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The World's In Flux: So Let's Talk About Luxembourg
2 April 2020
The world of international financial centres is in flux as these offshore centres compete to win inflows of business. Shifting geopolitics – and they will almost certainly be affected by the global pandemic – mean that stable places are at a premium. Privacy entitlement
Those thoughts came to mind when this publication recently interviewed Christian Bühlmann, chief executive of , a firm founded in 2002. It works with international wealthy individuals and mid-sized corporations. Its most important jurisdiction for business is Luxembourg, the small jurisdiction and EU member state that has for a while been known in the wealth sector as a registration hub for UCITS funds. The group has added to its presence in Geneva recently and in 2019 applied for a licence to become active in Monaco, a jurisdiction that appears to be flexing its muscles.
The firm recently appointed Patrice Sauro, as new group chief financial officer and operating officer. It also recruited Cecile Civiale-Vuillier, former branch president of STEP in Switzerland; she is head of private clients, based in Geneva.
What is important about Luxembourg?
“Luxembourg is important to us for many reasons. They range from the size of assets under fund administration – more than €4.5 trillion ($4.91 billion) - to location of choice for Chinese banks in Europe, and re-location of choice for Brexit financial professional refugees,” Bühlmann said. “In our line of business, we are also noticing a lot of interest from foreign corporate service providers to enter the jurisdictions, if they are not present yet.”
“What we also see in our daily practice is that some prominent international banks are using Luxembourg as a centre of excellence throughout their group when it comes to international wealth planning and (regulated) corporate or fund structuring. It is a hub with a very wide corporate and investment fund toolbox that has gained decades of advances towards many competing jurisdictions with a dual approach: pro-business on one hand but also very serious and credible regulation on the other hand,” he said.
Bühlmann reckons that Luxembourg is getting more exposure at the front-end private banking and wealth advisory side.
“The local ecosystem has grown very much in the last decades around fund and corporate administration, while the latest FATCA, CRS, ATAD 1, 2, BEPS and DAC6 , are all part of a move that promotes substance and economic-related structuring. While there is still a very large chunk of companies that do not require such substance, as they are merely established for asset holding and asset protection purposes, a growing number of those do actually require the relevant substance,” he said.
By “substance”, Bühlmann refers to the economic (operational) reality of a corporate structure which has been put in place because of international tax optimisation reasons. It is no longer enough to set up an entity that is simply an empty shell without staff or actual business activity.
The substance issue, Bühlmann, said, has put Luxembourg on the map.
“This trend has brought more and more decision-makers to visit the country and sometimes also establish a personal or corporate presence that is benefiting the local industry,” he said.
Recent years have witnessed pressure on legitimate financial privacy as well as unacceptable secrecy. WealthBriefing asked Bühlmann about how he handles those questions.
“The main challenge clearly is to define a proper set of values for corporate and individuals as opposed to values by default such as `we do not want to appear in the press as a black sheep’. In other words, now that everything has become more transparent, the question is whether the individuals are entitled to a level of respect in their privacy or not? Whether it be for corporate or for wealthy private individuals, is the tax confidentiality and respect owed to private sphere an offence? We appreciate these matters are debated and decided at EU level, but why was Luxembourg able to voice its position in the years 2000 on bank secrecy, and seems no longer able or willing to do it on these aspects? Do you know that public access conditions to Registrar of Beneficial Owners in France are more stringent than in Luxembourg? Basically, we should put the same energy in protecting the business and privacy of our clients as we are in regulating them,” he said.
Brexit, which roiled UK and European politics for three years, is now a reality – whatever may happen to a specific timetable because of COVID-19 disruptions. With TrustConsult’s footprint in EU and non-EU states such as Switzerland, Bühlmann has a particular perspective on the issue.
“Given our respective operational presences, especially in Luxembourg and Switzerland, it is more an opportunity than an issue that has to deal with political instability, unpredictability and uncertainty, which capital does not like. Both in the UK and in Europe, we are missing statesmen (women) who are able to develop a set of convictions and values, and fight for them rather than competing for the next political beauty contest,” he said.
“In that respect, Prime Minister (Boris Johnson) and President Donald Trump are probably Europe’s best allies in that they are forcing it to wake-up and start defending and promoting its own project,” he continued.
Bühlmann is concerned that European states’ parlous fiscal position has led them to hungrily hunt for revenues, damaging the rule of law in certain aspects. “Indeed, their wish to tighten up rules has gone so far that one could consider it as abusive. Furthermore, the intellectual conformism that has followed the crisis, and consisted in all financial institutions opting all of sudden for a first-in-class behaviour, has led to regulatory developments being applied regardless of good common sense and respect of the client’s legitimate rights for privacy.”
The world of international financial centres is in flux as these offshore centres compete to win inflows of business. Shifting geopolitics – and they will almost certainly be affected by the global pandemic – mean that stable places are at a premium.