The CEO of Jersey Finance examines the Common Reporting Standard, how early adoption has been important, and lessons for the future.
An international set of agreements about automatically exchanging data to foil tax cheats – known collectively as the Common Reporting Standard – has been a reality now for a year, although it remains highly controversial (see an example of criticism of it here). A jurisdiction with a particular slant on the matter is Jersey, a British Crown Dependency – not an EU member state – and one of a cluster of international financial centres feeling the impact of these rules.
The author of this article is Geoff Cook, the chief executive of Jersey Finance, the organisation representing Jersey’s financial industry. Geoff, who stands down from the post at the end of this year after a 12-year stint in the post, is well placed to discuss these issues.
As ever, the editors of this news service do not necessarily endorse all the views of guest contributors and invite readers to respond. Email the editor at firstname.lastname@example.org
It has been a year since the Common Reporting Standard (CRS) came into play, automatically, for firms in over 100 countries – but the odds are, it has felt like a lot longer for those doing the paperwork.
CRS is the global standard for the automatic exchange of financial account information and aims to prevent cross-border tax evasion.
Compliance can be an arduous but necessary task, essential for ensuring that all jurisdictions, including International Finance Centres, remain above board and tick all the right boxes for effective and robust regulation.
Jersey was one of the of 54 “early adopters” of CRS, leading the way in collating information on clients from the beginning of 2017 and exchanging information with the other early adopters. This early commitment to exchanging tax information clearly demonstrates Jersey’s willingness to meet its regulatory obligations on tax matters.
Indeed, being ahead of the game in understanding what is required adds another string to Jersey’s bow in terms of efficiency, while later adopters still get to grips with the process.
One year on – what has changed?
So, the question is – has the adoption of CRS been worth it? In Jersey’s case, the very act of early adoption and having a positive attitude towards the change is proof of our commitment to international standards. This level of commitment is in itself why investors choose to operate and do business in the island, and Jersey holds approximately £400bn of assets established by private individuals. Indeed, our high standards combined with our decidedly experienced, expert workforce of over 13,300 finance professionals strengthens our position as a leading forward-thinking IFC.
Our proactive approach has paid off; Jersey is seeing solid increases in foundations and philanthropic endeavours. The number of foundation structures registered in Jersey grew by 9 per cent in 2017, for example, meaning that a total of more than 360 foundations incorporated since the structure’s introduction in 2009, and around a third of these are established with a philanthropic purpose.
In fact, the non-discriminatory, intensive aspect of CRS is an important factor for Jersey when it comes to client take-on within firms, since all jurisdictions must adhere to the same standards.
It levels the playing field for IFCs like Jersey with multi-jurisdictional connections and so increases competition for business. This is good news and allows us to show our value in other areas, such as our robust regulatory system and a mature and respected legal framework.
Proud of what we do
Indeed, the introduction of CRS has worked in our favour and given Jersey an opportunity to show that the work we do is valid and actually making a positive difference in economies around the world.
Firms here are incredibly proud of the fact that their expertise is supporting businesses, governments and families with their investment portfolios, generating returns, and creating more wealth and jobs both locally and globally.
With extra competition comes the need to broaden horizons and that is why Jersey has also been diversifying and moving into growth markets across all financial sectors. It is anticipated that cross-border investment will increase between both developed and developing countries in future and Jersey has the global expertise to provide safe, structured solutions for clients in these regions.
Take Africa for instance – we feel strongly that Jersey has an important role to play in its future success by providing a strong, robust, high quality platform to enable institutional investors to put their capital to work where it is most needed. This summer, we underlined that message at the Africa Financial Services Investment Conference (AFSIC) in London, where we hosted a predominantly Jersey-based panel discussing the positive outlook of Jersey supporting African capital raising. Indeed, during Prime Minister Theresa May’s visit to South Africa this year, she highlighted that the UK would be making a "fundamental shift" in its strategic approach to Africa-targeted aid, to focus more on long-term economic objectives, committing to invest £4 billion from UK coffers.
With Jersey’s ambitions being perfectly aligned with that of the UK’s, it is clear that our proactive approach in terms of both regulatory standards and maintaining strong international relations puts us on the front foot with investor confidence. In fact, just last month we returned to South Africa to host two roadshow events in Johannesburg and Cape Town to emphasise both our ability to support outbound African investment, but also to work with overseas investors to facilitate Africa-focused FDI and enable much-need capital to be put to work.
Our commitment to CRS is clear. It has been recognised by Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, and Angel Gurria, the OECD Secretary General, and Jersey scored top marks from the OECD on tax transparency, receiving a “fully compliant” rating in the OECD’s Global Forum assessment. This further reflects our commitment to the highest standards of tax transparency and information exchange.
Despite the fact that firms have had to spend a significant amount of extra time and resources on adhering to CRS requirements, it is indisputably worth it. Jersey’s commitment to CRS and the global transparency agenda in general has proven to be a net benefit and a key differentiator for us as a jurisdiction – it sets Jersey apart as an IFC that is serious about fighting financial crime, but also places a value on privacy and handling personal data securely and professionally. This approach has had a positive impact on our reputation as a wealth management centre.