Is financial privacy utterly doomed or are certain developments reminding voters, as well as policymakers, that confidentiality is worth defending? A recent Breakfast Briefing debated the issues.
Wealth management practitioners painted a broadly bleak picture about the state of financial privacy in the UK and certain other developed countries, arguing that upcoming European Union rules about data protection are unlikely to herald a major pushback.
Industry figures gathered at the Carlton Club, St James’s Street in London, to discuss the theme of “The attack on privacy and controlling information for UHNW families investing and holding wealth.” The Breakfast Briefing event, sponsored by law firm Druces, was organised by the publisher of this news service.
Speakers on the panel were Robert Macro, partner at Druces; Charles Spragge, partner at Druces; Julius Bozzino, director at the Vistra Private Office, Vistra; Julie Collins, executive director at EFG Wealth Solutions (EFG Private Bank).
The wealth management sector has seen a number of alarm bells sounded over loss of privacy. A few weeks ago, a paper published by law firm Mishcon de Reya argued that the Common Reporting Standard was a “disaster waiting to happen”. CRS is a global network of agreements enabling governments to demand information from countries. Assaults on privacy were also bemoaned at last week’s Society of Trust and Estate Practitioners conference in Interlaken, Switzerland.
The Breakfast Briefing event was held at a time when the Paradise Papers and Panama Papers “leaks”, coupled with the rollout of the Common Reporting Standard, erosion of Swiss bank secrecy and calls for registers of beneficial ownership of companies and trusts, have put financial privacy not just under pressure, but removed it in some cases completely.
Druce’s Macro told delegates that the right to financial privacy was an important right, but was in danger of being lost. “Having privacy over your money doesn’t mean you are evading tax,” he said. He argued that much media reporting of events such as the Panama Papers had been unbalanced. “We in the industry need to speak up,” he said.
Asked by WealthBriefing what it would take to restore respect for privacy, Macro said a problem is that when people think the privacy of wealth, they assume it means tax evasion.
With the EU’s data protection directive, aka GDPR, due to kick in from May, there might be hope that such a focus on guarding data and gaining consent for how it is used might counter some of the pressure on privacy. However, Macro wasn’t convinced: “We know that government requirements and concerns over-ride everything. That is what has happened around the erosion of privacy.”
Panelists argued that while events such as the Edward Snowden exposé of US spying on its citizens, new data protection legislation and cyber-security breaches, had put privacy on the agenda, there remained a sense that with rich people, their financial affairs were fair game.
There is a difference between what people expect in the case of other people and their financial affairs, and what they want for themselves, Bozzino told delegates. There is a presumption that high net worth people should be under a particular obligation to disclose what they are doing. Other panelists suggested that politically, it is difficult to make much ground pushing back at the assault on privacy.
Collins said a worrying recent development was the UK’s register of beneficial ownership of trusts – introduced recently – that goes beyond the disclosure requirements required under CRS, for example. Persons who are not beneficiaries of a trust will be drawn into the system, she said. She reminded the audience that trusts originally were founded not to mitigate tax but to protect people.
Courts have been more willing to challenge what are deemed “sham trusts”, Bozzino said. He said there is a problem with politically exposed persons using offshore structures to shield their wealth, and that this can bring the system into disrepute.
Macro added, when considering how the words “offshore” and “onshore” are used, that much tax evasion and handling of illicit funds occurs in onshore financial hubs. “The last place you want to put your [dirty] money is into a place where it’s easy to get into but hard to get out of,” he said.
This news service is holding a conference GDPR and how it affects the wealth management sector, on 21 February, in London. See more details here.