guernsey +44 (0) 1481 737 000 | Email solutions@gg.logicalis.com | Jersey y +44 (0) 1534 288 088 | Email solutions@je.logicalis.com

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FOREWORD

Foreword By Joe Moynihan

ersey has done well to avoid much of the complacency that comes from assuming existing products and markets will never change. Our ability to maintain a successful international finance centre has been facilitated by our talent for adapting to market conditions and business needs. In 2013, the Jersey Government supported a Strategic Jurisdictional Review undertaken by McKinsey entitled Securing Jersey’s future as a leading international finance centre. The Government’s Financial Services Industry Policy Framework released in April 2014 was informed by the jurisdictional review. This document clearly articulates the Government’s view of the future of financial services in Jersey. In conjunction with Jersey Finance and the Jersey Financial Services Commission (JFSC), the Government is committed to delivering the recommendations of the strategic review. Against a backdrop of continued uncertainty in financial markets and international economies and external pressures in the form of both regulatory change and a drive on transparency and information exchange, Jersey remains committed to its core strength, the ability to adapt and develop on its strong foundations. The Financial Services Unit of the Chief Minister’s Department is the Government’s conduit for change in this area and in 2014 we have seen significant progress in delivering the objectives of the strategic review. There are two particular areas I would like to focus on specifically, working together and innovation. A key recommendation of the strategic review was improving the working relationship between the Government, the JFSC and the industry. In 2014 we saw significant progress in this regard with a strong collaborative approach by all parties. The results of this approach combined with our ability to innovate, are already showing benefits for Jersey – in 2014 a number of pieces of legislation were introduced quickly through the positive approach and hard work by all parties. A particular example of this was an Order made under the Financial Services Law by the Chief Minister in November 2014 relating to qualifying segregated managed accounts. This legislation was a hedge-fund manager-orientated initiative and was designed to facilitate the establishment of more of this business in the Island. The Order enables both a streamlined and proportionate approach to regulation in this important area of business for Jersey. The JFSC has received a number of notifications of reliance on the Order and this legislation continues to be a key tool in attracting hedge-fund business to the Island. Active promotion of this area is ongoing by Jersey Finance in overseas markets in which opportunities have been identified. Regulatory change continues across the industry driven by global trends. Evolving international standards means that standing still is not enough, complacency is unacceptable. The Government is committed to working with the Regulator to legislate for the right regulatory environment for business to flourish. However, the regulatory environment must also reflect Jersey’s consistent commitment to meeting global international standards that are widely adopted. To support these aims, 2014 saw the signing of a new Memorandum of Understanding with the JFSC that clearly recognises the partnership required between Government and the regulator. Indeed 2014 was a significant year of change in regulatory legislation. In addition, significant efforts were expended preparing for the on-site assessment of Jersey by MONEYVAL in January 2015 in relation to compliance with international anti money laundering and countering the financing of terrorism standards. This work has been spearheaded by the Financial Crime Strategy Group which includes representation from all insular agencies involved with tackling financial crime. The new closer working relationship is, in my view, the only method of ensuring that the right message about the position of Jersey in relation to international standards is communicated to the wider world. The course of 2015 will see a process of finalising the MONEYVAL report on Jersey where the close working relationship between all parties will continue to be crucial to ensure the Island’s international ratings remain consistent with that of a high quality international finance centre.

Jersey-First for Finance

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FOREWORD

“Innovation in the corporate structure of the Jersey company is key to retaining a competitive advantage whether it is for the purpose of market listings or alternatively for efficient corporate structuring for businesses of all types wishing to incorporate in Jersey” The banking sector is another area of the industry that has become subject to external change in the last year. The UK decision to implement the Independent Commission on Banking’s recommendations, particularly regarding the creation of ‘ring fenced banks’ and the subsequent decision not to allow non EU/EAA businesses to be part of the ring fence, has implications for the affected banks in the Island. The implications of this issue vary from bank to bank with the affected banks strategic proposals currently under consideration by the Prudential Regulatory Authority in the UK. Some of the banks located in the Island believe the changes will have a positive impact on their businesses. This is not the only change that the banking industry is facing with further external regulatory pressure in the liquidity and capital areas.

Photos: Chris George

Jersey-First for Finance

Last year saw a change in the licensing policy of the JFSC with a move away from the previous ‘top 500’ rule. This was done in partnership with the Government and the industry and represents a new and more

innovative way to consider applications for a banking licence. This approach strengthens ongoing marketing activity in the banking sector and it is anticipated that significant work in this sector will attract new entrants to the market place from more diverse jurisdictions in the future whilst maintaining the high quality of banks that operate in Jersey. Wealth management continues to be one of the core offerings in the Jersey financial services industry. In 2014, the Trusts Law celebrated its 30th birthday and Jersey now has the largest branch of STEP members of any jurisdiction in the world – these are significant achievements. Global consolidation of wealth management business has also favoured Jersey with significant inward movement of business during 2014. There is also continued innovation in the sector; a push to develop philanthropic wealth management in Jersey took a significant step forward in July 2014 when the Chief Minister took the Charities (Jersey) Law 2014 through the States Assembly. In 2015 we will see the implementation of that Law between the Government, regulator and the industry and a further push to enhance this sector. There is a further amendment to the Trusts Law in the pipeline representing a year of joint industry and Government work during 2014 – I anticipate that when consulted upon in 2015, Jersey will again be the talking point of the private wealth management world retaining our innovative and world leading reputation in this area. Innovation has also been evident in the corporate world with the eleventh amendment to the Companies Law being enacted in 2014. The Companies Registry has approximately 33,000 registered companies and anticipates this number will increase in the coming years. Innovation in the corporate structure of the Jersey company is key to retaining a competitive advantage whether it is for the purpose of

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FOREWORD

market listings or alternatively for efficient corporate structuring for businesses of all types wishing to incorporate in Jersey. Jersey’s funds industry continues to provide a good growth story for the Island. It is anticipated that this will continue, both in asset classes such as real estate and private equity and in new areas – building on the initial success Jersey has had with the establishment of alternative asset class managers in the jurisdiction. One of the key findings of the Strategic Jurisdictional Review was the need to simplify the funds offering in Jersey. Work has been ongoing for the last 12 months through the partnership with the JFSC and with the industry through an expert working group. Further work on this will continue during the coming year in the aim to find the best solution for Jersey. The changes I have touched upon here are only the tip of the iceberg as to why Jersey has a key competitive advantage in the financial services marketplace. We take pride in our roots as an international finance centre of substance and by recent collaboration and innovation we are committed to place Jersey in the best possible position to take advantage of all viable opportunities.

Joe Moynihan Joe Moynihan is Director of Financial Services for the States of Jersey. This role provides advice to government Ministers on all aspects of financial services policy. In addition, working with Jersey’s financial services marketing and regulatory bodies, he helps ensure that the financial services sector remains globally competitive. Prior to his current position he had been with AIB Group for over 35 years working in Ireland and Britain and has been based in Jersey since 1993. He was appointed Chief Executive Officer of AIB Jersey and Isle of Man in February 2007, with responsibility for running the bank’s offshore operations in Jersey and the Isle of Man, setting strategic direction and representing the offshore business at AIB Group level. Joe is a graduate member of the Institute of Bankers in Ireland and holder of an MBA from CASS University in London. He is a Past President of the Jersey Bankers Association and a member of the Jersey branch of the Institute of Directors.

“Jersey’s funds industry continues to provide a good growth story for the Island. It is anticipated that this will continue, both in asset classes such as real estate and private equity and in new areas – building on the initial success Jersey has had with the establishment of alternative asset class managers in the jurisdiction”

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INTRODUCTION

Introduction By Geoff Cook

he past 12 months have continued to provide challenges to the global financial services arena but Jersey’s reputation as a specialist finance jurisdiction of stability and substance has continued to grow in key markets worldwide. Whilst offering a stable commercial environment that inspires certainty and confidence amongst international investors, Jersey has also responded to global moves for greater transparency and invested both time and resources to ensure it continues to be innovative in the provision of services and the quality of its regulation and legislation. Built on a platform of tax neutrality and political and economic stability, Jersey’s success has been fuelled by its focus on high quality levels of service and its impressive network of specialist firms to provide substance and support to investors. Jersey’s finance industry employs over 12,500 people, the largest financial services workforce of any of the British Crown Dependences and Overseas Territories. International banking groups with offices in Jersey employ close to 5,000 of that number, whilst all the major professional service firms are represented and so are many of the largest international law firms. There are also many leading fund managers and fund administrators, custodians and advisers and some of the world’s largest trust companies. Jersey’s workforce includes more than 1,200 members of the Society of Trust & Estate Practitioners (STEP), the largest branch of STEP in the world. Meanwhile, in what is an important election year in the UK, Jersey continues to explain its positive role in a global context and to that end, in 2014 two significant reports were published - Moving Money, published by two US academics, Richard Gordon and Andrew Morris, which challenged criticisms of the role of International Finance Centres (IFCs) and analysed their vital contribution to the global economy, and Jersey’s Value to Africa, produced by Capital Economics, which set out the potential for Jersey to make a significant contribution to the development of Africa through facilitating inward infrastructure investment. Against a politically charged backdrop, this type of evidence based research continues to be vitally important in putting factual information in the hands of policy makers. Appeal Recent figures are testament to the fact that Jersey retains genuine appeal for a broad range of financial services. Jersey’s banking sector continues to attract capital from around the world, with deposits remaining steady throughout 2014, peaking at around £139 billion in the first quarter of 2014 – more than the total value of deposits held in the other Crown Dependencies combined. Meanwhile, the funds sector perhaps provided the biggest success story of 2014. In a year that saw the introduction of the Alternative Investment Fund Managers Directive (AIFMD), the funds industry continued to grow, with the value of assets under administration now at their highest level in seven years, around £229 billion, led by the alternative asset classes. Within the private wealth sector, meanwhile, Jersey’s trust legislation celebrated its 30th anniversary last year and the Jersey foundation continued to go from strength to strength with a total of almost 300 such structures having now been formed. In the rapidly growing capital markets sector, listings business through Jersey in 2014 was well up on previous years. There are now 110 Jersey companies listed on exchanges around the world with a total market capitalisation of £269 billion – an annual increase of 62%. Jersey also has the greatest number of AIM listed companies outside the UK and retains the greatest number of non-UK companies on the FTSE 100 index. These strengths have led to Jersey being recognised in numerous awards – last year, for the second year running, Jersey was judged to be the IFC of the Year in both the Citywealth IFC Awards and the Wealthbriefing European Awards. Jersey was also named the Best International Financial Centre in the Professional Adviser International Fund and Product Awards and, also for the second consecutive year, was named Best Fund Administration Centre by Investment Week.

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“a change to Jersey’s legislation in November designed to simplify and encourage the establishment of hedge fund management businesses in Jersey is helping to bolster the jurisdiction’s standing as a centre for hedge fund business” Regulation On the regulatory front, Jersey is focused on ensuring it has the frameworks in place to offer innovative products and services in a robust environment, and early last year the industry welcomed the publication of the Government’s Financial Services Framework, which proposed policy developments that reflect changes in the industry and the financial environment since the crisis. Of particular note in 2014 was the implementation of the AIFMD, and Jersey’s regulatory changes in response to the Directive are already proving attractive to this fast-growing class of fund managers. Also in the funds sector, a change to Jersey’s legislation in November designed to simplify and encourage the establishment of hedge fund management businesses in Jersey is helping to bolster the jurisdiction’s standing as a centre for hedge fund business. Meanwhile, Jersey has been leading the way in providing attractive and flexible charitable and not for profit vehicles for philanthropic purposes – and this strength was bolstered last year with the introduction of the Charities (Jersey) Law, which creates a robust and modern legal framework to support international philanthropic and charitable enterprise. In addition, the international drive towards greater transparency continues and while respecting client confidentiality, Jersey is fully supportive of moves towards greater international cooperation and remains committed to meeting global standards.

Photo: Chris George

Jersey was an ‘early adopter’ of the OECD’s Common Reporting Standard and is able to demonstrate a transparent and cooperative regime that more than meets international standards having signed

FATCA style agreements with the US and UK and having more than 44 tax agreements (both TIEAs and DTAs) in place, whilst Jersey’s regulator has signed bilateral or multilateral MoUs with regulators in over 90 countries. With an ability to capture beneficial ownership information of companies on a central registry, Jersey is also far ahead of those available in other onshore and offshore jurisdictions including the UK. This is all backed up by Jersey having an AA+ ‘Long Term Issuer Default Rating’ from Standard and Poor’s, one of the best international credit ratings possible. Global Something that has become clear from Jersey Finance’s programme of engagement in overseas markets is that these high standards are becoming increasingly desirable on the global stage. With that in mind, in 2014 Jersey Finance established a Shanghai launchpad office, allowing extended reach in Greater China, whilst at the same time capabilities were ramped up across the Middle East by adding a senior business development director to bolster Jersey Finance’s activities in the region. Over the coming months, maximising the additional resource in the Gulf region in order to capture significant private wealth and increasingly funds opportunities will be vital, whilst there will also be a greater focus on targeting alternative fund managers in the US who could look to Jersey for expert, European time-zone fund service support. In line with the findings of the Jersey’s Value to Africa report last year, there will also be increasing efforts to build relationships with SubSaharan Africa where there are considerable outbound private wealth and inbound infrastructure investment opportunities The breadth and depth of Jersey’s finance industry, combined with its flexible, innovative approach, collective expertise and global outlook, is helping attract increasing levels of business from major markets worldwide, right across its banking, funds, wealth management and capital markets sectors. At a time when stability, corporate oversight and quality of service are key factors in the mind of the global investment community, Jersey is well placed to continue to grow as a world class IFC.

Geoff Cook Geoff Cook is the Chief Executive of Jersey Finance. Geoff Cook joined Jersey Finance as Chief Executive in January 2007. In promoting the finance industry of Jersey, Geoff visits many of the world’s leading finance centres on a regular basis, highlighting the strengths of Jersey as a financial jurisdiction and updating Government officials, regulators, finance professionals and international investors on legal and regulatory developments and service innovations offered by Jersey. In addition to speaking at Jersey Finance hosted events, Geoff is a regular speaker and contributor to conferences and seminars around the world and he writes frequently on the issues affecting Jersey and other finance centres in leading publications. Geoff is a Fellow of the ifs School of Finance, a Fellow of the Chartered Institute of Securities & Investment, a Member of STEP and a Chartered Director.

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OUTLOOK

Outlook 2015 By Bill O’Neill & Dean Turner

nvestors are regularly reminded that markets have a habit of proving them wrong where they least expect, despite their best forecasting efforts. The start to 2015 was no exception, with the Swiss National Bank suddenly abolishing its minimum exchange rate floor of CHF 1.20 per euro, prompting the currency pair to fall almost instantaneously to parity and the main Swiss equity index to correct by 15% in a matter of hours. This unpredictable event illustrates some considerations that investors should always bear in mind. First, this shows the scope and power of central banks’ actions in driving financial markets. This is particularly relevant in a year which should see such institutions around the globe embark on diverging monetary paths. The US Federal Reserve continues to draw much of investors’ attention, and we expect it to begin to raise policy interest rates around the middle of the year. Nearer to home, the Bank of England is likely to keep policy on hold until the final quarter of the year before implementing the first of a very gradual series of rate hikes. Although the current low inflation rate certainly features in the Bank’s thinking via its

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influence on inflation expectations, the monetary policy outlook primarily hinges on the degree of slack in the labour market and prospects for pay growth. By contrast, the European Central Bank (ECB) announced its first quantitative easing programme in late January and should remain in easing mode well into next year. Meanwhile, fiscal agendas will be very much dictated by national circumstances. In the US, the drag of economic policy is likely to fade in 2015 as the budget deficit shrinks further, while in the Eurozone fiscal tightening will still amount to about half a percentage point of GDP. In the UK, the outlook for fiscal policy is highly dependent on the outcome of the general election, with the current consolidation programme liable to change in the event of a change in government. In emerging regions as well, the need to address fiscal imbalances will be high up on policymakers’ priority list. Countries such as Mexico have made considerable efforts to reform their tax system, while others,

“While Greece’s new government seems, so far, to be less confrontational than initially feared, the rapid ascent of anti-austerity parties within Europe hardly bodes well for the political stability of the region”

Jersey-First for Finance

like Brazil, have lacked the necessary reform impetus expected by financial markets. Ultimately, those emerging economies that engage in credible structural reforms will fare best and will be rewarded by an increase in market confidence. Second, this divergence in both monetary and fiscal policy outlook echoes differing fortunes in terms of growth profiles. The US is expected to contribute the most to the acceleration in global growth this year; we forecast that its economy will expand by over 3%, the fastest pace since the financial crisis. Similarly, the UK domestic economic recovery is now well entrenched, driven by a buoyant private-sector demand. This should translate into 2.4% GDP growth this year in our view, followed by 2.9% in 2016. At the same time, we believe that the ECB’s monetary intervention, improving credit conditions and a weaker euro should provide further support to the Eurozone economy. We expect the region’s economic

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growth to accelerate to 1.2% this year. One key factor that could improve this already positive outlook, in particular for the US and the Eurozone, is the rapid fall in crude oil prices as cheaper energy proves an impulse to households’ purchasing power at the expense of lost revenues for energy producing countries. Jersey’s economy, measured by gross value added, was stagnant in 2013 but probably began to grow in 2014. Because interest and exchange rates in Jersey are the same as in the UK, if demand in Jersey grows at a different rate than in the UK, it tends to be reflected, relatively quickly, in adjustments to labour market rates and property prices. Since average earnings are now rising faster than retail prices and house prices picked up very slightly in 2014, this effect is beginning to be visible. After a protracted period of almost no economic growth, the Jersey Government faces an important strategic decision. It seems likely that tax receipts were lower than Government spending in 2014, and that this was because of a shortfall in receipts, not an increase in spending. This means that the Island needs to continue to work to address what may be a structural budget deficit, either by reducing current spending or increasing taxes. At the same time, because the Government has invested, rather than spent, the excess tax revenues it received during the boom years, it would be possible to deploy its accumulated financial assets by investing in public assets that will support economic activity growth in the longer term. So, how does this diverging world translate into a global asset allocation, and how should investors leverage the challenges and opportunities that it presents?

geopolitical risk might be at its highest level in years, but domestic risk is likely to have an equally unsettling effect on markets. While Greece’s new government seems, so far, to be less confrontational than initially feared, the rapid ascent of anti austerity parties within Europe hardly bodes well for the political stability of the region. In the UK, the general election campaign has begun, and will produce increasing media noise once parties’ manifestos are published. Financial markets will be alert to the new government’s plans around the fiscal position, and will have to assess the chance of ‘BREXIT’. An outright Conservative victory would deliver a referendum on EU membership, with potentially momentous consequences for the financial services industry in the UK and Jersey if the UK were to leave the European Union. Similarly, a Labour majority could impact the UK financial industry if the mooted windfall tax on banks were to be enforced. Overall, the risk of a minority government is real and this is likely to be one of the closest elections on record.

“The US is expected to contribute the most to the acceleration in global growth this year; we forecast that its economy will expand by over 3%, the fastest pace since the financial crisis”

The first thing to acknowledge is that in a world of elevated volatility and potentially concentrated outcomes, the basic investment tenet of proper diversification becomes all the more important. Global

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“An outright Conservative victory would deliver a referendum on EU membership, with potentially momentous consequences for the financial services industry in the UK and Jersey if the UK were to leave the European Union”

Against this backdrop of continuing uncertainty, a core diversified strategic allocation focused on the long-term might be complemented with tactical deviations to take advantage of shorter-term opportunities. In our current tactical allocation, we favour assets from regions with the most robust growth backdrop, most notably the US.

currency should lead to superior earnings growth. In turn, diversification outside of equities and fixed income might be achieved via alternative investments like hedge funds, although such investors should be mindful of maintaining their exposure balanced across strategies. Private markets are another option for investors willing to diversify into illiquid assets in exchange for a discount.

The S&P 500 has been a strong performer in 2014 and the drivers of corporate earnings growth should persist into 2015. We currently have an overweight in US equities against EM equities, as we think consensus around EM earnings growth is currently too optimistic. We see the US dollar strengthening as well, as the Fed will likely be at the forefront of the global tightening cycle, with potentially far-reaching negative consequences for EM currencies and high grade bonds. We have a neutral view on UK equities as the positive impact of weakening sterling should be balanced with the drag of falling commodity prices.

Photo: Chris George

This mixed picture in the domestic stock market might give investors the opportunity to diversify regionally into Eurozone equities, where a positive economic growth momentum and the fillip of a depreciating

Bill O’Neill Bill O’Neill is Head of CIO Wealth Management Research UK at UBS. Bill provides both UK specific macroeconomic and investment content to the UBS Global Chief Investment Office and represents the CIO office in the UK, articulating the UBS house view for client advisors and clients. Bill has spent over 30 years in investment management and research roles on both the buy and sell-side. Prior to joining UBS, he was Chief Investment Officer, EMEA at Merrill Lynch Global Wealth and Investment Management. He has held a number of investment strategy and asset allocation roles in the past, including Head Investment Strategy & Asset Allocation, Barclays Wealth and Asset Allocation Strategist, JPMorgan Asset Management. Bill holds a Masters’ degrees in Quantitative Economics from University of London and Political Economy from University College, Dublin. He also holds a Bachelor’s degree in Pure Economics from Trinity College Dublin.

Dean Turner Dean Turner is a UK Economist with UBS Wealth Management. Dean joined UBS in 2014 as an economist covering macro strategy, fixed income and currencies for the UK market. He has over 17 years financial markets experience having previously worked for HSBC and Barclays Wealth and Investment Management. Dean is a CFA charterholder and gained an MSc in economics from the University of London.

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J E R S E Y: A S T E R L I N G R E P U TAT I O N

Jersey’s broadening role as a gateway into European markets By Robert Christensen MBE

ersey’s pedigree as one of the world’s leading International Finance Centres (IFCs) is based on a number of solid and enduring foundations, one of which is its flourishing relationship with the City of London, which has developed over the 50 plus years that Jersey has operated as a leading financial services centre. This relationship has enabled Jersey to position itself as a major gateway into European markets, especially during the last decade or so, when there has been a surge in international cross border business from developing markets. Sharing a similar time zone and common language to the UK has been important but the key factor has been the strong partnerships forged between finance and legal practitioners in London and the network of specialist finance professionals and lawyers in Jersey. The banking industry in Jersey alone employs close to 5,000 professionals but the infrastructure is further bolstered by access to all the major professional services firms, a wide selection of the leading offshore legal practices and an array of regulated, independent trust companies and wealth managers. In total, a skilled workforce of more than 12,500 is employed, including an extensive intermediary network, which is virtually unrivalled amongst competitor jurisdictions. Furthermore, to emphasise the quality of that workforce, it is generally acknowledged that Jersey’s 1,200 qualified members of the Society of Trust & Estate Practitioners (STEP) is the largest such grouping in any jurisdiction anywhere in the world. Infrastructure The wider economic picture shows that many of the key markets where Jersey is doing business anticipate significant growth during 2015; increasing economic activity will result in more trade, generating wealth and more demand for investment. A drive for infrastructure development, foreign direct investment and for capital to develop these growing economies, brings into sharp focus the role of IFCs such as Jersey and the partnership role with the City. Jersey is a conduit for international capital, helping to package it efficiently, within the framework of robust regulation and appropriate corporate governance oversight. It helps to explain why, aside from UK incorporated companies, Jersey companies are the leading constituents of the FTSE 100, with a global market capitalisation of Jersey companies listed on exchanges worldwide in the region of £269 billion. Meanwhile, Jersey’s banking sector continues to attract capital from around the world. More than 50% of all banking deposits are from depositors outside Jersey and the UK and the amount of deposits emanating from the Middle East and Far East is now close to

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J E R S E Y: A S T E R L I N G R E P U TAT I O N

“The Island’s funds sector is a leader in Islamic asset management and there is expertise available to create special purpose vehicles, which can be used with a variety of Shariah compliant capital market transactions including sukuk”

20% of the overall total, a substantial percentage increase during the last decade. Global wealth In line with global wealth patterns in markets around the world and in response to moves towards greater transparency within financial services, Jersey has invested time and resources to ensure we continue to raise jurisdictional awareness in key markets. There is now a much greater focus on certain African markets, whilst the Far East and countries in the Gulf region continue to be a prominent focus for our efforts. Business wise, we are seeing a surge of interest by overseas investors in using Jersey in support of their real estate investment strategies. For example, recent commercial activity has included a series of high profile London property investments on behalf of overseas investors which have been transacted through Jersey. In many cases, instructions are from London based lawyers and advisers who know that they can rely on their colleagues in Jersey to advise them on the Jersey regulated structure that meets the investment objectives of their client.

Jersey-First for Finance

Jersey’s specialist skills also extend to Islamic financial services. The Island’s funds sector is a leader in Islamic asset management and there is expertise available to create special purpose vehicles, which can be used with a variety of Shariah compliant capital market transactions including sukuk. Within the private wealth sector, Jersey trusts have been an attractive option to families and charitable, philanthropic institutions in the Gulf region where the institution of the Waqf is not dissimilar. Foundations, a more recent arrival on the Jersey statute, have also begun to attract interest in the region. A further illustration of the value and appeal of Jersey’s international expertise and its gateway role is evident when considering business undertaken with China and the potential to extend it into new areas. Jersey fund and corporate vehicles have proved to be an attractive proposition for listing and one fifth of all Chinese companies that have listed in London have done so through Jersey. Going forward, Jersey is well positioned to act as a supporting centre to London in the RMB market, given its market access and experience in currency transactions.

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J E R S E Y: A S T E R L I N G R E P U TAT I O N

Stability and substance The popularity of Jersey entities such as the company, trust and foundations, illustrate how the Island’s legal armoury has increasing relevance to international investors. A mature but evolving legal system is further supported by a robust, well regarded regulatory platform within a jurisdiction demonstrating high levels of stability and substance, a tax neutral platform and a concentration of financial service expertise.

“Jersey’s regulatory obligations are also a priority and so too the importance of engaging with regulators in key markets to ensure the appropriate mechanisms for exchanging information are in place”

Jersey’s role as a gateway for investment into London was driven home by an independent study undertaken in 2013 on behalf of Jersey Finance by the macro economic research firm, Capital Economics, which showed that Jersey was a conduit for £1/2 trillion of foreign investment into the UK, 5% of the total stock of foreign owned assets in the country.

Robert Christensen MBE Jersey’s regulatory obligations are also a priority and so too the importance of engaging with regulators in key markets to ensure the appropriate mechanisms for exchanging information are in place. There was considerable progress in that respect during 2014, with Memoranda of Understanding (MoU) being signed by the Jersey Financial Services Commission with both China’s Securities Regulatory Commission and the Emirates Securities and Commodities Authority. These agreements are part of an ongoing programme for Jersey, demonstrating its commitment to developing frameworks for international cooperation and reinforcing its position as a transparent and well regulated IFC, measures that assist in Jersey’s standing and reputation in international markets. Jersey’s regulator has now signed bilateral or multilateral MoUs with regulators in over 90 countries, complemented by a comprehensive and growing network of 44 international tax agreements including TIEAs and Double Taxation Agreements (DTAs). Furthermore, thanks to commitments made by Jersey’s Government, the jurisdiction continues to play a leading role in international efforts to promote cooperation and transparency in taxation and related issues, and the value of its contribution is now widely recognised. Last year, Jersey’s Government put regulations in place to confirm automatic tax information exchange with the USA and UK, outlined a package of measures reinforcing the message that Jersey does not welcome abusive tax-planning structures and joined more than 50 countries in Berlin to sign up as an early adopter of the OECD Common Reporting Standard. Quality Positioned geographically close to France but with an unbroken constitutional link to the British Crown dating back more than 800 years, Jersey has the political stability and economic autonomy to maintain the commercial conditions that appeal to international investors. With the quality evident in its service offering, Jersey has effectively carved out an important facilitating role in global financial services, able to structure entities, support corporate transactions, provide institutional banking and listing capabilities, and offer private wealth management strategies in partnership with institutions and intermediaries in the City of London.

Robert Christensen MBE, is the Chairman of Jersey Finance. Robert is also the Managing Director of Volaw. Robert originally joined the law firm then known as Michael Voisin & Co. in 1981 and was subsequently appointed as a director of its associated company Volaw Trust & Corporate Services Limited when it was first incorporated in 1982. Robert, who has over 35 years of experience in trust and company management services within Jersey, was appointed Managing Director of Volaw in 1988. Whilst he is responsible for clients administered in all departments of Volaw’s business, his principal area of work centres on ensuring the effective management and control of entities established by Volaw’s clients. Robert is widely respected for his knowledge and expertise on the corporate governance issues, especially in the area of fund administration. Since the 1980s he has been at the forefront of the development of Volaw’s Middle East client base and in been much involved with innovative Islamic finance projects. Robert was instrumental in setting up Jersey Finance Limited, the promotional body for the finance industry in Jersey, of which he was appointed Chairman in June 2014. He is a member of the Society of Trust & Estate Practitioners and holds the Trustee Diploma of the Chartered Institute of Bankers. Robert was honoured in the Queen’s New Year Honours list for 2015 by being appointed a Member of the Order of the British Empire (MBE) for services to charity.

Jersey’s quality product, combined with its flexible, innovative approach and collective expertise, is helping attract increasing levels of business from the major markets worldwide where new wealth is accumulating and where infrastructure investment for domestic and international markets is sought, while its established track record leads new investors to consider taking a similar route when they are planning investment in western markets. The impact of this new business is felt right across Jersey’s core banking, funds, wealth management and capital markets sectors. At Jersey Finance, it will be our intention throughout 2015 to tap into that momentum and introduce Jersey’s offering to an even wider range of international investors in those key markets.

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JERSEY’S GLOBAL REACH

Jersey’s External Relations By Senator Sir Philip Bailhache

was appointed Jersey’s first Minister for External Relations in September 2013 with a mandate to ‘Promote Jersey’s relationship with existing and emerging major economies, and develop the Island’s international reputation as a centre of excellence and an outstanding place to do business’. Jersey has been domestically autonomous for over 800 years, and, within a framework agreed with the United Kingdom, we are now also actively developing our own international identity, as set out in our common policy for external relations http://www.statesassembly.gov.je/AssemblyReports/2012/R.140-2012.pdf Our strategy for financial services is to protect existing markets, and to promote Jersey’s services in new markets where we expect to see growth in the coming decades.

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JERSEY’S GLOBAL REACH

Jersey’s most significant market is the United Kingdom - more specifically, the City of London. A lot of our overseas business comes to Jersey via the City. It is also true that the UK economy benefits significantly from its close relationship with Jersey. Jersey Finance commissioned a report by Capital Economics which estimated that the benefits to the UK from financial activities in Jersey included approximately £118bn in funds upstreamed to UK banks, providing valuable liquidity to the UK economy: 180,000 jobs added to the UK economy: £2.5 billion paid each year in UK tax: and, £0.5 trillion (yes, trillion) of accumulated foreign investment. Over the last 15 months, greatly helped by the Government of Jersey London office (established in September 2013), we have consistently conveyed these positive messages to parliamentarians, government officials, political advisers and members of the diplomatic community based in London. Jersey ministers again attended the main Party Political Conferences, where we participated in fringe events and held meetings with a number of UK ministers, shadow ministers, MPs and policy advisers. We are monitoring very carefully political developments around the possible referendum on the UK’s membership of the EU, including the consequences for Jersey of a BREXIT (British withdrawal). We plan to protect Jersey’s existing relationship to ensure stability and continuity for those businesses that engage in Europe.

“Jersey Finance commissioned a report by Capital Economics which estimated that the benefits to the UK from financial activities in Jersey included approximately £118bn in funds upstreamed to UK banks, providing valuable liquidity to the UK economy”

Jersey-First for Finance

Europe is also an important traditional market, where we have sought to protect market access through contact with the Commission, Parliament and Member States supported by our Channel Island Brussels Office. This has been supplemented by direct contacts with Ambassadors and officials in London and visits to European capitals: for example, recent missions to Berlin, Helsinki and Copenhagen, increased understanding of Jersey as a cooperative financial centre. In Stockholm we were able to counter misconceptions about how private equity companies, including those in Jersey, operate. We also worked hard for the removal of Jersey from a French blacklist of jurisdictions in 2013 and this was achieved by addressing mutual misunderstandings in relation to a small number of requests for tax information and by modifying our regulations. However, as is often the case, ministerial dialogue which takes place behind the scenes is significant in achieving these results. The Island’s presence in France was subsequently enhanced by the establishment in June 2014 of a joint Channel Island’s representative office in Caen. A further key element of Jersey’s common policy on external relations is ‘enhancing recognition of Jersey’s commitment to international standards’: our policy is to implement international standards and at the same time press for our main competitors to adopt the same standards. To this end, Jersey, in common with some 50 other countries, signed a multilateral agreement on automatic exchange of information in Berlin in October 2014, as a step towards a common, global reporting standard. My ministry has been helping to develop the Island’s international reputation as an outstanding place to do business and it will come as no surprise that we are taking this message to a number of growing economies in the Middle East, Asia and Africa. With this in mind, we hosted a visit to Jersey by the Arab Ambassadors’ Council in May 2014 and in the same year Ministerial colleagues and I visited the United Arab Emirates, Qatar, and Saudi Arabia. Our contact with senior political figures in these countries has reinforced their already favourable view of Jersey as a reliable, stable centre for corporate and personal finance.

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“My ministry has been helping to develop the Island’s international reputation as an outstanding place to do business and it will come as no surprise that we are taking this message to a number of growing economies in the Middle East, Asia and Africa”

China is another country where positive governmental relationships build an atmosphere within which business connections can develop. Jersey’s Chief Minister, Ian Gorst, met Vice Foreign Minister Wang Chou in the Spring of 2014, as part of a series of visits that has covered economic and political matters, and have also extended into educational and cultural fields: for example, there have been regular exchanges between Hautlieu school and Ba Yi school in Beijing, which President Xi Jinping attended as a student. This demonstrates that Jersey is committed to a long-term, broad relationship with China and we are hopeful that Jersey’s trade with China will see an upturn in the next year or so. Elsewhere in this publication, you will see reference to the report commissioned by Jersey Finance on Jersey’s Value to Africa. The Ministry for External Relations sponsored a roundtable discussion hosted in the Houses of Parliament, among MPs, NGOs, representatives from the financial community and diplomats, looking at the positive relationship between international finance centres such as Jersey and developing countries in Africa. I held meetings with heads of African Embassies in London and hosted a visit to Jersey by the Nigerian High Commissioner. In addition, Senator Philip Ozouf attended a global meeting on mining in South Africa in early February 2015, promoting the capability of Jersey to provide a stable framework for global mining companies.

Senator Sir Philip Bailhache Senator Sir Philip Bailhache is the Minister for External Relations and Assistant Minister for Education, for the Government of Jersey. Sir Philip Bailhache was Bailiff from 19952009 and served as Commissioner of the Royal Court and Judge of the Court of Appeal. He stepped down in July 2011 to run for office and was elected on 14 November 2011 and subsequently appointed Assistant Chief Minister. In September 2013 he was elected as Jersey’s first Minister for External Relations and re-elected for a further term in the 2014 Senatorial elections. He was appointed as Assistant Education Minister in November 2014. He is also Chairman of the Governing Body of the Institute of Law, the founding editor of the Jersey and Guernsey Law Review and the founder of the Jersey Legal Information Board.

Why does the Government of Jersey undertake this international activity in support of Jersey’s financial services industry? Governments and international bodies such as the OECD set the standards and framework for what is acceptable practice and where participation is possible in these bodies, we build confidence in Jersey. We also engage with international bodies in order to assess our performance against those standards, such as the Financial Action Task Force (FATF). In this regard, Jersey’s implementation of the FATF recommendations on anti money laundering and countering the financing of terrorism was assessed by MONEYVAL – a body of the Council of Europe – in January 2015. The result will be published towards the end of 2015. As a Government we help maintain access in Europe for businesses to trade in services, mainly through the Channel Islands Brussels Office, mentioned previously, which has been working behind the scenes on Market in Financial Instruments Directive (MiFID) issues and the Alternative Investment Fund Managers Directive (AIFMD), aimed at securing or maintaining access and status equivalent to that of an EU Member State. Investment in the conduct of external relations makes a valuable contribution to the Island’s reputation abroad and is key to protecting and promoting Jersey’s financial services in existing and new markets. We promote wider and better understanding – particularly among decision makers – about the positive contribution that Jersey makes as an international financial centre to business – your businesses – and to the global economy.

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Jersey’s ever expanding international reach By Richard Corrigan

ersey Finance continues to step up its campaign of international engagement and jurisdictional awareness in our key international markets, whilst not neglecting the prime London, UK and European markets, where Jersey’s success as an International Finance Centre (IFC) was shaped over the last 50 plus years. Our international activity continues to expand, recognising that international investors, financial institutions, intermediaries and high net worth individuals with investment ambitions are, more than ever, seeking long established, well regulated financial gateways into western markets. Jersey’s finance industry, supported by a government willing to send senior representatives to visit key global markets and by a regulatory authority that is committed to dialogue with other regulators and to the signing of formal agreements on exchanging information, has gained considerable traction in generating new business in locations where our skilled and experienced practitioners call upon Jersey’s first-class track record in supporting infrastructure investment, overseas investment opportunities and those clients seeking asset protection. A report published in 2014 by CityUK estimated that the world’s overall infrastructure investment needs for energy, telecommunications, water and road and rail transport were in the range of $50 to $70 trillion through to 2030 and that while most infrastructure investments were local, the sources of finances were increasingly global. Meanwhile, wealth creation in the East is outstripping the growth of the West’s. Around $12 trillion is now held by High Net Worth Individuals (HNWIs) in the Asia Pacific region, including Hong Kong, India and China, whilst wealth is increasing at above average levels in the Middle East and Africa*. However whilst wealth levels in this East continue to grow the quality of investment assets in the UK, USA and Europe remain an enduring attraction to international investors looking to diversify away from their home markets, due to the relative stability of asset values and good quality returns. Long term trends such as these influence our thinking about where we focus our resources in order to most effectively promote Jersey’s offering on the international stage.

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of the world’s leading bodies, such as the OECD and the IMF. Moreover, there is concerted effort internationally to crack down on tax evasion and financial crimes and Jersey has been praised by international bodies for its response to the global measures designed to improve the exchange of information between regulators and tax authorities. Jersey is one of the countries which has committed to early adoption of the OECD’s new Common Reporting Standard for automatic exchange of information between tax authorities worldwide and was one of the 51 countries to sign up to the multilateral agreement in October. Jersey already has in place regulation so that entities are fully accessible under Tax Information Exchange Agreements. Such moves are important in the international context if Jersey is to remain at the forefront of developing high quality solutions to meet the increasingly sophisticated and rapidly changing needs of global investors. Robust regulation in the major new markets of the world such as China, India and the Gulf is rightly a major selling point and Jersey, with the proactive support of the Jersey authorities, has been able to keep on track with key regulatory agreements. Target markets Specifically within Asia, Jersey signed a Memorandum of Understanding (MoU) in 2014 with the China Security Regulatory Authority, the latest move in a series of signed agreements which include bilateral and multilateral MoUs with regulators India, UAE and Qatar. Jersey and China signed a Tax Information Exchange Agreement in 2010 and Jersey and Hong Kong signed a Double Taxation Agreement in 2012. Investors in the region therefore can consider the advantages of the offering provided in Jersey, secure in the knowledge that appropriate regulatory agreements are in place.

Regulation Alongside the shifting market for wealth accumulation and the wider demands for infrastructure investment, it is now undoubtedly the case that investors and their advisers are increasingly looking not only to jurisdictions that can clearly demonstrate high levels of stability and substance but those that have an appropriate approach to confidentiality when formulating strategies. The rising tide of regulation in financial services has accelerated since the global financial crisis in 2007 and jurisdictions have needed to respond accordingly to maintain their competitive position. Jersey remains one of the best regulated international finance centres globally, a status acknowledged by independent assessments from some

“Jersey signed a Memorandum of Understanding (MoU) in 2014 with the China Security Regulatory Authority, the latest move in a series of signed agreements which include bilateral and multilateral MoUs with regulators India, UAE and Qatar”

Jersey-First for Finance

Jersey Finance has been represented in Hong Kong for five years since opening an office there and recently we appointed a new business development director and established a Launchpad presence, in conjunction with the China Britain Business Council, in Shanghai. These moves, which followed on from the most recent Government led visit to China by a Jersey delegation, provide us with an expanding platform for business development activity in the region, enabling Jersey to widen its network of professional services and financial institution contacts and deepen dialogue with the most relevant firms. Another key market for Jersey is the Gulf and it is now more than 12 years since a Jersey Minister first visited the region. Since then, there has been regular engagement at ministerial and at regulatory level across most GCC states, together with an industry presence led by the opening of a Jersey Finance office several years ago. In terms of the regulatory developments, the JFSC has signed bilateral MoUs, covering information exchange and cooperation, with the Central Bank of the UAE and the Dubai Financial Services Authority, whilst most recently an MoU was signed with the Emirates Securities and Commodities Authority. Meanwhile, we have ramped up our capabilities in the Middle East by appointing an additional business development director, based in the UAE, to provide a regional springboard across both the Gulf region and deepen our relationship with the region. Jersey’s financial service offering is highly attractive in this region and this appointment provides us with increasing capabilities to reach and communicate this into new markets. From a financial services perspective, today we are seeing growth in Jersey’s private client, funds, banking and capital markets sectors right across the region. As outbound and inbound investments in the Middle East become more and more sophisticated, Jersey is seeing growing interest in its expertise for structuring property investments in the UK, whilst Jersey’s Islamic Finance capabilities are being drawn on increasingly by clients in the Middle East too. We are encouraged also

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that a number of Gulf based operations that have established a presence in Jersey have continued to grow their business through their Jersey platform. As a further indication of our commitment to these regions, Jersey Finance for the first time hosted our own roadshows in both the Asia Pacific and Middle East region, arranging a series of breakfast and lunchtime events in Hong Kong, Kuala Lumpur, Singapore and Dubai. These were well attended by key gatekeepers and other intermediaries in the region and served to highlight the growth in business enjoyed in the region. Infrastructure investment We believe that robust IFCs such as Jersey will have a significant role to play in helping African nations access the investment funds they need. It has been estimated in a survey we commissioned* from Capital Economics that Africa has the opportunity to quadruple living standards by 2040 but that to do so it will need to find $11.4 trillion in extra investment over that period – and around $6.1 trillion of that will have to come from foreign direct investment. By providing protection for investors, efficient cross-border investment pooling, robust regulation and tax neutrality, IFCs like Jersey are well placed to make an important contribution to Africa’s economic growth. Jersey already has significant experience in advising clients on transactions in a number of African countries including corporate, funds, project and infrastructure work and has long established links in advising clients on wealth management and estate planning. Approximately 9% of assets looked after by trusts in Jersey have come from African sources and a number of African banks have a presence in Jersey. We will be working to build on those links, highlighting Jersey’s skills in corporate governance, experience in handling secure cross border transactions and a range of specialist wealth management vehicles. It is the same attractive qualities that we intend to promote in other key markets worldwide where growth is evident such as Russia and Latin America. Despite the economic difficulties in Russia, for example, there remain significant outflows of first generation capital and clients based there who are keen to internalise their investments are looking for a well regulated hub in which to do so.

“Jersey Finance for the first time hosted our own roadshows in both the Asia Pacific and Middle East region, arranging a series of breakfast and lunchtime events in Hong Kong, Kuala Lumpur, Singapore and Dubai”

Richard Corrigan Richard Corrigan is Deputy Chief Executive of Jersey Finance. Richard joined Jersey Finance as Global head of business development from Barclays where he was most recently a Director within the Wealth and Investment Management division. Through his extended team in London, United Arab Emirates, Hong Kong and India representative offices Richard helps to support member firms in a number of international growth markets and foster closer working relationships with a wide group of industry stakeholders. A qualified banker, Richard has extensive experience managing business units, coverage teams and clients within international corporate banking and wealth management businesses. He has supported a wide range of private clients achieve their business and financial objectives both with Barclays and previously at Royal Bank of Scotland Group where he was latterly Regional Director within the Financial Institutions Group. During his career Richard has acted as board director for trust company, fund services and investment management businesses.

Ideal partner As far as jurisdictional choice is concerned, service levels, knowledge and expertise, robust regulatory and legal frameworks, and a mature approach to transparency and confidentiality, are proving to be more important than bottom-line cost among many global investors. In the wealth management sector, when it comes to jurisdictional decisions, high net worth individuals and their families, especially in emerging markets, are increasingly looking for politically neutral, stable and wellregulated jurisdictions that can demonstrate substance, expertise and a rational response to transparency to support their dynastic planning, personal and family wealth management, and business activity. It is also apparent from the diverse range of corporate activity that has been taking place that the role of Jersey in the global flow of capital and as a structuring centre, supported by the high calibre of its regulatory and legislative regime, is already appreciated in our target markets. Having bonded closely with the City of London in a partnership which has endured and evolved, our intention is to further highlight the scope of our expertise and to position ourselves as an ideal partner both for enterprises in expanding new economies looking to navigate the overseas financial markets and those individuals seeking wealth management solutions in an increasingly volatile world. Footnote: *Jersey's Value to Africa, Capital Economics

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Jersey Roundtable 2015 Venue: Jersey Finance Limited, Sir Walter Raleigh House. Date: 12th February 2015

Photos: Chris George

Participants (right to left) Chairman: John Willman, former UK Business Editor of the Financial Times Nicholas Davies, Group Partner of Collas Crill Paul Savery, Managing Director and Country Manager for Barclays in Jersey Lorraine Wheeler, Client Services Director of First Names Group Jersey and Chair of the Society of Trust and Estate Practitioners (STEP) Jersey Alan Binnington, President of the Jersey Association of Trust Companies (JATCo) Geoff Cook, Chief Executive of Jersey Finance John Harris, Director General of the Jersey Financial Services Commission (JFSC) Jenny Swan, Senior Country Officer for J.P. Morgan in the Channel Islands and Executive Committee member of the Jersey Funds Association

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John Willman: The global economic environment continues to be volatile, despite signs of recovery in some countries and regions. Hostility to international financial centres shows little sign of abating and there is no let-up in the flow of legislation sparked off by the financial crisis. So I’d like to start by asking each of you to say how 2014 looks in retrospect for Jersey’s financial services industry and what the challenges are for 2015? Geoff Cook: Ever since mid-2013 we’ve seen a gradual build-up of confidence and business activity in our major sectors – funds, private client business and company formation and listings. Banking has been something of an exception but even then it has been level. We’ve still got a long way to go with some of the biggest regulatory changes we’ve ever seen but we’ve navigated our way through many of them already, breaking the back of some really quite difficult challenges pretty well. So I think that from a business point of view, we’re in good shape. We had an election in 2014 under Jersey’s new electoral system which naturally created some uncertainty locally. But that was navigated successfully and we seem to have a stable and business-supportive government, so that’s very encouraging. I think we can also say that the partnership between the industry, the government and the regulator is strong and positive. John Harris: I’d echo what Geoff just said but would emphasise that on the intense regulatory agenda, there are still a number of trains to come down the track. There is the wrangling around the European Union’s fourth money-laundering directive, for example, and around various aspects of the Markets in Financial Instruments Directive (MiFID), a very significant piece of legislation which will require us to do things for market access reasons that we might otherwise not wish to do. Another key issue is how the banks affected by the UK requirements to ring-fence their retail operations will change their models of how they serve their clients here within their groups. That is not due to come into force until 2019 but in reality it’s already happening and each banking group could evolve in ways that are quite different from the

simple model of the past which collected deposits in Jersey and upstreamed them to London. Paul Savery: From the point of view of the banking industry, the word to describe 2014 would be resilient. There have been a lot of headwinds which impact on profitability, in particular the ongoing low interest rate environment. That continues, with every forecast of an interest rate increase proving wrong so far – and I’m not counting on any rise in the near future. There is also the mountain of regulations coming through, as John Harris said, adding to the cost of doing business. But the industry is supportive of the transparency agenda which is putting us in a better place to do business. In addition to rising compliance costs, we all face the challenges of increasing efficiency, providing more digital online services and automating our operations. But there has been a big improvement in the capital position of the Island’s banks, and that reinforces the quality agenda for Jersey. From the Barclays point of view, we’re very confident about our business model and our continuing commitment to Jersey. Lorraine Wheeler: In the trusts sector, there is continuing consolidation and I don’t think that will stop yet. With all the regulatory and compliance changes in the market, you need a certain mass to run a company efficiently and effectively. And there is a greater focus across the industry on how Jersey can collectively move forward, with a lot more communication between business, the government and the regulator.

“Another key issue is how the banks affected by the UK requirements to ringfence their retail operations will change their models of how they serve their clients here within their groups” Jersey-First for Finance

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“Jersey is way ahead of many other financial centres in preparations for implementing international agreements such as that for the US Foreign Account Tax Compliance Act (FATCA) legislation, the UK’s equivalent arrangements and common reporting standards” I also feel that Jersey is way ahead of many other financial centres in preparations for implementing international agreements such as that for the US Foreign Account Tax Compliance Act (FATCA) legislation, the UK’s equivalent arrangements and common reporting standards. We have already collected a lot of the information we will be required to keep on file, while other centres are just starting and may lose sight of their clients as they do so. Jenny Swan: 2014 was a challenging year for the funds sector, especially given the uncertainty in the run-up to the implementation of the EU’s Alternative Investment Fund Managers Directive (AIFMD). At J.P. Morgan, we have spent a lot of time with our clients helping them to navigate through the new requirements. It is important that Jersey be seen to be ahead of the curve with an AIFMD-compliant regime. Thanks to the collaboration between the government, regulator and industry, Jersey was able to launch its AIFMD-compliant regime very quickly. Also a key focus for the sector was ensuring the right stakeholders were aware we remained open for business under the new regime. And the hard work paid off: Jersey’s fund assets are showing a strong recovery with asset value now exceeding £200 billion. Also encouraging is the fact that we have not seen any migration of business to EU domiciles. Alan Binnington: There has been a lot of new trust business flowing in

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from new markets, particularly in Asia and the Middle East. Traditionally, both of those parts of the world tended to look for a cheap and cheerful solution and I think they’ve now realised that if you’re going to structure your affairs properly, you need to have something that has real substance, stands up to scrutiny and is wellmanaged. Our trust law was 30 years old last year and it has provided an excellent framework for the industry – one that has been copied by lots of other jurisdictions. We have a long track record in administration and a wealth of experience, and we’re seeing a flight to quality. Nicholas Davies: I’ve recently come to Jersey after eight years in Moscow, where my focus was on finance and capital markets transactions in Russia, other former Soviet states and the Middle East – emerging markets that Jersey’s finance industry is targeting. In my previous work, I saw Jersey growing in popularity among emerging market clients as a jurisdiction for company listings, securitisation vehicles and other structures. One of the key drivers in that was the recognition by those clients that they need the high standard of regulation that is available in centres such as Jersey. John Willman: One of the big developments in 2014 was the publication by the government of the Financial Services Policy Framework, setting out a clear blueprint for the future. It proposed

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revising the criteria for licensing banks that wish to do business on the Island. What was the rationale for that, John? John Harris: Previously, only banks in the top 500 worldwide could operate in Jersey. The supervisory regime was based on licensing banks that were too big to fail – systematically important banks which the home authorities would not let go under. But that world has gone, because taxpayers are no longer prepared to bail out banks. That is why capital requirements for systematically important banks have been raised to increase their loss-absorbing ability. And if they fall into difficulties, it is the bondholders who have to bail them out. So Jersey must take more responsibility for supervision by making a risk-based judgment as to whether a bank should be allowed to do business on the Island. If it’s going to be serving retail clients, we’re likely to have a very different view than if it isn’t – if it’s a specialist private wealth institution used by very high net worth individuals, for example. We would also look at whether the bank could put pressure on Jersey’s deposit protection scheme. We’ll probably focus on the top 1,000 banks but we will look at almost any bank, analyse the risk and be prepared to manage it. Paul Savery: The change is inevitable, forced by legislation since the crisis. The local operations of the large UK banks in Jersey will not be

inside the ring-fence that protects retail customers, so the regulator must have a deeper understanding of each bank’s model, which clients it serves, what its risk profile is and whether its risk-management capacity is robust. And I have faith in the ability of Jersey’s industry, regulator and government to retain the quality of the banking stock. John Willman: How much progress has been made in focusing on the new international markets identified as targets in the 2013 McKinsey report commissioned by Jersey Finance? Geoff Cook: The McKinsey strategy was to maintain and improve market share in flat or declining markets, principally in Europe, while focusing on the growth markets – and we’ve been in implementation mode ever since. We’ve got a launchpad office now in Shanghai and presences in Hong Kong, Dubai, Mumbai, New Delhi and London, with other personnel active in mature Europe, Russia and increasingly in Africa. We are also prioritising some effort in North America during 2015 to look at how we can be a portal for US investment capital coming to Europe. We’re now quite global, with boots on the ground in all of these markets and the proportion of growth market business in our book is increasing quite fast. We also find that emerging markets are starting to move towards us on issues such as governance and regulation, recognising the value of our approach.

“capital requirements for systematically important banks have been raised to increase their loss-absorbing ability. And if they fall into difficulties, it is the bondholders who have to bail them out. So Jersey must take more responsibility for supervision by making a risk-based judgment as to whether a bank should be allowed to do business on the Island”

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problems. We certainly need to continue targeting gatekeepers in London because a lot of emerging market business still goes through there. But you also have to invest in going out to meet the people in growth markets whose share of global business will increase in the future. Those who make the effort to put in the hard yards now are those who will get the benefits when that growth comes through. John Willman: Jersey Finance published Jersey’s Value to Africa late in 2014, identifying the continent as a region of great economic potential which could benefit from the ability of Jersey to channel much-needed investment and cultivate entrepreneurship in support of its continuing development. What has been the finance industry’s reaction to that? Lorraine Wheeler: Africa is quite a big focus for my firm but it’s important to remember that it is made up of lots of countries with different cultures. The languages and the customs differ, even between cities in the same country. The potential is huge but we can’t target Africa as a single market. John Harris: Actually, the issue with African business is the same as that for all target markets: we don’t say thou shalt not go into XYZ market or take clients from there, because that’s a blunderbuss approach which makes no sense. There are lots of opportunities out there and while some of it’s good business, some of it’s less good.

Jenny Swan: In the funds sector, we collaborate with Jersey Finance concerning target markets, events and trips. However nearly half the money invested in Jersey funds comes from the EU with 30% from the UK – staying close to the London gatekeepers who influence choice of fund domicile continues to be a key focus for our funds business. We have recently added the US to our target market list as US managers now appreciate reverse solicitation into Europe won’t always work for them. It is not all about target markets for the funds sector. Jersey needs to be on the front foot when opportunities come up, especially niche opportunities where we can get a head-start on any new and innovative type of fund product. For example, the industry has developed expertise in debt funds, a growing sector for the investment industry. With interest rates continuing to remain low, investors are searching for yield and as the supply of bank credit continues to shrink, the fund industry can fill the demand. Additionally we need to continue to encourage existing and new managers to bolster their presence and substance in the Island. Nicholas Davies: As a new boy to Jersey, I am heartened by the decision to target growth markets but I believe it will be important to persevere with countries that may be having economic or political

“if you look at areas of the world that have suffered from political instability or a breakdown of the rule of law, people who have been successful in them are looking for a safe jurisdiction that respects and enforces the rule of law”

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The issue for the Jersey Financial Services Commission is to make sure that people identify good business opportunities through appropriate risk management analysis and manage those risks effectively. But firms have to continue to invest in their own capabilities to demonstrate that they have good processes for taking on clients, monitoring them, taking action when things don’t work out and keeping the reports that show appropriate action has been taken. Alan Binnington: One of the benefits of the Value to Africa report is that it identified a higher risk region in respect of which investors would choose somewhere like Jersey as the place to base their investment structures. They can see that we have very robust regulation: people here take compliance very seriously and will be on the lookout for the inevitable red flags that arise in higher risk markets. And if you look at areas of the world that have suffered from political instability or a breakdown of the rule of law, people who have been successful in them are looking for a safe jurisdiction that respects and enforces the rule of law. We have a strong judicial system and a tremendous amount of professional expertise on the Island. I think this reassures clients from such countries and also their investors that their assets will be looked after. Nicholas Davies: Jersey is really in a sweet spot on Africa. When you look at investors there, they use Jersey not for tax reasons but first and foremost for asset protection. Inward investors want a safe, legally robust vehicle to invest in and that works for both sides. Paul Savery: Jersey Finance has done a great job with a report that informs the debate and exposes some of the myths. My bank has a massive presence in Africa and I’ve shared the report across that business and it’s judged to be really good. It establishes Jersey as an alternative and/or complementary route to established centres such as Mauritius for inward investment. I also welcome the government’s activity in Africa: it sent a contingent to South Africa for the Indaba Mining event in February which also met the major South African banks in Johannesburg. Over the last year, I’ve heard ministers talk about mining and its importance to Jersey more than in the previous five years and some great international mining companies have opened significant offices here.

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There’s been a concerted effort by the government, regulator and the industry to attract more of that type of business. In addition, Jersey is heavily involved in trying to help African tax authorities improve their taxation capabilities. If we’re trying to do more business with Africa, we must make sure that local stakeholders and citizens see benefits on the ground as well – if not, this could cause us problems as a firm and perhaps as a jurisdiction. Lorraine Wheeler: Jersey Finance has also produced other reports on new target markets and we’re finding that when we go to such markets people already know Jersey. Ten years ago, that wasn’t so – and it gives Jersey an advantage that I know firms in other financial centres envy. John Willman: One of the successes in recent years has been the Jersey Foundation, which has proved attractive to philanthropists. Will the newly passed charities law give a further boost to philanthropy? Alan Binnington: The charities law was mainly aimed at local charities raising money from the public but it could encourage Jersey to become a centre of excellence for philanthropic structures. In the Middle East, zakat [alms-giving] is an Islamic obligation and there is already a focus on philanthropy in Muslim countries. Also, there is a lot more interest among firms in Jersey’s trust sector in helping clients find and manage charitable projects. The new charities law will add to a well-regulated environment without excessive bureaucracy which is well-suited to the creation of private family charitable structures. Lorraine Wheeler: As we discussed earlier, Jersey is now targeting emerging markets and philanthropy isn’t as high on clients’ lists of priorities in such markets as it is in the UK and the rest of Europe. But as emerging market clients grow in sophistication, our regime will appeal to families who wish to be involved in philanthropy. Nicholas Davies: That is certainly true: I foresee increasing interest in philanthropy in Gulf countries, which will find readymade answers in Jersey combined with valuable experience of philanthropic activities. It is positioning Jersey very well for wealthy individuals and rich families – and also corporates in emerging markets which face public pressure to do more in the way of philanthropy. John Willman: Transparency of ownership has become a big issue in international debates over financial centres, with UK pressure on the Crown Dependencies and British Overseas Territories to establish public registers of beneficial ownership. Where does Jersey stand on such initiatives? Geoff Cook: The Island now has some 15 years of experience with substantive measures to deal with abuses of the financial system, starting in 1999 with legislation criminalising tax evasion, antimoney laundering legislation and mechanisms to deal with both. We are now one of the few jurisdictions to capture ultimate beneficial ownership information, with an obligation to check inflows and make sure they are not proceeds of crime or evasion of tax. And we have regulation of corporate service providers to ensure that things are done properly. Add to that our early adoption principle for measures such as tax information exchange on request in 2002, being one of first countries to commit to implementing the US FATCA requirements and their UK equivalents, membership of the G5 group of

jurisdictions pioneering the EU arrangements and one of the 44 early adopters of common reporting standards that now cover 90 countries. We made a serious commitment to David Cameron’s G8 agenda on tax transparency and there has been a consistent message that Jersey embraces and is committed to sound business practices, good conduct and transparency. John Harris: On the UK demand for public registers of beneficial ownership, I detect a movement towards Jersey’s model of a central register that provides information to overseas authorities on demand. We also have a requirement for regulated trust service providers to keep such information up-to-date. And the Financial Action Task Force which sets the rules on money laundering worldwide has accepted the Jersey model as one of the models it can work with. We were criticised recently by the UK Labour leader over the lack of a public register. But the US, UK, France and Germany don’t yet have public registers, while our central register is already up and running. Alan Binnington: The outstanding issue is public access to the register. I believe that the Jersey model strikes the right balance between capturing reliable information which is available to authorities

“We certainly need to continue targeting gatekeepers in London because a lot of emerging market business still goes through there. But you also have to invest in going out to meet the people in growth markets whose share of global business will increase in the future”

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through established gateways and respecting individuals’ privacy which is a fundamental human right. I cannot see what is to be gained by having public registers of beneficial ownership, particularly in jurisdictions such as the UK where the information on the register will be of doubtful validity because the industry providing the information isn’t regulated. Paul Savery: The British Bankers’ Association has recommended a private register for the UK. It highlighted that the intentions behind a public register are good but there are many potential issues for individuals which need to be understood. But if they are going to be introduced it should be done consistently on a level playing field – otherwise there will be all sorts of problems over regulatory arbitrage and jurisdiction arbitrage. Jenny Swan: Beneficial ownership is not such a big issue for the funds sector. Jersey is a mature jurisdiction with many years of experience in legislating and regulating on this issue. We have a great story to tell. John Willman: There has been a lot of focus in recent international summits on Base Erosion and Profit-Shifting (BEPS), where it appears that large multinational companies are moving their tax liabilities to low-tax jurisdictions, weakening the tax bases of the countries where they mostly operate. Is Jersey exposed to measures to curb BEPS? John Harris: Profit-shifting takes advantages of double taxation agreements between countries to shift profits to countries where they are taxed at low or zero tax rates. Jersey doesn’t have a network of double taxation agreements, so we are not active in such practices. I’m reasonably relaxed on this generally. Geoff Cook: The concerns at the centre of this debate are over which countries have the right to tax the profits of companies that create substantial value by trading in many different markets. The last time that the international taxation arrangements governing such trade were seriously overhauled was in the 1920s, and the digital age has added complexities which have put the issue back on the agenda. But redesigning the arrangements could have some implications for Jersey if not done well. Our business is mainly to raise capital round the world and invest it where it can be put to work creating jobs and growth. It is principally investment in assets, rather than trading, which is why we don’t have a network of double taxation agreements. Those treaties were designed to stop double taxation but the authorities have become concerned about double no taxation – no tax is collected anywhere by anybody. It could be a problem for Jersey if funds investing across borders are unintentionally ensnared in regulation taxing investment flows that are doing a lot of good.

Our fund vehicles operate on a neutral tax platform: Jersey doesn’t tax the fund, people from all over the world can invest in it and they account for any tax on their returns in their home countries. But countries worried about BEPS, such as the UK, are considering legislation outside the international negotiations over a comprehensive overhaul, which could lead to profits from construction and infrastructure investments from jurisdictions like ours being subject to taxation. We believe major investors will not invest in such countries if they have to pay taxes on the returns that they cannot offset through double taxation agreements. They are likely to decide to invest in countries in Asia and the Middle East that don’t choose to levy such taxes, which would reduce much-needed foreign investment in UK infrastructure. Remember, the Jersey’s Value to Britain study estimated that about one pound in every 20 of foreign direct investment into the UK comes through Jersey. Jenny Swan: It is hard to get clarity on the consequences of the BEPS agenda for the funds sector. Our funds are tax neutral but these initiatives grow legs very quickly. This issue is very much one to watch. John Willman: Finally, Geoff, have Jersey Finance’s efforts to explain the Island’s role as an international financial centre to UK stakeholders and the wider world produced results? Geoff Cook: The UK coalition government has certainly become much more supportive of Jersey – I think on the back of the Jersey’s Value to Britain study we published in 2013, supplemented with the Moving Money report in 2014. There are now a number of MPs speaking up for our kind of financial centre in quite an informed way. In a recent parliamentary debate, the Financial Secretary to the Treasury, David Gauke, said that we are delivering on our commitment to international standards and that Britain can’t ask us to do things that are beyond international norms. We are a small nation which needs market access to lots of countries around the world and the political environment remains volatile. The political standoff in the US, instability in Europe and the threat of a Greek exit from the Eurozone provide plenty to worry about, as does the looming general election in the UK. Nonetheless, in terms of what we can influence and control, I think we’re in excellent shape. Our positioning as a cooperative and transparent jurisdiction of substance has drawn active support from the UK government and positive commentary from influential organisations such as the IMF, OECD and World Bank. I believe this sets us apart from our competition as a valuable partner providing the essential investment capital on which the global recovery in jobs and growth depends.

“I foresee increasing interest in philanthropy in Gulf countries, which will find ready-made answers in Jersey combined with valuable experience of philanthropic activities. It is positioning Jersey very well for wealthy individuals and rich families – and also corporates in emerging markets”

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Robust and responsive legal support By Timothy Le Cocq QC

ersey is a small jurisdiction with, amongst other things, a highly competitive, sophisticated, international financial services industry. A robust, responsive legal system is fundamental to Jersey’s success in this area; and the maintenance and development of our legal framework remains essential to its successful future. In Jersey, we have an almost unique legal and constitutional heritage. Our law is derived, in part, from the ancient customary law of Normandy, reflecting our historical position as part of Normandy under the English Crown until 1204. Over time, we have also drawn from English common law and French civil law. Jersey has therefore evolved into one of the relatively few mixed legal jurisdictions, that combines elements – some might say the best elements – of customary, civil and common law. The roots of our independent status derive from our history. When William, Duke of Normandy, conquered England in 1066 the Channel Islands were not integrated into England. We remained subject to the Crown but not part of England. After continental Normandy was lost by King John in the thirteenth century, the Channel Islands chose to be attached to the English Crown but retain their links to Norman laws. Since then, we have retained our independent government, autonomous for all of our domestic affairs. The United Kingdom is responsible for Jersey’s defence and in international law for the conclusion of international agreements, although the UK has entrusted Jersey to negotiate international tax agreements in its own right, and

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does not bind Jersey to international obligations without the consent of the Government of Jersey. We are not part of the European Union. Instead, we have a special relationship with the EU, being treated as part of the European Community solely for the purposes of free movement of goods. Whilst our legal and constitutional arrangements may seem complex to those not familiar with them, they provide some significant advantages. In respect of our legal system, for example, whilst judicial precedents have persuasive force, they are not binding as they would be in a common law jurisdiction. This enables the Courts to promote consistency but with the flexibility to be able to depart from precedent if necessary to deliver justice, for example, if common practice has evolved since the matter was last judicially determined. Furthermore, whilst the concept of a trust is an unfamiliar one in many civil law jurisdictions, our mixed legal system has embraced trusts to the end that Jersey’s trust industry is one of the pillars of our financial services industry. Consequently, our Royal Court is at the forefront of

“Whilst we have the advantage of our close relationship with the UK and being part of the British Isles, we can make our own decisions and have the agility to be able to develop our legislation swiftly”

developing jurisprudence in this area. Our cases are quoted extensively beyond our shores and indeed, a former judge of the highest court of the United Kingdom referred to the judgment in a leading Jersey case on trust law, Re Esteem Settlement, as ‘magisterial’. With reference to some of the common issues addressed in the judgment that arise in both English and Jersey law, Lord Walker of Gestingthorpe went on to say that, “it may be that the law of Jersey is developing faster, and in a better direction, than English law.” Whilst we have the advantage of our close relationship with the UK and being part of the British Isles, we can make our own decisions and have the agility to be able to develop our legislation swiftly. Our reaction to the introduction of the Alternative Investment Funds Management Directive (AIFMD) is an apt illustration of this: we were the first non-EU jurisdiction to announce that we would be offering a fully compliant AIFMD regime in relation to European business, as well as retaining our existing framework for the rest of the world. The Attorney General and Solicitor General although appointed by the Crown and therefore politically independent, are non-voting members of the States Assembly, Jersey’s legislature. They also provide legal advice to Ministers and the legislative assembly and the Attorney is ultimately responsible for all prosecution decisions. The Attorney also has particular statutory functions, such as being responsible for responding to requests for mutual legal assistance from other jurisdictions. In performing those duties, I am conscious of the demands that our position in the international financial services industry has on our legal framework and the importance of our law and practice continuing to evolve in line with modern practice and standards. Our international reputation as a well-regulated jurisdiction is well deserved but must be protected in the future. It is therefore imperative that those who might undermine our reputation by their criminal

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“The UK’s ratification of the UN Convention on Corruption was extended to Jersey in 2005 and most recently, it has been confirmed that the UK ratification of the Palermo and Strasbourg Conventions, dealing with transnational organised crime and money laundering respectively, will be extended to Jersey in the very near future” activities are brought to justice. Whilst most developed jurisdictions have anti money laundering legislation, Jersey remains one of the few offshore financial centres to have successfully used it to prosecute several cases. Furthermore, we also collaborate with international partners to ensure that people do not profit from the proceeds of crime, often working with foreign law enforcement agencies to freeze and assist in returning very substantial assets derived from corruption or other criminal activities. My department plays a key role in advising on compliance with international standards and works in partnership with policy officers and the Jersey Financial Services Commission (JFSC) in order to maintain and develop our regulatory standards. In our last IMF assessment in 2008 we were classed as being compliant with 44 of the 49 FATF recommendations, ranking us in the top division of finance centres. However, as international regulatory frameworks continue to evolve, significant resource is dedicated to working both internationally and domestically to ensure that we maintain the highest standards. For example, the UK’s ratification of the UN Convention on Corruption was extended to Jersey in 2005 and most recently, it has been confirmed that the UK ratification of the Palermo and Strasbourg Conventions, dealing with transnational organised crime and money laundering respectively, will be extended to Jersey in the very near future. We need responsive legislative development to keep pace with the speed of change. A dedicated team in my department advises on new legislation, assists with drafting instructions and liaises with the UK to ensure that any primary legislation, which requires Royal Assent, is

processed as quickly as possible. Since this team was established, the time it has taken for primary legislation to gain Royal Assent has reduced significantly. This helps our legislature to be agile in response to changing circumstances and a developing financial services industry. As Attorney General, I am proud of how our legal framework has evolved and developed in order to cope with the demands of globalisation. Our legal system has provided a strong foundation upon which our financial services industry can develop.

Timothy Le Cocq QC Timothy Le Cocq QC is HM Attorney General for Jersey. Following a career in private practice, in 2008, Timothy Le Cocq QC became Solicitor General for Jersey and was made Queen’s Counsel. In November 2009 he succeeded William Bailhache, QC as Attorney General for Jersey, an office which he currently holds. Mr Le Cocq retires from the office of Attorney General at the end of March 2015 and at the beginning of April is to be sworn in to office as Deputy Bailiff of Jersey.

Photo: Chris George

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Decoding Regulation The Sator Square is more than just our logo, it’s our philosophy.

Sator Regulatory Consulting Our flagship company: solving regulatory, governance, risk and compliance issues for financial service businesses. KYC Worldwide A global solution for businesses, enabling clients to outsource the CDD, verification, risk rating and monitoring elements of their AML/CFT obligations. A ground breaking new service. Sator Fidelis Providing fiduciaries with assurance that trusts are being run in the best interests of beneficiaries: a tailor-made review service. A ground breaking new service. Sator Solutions Our full spectrum AML/CFT training and awareness service combining e-Learning with face to face delivery. Jurisdictionally specific to your location and targeted by sector and seniority/role of employee. Regulatory Recruitment The natural choice for specialist compliance personnel: permanent and interim staffing solutions. Let us decode your regulatory and fiduciary obligations

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Addressing a dynamic regulatory environment By John Harris

t is always instructive to look at what one said a year previously in approaching an article such as this one and never more so than in the transition between 2014 and 2015. I say this because the impact of both the international and local regulatory scene on the all important financial services industry in Jersey has never been greater, more challenging and more demanding. The general economic situation in Jersey could be said to be one of gentle improvement. Certainly by many traditional indicators, including activity levels in areas such as fund services, private client work within the trust company sector and to some extent a stabilisation of banking business, the situation looks positive compared to the difficult years 2008 – 2014. Aggregate statistics on volumes are encouraging and at the turn of 2014 a significant increase in the volume of funds managed in the Island was observed. It is heartening to see capital raising being undertaken again across the range of traditional asset classes in which Jersey excels – property, private equity and hedge funds – as well as the welcome development of certain fund managers relocating part or substantially all of their operations to the Island as their primary base. These are good signs for the future, supplemented by Jersey’s traditional strength in the private client and trust arena where again the fallow years are beginning to give way to increased activity levels. MONEYVAL Perhaps the single most important event for the regulator in Jersey in 2014/15 has been the visit of MONEYVAL (Council of Europe body charged with the evaluation of its member jurisdictions on their observance of anti money laundering/countering financing of terrorism (AML/CFT) standards). Jersey was last reviewed by the International Monetary Fund (IMF) in 2008/09. That role now falls to MONEYVAL of which Jersey became a member jurisdiction in 2012. Their evaluation visit took place in January 2015, focusing very much on the emerging international standard that a properly functioning AML/CFT regime, not only needs to be well based in law and regulation but is also one where the legal infrastructure translates into effective action on the ground by regulators/law enforcement and policy makers. It is far too early to say at this stage how well Jersey has done in its evaluation but the indicators are mostly positive.

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However, within the MONEYVAL process it is clear there are a number of regulatory developments to which Jersey must pay attention. The first of these is the need for the jurisdiction to conduct (as part of the next round of assessments) what is known as a National Risk Assessment (NRA) in AML/CFT terms. This is a sweeping, allencompassing, thorough analysis and validation of the risks in the AML/CFT space with which Jersey as a jurisdiction is faced. Beneficial ownership Within this debate there are two other major issues which I feel to be worthy of mention. First is, where Jersey stands in respect of the international debate on the central register of beneficial ownership of companies and identification of beneficiaries to trusts. This has found expression in debates amongst bodies such as the G20, G8, the European Union (4th Money Laundering Directive). Jersey already has a central register of beneficial ownership of companies and has had for many years.

â&#x20AC;&#x153;Jersey is a member of a Group of International Finance Centres Supervisors (GIFCS) which groups together a number of smaller jurisdictions who are, amongst other things, particularly active in the trust and company service provider sectorâ&#x20AC;?

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Moreover, through its licencing, regulation and supervision of Trust and Company Service Providers (TCSPs) it has a supplementary mechanism to bolster the effectiveness of its central register by way of clear unambiguous and demanding requirements on TCSPs to identify the true beneficial owners of all structures for which they act, including all parties to trust arrangements. In this respect Jersey regards itself as being at the vanguard of current best practice in this area. Second, Jersey is a member of a Group of International Finance Centres Supervisors (GIFCS) which groups together a number of smaller jurisdictions who are, amongst other things, particularly active in the trust and company service provider sector. Nearly all of these member jurisdictions follow to some extent the regulatory model that Jersey has had in place over many years of overseeing and supervising TCSPs. In this respect, in October 2014, the GIFCS substantially overhauled and updated its Statement of Best Practice for the regulation of TCSPs and the publication of that standard on 17 October 2014, should again in our view be seen as a significant development internationally and probably be seen as the relevant international standard in this particular space. Regulatory change I have concentrated thus far on developments in which Jersey can claim high ground in developing relevant international regulation itself. However, across the world regulatory change has become the new normal. This impacts smaller centres rather dramatically in that we must work out what is relevant, appropriate and assimilable in terms of international regulatory developments and import those into our respective centres in pragmatic ways which allow industry to continue to function, maintain access to overseas markets whilst respecting the new standards. There are several examples of this.

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One would be the UK authorities’ decision to ring-fence retail banks to operate separately and in a more restricted way than the wider Group of which they form part. This has implications for Jersey’s up streaming model to UK ring-fenced entities and various plans for affected banks in the UK have now been submitted to the Prudential Regulation Authority (PRA) in London, which in time will probably change the way in which the Jersey branch or subsidiary does business with the parent. This need not necessarily be a bad thing but it will be a different thing. Another clear indicator of international regulatory action impacting upon the Island is the agenda of the EU. Here there are numerous things to mention but I will restrict myself to two. After the success of Jersey’s maintenance of its private placement regime via cooperation agreements with EU supervisors concluded in 2013, we have now moved on to the next stage of the Alternative Investment Fund Management Directive (AIFMD), whereby ESMA will conduct an initial assessment of a sufficiency and suitability of passporting for ‘third countries’ (i.e. USA, China, Jersey) and make recommendations to the European Commission and Member States by summer 2015. Jersey is working hard to ensure that it is on a list of priority jurisdictions to be assessed and reviewed in this respect and believes that it has every technical base covered for being positively assessed. Clearly further major significant challenges lie ahead, as is also the case with the emerging agenda for the Markets in Financial Instruments Directive 2 (MiFID 2) which seeks in many ways to emulate the additional regulatory tightening that AIFMD brought for Alternative Investment Funds but this time for the generalised investment management space for both retail and professional clients within the EU. Again MiFID 2 has a third country dimension and thus affects Jersey. At the time of writing, both Jersey and Guernsey have made an in principle decision to pursue a similar equivalence type outcome in respect of MiFID 2 that they did with AIFMD and a great deal of work will be needed to be able to ensure that this is both effective and recognised by the relevant EU authorities. I would briefly mention from last year something which has continued throughout 2014, namely Jersey’s own evaluation of its funds regime following the recommendations of the 2013 McKinsey review. This is about whether or not streamlining and simplification of the regime could be undertaken and various proposals have been developed and advanced by the Jersey Financial Services Commission (JFSC) and Jersey Government and increasingly shared with industry practitioners. The JFSC will continue to work avidly with Government and industry on this project in 2015.

“we must work out what is relevant, appropriate and assimilable in terms of international regulatory developments and import those into our respective centres in pragmatic ways which allow industry to continue to function, maintain access to overseas markets whilst respecting the new standards” supervisory regime in the increasingly demanding financial services world that we now confront both in Jersey and internationally. I hope these few lines have somewhat enlightened on the dynamic but challenging regulatory scene with which Jersey is faced. At the Commission we are proud to play the part that we have in Jersey life and look forward to continuing to be able to do so into the future.

John Harris John Harris is the Director General of the Jersey Financial Services Commission (JFSC). From 2002 to 2006, John Harris held the position of Director - International Finance in the States of Jersey Chief Minister’s Department where he had responsibility for all aspects of the government’s policy on the maintenance and enhancement of Jersey’s position as an international finance centre. From 1998 to 2002 he was Chief Executive Officer for NatWest Offshore with responsibility for offices in Jersey, Guernsey, Isle of Man, Gibraltar, Cayman, Bermuda and the Bahamas. He spent 22 years working for NatWest Bank during which time he held management positions in France, Switzerland and Singapore amongst others. John Harris obtained a BA (Hons) at Exeter University and is a fellow of the Chartered Institute of Bankers.

The Commission I end my remarks this year by focusing on the Commission itself. In June 2014 Lord Eatwell was appointed as the new Chairman of the Jersey Financial Services Commission and he has brought a range of ideas to the table to reflect a rapidly changing and developing world. He has made the case that all regulators need to be increasingly agile, listening, responsive and essentially more thoughtful, with decisions increasingly driven by internal and external research developed in order to keep pace with the astonishing range of international regulatory developments that have come to pass since the financial crisis. In this respect the Commission is also undertaking a Change Programme to maximise the effectiveness and efficiency of its own resources, increasingly upgrade its own technology interface with industry and meet the needs of emerging information management requirements (such as Freedom of Information legislation in Jersey from 2016, for the Commission), whilst also seeking to improve and upgrade its own management of staff resources. Add to this the need to think very carefully about the optimum nature and extent of a

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Jersey’s evolving AML /CFT regime By Helen Hatton

n the 1980s whilst the term ‘money laundering’ was heard occasionally, it certainly was not interpreted as it would be today. The concept of making dirty money appear legitimate was not generally recognised. However, an early event that would illustrate development of the modern concept of money laundering occurred in 1984 following the theft of gold bullion from the Brink’sMat warehouse at Heathrow Airport. Kenneth Noye travelled to Jersey to purchase a number of gold bullion bars, these were deposited in a safe deposit box at a local bank. Noye’s motivation in securing this transaction was to obtain an official bank receipt for legally purchased gold which subsequently would be used to claim that he had legitimate ownership of any gold bars that were found in his possession later. As followers of the Brink’s-Mat story may recall, the Brink’s-Mat gold was melted down and turned into smaller bars. These smaller bars closely resembled the legitimate ones purchased in Jersey. During the investigation of Noye and his gang, the police became aware that there were a number of gold bars held in the bank safe deposit box – there was no legal means of recovering the gold at that time and Mrs Noye was attempting to make a claim for

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the gold. The solution was that the police, who at that time did not know if the gold was part of the stolen Brink’s-Mat bullion or not, used the customary powers of the Duty Centenier (a post held within the honorary police service) who has the power to enter premises (by force if so required) and search/recover any property believed to be stolen property. So it was that members of the Commercial Branch recovered eleven gold bars without a warrant or any other legal process in place. Developing international cooperation mechanisms The lack of legislation to tackle financial crime did prove problematic for the local police – there were limited legal means to obtain information from banks or other financial services businesses. The Bankers’ Books Evidence (Jersey) Law 1986 was used extensively and foreign and UK police investigators could turn to the Evidence (Proceeding in other Jurisdictions) (Jersey) Order 1983 to have evidence recorded in Jersey for an ongoing criminal or civil investigation. Commissions Rogatoire were another avenue by which investigators could obtain evidence through the Jersey Courts. However, broadly speaking, means of cooperation were limited. It was common at that time to secure evidence relating to drugs funds held at local banks by the use of a warrant issued under the terms of the Misuse of Drugs (Jersey) Law 1978. The warrant would authorise the officers named within to enter the designated premises (by force if necessary) and search for drugs or documents relating to drugs use. The warrant would be served on the bank manager who would simply produce the relevant documents. However, thankfully, times change and as the international financial services industry grew in Jersey, so did its need to develop more comprehensive capabilities in the fight against financial crime. Introducing ‘all crimes’ money laundering legislation The big change came in the summer of 1999 when the Proceeds of Crime (Jersey) Law was introduced, for the first time, making it mandatory for

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financial services business to put defences in place to prevent and forestall money laundering. In addition to creating criminal offences for failing to have certain measures in place, the Law also created criminal offences in respect of assisting another to retain or conceal the proceeds of crime, failing to report suspicious transactions or tipping off. The scope of the new Proceeds of Crime (Jersey) Law 1999 was sweeping – requiring transactions to be reported wherever a financial services employee knew or suspected that moneys may be the proceeds of any crime, which, had it been perpetrated in Jersey, would be a crime punishable by more than one year in prison. No proof of an offence is needed, nor is it necessary to identify what the crime might be, as the obligation triggers on reasonable suspicion that the moneys may be the proceeds of crime. Importantly, the Law contains no ‘fiscal carve out’,

“Conducting sufficiently thorough due diligence to address risks, satisfy legal obligation and regulatory review, whilst at the same time keeping disruptive or ill-timed client questions and costs to a minimum, is a serious challenge”

Jersey-First for Finance

thus suspected tax crime was included in the scope of the reporting regime from its introduction in 1999, and remains so today. The Jersey Financial Services Commission was charged with the responsibility to ensure financial services businesses complied and issued an extensive handbook setting out the means by which it expected licence holders to meet their legal obligations. Meeting and surpassing international developments Post the 9/11 attacks in 2001 and again in 2008, Jersey further upgraded its regime to adopt the nine Special Recommendations mandated by the Financial Action Task Force as means to combat the financing of terrorism, including extending it to a far wider range of reporting businesses and professions including lawyers, accountants, high value goods dealers and estate agents. Additionally, the regime shifted to introduce the ‘objective test’ as the relevant test for suspicion and moved from obligations to report on suspicious ‘transactions’ to reporting suspicious ‘activities’. These changes brought the regime up to maximum international standard and in 2009 Jersey received the highest ratings in any assessment undertaken by the International Monetary Fund of anti money laundering regimes at that time. Jersey truly met international standards. Enforcement of the regime Jersey has adopted a tough position on enforcement of its standards with regard to anti money laundering. Protecting the reputation of the Island as a well regulated international financial services centre, is an important part of the objectives of the Island’s Government, police and regulatory authority. However it is an objective which Jersey’s high quality financial institutions share, sharing equal concern in

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maintaining expectations of legitimate client confidentiality, whilst willingly playing their part in the global fight against financial crime and terrorist financing. Jersey has not held back on its prosecutions or regulatory sanction of those businesses and individuals who have not maintained adequate defences against money laundering. Finding the next level There is a new fiscal morality in play, a demand for increased transparency, better communication and cooperation. An increase in the need for mature jurisdictions such as Jersey to demonstrate they operate responsibly, as fully engaged global partners, committed to their international commitments. This is not a new or uncomfortable positioning for Jersey but the right place for a long term, sustainable finance centre, built on track record and solid skilled professionals. Today there is a palpable shift in the focus of many Jersey businesses. Many of the best firms are wanting to improve the effectiveness of their risk management strategies to better monitor and mitigate the ever increasing fiduciary and regulatory risks of the complex cross border wealth management structures they manage. The focus is also on, in terms of maintaining leading edge client service at a competitive price and the constant pursuit of good governance and need to embed ethical values in all staff/client interactions. Many firms would list ‘attracting, developing and retaining the right staff’, ‘delivering assignments to excellent customer satisfaction’ and ‘managing risk’, as their top three objectives. These objectives run parallel to the needs of most clients. This parallel represents a community of interest and alignment of objectives which speaks well for Jersey’s future. Financial services businesses and private clients engage consultants in a range of mandates focused around these objectives, all ultimately designed to improve the customer experience, directly or indirectly through improved governance, risk management and compliance. Practical issues of compliance An excellent example of the drive to service quality, intersecting with increasing cost of regulatory obligation, arises right in the middle of the money laundering defences area. Conducting sufficiently thorough due diligence to address risks, satisfy legal obligation and regulatory review, whilst at the same time keeping disruptive or illtimed client questions and costs to a minimum, is a serious challenge.

Conclusion As the perception of crime changes, and global financial flows only increase; as the international spotlight turns with ever more intensity on ultra high net worth individuals and the jurisdictions they choose to safeguard their assets, so international financial services centres must increase their capability, transparency and cooperation. As a result of these pressures, the sophistication of risk management becomes even more central. Few international financial centres share Jersey’s good fortune in having the infrastructure, judiciary, regulatory framework, skills pool, track record and sheer strength – not to just meet these increasing standards but to stand at the very forefront of excellence.

Helen Hatton Helen Hatton is a senior executive with over 25 years board level experience and is the founder and Managing Director of Sator Regulatory Consulting Limited, a Jersey based business offering compliance and regulatory advice, training and staffing solutions to regulators, international standard setters and financial services businesses worldwide. Educated at Hurst Lodge, Sunningdale and St Wilfred’s, Exeter followed by Plymouth University, Mrs Hatton lectured in Business Studies in further and higher education institutions in the south west of England before joining American Express Bank in 1989 to give private clients wealth advice. In 1992 she was appointed director of enforcement to the Isle of Man Financial Supervision Commission and later became Deputy Director General of the Jersey Financial Services Commission (JFSC), retiring in May 2009.

Financial services businesses can now outsource much of their AML customer due diligence processes and risk assessment process.

Helen is a Fellow of the Institute of Advanced Legal Studies, a member of the Editorial Board of the Journal of Banking Regulation and a Freeman of the Worshipful Company of International Bankers.

In on-boarding new business, specialist services can achieve what a good in-house compliance team would do in conducting on-going

Helen is also the founder and Chairman of KYC Worldwide Limited, a due diligence outsourcing service.

“outsourced functions bring outsourcing model advantages such as service level standards, fixed cost, easy scalability, enhanced response time and audit trail”

Jersey-First for Finance

monitoring and undertaking period reviews. However outsourced functions bring outsourcing model advantages such as service level standards, fixed cost, easy scalability, enhanced response time and audit trail.

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Enhancing Jersey’s cutting edge corporate law By Robin Smith

ompany law underpins the attractiveness of Jersey as an International Finance Centre (IFC). Although the value of Jersey to other jurisdictions as a conduit for efficient movement of capital is well known and documented (for example, the Capital Economics report published in 2013 which demonstrated Jersey’s value to Great Britain), the role of our company law in attracting a steady flow of Jersey company incorporations is perhaps less well known. As a firm of lawyers, we are often called upon in early structuring stages of complex cross-border transactions. It is exactly during these moments that the constant development of our Companies (Jersey) Law (1991) is shown to be so important. Rather like proud parents, we are able to show off the 1991 Law’s robust shareholder protection and flexible capital maintenance regime as well as its sophisticated creditor protection. The 1991 Law has encouraged multinational companies to choose Jersey as the jurisdiction of incorporation of their parent holding companies. Equally, finance companies and private investment vehicles gravitate towards using Jersey companies because of its corporate law regime.

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â&#x20AC;&#x153;It is not always easy for smaller jurisdictions to demonstrate permanence or track record in relation to their own legislation and it is only possible to do this alongside a sophisticated and robust court systemâ&#x20AC;?

Sound corporate law principles are critical for any jurisdiction. It is not always easy for smaller jurisdictions to demonstrate permanence or track record in relation to their own legislation and it is only possible to do this alongside a sophisticated and robust court system. English law remains popular as a choice of law for corporate and finance transactions in many jurisdictions as a result of the long established principles underlying the English legislation, as well as the jurisprudence emanating from the highly regarded court system. Despite being a jurisdiction with legal origins which have been historically more closely connected to French law in some areas, Jersey has purposefully based its corporate law regime on English company law. The Jersey courts (where the final court of appeal is the Judicial Committee of the English Privy Council) and Jersey lawyers are therefore able to draw on the vast amount of English jurisprudence when posed with a difficult question. Notwithstanding the basis of the 1991 Law, Jersey has continually sought to improve the legislation, drawing from other crown dependencies where necessary and in the latest round of changes,

Jersey-First for Finance

which came into force on 1 August 2014 as a result of Amendment No.11, innovative provisions have been introduced which are expected to be of considerable interest to those considering using a Jersey company in their structures. Key changes to the 1991 Law as a result of Amendment No.11: Shareholder Resolutions: New rules have been introduced which enable different thresholds to be specified for different resolutions. We expect this flexibility to be of interest in many cases, including joint venture arrangements and where robust minority shareholder protections are required. Reductions of Capital: A new procedure has been introduced which enables companies to reduce their capital without having to go to Court. The new procedure requires a special resolution of the shareholders together with a supporting solvency statement by the directors. All types of company can take advantage of this new

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procedure, including private and public companies. The existing procedure, which involves Court confirmation of the reduction of capital, continues in force for anyone who prefers this route. Statutory Mergers: A number of improvements have been made to the existing statutory merger rules, including shortening the timetable required to effect a statutory merger. Statutory mergers have proved popular and we expect these changes to encourage their further use, for example as one of the options for takeovers of listed companies. Statutory Demergers: A new demerger regime will be introduced which enables an existing company to be ‘split’ into two or more surviving companies. Potential uses include effecting transfers of a portfolio of UK or other real estate without having to transfer that portfolio out of a remaining portfolio; splitting off certain assets in preparation for a sale; or creating a more robust separation of existing businesses and risks through the creation of a revised group structure. The details of the demerger procedure will be set out in separate regulations. Statutory Migrations: A number of improvements have been made to the existing rules, including shortening the timetable required to effect a statutory migration. A statutory migration involves the transfer of the seat of incorporation of the company from one jurisdiction to another and offers a variety of structuring options to clients. For instance, we have advised on transactions where the overseas law did not provide for the compulsory acquisition of minority shareholders following a takeover offer, where the company chose to migrate to Jersey to take advantage of our compulsory acquisition regime. Dividends: Amendments have been made to the dividend regime which ensure that any dividend or other distribution (including a ‘deemed distribution’ or ‘disguised distribution’) which does not have the effect of reducing the net assets of the company is not required to comply with the statutory rules in respect of distributions. This change is

expected to further facilitate the structuring of international finance transactions through Jersey vehicles by putting beyond any doubt that for example upstream guarantees are not treated as any form of distribution. Ratification of Unlawful Dividends: A new statutory procedure which enables a company to ratify a previously unlawfully made dividend or other distribution has been introduced. One advantage of this procedure over existing methods is that it results in the distribution being treated as lawfully made at the time it was originally made. The procedure requires an application to Court with a supporting solvency statement by the directors but does not require a shareholder vote or any creditor notification (unless the Court orders that creditors be notified). Ratification of Breach of Directors’ Duties: A new statutory regime now sits alongside (rather than replaces) the existing rules which enables shareholders to ratify any breach of directors’ duties by ordinary resolution (or special resolution if the articles of association require). This is based on the English law regime but with a simplified procedure.

“on 1 August 2014 as a result of Amendment No.11, innovative provisions have been introduced which are expected to be of considerable interest to those considering using a Jersey company in their structures”

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“Our new Security Interests Law, which came into force at the beginning of 2014, has been generally very well received. The upgraded legislation carries several advantages for both creditors and for borrowers” Prospectuses: Changes have been made to the prospectus regime with the result that many share offerings which currently require a prospectus will no longer require a prospectus under Jersey law. The detailed exemptions will be set out in a separate Ministerial Order. Takeovers: There have been changes to the minority shareholder compulsory acquisition procedure (known as the ‘squeeze out’) on takeovers, in particular in respect of the requirement to make the offer in jurisdictions where there are issues under the relevant law with doing so. This aligns the Jersey law with English law, although it serves as clarification only as this was already considered to be the position under common law. Annual General Meetings: For private companies (including existing private companies), there is a new ‘opt in’ regime for AGMs which replaces the existing ‘opt out’ regime. Under the new ‘opt in’ regime, the default position will be that a private company does not need to hold an AGM unless its articles of association specify otherwise. Short Notice of General Meetings: The threshold for consent to short notice of a general meeting has been reduced to 90%, except for meetings to consider special resolutions where the threshold remains 95%.

Photo: Chris George

Overseas Branch Registers: The overseas branch register rules have been amended to permit companies to include the details of any shareholder, not just those resident in that overseas jurisdiction. This will facilitate listings of Jersey companies on overseas exchanges which require such branch registers.

Purchase of Own Shares: It has been clarified that the payment for shares can take the form of cash or non-cash consideration, which provides more flexibility than some other jurisdictions are able to offer. There have also been changes to the rules regarding corporate representatives and proxies which align Jersey law with English law as well as the abolition of rules in relation to paying commissions on newly issued shares and restrictions on issuing shares at a discount to the nominal value. Amendment No.11 also changed certain requirements for creditor’s winding up of Jersey companies to ensure that a single large creditor cannot be prevented by other creditors from holding a creditors’ meeting. In cross-border finance transactions, the flexible and familiar structure of the Jersey company is critical for counterparties. This goes hand in hand with a state of the art security law governing the taking of security over intangible moveable property such as shares and bank accounts. Our new Security Interests Law, which came into force at the beginning of 2014, has been generally very well received. The upgraded legislation carries several advantages for both creditors (particularly in respect of the wide powers of enforcement) and for borrowers (for example, the simple method of creating security by agreement and registration of a financing statement). As a smaller jurisdiction, our legislature can respond quickly to changing market demands to ensure that the Jersey company continues to remain the vehicle of choice for both multinational publicly listed groups as well as private investors involved in cross-border finance transactions. We expect that company law in Jersey will continue to evolve to provide a corporate law regime that remains at the cutting edge while still staying close to its roots in English law.

Robin Smith Robin Smith is a Partner with Carey Olsen, Jersey. Robin is consistently recognised for his ability to deal with a wide range of international corporate and finance transactions. He has acted on numerous significant portfolio acquisitions and often acts for both lenders and borrowers on complex financings, refinancings and restructurings, with significant experience in relation to the financing of investment funds. Robin advises global banks and large corporates as well as smaller privately held entities. Robin regularly establishes new Jersey structures, including corporates, limited partnerships and unit trusts. He also has experience advising in relation to the establishment, transfer and redomiciliation of banking business in Jersey. Robin is a Director of Carey Olsen Corporate Finance Limited which provides sponsor services in respect of Channel Island Securities Exchange listings and regularly advises on transactions involving Eurobonds and other CISE listed securities. Robin trained as an English solicitor in London. Following his move to Jersey in 2002, he spent six years at another leading law firm in Jersey, prior to joining Carey Olsen in February 2008. Robin is qualified as a solicitor in England and Wales, a Jersey Advocate and was educated at King’s College, London.

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Deutsche Bank db-ci.com

Committed to creating lasting value in the Channel Islands. Deutsche Bank’s global reach and expertise connect our businesses, regions and markets. This enables us to provide innovative financial solutions to meet our clients’ most complex needs. As your financial solutions partner with more than 40 years' experience serving a broad range of clients such as international corporations, trust companies, family offices, portfolio, hedge and alternative fund managers, we have the expertise to help meet your financial objectives. To learn more about our financial solutions in the Channel Islands, please contact Mark Osment, Financial Intermediaries Telephone: 01534 889288 Email: mark.osment@db.com Darren Langlois, Treasury, FX & Execution Telephone: 01534 889159 Email: darren.langlois@db.com Jackie Foot, Corporate/Alternative Fund Services Telephone: 01534 889303 Email: jackie.foot-jsy@db.com Channel Islands Custodian of the Year Custody Risk European Awards 2012 - 2014 World’s No.1 FX Bank Euromoney FX Poll 2005 - 2013

Deutsche Bank International Limited is regulated by the Jersey Financial Services Commission

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Photo: Chris George

Jersey’s attractiveness for banks and their customers By Richard Ingle

anking has been at the core of Jersey’s financial services industry since the development of the jurisdiction as a modern international finance centre over 50 years ago. As vehicles for maturity transformation, banks offer a range of deposit and loan facilities for their customers and access to the international payments system. As such, the banking sector remains an integral and critical part of the economy and can be described as a core ingredient for the entire financial services industry. Today the landscape of the local banking industry bears little resemblance from its modest beginnings when it provided basic banking services to Island residents and some offshore investors. The £40 million collective value of bank deposits in 1960 is dwarfed by the £132 billion of total deposits maintained by the 33 licensed banks currently operating from the Island. High quality banking brands are attracted to Jersey by decades of stability, a well educated and expert workforce, open government, a tax neutral environment for international clients, flexible but high standards of regulation and a long-standing reputation as a leading offshore centre in a convenient time zone. The Jersey Bankers Association (JBA) is a formal organisation of all the licensed banks in Jersey. Our membership consists of significant international banking groups, many of which have a very long association with Jersey and collectively employ over 4,700 staff in the Island. The JBA acts as a consultative body and discussion/lobby group on a wide range of topics including

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regulatory, legal, marketing, taxation, recruitment, risk & compliance and occasionally product matters. We work closely with the States of Jersey, Jersey Finance and the Jersey Financial Services Commission (JFSC) to address the various industry challenges that arise from time to time. The integrated nature of banking means that our members are engaged in activities that range widely across the financial spectrum including retail deposit taking and lending services for the local population, wealth management and private banking services for international investors and high net worth individuals, global custody, corporate and commercial banking and the provision of banking services to the other sectors of the Jersey financial services sector. As a self-governing dependency of the British Crown, the early days of Jersey’s development was understandably closely connected to British expatriates seeking a safe and secure location to keep their savings and accumulate their wealth. Significant advances in technology and communication now mean that Jersey’s virtues have become as equally attractive to international clients seeking secure geographic diversification with familiar and trusted

“Immediate challenges faced by banking groups in Jersey and elsewhere arise not just from the prolonged period of low interest rates but a variety of measures arising from international banking reform”

Jersey-First for Finance

banking brands. This is particularly the case for wealth generators, entrepreneurs, investors and other banking clients from the emerging economies of the world where a lack of local banking infrastructure/expertise or geo-political instability might be good motivation for maintaining an offshore relationship in a reliable, wellestablished, expert and tax-neutral finance centre. A number of Island banks are equipped and experienced in dealing with the demands of international clients from across the world and offer banking products and investments in a wide range of currencies. Today, accounts may be opened in Chinese Renminbi which is poised to join the US dollar and the euro as one of the world’s top three global trading currencies. The quality, longevity and depth of Jersey’s banking industry provide a resiliency to the sector that is the envy of many competitor jurisdictions. Jersey banks were not immune from the global reaction to the 2008 financial crisis; the longevity of which has confounded many forecasters. The sector has weathered the crisis well although many of the global banking reforms stemming directly or indirectly from the crisis have yet to be fully deployed. Immediate challenges faced by banking groups in Jersey and elsewhere arise not just from the prolonged period of low interest rates but a variety of measures arising from international banking reform. These include stiffer capital requirements, initiatives aimed at strengthening banking systems (e.g. ring-fencing and liquidity regulations) and tax transparency measures aimed at eliminating illegal tax evasion. In this regard, Jersey has been at the forefront of supporting initiatives to combat financial crime for many years. It has had money laundering legislation since the 1980s and introduced ‘all crimes’ legislation in 1999. During 2014 Jersey’s Government reinforced its support for legitimate tax planning but indicated its desire that Jersey should not host structures or providers connected with abusive tax schemes designed to frustrate the will of national parliaments.

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The JBA strongly supports all measures to combat financial crime and uphold the reputation of Jersey. We also support the right of legitimate banking clients to confidentiality and privacy which are well established concepts in Jersey’s banking law and industry practice. We therefore also support the approach that ownership data is not information that should be generally available to the general public. The Jersey finance industry is fortunate to be recognised by local government as a valuable contributor to the local economy. This manifests itself beyond the obvious financial contributions that local banking institutions make directly to the tax authorities and includes the taxes paid by the 4,770 staff employed by the sector and the monies spent with local businesses and suppliers. Additionally, Island banks are keen supporters of the local community and are involved in many initiatives aimed at making a broader contribution to the Island through community projects, charitable initiatives, sponsorship and environment programmes. This contribution has been justifiably recognised in the Jersey Government’s Financial Services Policy Framework, published during 2014, which seeks to ensure the growth and development of the financial services sector. For the banking sector this means that Government is committed to continuing to foster strong links with the City of London and will also assist banks in adapting business models to new regulations from other jurisdictions. Government also plans to target growth in non-EU banks which want to set up a banking presence outside of the EU but in the geographical area. Pleasingly, this commitment is accompanied by an understanding from Government that the Island needs to produce highly skilled employees and provide flexibility in population policies to accommodate industry needs where the availability of the required skills in the Island falls short.

This level of governmental and regulatory support augurs well for the long-term growth and development of Jersey’s banking industry. With additional support and assistance from Jersey Finance, it also means that the industry is well equipped to manage the short term challenges that it faces and will be able to benefit from the longer term growth prospects that will inevitably present themselves to a high quality, well supported finance centre such as Jersey.

Richard Ingle Richard Ingle is President of the Jersey Bankers Association and Chief Executive Officer of Standard Chartered Bank in Jersey. Richard has spent over 28 years in the financial services industry based in both the UK and Jersey. He has been the CEO of Standard Chartered Bank in Jersey since 2010 where his role also involves providing area governance oversight to the Bank’s businesses in Guernsey and the Falkland Islands. His career prior to joining Standard Chartered included positions with the wealth management arm of a UK based insurer, the asset management and private banking divisions of a leading US bank and a period with a UK regulatory body.

“Whilst this broad philosophy remains unchanged, the JFSC Bank Licensing Policy was adapted during 2014 in recognition of international banking reforms and offers a more flexible and welcoming approach to bank licensing”

Photo: Chris George

Accompanying this refreshed Government approach is a revised banking license policy from the JFSC. It has been to Jersey’s advantage that only banking institutions of the highest quality have been permitted to operate from the Island. Whilst this broad philosophy remains unchanged, the JFSC Bank Licensing Policy was adapted during 2014 in recognition of international banking reforms and offers a more flexible and welcoming approach to bank licensing. This means that Jersey is able to accommodate a broad range of operating models for banking groups wishing to establish a presence in one of the world’s premier international finance centres.

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Jersey’s adaptable and innovative banking industry By Andreas Tautscher

he banking industry in Jersey has evolved and is a radically different proposition from the model that operated when Jersey was first established as an international finance centre. To continue to prosper in the twenty first century, banks in Jersey have needed to innovate, to acquire more specialist skills, to be willing to sometimes work more closely with competitors and to invest resources into the increasing regulatory and compliance requirements associated with international financial services, a trend exacerbated by the global financial crisis a few years ago. However, some aspects of the industry do not change and one of those – and one of the great strengths of the jurisdiction – has always been the concentration of major international banking groups that have a presence in the Island. Home to 33 banking operations and employing more than 3,000 professionals, bank providers have attracted capital from nearly 200 countries and have always been the backbone of Jersey’s finance industry success.

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“the focus has shifted with a far greater requirement to meet the demands of financial institutions and corporate clients who are seeking various asset holding structures to support their investment structuring and wealth planning” Yet while the volume of traditional business has reduced, this has been balanced by the increase in specialist work, a range of institutional banking services that are seen to be the primary growth area for banks in the years ahead. Meanwhile, London, the pre-eminent international finance centre, continues to view Jersey as a valuable partner in managing transactions as the research undertaken by Capital Economic in 2013 was able to highlight so effectively; Jersey has been a conduit into London for £1/2 trillion of foreign investment, 5% of the entire stock of foreign owned assets. Despite the downturn which affected global finance, Jersey’s banking offering has remained relatively stable – about £140 billion on deposit – with two thirds of that total in foreign currencies. As I have indicated, the evolution of the international banking sector has involved a move away from the straightforward provision of bank accounts and related financial services for retail customers working abroad or the provision of accounts for trust companies on behalf of their high net worth clients. Instead, the focus has shifted with a far greater requirement to meet the demands of financial institutions and corporate clients who are seeking various asset holding structures to support their investment structuring and wealth planning. For example, Jersey has developed a track record in providing suitable

Jersey-First for Finance

investment vehicles for IPOs, acquisitions, the sale of an asset and other corporate transactions. London based lawyers and other intermediaries who place this business know they can rely on Jersey to provide the corporate banking, custodian and escrow services needed to support and mitigate risk in such deals, using one or more of the global banking providers with a presence in the Island. We are also seeing more requests for lending to the corporate structure market and some of these require syndication with the funds booked in more than one location. Alongside the major finance centres led by London and New York, there are only a small number of leading jurisdictions worldwide with sufficient international standing and possessing the concentration of banking providers, with the appropriate global footprint and balance sheet strength, to attract this business and Jersey is one of those. It competes with locations such as Switzerland and Singapore but few others outside of this group can match the Jersey offering. It is also evident that a proportion of the specialist finance work now undertaken requires more than one jurisdiction to fulfil the needs of the structure. Once again, the international banking groups which have a significant presence in the major IFCs hold an advantage and can help facilitate the connectivity required by these structures. It is not uncommon if a structure has been formed in one jurisdiction, the Cayman Islands, for example, that other aspects of the arrangement, such as any custodial services, are placed in Jersey because of the strength of its banking proposition. We should not underestimate the value that is associated with having such a preponderance of globally recognised, international banking groups that are in place in Jersey. They are sending a strong signal of Jersey’s enduring appeal as a jurisdiction of choice for discerning investors. Another necessary development has been the increasing dialogue between the regulator and the banking institutions. It is not only a question of managing the increasingly complex regulatory changes within financial services but banks are also conscious that in handling more bespoke structures in the investment markets, there are times when

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they need the involvement of the regulator. The experience that the regulator has accrued from supervising structures of this nature and the strong working relationship it has with the leading banks, has helped to fashion a well-trodden path for investing into Jersey. In many ways this should be seen as a unique selling proposition (USP) for our jurisdiction. Within the global private wealth arena, the added regulatory requirements and increasing complexity adds to the responsibility facing leading finance professionals and advisers instructed to manage the cross border wealth of many ultra high net worth individuals. As a result, we have been experiencing a growing amount of interest from intermediaries, such as family office specialists, who are drawn to the international reach and regulatory experience that a global organisation such as Deutsche Bank can call upon from its Jersey offices. Another sector witnessing substantial growth has been alternative investments, especially the formation of structures to support private equity and real estate business and the administration of such funds. There is plenty of evidence that overseas institutional investors, such as sovereign wealth funds, are using a Jersey trust structure to ensure their property investments are made efficiently and securely and the bank’s corporate services team has seen real growth in the number of foreign investors acquiring UK ‘real’ assets. Following the success of these arrangements, the same institutional investors are considering investments in other jurisdictions and they prefer to follow the same tried and tested path – using Jersey as their holding jurisdiction of choice. Jersey continues to retain its leading IFC role in international banking. It has consolidated its partnership with London, the world’s premier capital market and maintained its high regulatory standards. Jersey’s banking industry has remained stable and solid, appreciated the need to adapt, added to its specialist skills and evolved its model to meet the

demands of international investors. It makes for a compelling proposition for international investors and heralds a positive outlook for the banking sector in Jersey.

Andreas Tautscher Andreas Tautscher has been Head of Deutsche Asset & Wealth Management Financial Intermediaries division for five years and is also Chief Country Officer for Deutsche Bank in the Channel Islands. He joined Deutsche Bank in 1995 and was previously Chief Operating Officer Channel Islands, Cayman and Mauritius, Chief Financial Officer Channel Islands, Cayman and Mauritius and Head of Client Trust Services. Prior to Deutsche Bank he worked for PWC as Senior Auditor. He is a Chartered Accountant (ICAEW) and has a BSc Honours degree from Kingston University London.

“London based lawyers and other intermediaries who place this business know they can rely on Jersey to provide the corporate banking, custodian and escrow services needed to support and mitigate risk in such deals, using one or more of the global banking providers with a presence in the Island” Jersey-First for Finance

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Expats expect a tailor-made service By Dean Blackburn

rom the Global Financial and Eurozone crises to the advent of smartphones and tablet computers, the banking industry has witnessed huge changes over the past decade. Technological advances are reshaping the way we manage our money. In Jersey, as elsewhere, retail banks are also responding to the needs of an increasingly mobile working population as companies look to new markets for growth. A recent report published by the consultancy PwC estimates that the number of people being sent on an assignment overseas by their employers has increased 25% in the past decade. By 2020, PwC predicts in its ‘Talent mobility: 2020 and beyond’ report, there could be a further 50% rise in so-called ‘mobile employees’. Global mobility will become the new normal. As the number of people working overseas increases, banks are responding with a more flexible range of services. Customers not only expect their bank to have a digital offering that allows them to manage their money 24 hours a day, seven days a week, they also want support in handling the complexities of living overseas. In an uncertain global market environment, expats are looking for security and a more sophisticated service from their bank. Jersey has benefitted from this flight to quality. With over 50 years of experience in serving overseas clients, Jersey is a wellestablished international financial hub. Jersey’s tax neutrality is a key factor in attracting investors but so too is the Island’s strong regulatory and legal system. Rather than just offering a traditional bank account, there is a shift towards international services that specifically address the changing needs of the burgeoning global expatriate community. Jersey based banks focus on expats mainly from the UK and Europe who are no longer resident in their native country. Often working as part of larger banking groups, they can offer tailored, cross-border financial solutions to help customers better manage and grow their wealth securely. Typical expatriate clients are cash rich but time poor. This kind of client is looking for a personalised service to help guide them through the complexities involved with living overseas. That means not just creating a compelling digital offering that allows

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relationship manager at a bank based in Jersey with individually assigned clients, can work with their colleagues in locations such as Dubai, Hong Kong and elsewhere overseas, to bring the global reach and benefits of the parent group to their clients. Given the expected increase in global mobility over the coming years, having such an international footprint is expected to become even more important for both banks and their clients. The most recent Expat Explorer report, which was conducted by YouGov on behalf of HSBC Expat, canvassed the opinions of nearly 9,300 people located outside their home country. The survey – one of the largest into expat attitudes towards living and working overseas – shows that emerging and fast-growing economies are attracting an increasing number of expats seeking a combination of higher earnings and a better quality of life.

them to manage their money wherever they are in the world but giving them someone to talk to about their wealth and foreign exchange needs. This is important because expats are typically juggling a new job, a new country, a new home and possibly new schools, all with the added complexity of managing some of their finances in a different currency and under a different tax system. Often they are managing properties in multiple locations – paying bills, overseeing tenants or making mortgage payments. Specialist expat services help customers plan and prepare for when they move countries and removes the complexities of managing money – enabling clients to grow and manage their wealth. Expats expect highspeed foreign exchange services, simple international money transfers and help when they want to buy an investment property. They also want useful information, based on real insight, on what it is like to live and work in a country. While online foreign exchange operators and specialist wealth providers are active in this space, there are clear advantages to having one point of contact working within a retail bank that has a global footprint. Expat customers draw comfort from having a financial institution with a physical presence and local knowledge of the place they have relocated to. Only a few banks boast a truly international retail banking network. Clients using specialist expat services such as those offered in Jersey have the reassurance of having a central home for their money and a consistent relationship as they travel around the world. For instance, a

In Brazil over a third of expats polled in the 2014 Expat Explorer survey said they had moved to the country because they were sent there by their company – that compares with 29% for Turkey, 26% for India and 24% for both China and Mexico. The figures, which are significantly higher than the global average of 13%, show how companies are looking to build their businesses in fast-growing economies. There is, however, a range of factors at play in encouraging overseas assignments. Many companies now see overseas transfers as a way to develop future leaders with an international perspective on business. Employees, meanwhile, often now expect companies to offer overseas career opportunities – overseas assignments have become a way to attract, retain and develop talent, according to PwC. The consultancy also points to another emerging trend. It says that whereas in the past employers sent their employees on long assignments, a more fluid global workplace is emerging. According to PwC: “The era where assignments meant a three or fouryear relocation followed by a return home is coming to an end. New forms of global mobility have developed in response to business demands and employee preferences, many of which don’t involve relocation at all.” The new generation of expats want more than traditional banking facilities and in response banks have developed tailor-made services. However there is no room for complacency. Digital advances are tempting new entrants to the market, which means existing players – whether they are based in Jersey or elsewhere – must continue to adapt and evolve to meet the needs of an increasingly mobile expat community.

Dean Blackburn

“This is important because expats are typically juggling a new job, a new country, a new home and possibly new schools, all with the added complexity of managing some of their finances in a different currency and under a different tax system”

Jersey-First for Finance

Dean Blackburn is Head of HSBC Expat, responsible for HSBC Expat’s global business, since 2010. He has overall responsibility for expatriate customers living and working in over 200 countries around the world. Dean joined HSBC in 2000 and since then has worked in Commercial and Retail Banking, and Wealth Management roles in the UK, Hong Kong and the Channel Islands. Although born on the mainland he has lived in Jersey with his family since 2009.

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Representing accountants in Jersey for 40 years By Andrew Quinn

ast year marked the 40th anniversary of the Jersey Society of Chartered and Certified Accountants (JSCCA). In order to mark the occasion the Society held a number of events, including a Past Presidentsâ&#x20AC;&#x2122; Dinner (right). So why exactly was the Society formed over 40 years ago in 1974? Well to answer that question one needs to go back a further 21 years to 1953 when practising accountants in Jersey formed the Jersey Association of Practising Accountants. As the name suggests, the membership of this Association was restricted to accountants working in practice only. Twenty years later, in 1974, many senior accountants in the Island thought it would be beneficial to form a new body embracing both Certified and Chartered accountants and not solely confined to those accountants working in practice.

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Although the initiative of having a Society of both Chartered and Certified members was not supported by everyone, the proposal to form a new Society was approved by a substantial majority of members at a crucial Society meeting on 7 March 1974.

order to ensure those in power understand and appreciate the interests of our members, our profession and the economic and social wellbeing of the Island as a whole from the perspective of the accounting profession.

In its early years, the Society had approximately 120 members and the annual membership fee was £2.

One of the Society’s most significant achievements over recent years is the introduction of the annual JSCCA bursary which this year will see the presentation of its fifth bursary award, designed to financially assist Jersey students who want to enter the accountancy profession after the duration of their studies at University.

Now over 40 years later, the Society has a membership of over 750, its annual membership fee is £25 and its members represent accountants in various industries across Jersey including finance, retail, utilities, construction and hospitality. The membership also extends to members of Chartered, Certified and other globally recognised accountancy bodies. JSCCA in Jersey over 40 years Over its 40 year history, the Society has consistently played an important role in Jersey, not only in representing its members but also by its participation in matters relating to the Island’s economic wellbeing. Some examples of how the Society has participated in matters relating to the Island’s economic well-being includes commenting on various legal and fiscal consultations issued by the Jersey Financial Services Commission (JFSC), Comptroller of Income Taxes or the Chief Minister’s Department and having regular formal and informal meetings with Government Ministers, the JFSC, Jersey Finance, income tax officials, other Jersey trade associations and the Audit Regulator, in

“Technology has revolutionised the way both small and global businesses operate and as a profession we have had to change the way we operate to deliver on what our clients require”

The scheme provides a bursary of up to £5,000 per year for a Jersey school leaver attending university or further education off Island and the opportunity to obtain work experience in an accounting environment during the summer months. With the issues of local Island employment and skills development never being as important as they are now, the Society is delighted to report that the first two bursary students have already secured training contracts to study for their professional exams in Jersey, following completion of their university degrees in September 2015. Therefore, bursary is already beginning to achieve it principal aims of not only assisting Jersey students in studying off Island but also in attaching local talent back to the Island to work in its accounting profession. Challenges and opportunities ahead Impact of technology During my 20 years working in the profession, the way businesses and accounting professionals operate has dramatically changed. Twenty years ago, the internet did not exist (or what did exist was used by a very limited number of people) and if you were lucky enough to have your own work PC you could put your back out lifting it given its weight. Technology has revolutionised the way both small and global businesses operate and as a profession we have had to change the way we operate to deliver on what our clients require. This trend is going to continue but at an even faster pace than over the past 20 years.

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www.pwc.com/jg

Connecting for Good Growth in Jersey

Weâ&#x20AC;&#x2122;re bringing our insight about global trends and our deep understanding of the market in Jersey to broker new connections between government and business leaders here. Unlocking new opportunities. Weâ&#x20AC;&#x2122;re helping to drive the right kind of sustainable economic growth for Jersey. Ensuring our Island remains relevant in a changing world. Supporting businesses to grow and adapt to change. Shaping Jerseyâ&#x20AC;&#x2122;s future good growth. To connect with us for good growth opportunities, contact us today: Brendan McMahon brendan.mcmahon@je.pwc.com +44 (0) 1534 838234

Neil Howlett neil.howlett@je.pwc.com +44 (0) 1534 838349

Alison Cambray alison.cambray@je.pwc.com +44 (0) 1534 838337

Karl Hairon karl.hairon@je.pwc.com +44 (0) 1534 838282

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ACCOUNTING

“Acronyms like AIFMD, FATCA, IGAs and CRS are now part of everyday language in the average day of most accountants working in financial services in Jersey”

Imagine if someone develops an App which performs nearly 100% of the work that a traditional management accountant is currently performing when preparing monthly management accounts. This has already happened in some parts of our profession with the function of the traditional book-keeper being replaced by new accounting systems which book-keep directly from online banking. This type of disruptive technology is going to continue to change the profession and the key challenge for accountants is to embrace this new technology quickly so we can remain as relevant to business as we have always been. For individuals that do not embrace this change, there is high risk that the job they are doing now will be done by technology in the next two to five years. For accounting firms themselves, technology may create more competitors; image a world in five years where instead of the Big-4 audit and accounting firms we have the Big-6 and the two additional firms are large technology companies, such as Apple or Google, which deliver all their accounting and audit services through the use of technology. Some accountants may laugh at the aforementioned suggestion but five years ago the iPad did not exist and look what they are being used for now. Imagine sitting at home submitting your Jersey income tax return through an App developed by a 20 year old in Singapore and completing your conveyancing work for a new property purchase using an App developed by a 12 year old from the West Coast of America. A time period of five years may be too long – it could happen next year and as a profession we need to turn this challenge into an opportunity which I fully believe Jersey’s accounting profession will do. Over the past 10 years we have seen the way technology has revolutionised the leisure and travel industries through use of the internet. Whether we like it or not, disruptive and enabling technologies will change the way accountants operate in the future. One of the main driving forces for this change is that businesses want the accounting profession to help them with business decisions about the future and not just compile and/or provide assurance on numbers from the past. Businesses want real time financial reports and accountants with the ability to analyse huge amounts of data in order to identify trends quickly to help make business decisions about the future. Generally, accountants by their very nature are analytical and with the assistance of technology, leading edge accounting firms are now providing Big Data analytical services to businesses which analyse and interpret huge populations of data with dynamic and value added results. These are the types of services local businesses are increasingly going to expect from the accounting profession in the future and those firms who invest in their technology and people to deliver these services should thrive and those who do not may struggle to survive.

Jersey-First for Finance

Impact of global regulation and tax transparency One of the main outputs of the financial crisis has been the avalanche of new global financial services and tax regulation which has impacted most businesses in the Channel Islands. Acronyms like AIFMD, FATCA, IGAs and CRS are now part of everyday language in the average day of most accountants working in financial services in Jersey. As usual Jersey had been one of the leading adopters of the new global standards and as a Society, the JSCCA has been very much involved in providing the profession’s views on how Jersey should best interpret and introduce these new requirements. Over the next few years, as the reporting required under these new standards is due, the profession will need to develop methodologies in order to provide the relevant stakeholders assurance that the reporting being generated is fit for purpose. This is a great opportunity for agile accountants and with further new global regulation expected, this opportunity should last for many years. New UK Standards (UK GAAP) With effect from periods beginning on or after 1 January 2015, UK GAAP, as users of accounts have known for the last 20 years has come to an end and the principal elements of UK GAAP now consist of Financial Reporting Standards 100 – 104 (FRS) and the Financial Reporting Standards for Small Entities (FRSSE). Although the aforementioned headline date is the period beginning on or after 1 January 2015, under the new FRS requirements, the comparative period in a set of financial statements needs to be presented in accordance with the new requirements, which also requires the opening balances for that comparative period to be restated. Therefore, for a business with a financial year end of 31 December 2014, the first year it will have to adopt the new requirements is the year ended 31 December 2015. However, it will need to restate the 31 December 2014 amounts in the 31 December 2015 financial statements and its opening balance sheet as at 1 January 2014, in order to comply with the new requirements. Therefore, for businesses and accountants who have yet to consider the impact of new UK GAAP, there is a lot of work to do over the next 12 months.

Andrew Quinn Andrew Quinn FCCA ACA, is President of the Jersey Society of Chartered and Certified Accountants. Andrew is a Partner at KPMG in the Channel Islands with 16 years of experience in delivering audit and assurance services to a wide range of both local and international financial services businesses including banks, trust companies, investment managers, fund managers and various types of alternative investment funds such as property funds, mezzanine funds, distressed debt funds and related debt repackaging structures. Established in 1974, the JSCCA supports the accountancy profession in Jersey and has over 750 members from across different accountancy bodies. www.jscca.org secretary@jscca.org

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MARKETS & EXCHANGES

Jersey and the capital markets - AIMing for the top By Sara Johns

he welcome news that the equity capital markets picked up considerably in 2014 and that Jersey saw a good slice of the action is testament to how successful the Island has been at creating the right platform from which global businesses can successfully go public. According to statistics published by Jersey Finance in February this year, 110 Jersey companies are now listed on exchanges around the world, from Canada and USA, to London, Amsterdam, Luxembourg and Hong Kong. In terms of number, this represents a reported growth of some 13% since 2013. Perhaps even more impressive is that the total market capitalisation of these companies increased by approximately 62% in 2014 to almost ÂŁ269 billion. Among them are big name multinationals such as Petrofac (oil and gas), WPP (advertising), Shire (pharmaceuticals) and Randgold (gold mining). Little wonder then that, by September last year, no country outside the UK was home to more FTSE100 companies than Jersey. What makes Jersey so attractive to these companies? Jersey has long enjoyed an outstanding international reputation, offering investors the comfort of reliability, substance and appropriate regulation. It has for years maintained its economic and political stability and is respected for its legal infrastructure and established judicial system. It is, when all is said and done, a blue chip place in which to do business. With the uncertainty of the 2015 general election looming in the UK, and other countries in turmoil, the importance of this cannot be underestimated. Tax Tax neutrality too, of course, is a key advantage the Island has to offer. With no income or capital taxes levied on them in Jersey, no need to make withholdings on their dividends and no local stamp duty on the issue or transfer of their shares, Jersey holding companies can have a real edge over some of their competitors incorporated in other jurisdictions. Although from a tax perspective a UK company may now be a viable option for some, there is always the risk that the UKâ&#x20AC;&#x2122;s taxation (and other) laws may change; Jersey, on the other hand, prides itself on its stability, which in turn provides reassurance to the business world.

Jersey-First for Finance

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“110 Jersey companies are now listed on exchanges around the world, from Canada and USA, to London, Amsterdam, Luxembourg and Hong Kong. In terms of number, this represents a reported growth of some 13% since 2013” Company Laws Yet tax is far from the whole story. Jersey’s company laws also appeal to businesses and investors alike, principally because they are familiar but flexible. Whilst the Jersey Companies Law bears many resemblances to the equivalent English statute and uses many of the same concepts, it also offers a degree of flexibility not afforded by English law in certain key aspects, including the sources from which dividends can be paid and from which shares can be repurchased. AIM It is benefits such as these that can make a real difference, particularly to smaller businesses aiming to attract initial public investment early in their life cycle. So it is perhaps no surprise that Jersey is the chosen home of 57 companies that have listed on London’s AIM market, the exchange which is specifically designed for small to medium sized enterprises. Two such companies in the world of online fashion that carried out initial public offerings on AIM in 2014 were Boohoo and MySale. In March, Boohoo, one of the UK’s largest online own-brand fashion retailers with a worldwide customer base, raised £300 million when it went to market. This was closely followed in June by MySale, a leading Australian online retailer backed by Top Shop owner Sir Philip Green, which raised £40 million. These companies had a lot in common –

both had a proven track record and a compelling offering, both came to market looking for funds to help them accelerate growth into identified new territories and both were successful at the placing price. Asia Businesses in Asia have also realised the benefits of using Jersey as a means of accessing the UK markets. Just under a fifth of Chinese companies currently listed on AIM are reportedly now incorporated in Jersey. Among them is GTS Chemical Holdings Plc, the largest Chinese manufacturer of ammonium sulphite, which joined AIM in 2014. Conversely, 2009 saw the recognition of Jersey as an approved overseas jurisdiction by the Hong Kong Stock Exchange. The associated listing of UC RUSAL paved the way for other Jersey companies, including Glencore Xstrata, to float on the Hong Kong exchange. As a result, businesses have for five years been able to access one of Asia’s largest financial centres and one of the most successful exchanges using a Jersey incorporated company. Debt markets However it is not just where a group’s ultimate holding company is incorporated in Jersey wherein the Island offers added value in terms of the capital markets. Multinational corporates and private equity houses in the US, Europe and Asia, in particular, have a track record of successfully using Jersey-incorporated bond issuing vehicles to raise funding for M&A, joint venture and other event-driven corporate finance requirements more cost-effectively than through bank lending. The most common debt funding instruments issued by these Jersey vehicles are high yield bonds and convertible bonds. Avis Budget, for example, financed its $500 million acquisition of Zipcar in 2013 through the issue of high yield bonds, and Intu Properties plc similarly used a Jersey subsidiary to issue its £300 million guaranteed 2.5% convertible bonds which commenced trading on the London Professional Securities Market in 2013. Convertible bonds (as well as the more typical placing of shares or rights issues) have similarly proved popular in the context of so-called ‘cash box’ structures which use a Jersey special purpose vehicle to help UK-incorporated, UK-listed public limited companies to raise money whilst avoiding pre-emption provisions, particularly to raise funds for potential acquisitions and to create distributable reserves. As we go into 2015, the future looks bright for Jersey as a key player on the world’s capital markets. There is much success upon which to build and the Island’s appeal to the Chinese business community, in particular, is likely to lead to further growth. Whilst it remains to be seen how the markets themselves will perform amid worldwide volatility, one thing seems certain: Jersey’s place at the table is very much assured.

Sara Johns Sara Johns is a Managing Associate at Ogier, Jersey. Sara Johns is a Jersey Advocate specialising in mergers and acquisitions, corporate restructurings, joint ventures and capital markets transactions involving offshore vehicles. She also leads Ogier Jersey’s competition law practice, and has advised on numerous merger control applications to the Channel Islands Competition and Regulatory Authorities. Sara has over 20 years’ experience as a corporate commercial lawyer, having worked in London for many years prior to joining Ogier in 2003.

Jersey-First for Finance

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FUNDS

A forward looking funds industry By Ben Robins

aving been at the heart of Jersey’s finance industry for over 40 years, the funds sector remains one of the most prominent and successful elements of the jurisdiction’s range of financial services. Despite the challenging global fundraising conditions that have impacted fund domiciles around the world in recent times, Jersey’s funds industry has continued to perform well. Figures show that the net asset value of funds being administered in Jersey grew by around 5.5% year-on-year in 2014, to reach just over £205 billion, the highest figure in five years. Alternative asset classes continue to represent around 70% of Jersey’s funds business, with growth led by strong performances in the private equity, real estate and hedge fund asset classes, and growth in the debt and infrastructure fund spaces. Figures also show the value of private equity business has almost doubled over the past five years, whilst real estate funds business has risen by around 50% in the same timeframe.

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The investment management sector continues to perform well too, with assets under management currently standing at over £21 billion. In addition, fund launches are well up on last year. There are now over 1,500 regulated and unregulated funds registered in Jersey (the majority regulated), with the fund formation rate now at its highest level since 2008.

This was marked in 2004 with the introduction of Jersey’s Expert Fund Regime, which remains hugely popular today. At the heart of this regime was an emphasis on helping to position Jersey strongly within the alternative investment funds market, by making the authorisation of funds targeting expert investors simpler and by introducing a more streamlined approval process.

These strong upward trends across Jersey’s funds industry, particularly in the period since the AIFMD was implemented, are clearly pleasing, pointing to Jersey’s ongoing appeal for alternative funds business.

This was followed in 2008 by the launch of the unregulated ‘Eligible Investor’ and ‘Exchange Traded’ fund classifications, and complemented further by the introduction of the lightly regulated Private Placement funds regime in 2012, specifically geared to raise funds from limited numbers of sophisticated investors.

Evolution The international funds landscape in which Jersey finds itself in 2015 is, of course, very different from the retail orientated focus of the 1970s and 1980s. Back in the 70s and 80s, Jersey’s success was largely based on fund groups making use of redeemable share capital companies, accumulation and distribution share arrangements and early umbrella funds. As other financial centres within the European Union began to move into the same retail area under the UCITS directive, Jersey’s fund product necessarily became more diversified with a gradual shift towards funds for institutional and expert investors.

“Regulation continues to form a major point of discussion within the global funds community and a major change last year was of course the implementation of the EU Alternative Investment Fund Managers Directive (AIFMD) in July 2014”

Jersey-First for Finance

The overall result today is a full spectrum of fund solutions, from highly regulated retail funds to lighter touch options for more experienced, sophisticated, institutional investors. Regulation Regulation continues to form a major point of discussion within the global funds community and a major change last year was of course the implementation of the EU Alternative Investment Fund Managers Directive (AIFMD) in July 2014. Having engaged heavily with the European Securities and Markets Authority (ESMA) and EEA regulators in recent years, Jersey’s flexible and ‘future proof’ response to the AIFMD offers stakeholders a range of options. As well as allowing managers to maintain EEA-focused marketing through on-going private placement arrangements in EEA Member States, Jersey was also the first third country to create the option of a fully-compliant AIFMD regime, in anticipation of Jersey managers gaining an EEA-wide marketing passport as and when they are made available to third countries. Also, of course, managers can also use Jersey to market their funds to investors in the rest of the world through existing regimes that fall completely outside the scope of the AIFMD.

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FUNDS

The response from the fund management community to Jersey’s approach has been extremely positive – undoubtedly the trend evidenced across managers based in Jersey last year was one of building significant future management substance. The arrival in Jersey of an increasing number of major asset managers and service providers underscores the jurisdiction’s continuing appeal to blue chip promoters. In addition, recent statistics indicate a strong take-up in Jersey’s private placement route into Europe. A total of 186 Jersey funds and 60 Jersey fund managers are already actively marketing into EEA countries with authorisation from Jersey’s regulator under private placement regimes. Europe’s largest private equity fund raised in recent years enjoyed its final $10 billion closing from a Jersey management platform last year too, whilst the second largest ever real estate fund to be listed on the London Stock Exchange, the Kennedy Wilson European Real Estate fund, with a capital raise of over £1 billion, was structured through Jersey. Meanwhile, the initial response of managers to the much-hyped AIFMD passport has been mixed. In research by IFI Global (‘The Impact of AIFMD’, October 2014), for example, a significant number of managers said the AIFMD’s carrot, the passport, was of ‘little’ to ‘no interest’ to them. Research by BNY Mellon and FTI Consulting (July 2014) also suggested that only 39% of managers believe that AIFMD will be either ‘very beneficial’ or ‘slightly beneficial’ to their organisation. Overall, the value and ease of implementation of the AIFMD passport are far from clear, whilst Jersey’s private placement option is proving an attractive alternative. The appeal of the AIFMD brand will likely grow but in the meantime Jersey’s flexible structuring options should allow Jersey managers to test the water with different regimes according to their own needs and circumstances. Looking beyond AIFMD, managers will need to think carefully about the most suitable structures for their asset management activities within the EEA against an increasingly complex European regulatory backdrop. Jersey adheres to global best practice in securities regulation and the marketing requirements of AIFMD have inevitably brought it to Jersey’s doorstep but as a non-EU ‘third-country’, Jersey is ringfenced from much of the additional, emerging regulation emanating from Europe. Innovative Maintaining flexibility and developing innovative products remains absolutely vital however and, with this in mind, Jersey’s broad range of fund regimes are kept under constant review. There are plans to look at enhancing Jersey’s funds regime further in due course to make the authorisation process more streamlined for new fund promoters, whilst

“the second largest ever real estate fund to be listed on the London Stock Exchange, the Kennedy Wilson European Real Estate fund, with a capital raise of over £1 billion, was structured through Jersey”

Jersey-First for Finance

the industry is also working closely with Government and the regulator to implement the positive recommendations of the 2013 Finance Industry Strategic Jurisdictional Review. One recent legislative change, introducing a new exemption under Jersey’s Financial Services Law, is expected to help bolster Jersey’s standing as a centre for hedge fund business by simplifying the regulation of regulated hedge fund management businesses established in Jersey who wish to undertake managed account business. Meanwhile, whilst a great deal of focus has been on Europe as a result of the AIFMD, it is pleasing that there has been a noticeable increase in the volume of non-European fund activity being channelled through the Island recently. Asian sovereign wealth funds for instance are increasingly looking at global (and particularly UK commercial) real estate investment opportunities through Jersey, whilst the ‘Jersey’s Value to Africa’ report, published by Capital Economics last year, supports the view that Jersey funds can play a significant role in channelling muchneeded foreign investment into infrastructure projects in Africa. With managers remaining cautious about the full impact of global regulation, Jersey offers a compelling solution. Its commitment to innovation, regulatory standards, highly skilled workforce and a first class infrastructure means that Jersey can continue to give investors, fund promoters and managers the confidence they need in the long term.

Ben Robins Ben is Chairman of the Jersey Funds Association. A partner and head of the funds practice area at Mourant Ozannes in Jersey, Ben has extensive experience in investment funds, offshore capital markets and structured finance. Having qualified as an English solicitor with Speechly Bircham in London, he returned to Jersey to join Mourant Ozannes (then Mourant du Feu & Jeune) in 1997. He became a partner at the firm in 2002 and has headed its Jersey and global funds practice areas since 2008. Ben has been a frequent participant in local industry working groups looking at key regulatory changes, including most recently the implementation of the EU Alternative Investment Manager’s Directive (AIFMD). He was appointed Chairman of the Jersey Funds Association in July 2013.

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FUNDS

Jersey’s international standing as a funds jurisdiction By Maxine Rawlins and Claire Keeney

s we started 2014, there was a continued sense of caution and perhaps even trepidation amongst Jersey fund service providers. These feelings were driven by the continued softening of the funds market compared to its highs of 2007 together with uncertainty around the impact of supranational legislation. However, the year ended on a spectacular high for many of us, with renewed levels of activity, not simply derived from resolving and restructuring existing funds, but in a significant uptick in the cherished, new business. Trends The growth trend is back and supported by statistics demonstrating that the latter half of 2014 showed signs that Jersey is on the cusp of attaining business growth and levels of interest akin to those seen pre 2008. (Source: Jersey Finance’s Quarterly Report, Q3 2014). These statistics show Jersey’s funds industry continues to build momentum, with the net asset value of funds under administration increasing by £5 billion to £205.4 billion. Whilst Jersey’s net asset valuation of authorised CIF’s has not yet reached the highs of the first quarter of 2007 of £246 billion, the NAV as at 30 September 2014 stands at a healthy £205.4 billion. Whilst traditional private equity and property funds continue to dominate our funds market, we have also seen – and continue to see – a growth in alternative investment classes, such as digital media and cybersecurity. Jersey’s own aspiration to develop and

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FUNDS

“It is around this time of year that many businesses turn the page into a new year and look to implement their defined strategy. Although SWOT analysis may be a basic tool and its detailed results beyond the scope of what is a short article, nonetheless it is a useful one to employ” market itself as a gigabyte island positions us well for these emerging entrepreneurial funds. We also continue to see the institutionalisation of private wealth structures with the creation of more sophisticated family offices managing wealth through investment funds vehicles. Jersey’s ‘global footprint’ continues to grow and develop. The efforts and willingness of Jersey Finance, the States of Jersey, local professional bodies as well as Jersey based organisations to explore and develop a more diverse international consumer base, continues to bear dividends for our financial services industry. Accordingly we see a continuation towards diversification, not only limited to changes in asset classes but also from regions and countries historically viewed as ‘no go areas’ such as Africa, Israel and India. A shift in mentality coupled with a greater understanding of these places has transformed our approach from a ‘no go’ to a selective ‘proceed with caution’, which in our view is appropriate with markets badged as ‘high risk’ by our regulator. Jersey can offer a coherent, well organised and transparent

Jersey-First for Finance

administrative structure to service such new business and is well placed to take advantage of such opportunities. Jersey SWOT It is around this time of year that many businesses turn the page into a new year and look to implement their defined strategy. Although SWOT analysis may be a basic tool and its detailed results beyond the scope of what is a short article, nonetheless it is a useful one to employ. We benefit from having a regulator that is staffed with former practitioners, which fosters an open and transparent approach with fund services businesses. The regulator understands and actively assists finance professionals, mindful that the way each conducts their business is fundamental to maintaining Jersey’s reputation as a well operated and well regulated international jurisdiction. Jersey’s entry on databanks such as the OECD/G20 ‘White List’ is testament to such an approach. A high degree of comfort can be taken following the industry’s engagement with the regulator, policy makers and Jersey Finance to mitigate prejudicial effects that could have arisen as a result of international legislation such as FATCA, Dodd Frank and AIFMD. Jersey is known for its strong legal and regulatory framework as well as for the quality and technical depth of its industry professionals. Over recent years, Jersey has clearly demonstrated its proactive and sophisticated attitude to funds with the development of the expert funds (2004) the unregulated funds regime (2007), the private placement funds (2012), optional fully compliant AIFMD (2013) together with multiple options for legal entity formation, including the various partnerships structures. These and other qualities provide a robust network to ensure investors are confident that their money is safe and that there is full accountability.

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FUNDS

Furthermore, our strengths continue to be recognised internationally, with Jersey continuing to secure prestigious awards. Following on from a series of award successes in 2013, Jersey was named the best international finance centre at the International Investment Fund and Product Awards 2014, and very recently Citywealth’s ‘International Financial Centre of the Year’ in 2015, which Jersey also won in 2014. Whilst variety can be good, it is not always the ‘spice of life’. It is true that diversity in regimes and legal entity options creates welcomed flexibility. However, we need to ensure we communicate the benefits to our customers and onshore intermediaries who are far too often unaware of the range or benefits of some of our products and, therefore, have a tendency to revert to the comfort of well-trodden structures, including those of our competitor jurisdictions. In fact the 2013 McKinsey report into the future of Jersey as a financial centre, identified simplification of the funds regime as one area of focus. Aside from the opportunities arising from asset and jurisdiction diversification, opportunities are increasingly arising in the redomiciliation of established funds from competitor jurisdictions to Jersey. Last year, a $25 billion hedge fund and a €2.5 billion private equity fund relocated to Jersey from Guernsey and Cyprus respectively. This is a testament to Jersey’s increased vision and international recognition. There will always be threats, the latest being the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, and it is how we deal with these challenges that ensures we stand ahead of our onshore and offshore competitors. Jersey has shown that neither complacency nor arrogance is a threat and recognises that failure to be proactive and proportionate, both in our funds regimes or regulation, could ultimately lead to a loss of business. It is rare to consider success a threat but one of the biggest practical challenges is the ability to attract and retain experienced funds professionals. As the funds industry develops and grows, we will see

an increasing need for qualified professionals and we should take care to implement measures now to meet this growing need. Here’s to 2015 So it is with optimism that we herald the arrival of 2015. In our success as a jurisdiction we should continue the journey wisely and proactively, ensuring we retain our competitive strengths, retain our strong customer focus, capture opportunities and manage well and quickly the challenges that will come along the way.

Maxine Rawlins Maxine Rawlins is CEO of Hawksford Group. She was previously a Partner at Ernst & Young in Jersey where she led the Channel Islands’ Tax Practice and was head of EMEA Asset Management Tax. Prior to this Maxine was Chief Executive of Maples Finance, a financial services business headquartered in the Cayman Islands, which she drove to achieve significant growth, including expansion into six jurisdictions.

Claire Keeney Claire Keeney is Head of Hawksford’s funds team. Claire is well-established in Jersey and abroad as a leading offshore funds practitioner with considerable technical expertise and specialist knowledge of all types of fund administration, particularly international property and private equity structures.

Jersey-First for Finance

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CLEANTECH

Recognising the power of cleantech By Nigel le Quesne

he cleantech investment sector started with much fanfare and goodwill, yet in recent years the initial excitement did not realise its potential in the institutional investment markets. Now, cleantech is back in earnest and the indications are it will remain a key sector. To paraphrase US Secretary of State John Kerry and Secretary General of the United Nations Ban Ki-Moon - there is no planet B - the time for action is now. Recent figures reflect the winds of change in cleantech with a surge of investment in the industry. According to PwC’s ‘Cleantech MoneyTree Report: Q4 2014’ which covers agriculture and bio products, energy efficiency, smart grid and energy storage, solar energy, transportation, water and waste management, wind and geothermal, and other renewables, ‘investment in cleantech in the fourth quarter of last year totalled $521 million and the sector received $2.0 billion in 2014, 39% more than 2013. This quarter’s funding represents a 25% increase in funding year over year and a 29% increase in funding compared to the third quarter of 2014.’ Growth drivers The reasons why this sector is growing are various but include greater global harmonisation both politically and culturally on the socio-economic benefits of cleantech energy – such as the UN Framework Convention on Climate Change (UNFCC) and the Kyoto Protocol, towards reducing emissions by 2050 – with governments, institutional investors and corporates all now focusing on what cleantech can offer. Another factor is the importance of technology in supporting and growing cleantech. Technological change is accelerating progress, leading to greater commercial viability for solutions within the clean energy arena. The sector’s future potential looks bright too. Analysts at Bloomberg New Energy Finance forecast that $5 trillion of an estimated $7.7 trillion of global energy investment could be spent on renewables by 2030. Moreover, it is estimated that this will encompass both large scale projects and life-changing access to residential-scale power for the world’s poorest communities. A global climate change A key driver in accelerating the pace of change within cleantech is the action of governments worldwide in the face of a rapidly shortening timeframe in which to achieve the Kyoto objectives. The E&Y ‘Renewable Energy Country Attractiveness Index’ (RECAI) ranks the attractiveness of 40 nations for investment in renewable energy generation infrastructure. The UK is ranked seventh, behind China in first, then the US, Germany, Japan, Canada and India. China’s ranking as the leading nation for investment attractiveness in cleantech is not only important for the influence this nation holds domestically but also its influence with key global economic partners for export markets, plus its investment in other markets (especially emerging markets like Africa and Latin America). Governments are changing their attitudes and becoming socially responsible, with developing countries and small governments increasingly grasping the agenda. Africa is a key example as recognised in the report, Jersey’s Value to Africa, with improvement in infrastructure an area which will create potential for growth across Africa. Of the 25 countries in the world with the worst infrastructure, 16 are in Africa. Africa’s largest infrastructure problems are in the power sector. According to the US Agency for International Development, 70% of the population of sub-Saharan Africa is without access to electricity. Therefore improvements through investment are vital for any sustainable growth to occur in Africa. Some African countries are addressing this and in the RECAI report South Africa is ranked

“A key driver in accelerating the pace of change within cleantech is the action of governments worldwide in the face of a rapidly shortening timeframe in which to achieve the Kyoto objectives”

Jersey-First for Finance

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CLEANTECH

16th and Kenya is ranked 36th as attractive countries to invest in renewable energy generation. Countries willing to embrace a new approach to energy provision can also benefit economically and socially by attracting global investment. An example of a government embracing cleantech opportunities and the added socio-economic benefits it can bring, is the wholly-owned subsidiary of the Abu Dhabi government-owned Mubadala Development Company. In 2008, Masdar City broke ground and embarked on developing the world’s most sustainable eco-city. Through smart investments, Masdar City is successfully pioneering a ‘greenprint’ for how cities can accommodate rapid urbanisation and dramatically reduce energy, water and waste, in conjunction with the city’s research university seeking solutions in energy and sustainability. Investment in cleantech There is a movement amongst institutional investors to become more active in this area too, lobbying governments to take action on climate change and influencing corporate behaviour. Whilst just a few years ago, performance was the key driver for investment in cleantech, now institutional investors are aligning their investments with energy technologies for the future. They are more aware and active around embedded carbon related risks in their portfolios, even disinvesting non-renewable energy assets classes. This trend is reflected in PwC’s Cleantech MoneyTree Report with venture investment showing strong growth in 2014, increasing 39% compared to 2013 and cleantech investment for late stage opportunities having increased year over year by 28% to $496 million. The solar industry had an outstanding year, with funding surpassing 2013 and 2012. All of this is influencing corporate behaviour, with many cleantechaware companies active in driving investment, especially in the technology sector. All of Apple’s data centres are powered by 100% renewable energy sources. Google has committed more than $1.8 billion to renewable energy projects, including wind and solar farms on three continents and contributing to a SolarCity fund valued at $750 million, the largest ever created for residential solar. Solar, wind and tidal energies are now more viable and have greater certainty attached to them, gaining more ‘grid parity’ alongside other forms of energy. Meanwhile, traditional barriers deterring institutional investors from cleantech investment in the past, such as huge initial capital spend, uncertainty of returns and length of investment cycle, are being eroded by technology developments. Importance of technology In the last few years the digital sector has also recognised the importance of cleantech and the combined power of these industries are complementing each other and driving change, growth, innovation and investment opportunities. Initiatives such as Cleanweb, address resource and sustainability challenges with connected ICT such as energy monitoring systems, helping people network around local food, green technology or online tools for sustainability. Distributed Generation is also moving to the forefront of corporate consciousness and the needs of today’s economically and environmentally minded companies. Distributed Generation (DG) refers to power generation at point of consumption. Generating power on-site, rather than centrally, eliminates the cost, complexity, interdependencies and inefficiencies associated with transmission and distribution. Like distributed computing (i.e. the PC) and distributed telephony (i.e. the mobile phone), DG shifts control to

the consumer. Solar is a popular DG option and other DG initiatives such as Bloom Energy Servers can produce all year around. This can give access to clean energy to bespoke communities through projects that are much smaller in scale, allowing the end user to participate in technology that would not have been available to them. Increasingly, opportunities like this are fitting institutional investors’ investment criteria far more readily than traditional investments. Jersey: a cleantech centre of excellence Jersey is a key location globally in the private equity and infrastructure sectors and is equipped to support cleantech investors and help sustainable investment funds manage for growth, with professional service providers who have specialist knowledge in all aspects of cleantech investments. Jersey also has the entrepreneurial dynamic and sophisticated technical expertise required to drive technological developments in cleantech. Major players have been in Jersey for some time, including Renewable Energy Generation Ltd (listed on AIM) who develop, construct, finance and operate onshore renewables projects in the UK split across three main sectors; onshore wind, bio-mass and solar. The Foresight Group, a leading independent infrastructure and private equity investment manager, has over £1.3 billion of assets under management with one of the UK’s leading solar infrastructure investment teams and is listed on the main market of the London Stock Exchange. Driven by governmental action, in tandem with the shifting attitudes of institutional investors and corporates – and made possible by technology developments – cleantech will gain importance as an asset class over the next 20 years. Jersey has all the attributes to position itself as a centre of excellence for cleantech, being a leading IFC with world class alternative funds expertise, committed to a digital economy, engaging with those set to lead cleantech growth (e.g. China, Europe, India, GCC, UK and Africa) and supported by Jersey Finance initiatives.

Nigel le Quesne Nigel le Quesne is the Group CEO & Chairman of JTC. Nigel has been instrumental in significantly growing JTC over the last 23 years. Drawing on extensive experience gained from roles as diverse as personal trustee through to directorships of quoted companies, he provides strategic leadership and management for all areas of JTC’s operations, as well as developing the people he works with. Nigel has been named as one of the top 20 trustees internationally in the Citywealth Leaders List 2013 and has been recognised as a leading ‘Trustee of the Year’ in the 2014 Citywealth Magic Circle Awards. Nigel is a Fellow of the Institute of Chartered Secretaries and Administrators and the Chartered Management Institute. He is also a member of the Society of Trust Estate Practitioners, the Jersey Taxation Society, the Institute of Directors and the Jersey Funds Association. Nigel currently holds and has held a number of directorships across several business sectors in both private and quoted companies.

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P R I VAT E E Q U I T Y

The rise of private equity in Jersey By Andrew Weaver

ersey has long been happy to welcome private equity to the Island, recognising the value created by the investment and management activities of this significant segment of the global financial markets. Organised private equity, through the establishment of pooled investment vehicles and the management and advisory services provided by focused specialists, has grown from the middle of the twentieth century, originally in the form of venture capital and then as private equity from the early 1980s onwards. The private equity sector has grown and diversified substantially since then, with sector specialisations in small, mid- and large capital buyouts, turnaround specialist and increasingly real estate investment. In response to the last boom and bust cycle and the substantial reduction in sources of credit that keep business and investment going, the private equity sector has started to diversify into the provision of credit finance through a number of ways. From its earliest possibilities in venture capital, especially in the technology sector, Jersey has been closely associated with private equity as a home to the pooled investment vehicles, gathering investors from the UK, Europe and across the globe and seeking opportunities to invest in new ventures wherever they arose. Flexible and appropriate regulation, innovative legal structuring and tax neutrality and transparency all helped to ensure that Jersey was seen as a key location to establish these vehicles. As European private equity investment grew out of these roots, it naturally found its home in Jersey. As a result, investment advisers in the United Kingdom, Germany, Switzerland and Scandinavian countries, looked to the Island to establish investment funds to pursue these opportunities to create and develop value, jobs and new business. Today, private equity and venture capital firms from countries as widespread as the Czech Republic, India and South Africa have created investment vehicles in Jersey. Boutique specialist expertise As a result of the interest in â&#x20AC;&#x201C; and suitability of â&#x20AC;&#x201C; the Island environment for these investment structures, the need for specialist services grew and Jersey is now home to world leading administration service providers offering both generic and bespoke services and successfully competing on the global stage. This is not restricted to domestic structures; Jersey firms are servicing

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“Even as the UK introduced REIT legislation, the popularity of Jersey continued apace and once again a depth of talent in real estate investment administration and services has built up”

structures established in other jurisdictions with alacrity, providing a real European home to global private equity. In addition, other service providers in the Island – including legal and accounting – are now regularly recognised among the leading experts in the world. Recent trends show the level of private equity investment in the corporate services sector is soaring as the investors themselves recognise the value creation opportunities in fund administration; substantial consolidation can be expected in this sector. Development of management and advisory functions The years of expertise built up in the Island and the development of a sound regulatory framework has also recently resulted in a significant increase in the talent pool in Jersey, augmented by the arrival of further talented individuals and businesses. Jersey is no longer a passive home for investment vehicles in the private equity sector but is developing as a strong centre for the location of management and advisory functions in relation to those vehicles (and this is also being reflected in the hedge fund sector). Some of the leading businesses in private equity advisory services and hedge fund management have established offices and regulated business in the Island. The effect is not only an increase in the number and skill set of the investment professionals on the Island but also a substantial increase in related professionals such as compliance managers, business risk consultants and governance advisers.

Photo: Chris George

Real estate In the latter part of the 1990s and into the noughties, in addition to

private equity, Jersey carved out a role facilitating international investment into real estate in the United Kingdom, in the absence of a suitable indirect real estate investment vehicle under UK law. Even as the UK introduced REIT legislation, the popularity of Jersey continued apace and once again a depth of talent in real estate investment administration and services has built up. The reach of this expertise has since expanded, with recent Jersey investment funds and investment vehicles being established to invest in European real estate, such as in Ireland and Spain, as well as the United Kingdom. Along with the private equity and hedge fund sectors, the location of management expertise and specialist governance on Jersey has also been increasing. Debt and mezzanine, infrastructure The perennial investors’ search for yield, in a dry credit market following the global financial crash, combined with the regulatory and other pressures that resulted in a substantial slow down in the traditional sources of debt funding, created an opportunity for those with appropriate expertise. Even as credit markets are beginning to ease, the private equity and hedge fund firms have established themselves as alternative sources of debt finance and the leading global players are establishing both private and listed fund vehicles to undertake principal lending activity. We expect this trend to continue and Jersey is proving particularly popular as a location in which to establish these structures. Likewise, investor demand for access to the relative certainty of steady returns over the long term (matching the long term obligations of institutional investors such as pension funds) has created a rising demand for infrastructure investment. Despite a few stumbles along the way this is a substantial segment of the Jersey funds industry. Conclusions As private equity investment has grown from its origins in the US, to become a significant economic contributor in Europe and then expanded globally, so Jersey has embraced this value creator. From venture capital, through buyout and into real estate, debt and infrastructure, and on to hybrid investment, Jersey has built up world class expertise in servicing the needs of this industry and is increasingly becoming a principal base for the provision of management and financial advisory skills to the sector. The Island’s government, industry and regulatory arms are all keen to preserve and build upon Jersey’s unique, specialist position in this sector with world class standard setting, flexibility and innovation.

Andrew Weaver Andrew Weaver is a Partner in Appleby’s Corporate department in Jersey. Andrew specialises in real estate, hedge and private equity funds, regulatory advice and corporate work in matters of Jersey and Cayman Islands law. He also advises leading fund managers, advisers and financial institutions in the UK, Europe, the USA, the Middle East and Asia. He works closely with fund managers and administrators, trust companies and custodians in Jersey, Dublin, Luxembourg, Switzerland and the Cayman Islands. He has substantial experience in public equity offerings, M&A and corporate structuring and an indepth knowledge of partnerships and unit trusts. He was named as ‘Leader in his Field’ by Chambers UK 2015 and referred to as ‘very approachable’ and said to have displayed a ‘willingness to think innovatively to address problems’ in Legal 500 UK 2015.

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A T O P F I V E G LO B A L W E A LT H M A N A G E R * DELIVERING

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BANKING | CREDIT | INVESTMENTS | TRUST | TAX CONSULTANCY | CUSTODY | FUNDS | EMPLOYEE BENEFITS *Scorpio Partnership Private Banking Benchmark 2014. This measurement includes all global RBC Wealth Management affiliates including the U.S. division. ® / TM This advertisement is issued by Royal Bank of Canada (Channel Islands) Limited ('the Bank') on behalf of RBC ® companies that comprise RBC Wealth Management in the British Isles. The Bank is regulated by the Guernsey Financial Services Commission in the conduct of deposit taking and investment business and to act as a custodian/trustee of collective investment schemes in Guernsey and is also regulated by the Jersey Financial Services Commission in the conduct of deposit taking, fund services and investment business in Jersey. The Bank's General Terms and Conditions are updated from time to time and can be found at www.rbcwminternational.com/terms-and-conditions-British-Isles. html. Registered Office: Canada Court, St Peter Port, Guernsey, Channel Islands, GY1 3BQ, registered company number 3295. Deposits made with the offices of the Bank in Guernsey and Jersey are not covered by the UK Financial Services Compensation Scheme; however, the Bank is a participant in the respective Deposit Compensation Schemes in Jersey and Guernsey ('the CI Schemes'). Links to the official websites which provide details of the respective CI Schemes are available on the Jersey and Guernsey pages of our website. Copies of the latest audited accounts are available upon request from either the registered office or the Jersey Branch: 19-21 Broad St, St. Helier, Jersey JE1 8PB. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. 45_08940_006

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TRUSTS

Jersey’s trust industry 30 years on By Alan Binnington

ersey is now regarded as one of the world’s leading trust jurisdictions, yet 30 years ago there was some doubt as to whether one could even have a trust governed by Jersey law. The reason for this uncertainty was that the origins of Jersey law lay in the ancient customary law of Normandy, to which trusts were unknown. All that changed in 1984 with the introduction of the Trusts (Jersey) Law 1984 (the ‘TJL’), which provided a comprehensive legal framework for the creation and administration of Jersey trusts. The statute was at the time regarded as an innovative piece of legislation given that it comprised a concise, readily understandable set of rules, features that are sometimes lacking in legislation relating to financial services. Given that it is often said that imitation is the sincerest form of flattery it is worth noting that the statute was subsequently used as a model for trust statutes enacted in a number of other international finance centres. Since 1984 the statute has been subject to a continuous process of review and amendment in order to ensure that it meets the demands of settlors wishing to create Jersey trusts, whether that be for succession planning, asset protection or philanthropy. Notable amendments have included the abolition of perpetuity periods for trusts, the introduction of non-charitable purpose trusts, provision for settlor reserved powers and most recently a statutory enactment of the rule in Hastings-Bass.

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Statutory innovation in trust law is sometimes said by the purists amongst trust lawyers to be too ‘product driven’ but a look at some of the changes introduced by amendment to the TJL would suggest that the process has simply reflected the changing requirements of those who use trusts. One example is the abolition of perpetuity periods for trusts. Although the TJL, when originally enacted, contained a limit of 100 years for the duration of a trust, Jersey law had never featured the complex English rules against excessive accumulation of income which were designed to prevent property becoming inalienable and therefore falling out of economic circulation. Following the introduction of the statute it was found that many families wished to create structures that would benefit future generations beyond the 100 year limit and there was no compelling reason under Jersey Law to outlaw this. Interestingly a number of jurisdictions have followed suit, suggesting that the economic imperatives of earlier centuries have given way to public demand. It is a basic principle of trust law that trustees are accountable to their beneficiaries. In relation to the creation of trusts for purposes rather than for identifiable beneficiaries English law only permitted the creation of purpose trusts in the case of charitable trusts, which could

be enforced by the Charity Commissioners. However there was clearly a need for trusts for purposes which were non-charitable, for example the holding of shares in a private trust company. The TJL was therefore amended to make provision for such trusts, but to ensure that trustees of such a trust will remain accountable for their actions, the statute requires that an ‘enforcer’ is appointed in respect of the trust’s noncharitable purposes. More recently the Trusts (Jersey) Law 1984 was amended to provide a statutory basis for what has become known as ‘the rule in HastingsBass’. The remedy had been developed by English courts and applied by Jersey courts to enable the court to set aside a decision made by a trustee where the trustee had failed to take into account relevant considerations or had taken into account irrelevant ones. Although at first sight one might think that the rule was designed to benefit careless trustees, the reality was that in many cases where the rule was applied and a transaction was set aside, the trustees had relied on tax advice which had turned out to be wrong. Had the court not set aside the transaction the only remedy would have been for the trustees to sue the advisors, with all the cost and uncertainty of outcome that litigation entails. In 2013 the English Supreme Court re-examined the rule and made clear that in addition to there being a defect in the

“Jersey law had never featured the complex English rules against excessive accumulation of income which were designed to prevent property becoming inalienable and therefore falling out of economic circulation”

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TRUSTS

trustee’s decision making process there must also have been a breach of duty on the part of the trustee. This formulation could lead to a situation where a decision of an incompetent trustee who fails to take advice and is therefore in breach of duty is set aside, yet that of a competent trustee who takes advice, which turns out to be wrong, is not. Jersey amended the TJL to preserve the rule as applied by the Jersey (and English) courts prior to the Supreme Court decision, arguably for the benefit of the beneficiaries rather than the trustee. In each of these cases the statute has been amended not to devise some new ‘product’ but to reflect the changing needs of those who wish to create trusts or, in the case of the rule in Hastings-Bass, to preserve a rule that had been formulated and applied by the courts for the benefit of beneficiaries. Although having a good legal framework is an essential attribute for any finance centre wishing to develop a successful trust industry it is not enough, as some aspiring centres have discovered. The other essential attribute is having a skilled and experienced workforce. However well drafted, the success of a trust in achieving the family’s objectives will depend very much on those who administer it on a day to day basis.

“The other essential attribute is having a skilled and experienced workforce. However well drafted, the success of a trust in achieving the family’s objectives will depend very much on those who administer it on a day to day basis”

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Given Jersey’s 30 year history as a trust jurisdiction there has been ample time to develop skills in administration. By June 2014, 25% of the 50,000 workforce in the Island’s private sector were employed in the finance industry and of that 25% some 27% were employed in the area of trust and company administration and fund management. In terms of training it is worth noting that the Jersey branch of the Society of Trust and Estate Practitioners, or STEP, is one of the largest such branches in the world, so large that more than 1% of the Island’s population are members. The last 30 years have seen a trust statute continually updated to meet the needs of prospective settlors, the development of a trust jurisprudence by the Jersey courts which is frequently referred to by courts in other jurisdictions and the creation of a workforce skilled in trust administration. With those firm foundations we look forward to the next 30 years.

Alan Binnington Alan Binnington is President of the Jersey Association of Trust Companies (JATCo) and a Private Client Director of RBC Wealth Management’s Fiduciary Services business. Based in Jersey, he specialises in establishing fiduciary structures for high net worth individuals and their families. He studied law at Cambridge, following which he qualified as an English barrister. On his return to Jersey, he qualified as a Jersey Advocate in 1984 and was a Partner in the Jersey Law firm Mourant from 1985 to 2009, specialising for many years in commercial litigation. He joined RBC in 2009. alan.binnington@rbc.com

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W E A LT H M A N A G E M E N T

Vive la Difference By Ann Marie Vibert

ince weathering the global financial crisis, Jersey has benefitted from an influx of investors seeking stability and safety. Widely regarded as one of the most developed offshore financial centres in the world, the Island’s history and long-established wealth management industry has provided many investors with the security they craved in the face of financial turmoil and uncertainty. However, new market competitors in the international financial centres space are emerging strongly and are eagerly pursuing and vying for our clients. How Jersey can challenge these new competitors lies in the strengths that have traditionally served it well. Maintaining its distinct qualities will help the Island to enjoy continued growth in an increasingly competitive landscape. A history of success For the past 50 years, the success of Jersey as an offshore financial centre can be attributed to the breadth and depth of expertise within its qualified workforce and the political and economic stability of our Island. Providing dedicated and knowledgeable service, delivered by experienced financial professionals, is now an integral part of Jersey’s value proposition to international clients. For more than half a century, Jersey has been attracting private clients and institutions from around the globe. These investors continue to seek the broad range of products and solutions for individuals, families, corporate and institutional clients that has flourished in Jersey. Jersey’s political stability has further set it up for success among its competitors. Global investors are attracted here with the comfort that their investments are in a stable jurisdiction with a healthy budgetary balance sheet, an advantage that many international financial centres do not provide. Jersey’s hard-won reputation for transparency and regulatory compliance is appreciated by investors, who still rightly value the importance of client confidentiality.

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W E A LT H M A N A G E M E N T

Photo: Chris George

Our people are the foundation The success of any global financial centre is not predicated upon good fortune or chance. Indeed the ground work for a successful financial centre is laid by its educated and knowledgeable labour force. Jersey is recognised for its deep industry knowledge in wealth management and structuring, and this is directly attributed to the talented labour force it attracts and maintains. The same cannot be said for all competitor markets, many of which foster transient professional migration. Jersey’s community culture promotes strong work-life balance in the financial services industry. This means many of Jersey’s wealth managers have experienced employees with strong institutional knowledge, benefitting both

“The proximity of Jersey to London has seen a remarkable level of partnering with onshore industry leaders. However, partnerships among Jersey’s institutions are not solely limited to those in the UK”

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companies and client. This also lends itself well to developing and fostering long-term client relationships, an obvious yet exceptionally important component for institutions to ensure superior customer service. Location, location, location As well as a strong tradition of client service, Jersey has the advantage of being geographically positioned in an area that benefits many clients the world over. In addition to being in a time zone that easily serves clients across geographies, it also allows for quick access to and from London. The proximity of Jersey to London has seen a remarkable level of partnering with onshore industry leaders. However, partnerships among Jersey’s institutions are not solely limited to those in the UK. The Island now benefits from the presence of international financial leaders in clearing banks, merchant banks and international banks from geographies ranging from the UK, Europe, North America, the Middle East and Africa, many of whom leverage global business and practice to complement product and service offerings in Jersey. We might be a small island in size but the impact of our financial institutions is large and can be felt throughout many countries. While international financial leaders are making their marks in Jersey, many private and family clients continue to be attracted to investing on the Island in part due to its close ties with the UK, where many clients have children in education, or own property. The strong cultural ties that the Island has with the UK, along with the close relationships that

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“due to the global trend towards greater transparency Jersey’s financial institutions have adapted to ensure legitimate client confidentiality while meeting regulatory requirements”

many institutions there have forged with partners throughout the British Isles’ banking system, differentiates Jersey from its competitors. Adaptability in changing environments At first glance, many outsiders may look at Jersey as simply a taxneutral domicile, allowing for non-resident investment with no capital, withholding or wealth taxes. While these may be some of the initial attractors for both financial institutions to set up shop and private and institutional clients to invest, resiliency and adaptability in uncertain times further strengthen Jersey’s value proposition and sets it apart from other jurisdictions. As we have seen in recent times, the global financial services sector has been on a crash course with a changing regulatory environment and

this has forced some financial centres to face uncomfortable realities in terms of regulation compliance. On the other hand, Jersey has faced these challenges head on, by proactively engaging with regulators and policy makers to ensure it is well-positioned to comply with new legislation, such as the Foreign Accounts Tax Compliance Act (FATCA) and other measures implemented by global authorities. Indeed, Jersey has a long history of strong AML procedures and leading actions to stop financial crime. Through this – and due to the global trend towards greater transparency – Jersey’s financial institutions have adapted to ensure legitimate client confidentiality while meeting regulatory requirements. Experience is our competitive edge Despite some of the challenges that Jersey’s financial institutions face, including increased competition by other offshore financial centres and a changing regulatory environment, our advantages are numerous and distinct. After spending more than 50 years establishing a vibrant and robust financial services community with a strong and well-qualified workforce, Jersey is well positioned to take advantage of new opportunities. While the future is impossible to predict, and will inevitably come with its own challenges, Jersey has positioned itself as a leader among offshore financial centres by relying on its experience.

Ann Marie Vibert Ann Marie is Head of RBC’s offshore Private Client Wealth Management (PCWM) business. Based in Jersey, Ann Marie has overall responsibility for the integrated wealth management offering delivered to private clients in key markets of focus from RBC’s offices in the Channel Islands. Her role encompasses leadership of a team of wealth managers in Dubai and Jersey, as well as the development of PCWM’s business strategy. Prior to joining RBC in 2014, Ann Marie was with Standard Chartered, where she held a number of senior roles during a 30 year career there. Her most recent position was Executive Director which entailed leadership of a team of wealth managers in Jersey focused on building and maintaining portfolios of high net worth and ultra high net worth clients connected to the Middle East and South East Asia. Before this, she was Head of Client Infrastructure, with responsibility for creating, implementing and maintaining the service and operating platform for Standard Chartered’s private banking businesses across Europe, the Americas and the Middle East. Ann Marie is a member of the Chartered Institute for Securities and Investment (CISI) and holds the CISI Investment Advice Diploma.

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PHILANTHROPY

Jersey: international centre for philanthropy By Zillah Howard

hilanthropy is important for many families, with increasing numbers establishing new structures to support particular altruistic causes that they identify with, whether those causes are technically charitable or not. Jersey is an attractive choice of jurisdiction in which to establish such structures for a variety of reasons. Chief among these are that the Island offers: • • • • •

stability (politically, economically and geographically); a robust and highly regarded regulatory régime; a well-respected and independent judicial system; a depth and breadth of experience amongst its professional advisers; legislation which places a strong emphasis on the importance of flexibility, allowing for the creation of structures tailored to individual client requirements.

Added to this list is the fact that Jersey is readily accessible from the UK (with several daily flight connections and a flying time to London of under an hour) so that, for those clients with business interests and/or family connections in London or elsewhere in the UK, choosing the Island also makes logistical and practical sense.

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Trusts and foundations are the two key structures used for philanthropy in Jersey, with the Trusts (Jersey) Law (the ‘Trusts Law’) dating from 1984, and the Foundations (Jersey) Law (the ‘Foundations Law’) having been brought into force in the Island in 2009. In addition to these two key pieces of legislation, the Charities (Jersey) Law 2014 (the ‘Charities Law’) has been enacted, as part of Jersey’s initiative to strengthen and develop the Island’s position as a centre of excellence for philanthropic wealth management. The Charities Law is being brought into force in stages and, when fully enacted, will complement the Trusts Law and the Foundations Law by offering a voluntary system of registration in Jersey, for those wishing to register structures as charities. Trusts The Trusts Law allows for the creation of both charitable and noncharitable purpose trusts. It is therefore possible to establish a trust for charitable purposes or, alternatively, for philanthropic purposes which may not be technically charitable, such as a trust for humanitarian, ecological or research purposes. With a trust established under Jersey law, the following are key points to note:

“It is possible to establish a trust for charitable purposes or, alternatively, for philanthropic purposes which may not be technically charitable, such as a trust for humanitarian, ecological or research purposes”

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•

Duration: The trust can be established for an unlimited period.

•

Registration: There is no public registration of trusts in the Island and the establishment of a Jersey trust can therefore be attractive to those not wishing to have a public profile in relation to their philanthropy.

•

Enforcement: The Attorney General in the Island enforces charitable trusts. A non-charitable purpose trust has an office holder known as an enforcer, to enforce its non-charitable purposes. The enforcer cannot also be a trustee of the trust but there are no other limitations with regard to the choice of the enforcer. An individual or a corporate entity can be appointed and there is no requirement for the enforcer to be resident in Jersey.

•

Taxation: In relation to charitable trusts, the Income Tax (Jersey) Law 1961 (the ‘Income Tax Law’) provides an exemption from income tax in respect of income derived from the property of a trust established in Jersey for the advancement of education, the relief of poverty, the furtherance of religion, a purpose beneficial to the whole community, or the service of any church or chapel or any building used solely for the purpose of divine worship, in so far as the income is applied to those purposes. In relation to noncharitable purpose trusts, a concession provides that Jersey income tax is not payable on foreign income or Jersey bank interest in respect of non-charitable purpose trusts under which no resident of Jersey (other than a charity) has an interest or is intended to have an interest, whether during or at the end of the trust period.

Foundations The Foundations Law is very flexible and allows for the creation of a foundation for purposes – known as objects – which are charitable, non-charitable, or both charitable and non-charitable. From its introduction in 2009, one of the most important uses for Jersey foundations has been in relation to philanthropy, with foundations being seen as an ideal vehicle for those keen to pursue particular philanthropic initiatives, some or all of which may not be strictly charitable.

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“A foundation can be incorporated to pursue a client’s chosen causes – causes that he or she is passionate about – whether or not they are technically charitable. This flexibility is clearly attractive and significant numbers of Jersey foundations have been incorporated with philanthropic objects, either alone or in conjunction with objects for the benefit of people”

Key components of a foundation’s structure are as follows: •

Founder: The founder is the person upon whose instructions a foundation is incorporated. A founder need not endow assets upon the foundation and (unlike a trust) it can come into existence without assets.

•

Constitutional documents: A foundation’s constitutional documents are its charter (which is registered and open to public inspection) and its regulations (which are not registered and are therefore private).

•

Council: The council is similar to a company’s board of directors. Its function is to administer the foundation’s assets and to carry out its objects. The council can have one or more members, with one member being a ‘qualified person’ with the appropriate regulatory licence pursuant to the Financial Services (Jersey) Law 1998: this member is known as the qualified member.

•

Guardian: The guardian’s role is to take such steps as are reasonable in all the circumstances to ensure that the council carries out its functions. The founder and the qualified member (but not others) may fulfil a dual role as both council member and guardian.

foundation’s assets) or might be the guardian (with a monitoring role, to ensure that the council administers the assets and carries out its objects as required by the constitutional documents). •

Open profile: For some clients, it will be important that a foundation’s existence is a matter of public record and that its charter can be viewed by conducting a search of the register of foundations. Where a structure is being established for philanthropic purposes, it can often be appropriate to establish and maintain an open profile and relevant information can be included in a foundation’s charter (in addition to the mandatory provisions) to satisfy a client’s objectives in this regard.

Some of the reasons for choosing foundations for philanthropy are as follows: • Choice of objects: A foundation can be incorporated to pursue a client’s chosen causes – causes that he or she is passionate about – whether or not they are technically charitable. This flexibility is clearly attractive and significant numbers of Jersey foundations have been incorporated with philanthropic objects, either alone or in conjunction with objects for the benefit of people. Some examples to mention are of foundations incorporated with objects to hold heritage assets (such as artworks or buildings), to protect the environment, to provide funds for medical or scientific research and to support education. •

Legal personality: A foundation exists as a legal entity (without shareholders or any other form of owners) which holds assets and enters into contracts, in its own name. This contrasts with the position in relation to a trust (which is not a separate legal entity), where transactions are entered into in the names of the trustees. The ability to refer to a foundation as such – and, for example, to use the foundation’s name when distributions are made – can be important for clients when considering how their philanthropic giving will work in practice.

•

Ongoing involvement: Another attraction of Jersey foundations is that they allow opportunities for ongoing involvement. For example, the founder can choose to be a council member (and so might participate in a giving committee, distributing the

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•

Choice of name: Another important factor is that there is considerable flexibility as to the choice of name for a foundation, provided that it ends with the word ‘Foundation’ or a foreign language equivalent. It is therefore possible to use a family name, or other name of personal significance, for a philanthropic foundation if that is desired or, alternatively, to choose a name which preserves the anonymity of the client.

•

No ultra vires: The doctrine of ultra vires (i.e. beyond the powers) does not apply and a foundation can exercise all the functions of a body corporate, save only that it cannot directly (a) acquire, hold or dispose of immovable property in Jersey or (b) engage in commercial trading that is not incidental to the attainment of its objects. However, both of these restrictions can be overcome by interposing an underlying company, so that the relevant activity is not undertaken directly by the foundation.

•

Indefinite existence: As with Jersey trusts, foundations can continue to exist for an indefinite period or for a specified period, to suit a client’s chosen objectives.

“The Charities Law, when fully enacted, will complement the Trusts Law and the Foundations Law by offering a system of registration in the Island, for those wishing to register structures as charities”

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•

Taxation: Whilst the exemption contained in the Income Tax Law which applies to charitable trusts does not apply expressly to foundations, an exemption from Jersey income tax will nevertheless be granted by concession to a foundation which is established solely for charitable purposes. Where a foundation is established for philanthropic purposes which are not strictly charitable, it is charged to income tax at the rate of 0% (save for a prescribed category of profits or gains deriving from land situated in Jersey in respect of which it is charged to income tax at the rate of 20%). If a Jersey resident has an interest in a foundation (directly or indirectly), an application should be made to the Comptroller of Taxes for pre-clearance prior to incorporation (to determine whether or not the statutory anti-avoidance provisions are relevant).

Charities Law As mentioned previously, the Charities Law is being brought into force in stages, to allow for preliminary matters to be completed first, before it becomes fully effective. These preliminary matters include the appointment of a Charity Commissioner, the issuance of guidance by the Commissioner and the introduction of supporting regulations and orders. During this initial stage, whilst only certain provisions are in force, the remainder of the Charities Law will effectively be dormant, so that the customary law of Jersey in respect of what is charitable will continue to apply and it will not be possible to register as a charity under the Charities Law. The Charities Law, when fully enacted, will complement the Trusts Law and the Foundations Law by offering a system of registration in the Island, for those wishing to register structures as charities. Registration as a charity will be voluntary but will be relevant in determining entitlement to certain charitable tax reliefs and to the use of the term ‘charity’.

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The Charities Law allows for ‘entities’ (including the trustees of a Jersey trust and Jersey foundations) which satisfy the new charity test in the Charities Law to apply for registration. An entity meets the charity test if: •

all of its purposes (as defined) are charitable purposes or purposes that are purely ancillary or incidental to any of its charitable purposes; and

•

in giving effect to those purposes, it provides (or intends to provide) public benefit in Jersey or elsewhere to a reasonable degree.

However, an entity will not satisfy the new charity test for the purposes of the Charities Law if its constitution expressly permits its activities to be directed or otherwise controlled by (or any of its governors – i.e. its trustees if a trust, or its council members if a foundation – to be) Jersey’s Chief Minister, a member of the States Assembly, or someone holding an equivalent position in another jurisdiction, acting in his or her capacity as such. The Charities Law contains an extensive list of charitable purposes including, for example, advancement of the arts, heritage, culture or science and also the advancement of public participation in sport (which is not currently charitable under Jersey’s customary law). It also provides for other purposes to be treated as charitable if they can reasonably be regarded as analogous to those which are listed and allows for the list of charitable purposes to be added to in due course. There is to be no presumption that any particular charitable purpose is for the public benefit. The Commissioner must compare, as a consequence of the entity exercising its functions: •

•

any benefit gained or likely to be gained by members of the entity itself or any other people (other than as members of the public) and disbenefit incurred or likely to be incurred by the public.

If benefit is likely to be provided to a section of the public only, the Commissioner will also consider whether any condition on obtaining that benefit (including any charge or fee, such as a membership fee) is unduly restrictive. An entity wishing to register will provide prescribed information to the Commissioner and, when registered, will be given a certificate of registration, confirming its registered name and number and the date of its registration. The register will be divided into general and restricted sections (for current registrations) and an historic section (for registrations which are no longer current). The general rule will be that all of the information on the general and historic sections of the register will be publicly available but that only limited information will be publicly available in relation to the

“The Charities Law contains an extensive list of charitable purposes including, for example, advancement of the arts, heritage, culture or science and also the advancement of public participation in sport”

the benefit gained or likely to be gained by the public; with

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“With the introduction of the Charities Law to complement the Trusts Law and the Foundations Law, Jersey is well-positioned to operate as a centre of choice for philanthropic wealth structuring”

restricted section. In addition, the Commissioner will have the power to designate a specified matter – on any section of the register – as not being a public part of the register for that particular entity. This power will be available if the Commissioner considers that the safety or security of any person, property or premises would be significantly put at risk by public access to the specified matter. It is envisaged that those wishing to register as a charity will choose: •

the general section if the intention is to raise funds from the public, to have full access to the Jersey charitable tax reliefs and to use the term ‘charity’;

•

the restricted section if the intention is to fund a charity with the family’s own moneys and there are concerns in relation to privacy and confidentiality.

others, registration as a charity under the Charities Law, either on the general or the restricted section of the register, will be preferred. •

Jersey is a tax neutral environment in which to establish structures, with Jersey tax exemptions also available subject to compliance with relevant conditions.

It is therefore anticipated that the Island’s established position in relation to philanthropy will continue to strengthen as more clients choose Jersey structures to pursue their philanthropic giving.

Zillah Howard Taxation Registered charities will be eligible for the full range of Jersey charitable tax reliefs, as follows: •

exemption from income tax;

•

entitlement to recover income tax on certain donations received by way of a lump sum payment or pursuant to a deed of covenant;

•

entitlement to reclaim any goods and services tax (GST) paid and exemption from the requirement to register for GST;

•

entitlement to reduced rates of stamp duty and land transaction tax.

Once the Charities Law is fully enacted, it will still be possible for charitable trusts and foundations which are not registered to qualify for exemption from Jersey income tax on satisfaction of certain conditions. In addition, tax neutrality is to be preserved for structures with no beneficiaries in Jersey and no income deriving from land and buildings in Jersey. Conclusion With the introduction of the Charities Law to complement the Trusts Law and the Foundations Law, Jersey is well-positioned to operate as a centre of choice for philanthropic wealth structuring: •

The Trusts Law and the Foundations Law both place a strong emphasis on the importance of flexibility, so that each client can tailor a structure to pursue his or her chosen philanthropic goals, whether or not those goals are technically charitable.

•

For those keen to have some form of public profile in relation to their giving, there is a choice in relation to registration options. For some clients, registration as a foundation will be appropriate; for

Photo: Chris George

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Zillah Howard is a Partner at Bedell Cristin in Jersey with more than 25 years’ experience in international private client work. She provides Jersey law advice for high and ultra high net worth families in relation to trusts, foundations and philanthropy, and works with trust companies and leading law firms on estate planning issues. She advises extensively on the establishment and reorganisation of complex structures, the use of settlor reserved or granted powers, and the use of private trust companies. Zillah is an active member of working groups which help to shape trusts, foundations and charities law in Jersey. She was recognised as ‘Best in offshore’ at the Europe Women in Business Law Awards in 2012, 2013 and 2014, and is included in Private Client Practitioner’s 2013 and 2014 lists of the UK’s 50 Most Influential Private Client Practitioners, the ‘Honours List’ in the ‘Leading Lawyers’ category of the 2012, 2013 and 2014 Citywealth Leaders Lists, in Citywealth’s 2013 list of the IFC Power Women Top 100 and in Citywealth’s 2014 list of the IFC Power Women Top 200.

This article is intended to provide a brief commentary in relation to the subject named. It is not intended to be comprehensive nor to provide legal advice and should not be acted or relied upon as so doing. Professional advice appropriate to the specific situation should always be obtained. zillah.howard@bedellgroup.com ©

2015 Bedell Cristin

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ISLAMIC FINANCE

Family governance and succession planning: emerging trends in GCC By Siobhan Crick

growing trend in the GCC is for families to consider a more international approach to their succession planning, both in terms of asset diversification and by bringing their businesses up to international governance standards. This can be achieved through the appointment of external executives who are tasked with ‘internationalising’ the families’ businesses. Structuring has always been more prevalent outside of the GCC region, largely due to the tax regimes in such countries, however we are seeing a return to the use of vehicles such as trusts for their original purpose; asset protection and the passing of generational wealth. GCC families are also diversifying their interests by entering into cross-border activities, particularly in the acquisition of global real estate and private equity investments, using a variety of structures depending on the location of the asset in question. There has been increasing involvement with friends and family co-investment structures to take advantage of such opportunities with like-minded families within the region. Special purpose vehicles (SPVs) from various jurisdictions are used, often through Sharia Compliant structuring arrangements. Cayman SPVs are commonly used in the private equity investments which corporate administration firms have dealt with to date. Jersey remains the preferred jurisdiction for UK real estate, Luxembourg for European real estate and a combination of Cayman and Delaware for US acquisitions. As families’ businesses in the GCC

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become more international and take on a wider global footprint, the need for robust administrators with a global capability themselves is becoming a core requirement. A key difference for GCC clients is of course the application of Sharia Law which will ultimately have an impact on planning and related operations for the individuals involved, their families and their business interests. We have seen first-hand how simple Mudarabah and Istisna financing structures can be used for Sharia compliant solutions. The use of these types of structures are being utilised more and more and we do not foresee there being any reduction in the use of them. We have also seen a greater uptake in the use of Dubai International Finance Centre (DIFC) special purpose companies (SPCs) that are incorporated under the laws of the DIFC. These may only be used for ‘Exempt Activities’ which include acquisition, holding or disposal of any asset, obtaining financing, granting of security, providing

“A key difference for GCC clients is of course the application of Sharia Law which will ultimately have an impact on planning and related operations for the individuals involved, their families and their business interests”

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indemnities to shareholders or subsidiaries, acting as trustee or the financing of another SPC. One of the key reasons for SPCs being so attractive is that no corporation tax will be payable on them until at least 2054, a matter which has been guaranteed by law. Most interestingly, 100% foreign ownership is permissible under the current legislation. Family/corporate governance, generational and succession planning Family governance generally covers areas of estate planning, leadership transition during the generational change, recognition of family fairness and establishment of family protocols. Recognition is given to the fact that dynamics of family firms is inextricably linked to the life cycle of families and that governance mechanisms need to react to changes and developments during the life cycle, if the family is to be conserved. Dynastic planning is a topic that is often difficult to address, as it requires sensitive discussion not only between siblings and different generations of family members, but often between the principal and the advisors. Families often already have in place a strategy which they believe will work, only to find on closer inspection that it is no longer fit for purpose, either due to changes in family dynamics, within the regulatory landscape, or indeed the direction of the business itself. Whilst it is still a developing area for principals to consider the use of trusts for succession planning purposes, matters such as conflicting objectives for multi-generational families can be addressed by establishing a holding structure that governs the ownership of shares and other assets and clearly sets out the family members’ rights and

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responsibilities. In time, through the introduction of more flexible options, such as foundations or private trust company structures, the Principal can continue to still retain an element of control, whilst engaging with independent directors who sit alongside them. These individuals, which may also include other family members, can form advisory boards or a family council. These groups are put in place to ultimately improve the governance of the business. Another popular topic within the region is the foreign ownership restrictions, allowing only GCC nationals to own certain types of local assets. It is commonly known that there are some issues surrounding planning and structuring of GCC based assets. These planning opportunities remain challenging today. That said, it is clear from the introduction of new vehicles, such as DIFC trusts for example, that there is an appetite to structure family assets. However, it is clear that GCC clients in our experience are reticent to proceed to implementation, until they have been tried and tested by others. We are therefore still finding that Jersey and Guernsey are the preferred jurisdictions with regard to trusts and to a certain extent Jersey and Guernsey foundations alongside the Dutch foundation. For clients with substantial wealth, setting up their own family office is still an option and we work with a number of UHNWIs and their families to implement the correct structure for such ventures. The Single Family Office Law introduced in 2001 allows these to be formalised within the DIFC, however families of this size and substance are capable of housing these arrangements within their own premises and see this as an extra layer of cost which is not necessary. Remuneration policies The other area which has experienced a growing interest is the executive incentive arena.

The fundamental principles of long term incentive and retention plans through the alignment of employee interests with corporate objectives is not a new concept and the implementation of structures to govern these arrangements is gaining momentum in the region. This is arising from regulatory requirements and competitive pressures. There is also a greater demand for the setting up and ongoing management of an increasingly sophisticated and diverse range of plans, both standard and bespoke, for significant regional businesses. Conclusion The GCC region will continue to present fantastic opportunities for those professional services firms that commit to the region for the long term and focus on establishing well founded relationships built on trust.

Siobhan Crick Siobhan Crick is a Director within the Private Client division at Sanne. Siobhan has responsibility for the delivery of trust and corporate services to an international client base, with a specific focus on individuals from the MENA region. She has over 16 yearsâ&#x20AC;&#x2122; experience in dealing with the implementation of complex structuring arrangements for sophisticated international ultra-high net worth clients and their diversified asset classes.

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Partnerships, relationships, affiliations. Whatever you call them, all companies need good connections. ^ƵƌĞ /ŶƚĞƌŶĂƟŽŶĂů ŝƐ ƉĂƌƚ ŽĨ ƚŚĞ ĂƚĞůĐŽ 'ƌŽƵƉ͕ Ă ĐŽŵŵƵŶŝĐĂƟŽŶƐ ĐŽŵƉĂŶǇ ǁŝƚŚ Ă ŐůŽďĂů ĨŽŽƚƉƌŝŶƚ ĂŶĚ ǀĂƐƚ ĞǆƉĞƌƟƐĞ͕ ĚĞůŝǀĞƌŝŶŐ ĐŽƌƉŽƌĂƚĞ ƚĞůĞĐŽŵŵƵŶŝĐĂƟŽŶ ƐĞƌǀŝĐĞƐ ƌĂŶŐŝŶŐ ĨƌŽŵ ǀŽŝĐĞ͕ ŵŽďŝůĞ ĂŶĚ ďƌŽĂĚďĂŶĚ ƚŽ ŶĞƚǁŽƌŬƐ͕ ŽŶͲŝƐůĂŶĚ ĚĂƚĂ ĐĞŶƚƌĞ ŚŽƐƟŶŐ͕ ŐůŽďĂů ĐŽŶŶĞĐƟǀŝƚǇ ĂŶĚ ŵĂŶĂŐĞĚ ƐĞƌǀŝĐĞƐ ƐŽůƵƟŽŶƐ͘ KƵƌ ŐƌŽƵƉ ƐƚƌƵĐƚƵƌĞ ĐŽƵƉůĞĚ ǁŝƚŚ ůŽĐĂů ĞǆƉĞƌŝĞŶĐĞ ĂŶĚ ŬŶŽǁͲŚŽǁ͕ ŵĂŬĞ ƵƐ Ă ƉĞƌĨĞĐƚ ĐŽŶŶĞĐƟŽŶ ĨŽƌ ǇŽƵƌ ĐŽŵƉĂŶǇ͘ Contact Jon McCulloch, Head of Sales on 01534 888291 or email business@sure.com

ŝŶƚĞƌŶĂƟŽŶĂů͘ƐƵƌĞ͘ĐŽŵ

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ICT

Jersey: an ideal environment for FinTech By Paul Masterton

he widespread and essential role of technology in the finance sector is not new news – indeed the sector could not survive without stable, efficient and effective technology platforms. What is ‘news’ is the rapid growth of investment in ‘FinTech’, which is quickly becoming a ‘sector’ in its own right. Global investment in financial technology tripled in the last five years, with over $3 billion raised by private companies alone in 2014. This level of investment is delivering immense opportunities for value creation as well as unique challenges to financial markets, with the potential to restructure existing business models, making some obsolete and others disintermediated. This double face of technology, as both a creator and a destroyer of value, has always existed however the new pace of digital change is impacting economies and society as never before. Given the vital role of finance to the economy of Jersey, the implications and impacts of FinTech are of strategic importance, meaning we must be prepared and ready to participate and to effectively surf this wave of change, in order to preserve and enhance our position as a leading international finance centre.

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“Increasingly FinTech also includes small and highly creative companies and start-ups, applying new technology in innovative and disruptive ways, as recent changes in insurance, mortgages, crowd-sourcing, crypto-currencies and many more attest to”

The term ‘FinTech’ includes existing technology supporting financial services and is most often represented by large complex systems provided by established technology companies. Increasingly FinTech also includes small and highly creative companies and start-ups, applying new technology in innovative and disruptive ways, as recent changes in insurance, mortgages, crowd-sourcing, crypto-currencies and many more attest to. The well-documented drivers of eCommerce growth are equally material for FinTech – high levels of internet and mobile broadband connectivity, increasingly ‘smart’ mobile devices, mobile payment and authentication capabilities, access to data and analytics and the cloud are all accelerating new services and businesses. In addition to these general ‘digital’ drivers, pressure and change within financial services are equally compelling – there is a pressing need to reduce costs, while developing new services to meet increasingly sophisticated customer demands in the world of eCommerce, something clearly evidenced by the recent fundamental changes in high street banking. The impact of the Internet, together with the technology and services that ride on it, has led to unbelievable new value creation: many of the largest companies today – think Amazon and Facebook – are recent and highly innovative businesses. At the same time other industries have been completely restructured – think publishing and music – with many well-established players failing to compete and fading from view. These same changes are well underway in financial services; processes

that are easy to automate are increasingly digital, with more knowledge based areas now coming under scrutiny; the highly important and increasingly resource intensive needs for KYC and audit are excellent examples. This digital-driven change in financial services must also consider the additional ingredients of regulation and culture. Financial systems are complex, interconnected and global and are monitored and regulated by an equally complex system of controls. When these do not work the results can be – and have been – devastating. Given the pace of technological development, we are already seeing the tensions and pressures for regulators, laws and legislation to ‘keep pace’. While it is entirely appropriate for regulators to exercise a moderating influence to ensure integrity of markets and services, they must work to avoid becoming a brake on developments and a point of resistance. This leads nicely in to the question of culture, more specifically the difference in culture between financial services and the digital sector. In the latter, debate tends to be open and public, often using modern social media capabilities – discussions, successes and failures are there for all to see and comment on. This form of ‘system’ development is well known through the open source programming community and is broadly adopted throughout the digital sector. This contrasts with the more conservative, traditional approach used so successfully in financial services. Neither is right or wrong but it will be interesting to see how these two cultures come together around the FinTech nexus. The characteristics and strengths that make Jersey a leading international finance centre equally position us to excel in the area of FinTech. Jersey has an excellent financial services infrastructure, leading experts in professional services across multiple fields, is self-regulating with a flexible regulatory approach and has great access to capital. Supporting this, Jersey – by its nature – has excellent social connectivity, with access to key decision makers, enabling the Island to move quickly and with agility to respond to new opportunities. Finally, Jersey is home to a growing digital community which is supporting and developing FinTech opportunities. We are currently ‘The International Finance Centre’, we may in the future also become ‘The International FinTech Centre’.

Paul Masterton Paul Masterton is Chairman of Digital Jersey. Following a 30 year career in printing, business outsourcing and data management, Paul was chief executive of the Durrell Wildlife Conservation Trust from 2008-13. In addition to Digital Jersey, he holds nonexecutive positions in finance, insurance and property development, is a Governor of Highlands College and Vice President of the Jersey Hockey Association. Digital Jersey is an independent development agency, supported by the States of Jersey, acting as an accelerator to grow Jersey’s digital economy and generate jobs. While creating a digital ecosystem that will support digital growth in all businesses, Digital Jersey focuses its development activities in target sectors, including FinTech.

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I C T: F O C U S

FOCUS ON: JT Mobile Intelligence By James Trenholme, JT Head of Wholesale Business Development

ack in 2012 JT developed a strategy to grow our business outside of the Channels Islands through activities such as the acquisition of Worldstone, a global Managed Services company that provided us with valuable partnerships in more than 100 countries worldwide. Since then we have grown our Machine-to-Machine (M2M) business significantly and are now providing hundreds of thousands of JT SIMâ&#x20AC;&#x2122;s to customers across the world. One exciting area benefitting is insurance where this technology enables services such as monitoring a personâ&#x20AC;&#x2122;s driving that helps reduce insurance premiums and is already being implemented in the UK. Furthermore, we have developed new and successful partnerships in a number of other areas of emerging technology with cutting-edge technology businesses, born out of successful testing work in the JT Lab, here on Jersey. This focus on our off-Island activities always has our C.I. customers and local market at its core. For example, revenues that those services generate come back directly into our local economy and support enterprise and development here in Jersey. Moreover, it also means that through this work our customersâ&#x20AC;&#x2122; benefit from competitive pricing and access to the latest and cutting-edge innovation. To put this in context, JT is currently working on a new innovative service that has the potential not just to generate revenue but that will provide a service to benefit people in Jersey and importantly has the potential to improve things for literally millions of people around the world.

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I C T: F O C U S

“It is estimated that every year each of the big UK High Street banks potentially loses a staggering £200 million and frequent ‘false-positives’ where cards are declined over legitimate transactions, causing inconvenience and frustration to customers” In the last few years, digital technology has transformed the world of retail banking. What used to be perceived as perhaps a rather conservative industry has had to react and embrace the opportunities created by the internet and mobile technology to ensure they are providing their customers with the service they expect, when and where they expect it. The result for consumers has been a far more convenient and flexible service, and it’s hard to imagine that anyone would want to go back to the days of having to see a personal banker to set up a simple standing order. Those changes have been good for banks too – they have let other firms compete with the major established players in the retail banking sector and they have created better and more efficient ways of working. However they have also created challenges.

Photos: Chris George

Today’s technology means customers have near total access to their finances at home, in the office, and on the move; be it through their mobile, laptop or tablet device. Yet this access has also brought with it new security threats. In the UK alone eCommerce fraud was worth £110 million in the first six months of 2014 – which was acerbated by the continuing boom in the size of the overall eCommerce market – while increasingly savvy and sophisticated online banking fraud rose 71% over the same period.

However, we have created a solution – and it is relatively simple. It is provided via a system that can take alerts of potential fraudulent activity on a card (flagged up by testing meta-data for a transaction in an unusual place, for a large amount, or at an odd time of day) and cross check it against a strong indicator of where a person actually is. How does the system know where you are? By simply identifying the geographical location of your mobile phone. The deal that JT has with a number of UK operators provides access to location data, which means we can – in milliseconds – provide a ‘yes’ or ‘no’ answer to a query from a bank, or payment company about a transaction taking place in an unusual location. By confirming the locality of a customer’s phone and identifying important changes such as a swap of SIM or whether the customers’ handset has been cloned, JT is able to help verify that the card transaction being made is actually them and not made by a fraudster. What makes this innovation unique is a careful combination of a custom made platform, our 530 global roaming partners and importantly our size – in comparison with our UK counterparts – and location. Being based in the Channel Islands has enabled us to sign deals with major mobile operators such as EE and Vodafone to provide authorised access to mobile data, so JT can use their information to verify the location of a customer for a bank. It is a real challenge for operators to develop a service like this, especially given an alliance with competitive operators in a market are few and far between. So, using a third party like JT is ideal because; we are a trusted Tier 1 operator; we do not compete with them or threaten their domestic market; and we operate in a trusted regulatory environment with firm data protection laws. In turn, being authorised to access mobile data of all major UK operators means we are singularly able to offer almost universal coverage of a bank’s customer base. Now, after a two-year development project this new market leading mobile intelligence service launched in late 2014, is already being used by two UK banks to help protect their customers. It is estimated that every year each of the big UK High Street banks potentially loses a staggering £200 million and frequent ‘false-positives’ where cards are declined over legitimate transactions, causing inconvenience and frustration to customers. These two facts alone have made both banks and payment companies sit up and take notice of this new, innovative service. Developing the technology that sits between JT’s platform, the other operators and the banks, has presented significant technical challenges. However, it is a strong example of the expanding and agile FinTech sector that is developing here in Jersey and which has the potential to make significant changes to the way that everyone in the world does their banking. By playing our part in this, JT hope to further develop the already close links that we have with the Island’s international financial services and digital sectors, in order to bridge that gap. We have every confidence that our Mobile Intelligence platform has the potential to be a hugely valuable tool across the thriving mobile payments and banking sphere – as well as many other sectors using mobile devices to conduct business; and we are excited about placing Jersey into the heart of that innovative business. That move is just one further part of our plan to realise our vision of becoming the partner of choice for global telecommunications innovation.

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FOCUS ON: A Sure thing from Jersey to the World By Graham Hughes, Chief Executive of Sure (Jersey) Ltd

ver the course of the past 50 years, Jersey has transformed itself into a financial centre of international standing and although other industries still remain important elements of the Island’s economy, the days of Jersey relying on the seasonal whims of the agriculture and tourism sectors are long gone. Today, as an important part of the global financial system, Jersey is again broadening its appeal to the wider world as it develops a digital sector that is already proving to be a fantastic complement to the financial services industry. Among the Island’s most immediate successes in the digital sector has been the creation of an eGaming proposition that is attracting interest from around the world. The eGaming arena uses the best of Jersey’s financial expertise and combines it with the Island’s technological strengths. Whether a company needs specialists in corporate structuring, tax advice, accounting or law, they can be

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Foreshore’s global capabilities were put to the test in 2004 when Hurricane Ivan struck Grand Cayman, causing devastation to buildings across the island and compelling companies to enact their business continuity plans. Foreshore’s technology kept several clients trading during that difficult period, giving companies time to recover from the disaster. Today, Foreshore forms part of Sure’s tri-island data centre network which reaches to Guernsey and the Isle of Man. Together the network offers a wide range of hosting, cloud and managed services in addition to its role as a disaster recovery facility. Foreshore is also accredited as a top-tier data security supplier for users of the payment card industry as a PCI-DSS Level One Service Provider. Reaching Out Sure’s core network reaches across the islands of Jersey, Guernsey and the Isle of Man, delivering the full suite of communications services to business and islanders but it is our global reach which makes us stand out from the crowd. Forming a key part of the Batelco Group, whose international network stretches across four continents and gives us particularly strong links in the Middle East, Sure brings international quality and expertise to Jersey. The strength of our relationships and the high standard of our global network means that we are proud to work with Jersey Finance to help companies across the world learn more about the Island’s international capabilities and understand that Jersey can play an important part in their global operations. It is this combination of global expertise and local knowledge that enables us to provide global solutions to businesses whose locations cut across time zones and which need consistent global connectivity of the highest standard. Photo: Chris George

found in Jersey already working within an environment that enjoys world-class connectivity that is backed up by highly secure tier three data centres which offer the perfect solutions for processing live transactions or securely storing data. Sure International’s standing in the eGaming sector is second-tonone in the Channel Islands, a fact that has been reinforced by last year’s acquisition of the leading data centre and hosted services company, Foreshore. Based in St Helier, Foreshore has been at the vanguard of data security in Jersey. It has built a client base that reaches across the Atlantic and has helped it become one of the leading providers of disaster recovery and business continuity services to dozens of major financial services companies in the Caribbean as well as many much closer to home.

“It is by staying at the forefront of technological developments that Jersey is able to keep businesses running 24/7 and able to process ever greater amounts of information”

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To this end, we have built a Network Team that is dedicated to ensuring that Island businesses have the means to operate at the local, regional and global levels. This highly qualified and very skilled team is able to design the network that your company needs whether it has to send information efficiently, securely and effectively across continents or just across Jersey’s parish boundaries. As I’ve mentioned, part of Jersey’s all round attraction as a location for doing business is the easy availability of the very latest communication technologies. It is by staying at the forefront of technological developments that Jersey is able to keep businesses running 24/7 and able to process ever greater amounts of information. An excellent example of Jersey employing the latest technologies is this year’s launch of Sure’s 4G mobile network. Finally, businesses will truly be freed from the office because the superior mobile data speeds and increased capacity offered by 4G will enable companies to make full mobile cloud access possible across the Channel Islands. In turn, this will enable the complete adoption of mobile data capabilities in businesses. With firms increasingly turning to the cloud for their IT systems, services and storage, staff will be able to access virtually every file, no matter what its type or size, on their mobile devices. There is no doubt in my mind, that Jersey is a prime location from which to do business. Not only do you have access to the highest levels of expertise across a range of professional services but with firms like Sure at your side, your company knows that, from this small Island, it can operate at a truly global level.

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JERSEY’S ECONOMIC DEVELOPMENT

Jersey’s economic evolution By Senator Philip Ozouf

s the title of this publication suggests, Jersey is still ‘First for Finance’ but the competitive terrain has been loose under foot and hilly over the last few years. In my role as Assistant Chief Minister with responsibilities for Financial Services, Digital, Competition and Innovation, I have Jersey’s future business and economic evolution in these areas, at the top of my to-do list. It is essential that we increase the economic value of Jersey as fast as possible, with a focus on business income and jobs. To achieve this we have to better understand what opportunities are available to us within the stable and well respected IFC we have created. However relying on our previous successes is not enough and we must stimulate forward looking growth through sensible innovation, investment and enterprise – I see the digital industries as core in this new world. A leading IFC of substance The last few years have faced us with difficult questions about how Jersey would survive in a world beginning to emerge from the Photo: Chris George

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financial crisis, which set forward a period of careful strategic planning for our jurisdiction. In 2013 the consultants McKinsey conducted an independent jurisdictional review of Jersey. This left us confident that there continues to be a need for IFCs, be it for: managing cross border financial flows, wealth management, efficient tax structuring, or mitigating risk from political instability. McKinsey also identified emerging global trends and issues in the sector, namely: a focus on tax and transparency, consolidation of existing banking entities and a continued push towards more supranational and domestic financial regulation. In order to maintain our position as an IFC of substance – and substance is the key word – Jersey must meet the demand for IFCs in a modern global economy and address the emerging trends and issues within the sector. Thankfully, McKinsey went further and provided us with four lifemantras to follow, if only to keep us moving fast to stand still. First, we must sustain Jersey’s core business and ensure long term prosperity of Jersey’s financial services. Second, we must enhance the business enablers

“Jersey is considered a good partner to the UK and EU and as such we must create a proportionate and appropriate regulatory framework in which to do business, whilst at the same time remaining competitive”

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that allow us to stand out as an IFC; then we must learn to capture adjacent growth with our existing products, services and markets. Finally we need to explore more ambitious opportunities in less familiar business territories by repositioning and building new capabilities. As Assistant Chief Minister with responsibilities for financial services, digital, competition and innovation, there are some core principles I wish to instil in order to protect and enhance our position as an IFC of substance. These principles are available in more detail in the Government of Jersey’s Financial Services Policy Framework. Stability: we have a Government and a regulator which are committed to industry with an aim to sustain and further invest in long-term growth. We have a tax neutral platform with appropriate TIEAs with other jurisdictions. Jersey’s legal system is a robust, modern and sophisticated framework and our judiciary is independent and experienced with strong legal precedents in complex international matters. Our Island’s fiscal management is prudent and the Island is

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Photo: Chris George

underpinned with good infrastructure provision such as: air-links, communications and modern office provision.

international finance centre. I am also committed to working closely with public funded agencies such as Jersey Finance and Digital Jersey in the delivery of their vital promotional work.

Responsibility: as a leading IFC, we must be good neighbours to those around us and comply with international standards and global initiatives. Jersey is considered a good partner to the UK and EU and as such we must create a proportionate and appropriate regulatory framework in which to do business, whilst at the same time remaining competitive. We are also committed to international standards that are widely adopted and continue to participate in discussions and assessments with a number of international standards bodies.

Securing Jersey’s future The future of our economic evolution lies in our ability to adapt, innovate and introduce new technology; as well as using our traditional strengths as an IFC to provide ‘incubator’ space for digital business. I am therefore committed to realising Jersey’s potential in the ‘digital ecosystem’ and to promoting activities that improve the environment for digital business in Jersey.

Excellence: thanks to years of hard work, Jersey has established many world class financial services institutions, each employing highly skilled and experienced individuals. We are committed to ensuring we maintain this excellence and will grow our local skill base to carry forward these high standards. Local expertise also extends to our pool of talented non-executive directors whose advice allows firms to diversify capabilities and continue to deliver market leading products.

One of the most natural digital environments for Jersey to focus on is the merger of financial services with technology, known as FinTech. The UK FinTech market is currently worth £20 billion in annual revenue, according to EY; in addition, figures from London & Partners, the Mayor of London’s promotional body, show that more than half of all European FinTech venture capital investments made in 2014 went to London firms (£342.6m), which is triple the amount raised in 2013.

Innovative: as mentioned already, to ensure long term prosperity Jersey must explore more ambitious opportunities in less familiar business territories. This can only be achieved by repositioning and building new capabilities and acting quickly when opportunities arise. The JFSC’s recent commitment to extending the bank licensing rules to allow applications from banks in the global top 1,000 – rather than just top 500 – is a clear enabler in this area. Working together: sometimes the most effective solutions are the simplest. The Government, industry and regulator must align priorities and coordinate developments for the benefit of all; without, of course, impacting on the independence of the regulator. We already have a well-established steering group to recommend what decisions are required to maintain progress and ensure Jersey remains a top-rated

“The future of our economic evolution lies in our ability to adapt, innovate and introduce new technology; as well as using our traditional strengths as an IFC to provide ‘incubator’ space for digital business”

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“St Helier must continue to be a smart, vibrant and dynamic place to work, live and visit, which in turn will focus development away from the greener parishes and preserve the delicate balance between town and country”

Jersey can and must demonstrate its value to this new emerging sector. I am proud of the work being carried out by the Island’s publicly funded promotional body Digital Jersey, which act as an accelerator for the digital economy and as an accelerator for a digitally enabled society. I am committed to working with Digital Jersey as they set about their objectives of supporting sustainable economic growth in Jersey’s digital industry, enable a connected digital society and establish Jersey as an international well-regarded ‘digital centre’.

earned reputation as an IFC of genuine substance. Then, as we learn how to discover our new digital industry’s offerings and realise the opportunities they bring, we must be mindful to focus on business income, jobs and protecting our hard fought for reputation.

However, words are not enough and we must provide measurable results in terms of job creation, GVA and the presence of successful digital businesses. We must look at the provision of online services by Government, changes to the education curriculum and improved skills and awareness in the general population. Furthermore we must look at the development of essential ‘digital’ infrastructure such as competition in digital service provision and lowering the barriers to entry.

Senator Philip Ozouf is the Assistant Chief Minister with special responsibility for financial services, technology, competition and innovation.

Moving on, whilst we catapult Jersey into the future, we must not forget the driving force underpinning this development, St Helier. The commercial and residential centre of Jersey will continue to be our capital city and we must forge ahead with its economic development and regeneration. St Helier must continue to be a smart, vibrant and dynamic place to work, live and visit, which in turn will focus development away from the greener parishes and preserve the delicate balance between town and country.

Photos: Chris George

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Senator Philip Ozouf

Born in Jersey, he was educated at Victoria College and went on to the European Business School in London, Frankfurt and Paris. He then worked for one of the world’s largest multinationals on a range of projects across Europe, Africa, Asia Pacific and the US. Since 2002 he had numerous roles including: Vice Chairman of the Finance and Economics Committee, President of the Environment and Public Services Committee and Economic Development Minister. In December 2008, he was re-elected as Senator and appointed Minister for Treasury and Resources and Deputy Chief Minister. He was re-elected in 2011 as Minister for Treasury and Resources and then re-elected for a further term in the October 2014 Senatorial elections.

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ON THE HORIZON

Jersey: responding to what is on the horizon By Colin Powell CBE

ersey is a small jurisdiction whose economic success depends on selling a range of services and goods to non-residents in a market environment over which it can exercise little if any influence. It is buffeted by economic winds generated by an ever changing business climate which bring both opportunities and challenges. In these circumstances it is essential to keep one’s eyes firmly fixed on the horizon so that where possible appropriate early action can be taken. Jersey’s success as an international finance centre, recognised worldwide, has been assisted by an ability to adapt to changing market conditions and business needs. The complacency that comes from assuming that existing products and markets will never change – and alone can be relied upon for jobs and growth – has in general been avoided. In this respect the future will be the same. What is different is that in the past the external climate was more favourable. Jersey was faced with a situation where there was more business seeking to take advantage of Jersey’s attractions than it had the resources to accommodate. For the foreseeable future Jersey will need to fight more for its desired share of an increasingly competitive global market for financial services.

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“Jersey has a particularly close and complementary relationship with the City of London and what is good or bad for the City of London will usually be good or bad for Jersey”

When regard is had for what is on the horizon these are all fundamental elements for an effective response not only to the market conditions that are expected to prevail but also to the international action being promoted by the G20 and implemented by organisations such as the OECD and the EU and by individual jurisdictions. These actions represent a much more intense, comprehensive and coordinated global approach to financial regulation, AML, tax transparency and information exchange. Not only is this on the horizon, the horizon also is much closer. To bring what is on the horizon more into focus, reference can be made to what is included in documents issued by the G20 following their most recent Summit in Brisbane in November 2014.

It is of great importance therefore that a clear view is maintained of what is on the horizon. However at the same time there will be a need not to lose sight of what have been – and can be expected to remain – the fundamentals that make Jersey attractive as an international finance centre. Andrew Edwards in his review of financial regulation in the Crown Dependencies undertaken on behalf of the UK Government and published in 1998, referred to six reasons why business was attracted to Jersey, reasons that are as relevant today and for the future as they were then – • •

Stability: political, economic and fiscal Respectability: selection of business institutions of stature, comprehensive and up-to-date legislative framework, international regulatory standards Security: secure ‘constitutional’ relationship with UK and EU, confidentiality for legitimate business through customary law Fiscal: trusts and companies owned by non-residents may be exempt from Jersey income tax: Flexibility: speed of response to market needs, government/industry ‘partnership’, approachability of government Quality: quality of service reflecting skills/experience of the work force, the judicial system, high standard of international communication links, proximity to City of London and other European finance centres.

• • • •

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A key priority for Jersey is business growth and jobs. As a community dependent on the export of goods and services success in achieving this objective is enhanced if export markets are buoyant. It is helpful then if on the horizon there are good signs of a solid international commitment to the growth of the global economy. In their Brisbane Summit Communique the G20 Leaders said: “Our actions to boost growth and create quality jobs are set out in the Brisbane Action Plan and in our comprehensive growth strategies. We will monitor and hold each other to account for implementing our commitments and actual progress towards our growth ambition, informed by analysis from international organisations. We will ensure our growth strategies continue to deliver and will review progress at our next meeting.” As an international finance centre Jersey is particularly focused on those jurisdictions where wealth generation is taking place and investment opportunities abound. Of great interest in this respect is the evidence being presented of the growth potential of African countries. The G20 commitment to ensuring that their actions contribute to inclusive and sustainable growth in low incomes and developing countries is supportive of this. Jersey for its part, in seeing what is on the horizon, is seeking to promote its business interests in Africa through the negotiation of DTAs to encourage inward investment and through offering technical assistance to help enhance their revenue raising capacity upon which necessary infrastructure investment also depends.

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What is also on the horizon however are clear signs of increasing competition for the business opportunities being presented. When the G20 say “we are promoting competition, entrepreneurship and innovation including by lowering barriers to new business entrants and investment” this is a clear signal that Jersey must follow suit if it is to be successful. The lowering of barriers by other countries is also important for Jersey and the G20 commitment to resist protectionism is to be welcome. The relatively poor growth prospects for the EU Member States tempts a protectionist response which if it is unchecked will be detrimental to the Island’s best interests. Jersey has a particularly close and complementary relationship with the City of London and what is good or bad for the City of London will usually be good or bad for Jersey. This is one of the reasons why the Island is keeping a keen eye on the UK’s future relationship with the EU in the light of the prospect of a referendum on EU membership in 2017, or earlier, and what this might mean for the City and for Jersey. Another clear signal is the need of countries to increase tax revenues to support essential health, education and other public services. To this end the G20, to quote from the Brisbane Communique, has said “we are taking actions to ensure the fairness of the international tax systems and to secure countries revenue bases. Profits should be taxed where economic activities deriving the profits are performed and where value is created.” Jersey has seen these clear signals on the horizon and has taken the view that its long term future lies in supporting the international tax initiatives on transparency and information exchange. Thus in October 2014 Jersey joined with 51 of the then 54 countries in the ‘early adopters group’ in signing a multilateral Competent Authority Agreement as a first step in the implementation of a global Common Reporting Standard on Automatic Exchange of Information (AEOI). Jersey is a vice chair of the AEOI working group of the Global Forum on Transparency and Exchange of Information for Tax Purposes which will monitor the implementation of this new standard. Jersey is also supportive of the work of the OECD on Base Erosion and

Profit Shifting (BEPS), although Jersey is not as involved in the profit shifting activities of multinational companies as elsewhere because of the absence of a comprehensive range of Double Taxation Agreements (DTAs). At the time of writing Jersey has signed 36 Tax Information Exchange Agreements (TIEAs) and eight DTAs of which the majority are in force. Jersey is currently engaged in negotiating a number of DTAs to help facilitate investment flows. Jersey is joined in the Multilateral Convention on Mutual Assistance in Tax Matters which provides for both information exchange on request as well as AEOI. Jersey is also supportive of the international efforts to enhance the transparency of the ownership and control of legal persons and legal arrangements and welcomes the steps being taken by many countries to match Jersey’s internationally recognised leading position in this respect. The G20 is also committed to strengthening the stability of the financial system. As an international finance centre Jersey is inevitably caught up in the actions being taken to reduce risks in the global financial systems. In this changing scene the past policy of only licensing banks thought to be too big to fail is no longer tenable. There is a need for both Government and the regulator to respond. First, by taking on board the regulatory developments required to strengthen the financial sector and, second, through legislation that meets the

“As an international finance centre Jersey is particularly focused on those jurisdictions where wealth generation is taking place and investment opportunities abound. Of great interest in this respect is the evidence being presented of the growth potential of African countries” Jersey-First for Finance

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“Jersey can be expected both to maintain its excellent track record in adapting to economic and political change, and to further reinforce its growing international reputation as a jurisdiction supportive of G20 and other global initiatives on financial regulation, AML and transparency and information exchange” changing needs of business while remaining consistent with developing international standards. There can also be expected to be a growing need to meet the requirements of equivalence in compliance with the standards to ensure market access, particularly in respect of the EU.

• •

What is promising for Jersey are the signs that the past discrimination against so called tax havens per se is giving way to a focus on which jurisdictions are failing to comply with the international standards that have been set. There is some distance to go before a truly level playing field is established and there is still the frustration faced where a jurisdiction maintains Jersey on a black list based on historic views notwithstanding that Jersey is a signatory to the Multilateral Convention, is an early adopter of AEOI and has a large number of tax information exchange agreements. However, the global approach being promoted by the G20 is welcome. It should mean that Jersey will be less exposed to the risk of business loss to jurisdictions who seek to compete through lower standards. Increasingly business success will be a function of the quality of the services provided and the speed of response to market needs, on a foundation of common standards, and Jersey is well placed on all counts. In summary, what a study of the horizon should tell Jersey is that there is a need: • for a clear economic strategy to which all in the Island are fully committed • for a commitment to business growth to be combined with

•

complying with international standards to protect the Island’s international reputation for a partnership between Government, the regulator and the industry with shared objectives to be competitive with a quality product and a market response which in turn calls for a positive approach to the availability of manpower in sufficient number and with the required skills for quick action in decision making whether it be in enacting necessary legislation or in providing essential infrastructure

If eyes remain fixed on the horizon and there is appropriate early response there is every reason to remain confident in Jersey’s ability to protect and enhance its position as a quality international finance centre. There will be many business opportunities in existing and new markets and Jersey requires only a small share of what will continue to be a large global market for financial services. Jersey can be expected both to maintain its excellent track record in adapting to economic and political change, and to further reinforce its growing international reputation as a jurisdiction supportive of G20 and other global initiatives on financial regulation, AML and transparency and information exchange. The horizon is not without some clouds but nevertheless the future remains bright.

Colin Powell CBE Colin Powell CBE, is Adviser - International Affairs to the Chief Minister. From 1969 to 1999 he was Adviser to the States of Jersey on the Island’s economic development including as an international finance centre and from 1999 to September 2009 he held the position of Chairman of the Jersey Financial Services Commission. He is currently Adviser on international affairs to the Chief Minister and in this capacity is engaged in negotiating tax information exchange agreements. He represents Jersey on the Global Forum on Transparency and Exchange of Information for Tax Purposes. From 2009 until the end of 2013 he was a vice-chair of the Global Forum Peer Review Group. While remaining a member of that Group he is now a vicechair of the Global Forum’s Working Group on Automatic Exchange of Information. From 1981 to 2011 he held the position of Chairman of the Group of International Finance Centre Supervisors (formerly the Offshore Group of Banking Supervisors) and in that capacity participated in and contributed to the work of the Financial Action Task Force and the Basel Committee on Banking Supervision.

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